Pentagon Acts to Fix Payment Problems : Responsibility for paying local defense contractors has been shifted to Ohio to help eliminate delays.

Richard Puga, the owner of a small aerospace machine shop near Watts, has been waiting weeks for $65,000 the Department of Defense owes him for aircraft parts. Now, Puga is worried about having enough money to pay his 19 employees.

“The government makes you feel like you are asking for welfare or a loan,” Puga said Friday. “It isn’t right. We worked hard for this money.”

Aerospace contractors have been complaining in vain for years about inefficiency at the Pentagon’s Los Angeles regional payment center, known as the Defense Contract Administration Service. Defense officials have insisted, however, that there has been no payment problem.

But Brig. Gen. John Serur, commander of the contract service in Los Angeles, issued a letter last week to aerospace chief executive officers that admits to a “deterioration of operations” and to “serious payment problems.”

Aerospace industry officials at small and medium-sized companies say the problem has continued to grow in the past year. Many small contractors must employ a bookkeeper or a contracting consultant to get DCAS to pay their bills.

National Reorganization

Now, the Pentagon believes that it has a solution to the payment problem. In his Feb. 1 letter, a copy of which was obtained by The Times, Serur said responsibility for payments to local contractors will be transferred to a new finance center in Columbus, Ohio. The move is part of a national reorganization, eliminating nine regional payment centers and five regional supply centers over a five-year period.

The Los Angeles office of DCAS “will be one of the first to move due to its serious payment problems,” Serur said in the letter. The Los Angeles DCAS payment center is the largest in the nation, dispersing $28 million a day to defense contractors in the Western United States.

Some aerospace industry officials, however, are seriously worried that a single national payment center in Columbus will be a monolithic bureaucracy, even less responsive to local problems.

“If they think that is going to solve the problem, oh, wow,” said Charles Culver, a consultant and instructor in federal contract regulation at California State University, Northridge. “The minute you move something 2,500 miles from the West Coast, you are just adding delay and bureaucratic headaches. They are not fixing what is wrong. They are making it worse.”

Small contractors are also worried that the long-distance telephone costs of calling Columbus will add seriously to their financial burden.

“If I have to call Columbus every day, can you imagine what it is going to be like,” said Puga. “I will go broke on my phone bill.”

Such calls are almost a routine exercise for many contractors. Invoices are lost, clerks quit their jobs, administrative errors are found on complex forms and a variety of other problems hold up payment, they say. As a result, the contractors must spend hours on the telephone battling the bureaucracy.

“I have dialed for dollars lots of times,” said Joel Saltz, who formerly was director of contracts at Aerospace Corp. and now runs ACS Management Group, a temporary job-placement service for retired aerospace professionals in El Segundo. “If they find even one minor mistake and bounce the invoice back, it is 30 or 40 days before you even know you have a problem.”

Audits Find Violations

A federal law, known as the Prompt Payment Act, is supposed to compel DCAS to pay contractors within 30 days of being billed, but contractors say the agency is not complying with the law. Audits by the General Accounting Office have found widespread violation of the law in many government agencies.

One provision of the law permits the government to take a 1% discount on a bill if payment is made within 10 days of receiving the invoice. The Los Angeles DCAS office allegedly takes the discount frequently even when it does not pay within the 10-day period.

“What is a small contractor going to do, hire a lawyer and sue the government?” asked James Southerland, president of Contracts Advisory Services, a Torrance consultant in federal contract regulation. “It can cost $10,000 just to pursue a claim without going to court. You just have to ignore it and go on with life.”

Puga said he has tried not to protest loudly in the past, fearing retribution by petty bureaucrats who wield enormous power over little companies like his own.

“There’s nothing you can do but turn the other cheek,” he said. “These guys can make you get on your knees.”

Some small contractors said in interviews that they have been penalized for objecting to DCAS incompetence in the past. In one case, a contractor who complained was slapped with a government audit the following week.

DCAS officials declined to comment Friday, and Serur was said to be out of town on business. Other Pentagon officials have strongly denied that a payment problem exists.

After The Times published a story last year about the payment problems at DCAS, Lt. Gen. Aloysius Casey was directed by Washington officials to personally come to The Times and protest the story, according to sources inside DCAS.

At a meeting on June 13, Casey, who was then based in Los Angeles as head of the Air Force’s Space Division, said there was no payment problem. Casey, now retired from the Air Force, did not return a reporter’s call Friday.

In his letter to chief executives, Serur said “outdated systems, personnel turnover and growing work load have all contributed to the deterioration of operations. The impact has been especially severe in the Los Angeles region, as many of you are well aware.”

A DCAS spokesman said some of the payment delays have been caused by new computer equipment, but that the backlog of unpaid bills has been reduced by 40% since the January.

Employee turnover, however, has grown worse than ever. During 1988, 40% of the agency’s Los Angeles area workers left their jobs, according to the spokesman.

“Every time you call, somebody different is there,” Puga said.

DCAS facilities around the nation are understaffed. In recent years, the work load as measured by contract volume has increased five times faster than the size of the agency’s staff.

Federal pay has seriously lagged behind that in private industry. A DCAS contracting officer with postgraduate education can earn about $35,000 a year, half of what he would make in private industry.

“Everybody is jumping ship there,” added another small contractor. “They get these kids out of college and as soon as they get their feet wet, they’re gone.”