Symbol, no caption; Picture, Sen. David Pryor and Rep. Herbert Harris: focus on consultants. By James K. W. Atherton -- The Washington Post

As the government had reached out to private industry for services ranging from designing Marine Corps scarves to elaborate national security systems, the spread of federal contracting has raised troubling questions, including -- who governs?

In some cases -- when private corporations define the problem, review the data and make the recommendations later adopted by an agency as policy -- it is hard to tell.

"I look at it as almost an unconstitutional delegations of authority," said Sen. David A. Prior (D-Ark.). Pryor and Rep. Herbert Harris (D-Va.) have been among the most vocal recent critics of federal contracting, focusing particularly on the use of consultants.

"These people are running the country almost," said Pryor.

But contractors argue that so long as a federal official is the one to decide whether to adopt a policy, decision making is still where it belongs, both in theory and in law.

Although the question of who makes policy has emerged as a major concernn over federal contracting, it is by no means the only one.Critics of the way the federal goverment has handled contracting also have trotted out a parade of examples of conflicts of interest, purchases of unneeded services and unused studies, the use of contracting to avoid federal personnel ceilings and other concerns.

And there has been a continuing struggle to get a clear picture of how much the federal government relies on contractors. Until recently there was no real attempt to obtain that information. A Federal Procurement Data System set up to respond to such concerns has produced the most complete information to date. According to the system's compilations, the federal government spent at least $74 billion on contracting in fiscal 1979, but officials say they expect the true figure is closer to $100 billion.

"A consumer who didn't know how many products or services he was buying or how much he was paying for them, or whether he was paying too much for these services, or whether he could get them done better or for less price somewhere else would not be considered a very wise shopper," wrote John D. Hanrahan in a report for the American Federation of Government Employes on "The Hidden Bureaucracy of Contracting Out."

"That is exactly the position the government finds itself in today in regard to contracting out," he said.

"The record is full of examples of the types of problems critics have cited. What is harder to say is how common the bad examples are.

"In most cases, I really don't think the contractors are a bunch of crooks out there trying to skin the public," said John Cibinic, a law professor at George Washington University law school who specializes in federal procurement law. "Most contractors are interested in profits but interested in making them honestly."

Federal officials familiar with government contracts said that the culprit in inefficient, costly contracts is more often poor management by overwhelmed federal procurement workers than it is contractor greed.

Wherever the blame lies, a look at some recent General Accounting Office and internal reports on contractor activity at the Department of Energy demonstrates some of the concerns that have been raised by federal contracting. Because the DOE spends approximately 80 percent of its budget on contractors, much recent concern over federal contracting has focused there.

Item: In a May 1979 report on a contract for a coal liquefaction pilot plant, the DOE's inspector general said his office's findings reflected "gross mismanagement that has already cost the taxpayer many millions of dollars in unnecessary expenditures."

"The original total estimated cost of this project was $178.8 million, "but the total price tag was expected to amount to $296 million, or $117 million more than estimated, the report noted.

It also said that the project was running 14 months behind schedule. A major contributing factor in the management problems at the plant was "the dismal management performance of Ashland Synthetic Fuels Inc., a wholly owned subsidiary of Ashland Oil Co.," the report noted. The DOE removed the Ashland Subsidiary from its position as construction manager for the pilot plant in 1978.

The report charged that, among other things, Ashland had "manipulated DOE into paying more than $1 million for an elaborate brick administration building and a guard building with clothes-changing facilities for employes." The DOE originally had directed that plain, prefabricated buildings be used because the pilot plant was scheduled for only two years of operation.

Ashland countered that most of the problems noted in the report had been resolved "prior to the inspector general's review." The inspector general's observations on the brick building were "very misleading and distorted," said Charles D. Hoertz, president of Ashland Synthetic Fuels Inc., who said the pilot plant program was expected to last for four years.

Delays in construction and increases in the cost resulted from substantial changes in the scope of the project and from the impact of two severe winters on completion of construction, Ashland said.

Item: Another study by the same office found that the department ignored recommendations of its own scientists and evaluators and gave grants to projects the experts said were a waste of money. The report also found that the department passed out money without evaluating other applications and paid for "research" on equipment that could be bought off the shelf.

A General Accounting Office review of the DOE's practices in awarding and administering contracts completed last fall concluded that the department's procurement system was not "operating effectively and efficiently."

The GAO questioned whether the DOE was encouraging competition for contracts as much as it should and raised questions about who was setting government policy. "Some of these contracts appear to . . . offer the potential for allowing the contractor to determine energy policy," according to the GAO.

The GAO reported on one $87,000 contract for a study to identify the DOE's responsibilities for dealing with energy emergencies. The contract also called for the contractor to design and develop and define a stategy for implementing an energy emergency planning process and to assist in establishing a strategy for distributing fuels during periods of short supply. "DOE officials informed us that the contractor was selected in part because it is a firm which has sufficient credibility and reputation that senior government officials would feel comfortable with its judgments," the report said.

In that and other examples, "It appears that the contracts' statement of work requires the contractor to perform basic management functions," according to the GAO.

"Whether the contractor actually performed these functions or only assisted DOE in their performance is open to debate," the GAO said. But it noted that lack of available in-house expertise often was cited as the reason such contractors were hired. "Such lack of in-house expertise would . . . limit the ability of DOE to consider energy policy, planning or priority options other than that proposed by the contractor," the study concluded.

Accountability for government policy is a theme critics of contracting out come back to again and again. Pryor offers "civic lessons" about how Congress created the agencies to help do the business of government. Then the acencies reached out for help from contractors, he said. Then the contractors turned to subcontractors. "That's an awful long way from anyone who is accountable," said Pryor.

Both Pryor and Harris acknowledge there are some areas where contractors and consultants are legitimately needed. But Harris added, "There are some creatures of the federal government -- nothing more than poor, pale shadows of the government -- created by the government and getting lazy under the government."

"They've gotten used to no accountability," he said.

Harris and Pryor said they are considering a range of legislative approaches to what they see as the problems in federal contracting. Some call for more disclosure by agencies on the use of consultants. Another approach taken by Harris and described as "sinister" by the U.S. Chamber of Commerce would offer agencies incentives in the form of raised personnel ceilings for not contracting out work.

Pryor said he also may propose a clearinghouse to prevent duplication of studies. A smiliar system has been set up to prevent duplication of motion pictures made under contract for the federal government.

The stories Pryor and others tell of abuse by federal contractors are isolated examples and "a boogeyman created by people to justify increasing the size of the federal work force," said Earle C. Williams. Williams is president of BDM, a professional service corporation located in Tysons Corner that provides a wide array of planning and research services for federal agencies.

"Is defrauding the government the M.O. (modus operandi) for the professional services?" questioned Williams. "It isn't."

"If I provide a legitimate service at a fair price -- something the government needs" -- why should he be attacked, asked Williams. "I'm really very proud of what we're doing. I think we represent an enormous asset to society."

Williams rejects the notion that contractors set policy. "To argue that is to say congressional staffs make the laws," Williams said. "Voting on the floor constitutes making the laws. The person to blame is not the staff but the lawmaker."

"Personal services firms are not making decisions. That's not debatable," said Williams.

"We are a naligned industry."