The Senate Banking Committee voted yesterday to abolish the Renegotiation Board, the federal agency that guards against excessive profits on space and defense contracts.
In a vote described by Sen. Richard Lugar (R-Ind.) as "A litmus test of sunset legislation," the committee accepted, by an 8-6 margin, arguments by Lugar and Sen. Alan Cranston (D-Cal.) that the board's value to the government is too small to justify the paperwork burden it imposes on business.
The committee action was a major victory for defense contractors, who have been loobying stadily against the board since it was created in 1951 to review weapons contracts generated by the Korean War.
But the vote was a setback for President Carter, who has actively supported a contrasting bill that would extend the board's life and enhance its authority.
A bill to strengthen the Renegotiation Board was approved by a House committee last spring, and had been scheduled to come up on the House floor next week. But chances of House passage were never certain, and supporters of the House bill said yesterday they may put off the vote because of the Senate committee action.
Cranston, the second-ranking member of the Senate's Democratic leadership, said yesterday his bill to kill the board would have "a pretty good chance" of passage on the Senate floor.
But Banking Committee chairman William Proxmire (D-Wis.), who was on the losing end of yesterday vote; told Cranston that "you won't get action on the floor; it might be filibustered." Proxmire is the chief Senate sponsor of legislation to strengthen renegotiation.
Reflecting their own uncertainty about the prospects of the Lugar-Cranston measure, the committee members yesterday approved two different bills dealing with the board.
One was the Lugar-Cranston termination bill. The other, passed as a fallback in case the first bill loses on the floor, would leave the board in a sort of limbo pending a six-month General Accounting Office study of its cost and benefit.
The measure pushed by Lugar and Cranston would put the board in "mothball" status, so that it could be reativated by the President under emergency conditions. It would permit the board to keep operating for an indefinite period, but only to complete work on its considerable backlog of old cases.
The termination bill would cut the backlog by eliminating, retroactively, the board's jurisdiction in past cases involving firms with annual sales under $5 million. The board says about 58 per cent of its work involves such firms.
The Renegotiation Board is a small agency (about 300 employes) that reviews federal contrats after they have been completed to gauge the contractor's final profit on the job. If the board concludes that a firm's profit on all its government work in a given year is "excessive," it can order the firm to refund the money.
In fiscal yar 1976, the board reviewed $41 billion in federal contracts and recovered $40 million in profits.
Supporters of renegotiation say the board is a necessary check against profiteering in the space and defense industry, where most equipment is bought on a non-competitive basis.
They argue that Proxmire's bill, which would strengthen the board, would lead to a quantum leap in the amount of defense profits recovered by the government.
Opponents see renegotiation as a fount of red tape and government harrassment that deters many firms from bidding on government contracts.
They also say that by concentrating on profits rather than costs, the board penalizes efficient, high-profit producers but passes over less efficient contractors whose profit margins are low.
The board has been the target of intense lobbying all year by large and small defense contractors. Since there is at least one defense contractor or subcontractor in almost every congressional district, the industry has been able to mount an effective person-to-person lobbying campaign.
Yesterday's committee vote, though, surprised even the lobbyists. They had expected to have enought votes to defeat Proxmire's tightening legislation, but they did not expect passage of a bill terminating the board.