Federal waste put in billions Government's contractors lack supervision, report alleges

December 02, 1992|By New York Times News Service

WASHINGTON -- Mismanagement by federal contractors i wasting billions of dollars annually because of inadequate supervision by government agencies, according to a report prepared for the White House.

The audit report says the Reagan and Bush administrations tried to save money by cutting the staffs of the federal offices that supervise contracts at the same time they were expanding use of private contractors to take over government work.

The White House acknowledged yesterday that contractors are squandering vast sums because federal agencies fail to supervise how hundreds of billions of dollars are spent each year.

The survey prepared for budget director Richard G. Darman found that private companies had been paid for unauthorized expenses including tickets to sports events, lavish cruises and excessive salaries for executives.

Federal auditors from the White House and 12 agencies said private companies had been paid for what were, at times, illegal expenses.

A top official of the Office of Management and Budget said

yesterday that the report was intended to draw attention to a basic management problem that was wasting billions of dollars, though the exact amount is not known.

Still, the sweeping assertions about mismanagement and specific recommendations for fixing the problems also make it among the most incisive critiques the government ever published against a central philosophical tenet of the Reagan-Bush era: The idea that private companies can do the federal government's work better and for less money.

"The major issue here is that agencies have spent a lot of time and resources in ensuring that contracts are let and not on seeing to it that the contract is working effectively," said Allan V. Burman, the administrator for federal procurement policy at OMB.

The White House study is the product of a five-month investigation that was prompted by disclosures of mismanagement made over the last year by several congressional committees and the General Accounting Office.

The White House urged changes in federal rules for contracting to more clearly define unallowable expenses. The White House also called for increases in resources for hiring federal auditors. And the White House urged a change in the "culture" of federal agencies that are eager to award contracts but have been

reluctant to supervise them.

The report was scheduled to be made public in a hearing today by Rep. John D. Dingell, D-Mich., the chairman of the House Energy and Commerce Subcommittee on Oversight and Investigations. Mr. Dingell made an advance copy of the report available.

Although opponents have argued that many government responsibilities are inherently unsuitable for private enterprise, Presidents Reagan and Bush pushed hard to increase government contracts to private companies.

The government spent $210 billion in the 1992 fiscal year on contracts for goods and services, or roughly one-sixth of all government spending, according to the OMB. The percentage of money spent for contracts has risen sharply over the last decade, according to the budget office.

In several agencies, particularly the Department of Energy, the EPA, and NASA, contractors are performing virtually all of the work.

Although investigators are unsure about the amount of money wasted each year, they wrote that there was unsettling evidence that the problem crosses all the civilian agencies. In almost every instance where auditors took a close look at contracts, they found problems.

Lockwoode Greene Inc., a company that held a $38 million contract at the Energy Department's Oak Ridge National Laboratory in Tennessee, was found by the government to have spent $3.5 million on unallowable costs like liquor, travel for the spouses of employees and registrations for golf tournaments.

CH2M Hill, an Oregon company that supervises the cleanup of hundreds of toxic waste sites for the EPA and more recently for the Department of Energy, billed the government for parties, country club fees for employees and the use of a corporate airplane, the auditors said.

The problem of fraudulent charges from the private contractors is far from unique to the Bush and Reagan administrations.

But the conclusions of the report by the White House budget office, the first comprehensive study of contracting across all the government's civilian agencies, suggest that such heavy reliance on private companies can only be effective if the government closely supervises its contracts.

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