In a memorandum suggesting that contracting procedures in his agency are shot through with waste and illegality, Health, Education, and Welfare Secretary Joseph A. Califano Jr. yesterday ordered a series of changes in the way HEW spends some $7 billion annually on grants and contracts.
At the heart of the new procedures is an effort to give HEW's purchasing officers authority to stand up to top agency officials who have frequently ignored procurement laws and regulations in the past.
"You've got the problem where the procurement man quotes the rule and some Nobel laureate who runs the office says he doesn't care," explained Thomas S. McFee, a deputy assistant secretary who worked with Califano on the new procedures.
"We want the procurement officer to know that he can blow the whistle and he'll be back up," McFee said.
Califano's memorandum included a 15-page catalogue of what he called "major deficiencies" in HEW contracting practices. But the department provided no specific examples, or names of officials who had violated rules. McFee said the agency's inspector general is investigating some cases of improper procurement procedures.
Among numerous abuses set forth in general terms in Califano's memorandum is a "buddy system," in McFee's phrase, in which top HEW officials funnel money, through noncompetitive awards, to favored projects and contractors.
Normally, Califano wrote, contract awards should be made only after HEW solicits bids from various potenial contractors. In practice, "personnel . . . in violation of law and regulations concert with vendors to submit supposedly unsolicited contract proposals."
When the contract is thus awarded to the favored firm, according to the memorandum, the officials continue to pass funds to the firm by writing extensions or modifications to the old contract for later work. This circumvents the procedures for competitive solicitation that would be required on a new contract.
in other cases, where competitive bids are taken, Califano wrote, "inside information given to favored offerers" skews the competition to benefit the preferred firm.
Another problem is the HEW tends to spend large chunks of its money in a samll period at the end of the fiscal year - apparently to avoid having any procurement funds unspent.
in 1974, the memorandum says, the agency spent 52 per cent of its contract funds in the last month of the fiscal year. The last-month spending crunch precludes competitive procedures and careful review of procurements, Califano said.
To combat all this, the new Secretary proposed a series f new checks and reports to let the agency's top management officials review how procurement money is spent. He called for detailed scheduling of contract awards to counter the end-of-the-year syndrome. He order training programs and a certification procedure to give procurement officials more stautre within the various HEW offices.
Every HEW Secretary for the past decade or so has tried to do some thing about the agency's procurement problems. Califano's proposals were largely prepared by McFee and Jack Young, the assistant secretary for management, who are both veterans of earlier housecleaning drives. "We made use of all the old studies," McFee said.
"This time, the Secretary is serious," McFee said. "That's what's new. He told us that he is going to see to it that we stick to the rules no matter who it is who's bucking them."
McFee said in an interview that the procurement officer in a typical HEW contracting office will have a GS-12 or GS-13 rating. The chief of the office is likely to be a GS-15 or higher whose office wall is decorated with a gallery of degrees and professionalawards.
"The result is that it's awfully hard for the pr awards.
"The result is that it's awfully hard for the prts to give a grant to some lab that he likes to deal with," McFee said.
"Now they're going to be getting a certification of their own, and they'll have the Secretary's office to support him."