An internal review of several Energy Department contracts suggests that DOE paid "unreasonably high salaries and fees for work done" by consultants and questions whether DOE is doing as much as it could to control costs.
A report by the department's inspector general focuses on high salaries paid to executives of two contracting firms, fees paid to consultants hired by the contractors that exceed DOE's ceiling for costs for such services and DOE's failure to determine whether it could do the job more cheaply in-house.
But much of the report is disputed by DOE's chief procurement officials, who said the report showed considerable naivete about federal contracting.
The report examined six contracts awarded to two unmaned consulting firms for support services over the years 1977 to 1979, but discussions with procurement and other DOE officials indicated that what the inspector general's office found is "not unique to the particular contracts . . . but are representative of broader problems," according to the report.
Among the findings were that the top executives of the two firms, which the report described as 90 percent dependent on the federal government for their business, earned $92,700 and $75,000 as of June 1979 -- or substantially higher salaries than the $66,000 salary paid the secretary of Energy or the $47,500 salary ceiling on senior civil servants. The $75,000 salary, however, has subsequently been reduced by DOE procedures put in operation before the review.
The review also found that annual salaries of top officials and employes of the firms increased on the average from 48 percent to 100 percent over the years reviewed, growing at a substantially faster rate than government salaries.
"It's a losing kind of strategy to compare government salaries against private salaries," said Michael Tashjian, director of procurement and contract management for DOE. "Suppose a company does 90 percent government work and 10 percent commerical work. That shifts as contracts come and go.At what point does the government have the right to question the executive salary structure?" he asked.
The review also found that the contractors charged DOE for consultants hired to perform part of the contract at much higher rates than the maximum $182 for consultants hired directly by DOE. That maximum has been raised to $192 since the period under audit.
The contracts under study were "cost reinbursable" contracts, similar to cost-plus contracts in construction where the costs are not fixed in advance. However, DOE contracting officials said that such contracts are audited at completion, and excessive costs are disallowed.
The report quotes officials from the Defense Contract Administration Services, which performs some of the post-contract audits for DOE, as saying that "if the contract does not stipulate salary limits and the contractor is reinbursed for apparently high salaries, it is extremely difficult to disallow these costs after the fact."
One of the strongest recommendations in the reports is that cost comparisons should be required to determine if DOE might do the work itself more cheaply. Tashjian said that in many cases the need for special expertise or the intermittent need for the services makes that impractical.