U.S. says contractors squandering vast sums White House cites lack of supervision

December 02, 1992|By Keith Schneider | Keith Schneider,New York Times News Service

WASHINGTON -- After years of effort to transfer government work to private companies, 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.

In a report prepared for Richard G. Darman, the director of the Office of Management and Budget, federal auditors from the White House and 12 agencies said that private companies had been paid for unauthorized and, at times, illegal expenses, including tickets to sporting events, lavish cruises and excessive salaries for executives.

The auditors said that even as the government vastly expanded its use of private contractors to assume duties as basic as writing congressional testimony for Cabinet officers and as sweeping as cleaning up widespread environmental contamination produced by the military, the Reagan and Bush administrations tried to save money by cutting the staffs of the offices that supervise contracts.

Congress approved that policy by approving the administrations' budgets.

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 ever published by the government of 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 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 is scheduled to be made public in a hearing tomorrow 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 Environmental Protection Agency and the National Aeronautics and Space Administration, contractors are performing virtually all the work.

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

Some of the examples cited involved environmental work -- swiftly expanding area as toxic and radioactive wastes left by military development during the Cold War are cleaned up.

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 such 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. All of these expenses were prohibited, they said.

Earlier this year, when congressional investigators made the charges public, Lyle Hassebrook, president of CH2M, said that he was "very proud of our accomplishments" in the cleanup program and disputed the assertions.

The government spends between $500 million and $1 billion annually to determine the level of toxic materials in soil and water and is becoming concerned that the results are meaningless.

In the last four years, in the EPA's Superfund program to clean abandoned waste sites, the government has successfully prosecuted six laboratories and 17 individuals for fraud, and three dozen other laboratories are under investigation.

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

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