Main Contractor Overcharged EPA, Investigators Report

The Environmental Protection Agency’s largest private contractor--CH2M Hill Cos.--has systematically overcharged the government for overhead costs by including expenses for parties, chocolate bars, sporting events and other inappropriate items in its calculations, according to congressional investigators.

In a memorandum prepared for members of a House energy and commerce subcommittee, investigators said the company, which received $35.8 million from the EPA in 1990, tolerated “very sloppy accounting practices” and permitted “numerous improper (overhead) charges to remain” on its books.

The company, which employs 4,200 nationwide, is under contract to the EPA for work related to cleanups at more than 200 Superfund toxic waste sites throughout the country, including the Stringfellow acid pits in Glen Avon Heights, the McColl dump in Fullerton and 21 other sites in California.

The oversight and investigations subcommittee, headed by Rep. John Dingell (D-Mich.), is scheduled to hold a hearing on the issue today on Capitol Hill. Among those testifying will be representatives of the General Accounting Office, which has completed an independent audit of CH2M Hill overhead expenses.

In a statement, the Greenwood Village, Colo., company denied that it had made any improper charges, and said it welcomed the opportunity to present its case in the subcommittee hearing.

“Taxpayers have paid only legal and allowable costs, and not a penny more,” the statement said. It asserted that the company’s costs and overhead charges have been checked and cleared by outside auditors, including those of the government.

The dispute over Hill’s accounting is similar to one that erupted last year over the “indirect costs” charged to the government by universities that conduct federally funded research. Government auditors accused several major universities, including Stanford, of overbilling the taxpayers millions of dollars in overhead costs. Many of the disputes remain unresolved.

The congressional staff memo on Hill said the EPA contractor included in its overhead calculations such items as $2,500 for customized chocolate bars, $1,500 for a membership at the Orange County Performing Arts Center, $100 for a Christmas party dance instructor and $2,772 for tickets to Denver Nuggets basketball games.

Most troubling, the investigators said, was the company’s decision to include $6.6 million in company bonuses in its overhead accounting. Because the size of the bonuses depends on company profits, which in turn depend to some extent on EPA contracts, the investigators said that “Hill is charging the government twice.”

Investigators were unable to state precisely how much they believe the government overpaid. However, they said they are questioning between $6.6 million and $8 million in expenses.