Budget chief Bert Lance says he is inclined to deny a major staff expansion sought by the Renegotiation Board, the tiny agency responsible for recovering excessive profits made on defense contracts of about $30 billion a year.
Lance, director of the White House Office of Management and Budget, said in a telephone interview last week that he sees no conflict with the position taken by President Carter in his inflation message April 15.
"We will . . . insist upon a strengthened Renegotiation Board which hears down hard on excessive profits in government contracts," Carter said.
The agency asked the OMB to increase its staff of 177 to 292 in the fiscal year starting Oct. 1. The current budget of $5.7-milliohn would rise to $8,750,000. The OMB expects to make a final decision this week.
Goodwin Chase, who was named board chairman by Carter, told the agency staff March 15 that it is far too small "to give responsible or even cursory examination" to the 3,400 filings made by defense contractors each year.
Two weeks later, he told the House Banking Subcommittee on General Oversight and Renegotiation that the staff is also too small to review "a monumental $150 billion . . . backlog" of reviewable sales by defense contractors. Many cases "have been languishing at the board for 10 years or more," Chase testified.
Chase, in his talk to the agency staff, termed the backlog "a discredit" to the Republican adminsitrations "that furthered it." Asked for comment on Lance's position, he cited his subcommittee testimony.
Lance told a reporter his basic concern is that staff increases - in every agency of government - he "cost-effective." At least for the time being he said, he favors only slight increases in the board staff, so he can judge if they pay off.
"I don't want to expand the number of folks that are in the position of auditing and that sort of thing," he said.
On Wednesday, with the OMB's general blessing, the House Banking Committee approved, 27 to 16, an omnibus reform bill intended by its sponsor, subcommittee Chairman Joseph G. Minish, (D-N.J.), to close "glaring loopholes which allow the big corporations to reap excessive profits . . ."
The bill is expected to be taken up by the House on Thursday. Committee aides said defense contractors have lobbied heavily against the measure. Some of the strongest objections were made to a provision to require review fo sales and profits on a productd-line of division basis, rather than on the current aggregate or conglomcrate basis.
The distinction can involve tens of millions of dollars for a single contractor, as shown by the case of the McDonnell and Douglas Aircraft Corps.
In 1966, McDonnell's principal product, the F-4 Phantom aircraft, was so profitable that the company refunded $27 million to the government. Doug, meanwhile, was losing money or making low profits on its principal product, spacecraft McDonnell acquired Douglas in 1967.
The Renegotiation Board then voted to treat aircraft and spacecraft as a single product line, with the result that the new McDonnell Doulgas Corp. was ruled to have excessive profits of a relatively small $5 million in 1967 and zero in 1968 and 1969.
Goodwin Chase, then a member of the board, protested that had aircraft and spacecraft been defined as separate products, the company would have been required to refunded at least $15 million for 1967, at least $16 million for 1968, and a large but undetermined sum for 1969.
In a last-minute letter before Wednesday's vote, the OMB's Lance told the committee "that some flexibility should be provided" in the provision of the bill requiring the product-line approach across the board.
The committee then adopted an amendment, supported by Minish, to empower the board to waive the requirement for companies whose annual sales are under $10 million.