EPA Supplier Defends Its Work for the Agency : Controversy: Computer Sciences’ stock rises after the firm notes that it has not been accused of wrongdoing.
Despite findings of questionable payments under Environmental Protection Agency contracts, Computer Sciences Corp. said Tuesday that it always has followed EPA contracting procedures and has done a good job for the agency.
The statements were made in response to a government report that raised questions about $13 million in payments El Segundo-based CSC received under an EPA contract. CSC, which provides computer services, has not been accused of wrongdoing.
“We’ve done what the EPA has requested under its (contracting) regulations,” said CSC spokesman Bruce Plowman. “If the EPA sets up new contracting procedures, we will comply with those procedures. . . . We think we’ve done a good job for them.”
The report, an internal EPA audit, surfaced Friday in Washington. The stock market reacted negatively Monday, sending CSC’s stock down $6 in heavy trading on the New York Stock Exchange. It rebounded slightly Tuesday, rising $1.875 to $78.25.
Some industry analysts said the recovery came because many investors concluded that the flap over CSC’s EPA business would not affect the firm’s contracts with other government agencies.
The report said the EPA does not have proper management oversight of contracting activity with the CSC--leaving the agency increasingly vulnerable to possible fraud, waste or abuse. The audit and the EPA’s contracting procedures will be examined by a Congressional subcommittee on oversight and investigations, headed by Rep. John D. Dingell (D-Mich.), at a hearing in Washington today.
The EPA is under pressure to reduce its reliance on outside contractors for many functions. The audit turned up “weaknesses” in EPA oversight. Among the questionable CSC charges cited were $2 million for CSC personnel to perform tasks for which they were not qualified and $66,000 to train company workers in basic computer skills.
Plowman declined to talk about specific findings in the audit, saying the company had not had an opportunity to fully review the report.
CSC helps the agency manage its data under contracts valued at about $60 million annually. Its contracts with the EPA amount to less than 1% of the company’s revenue of $1.7 billion. About 1,500 of the firm’s 26,000 employees are involved in contract work for the EPA.
Plowman said he expects no problems in future contracting with the EPA, and said the volume of business with the agency “does not materially affect the company’s financial position.”
Byron Callan, an analyst at Prudential Securities in New York, said investors probably overreacted to the report on Monday.
“People decided to sell stock and ask questions later,” according to Callan. “Investors are now beginning to take into account that the EPA is just one contract and that other government agencies manage their contracting programs differently.”
Callan said the controversy will not hamper CSC’s ability to attract private-sector business, an area in which it has been trying to diversify. About 38% of the company’s revenue comes from contracts with businesses.
