Amid the growing clamor on Capitol Hill to eliminate the budget dificit, Congress is about to kill one of the few federal agencies that takes in more money than it spends.
The victim is the Renegotiation Board, a small watchdog office created to guard against profiteering on defense and space contracts.
The board's impending demise is the result of an intense lobbying campaign by the defense industry -- a campaign that was supported by many of the same members of Congress who now are most vocal in calling for a balanced federal budget.
But the agency has suffered as well at the hands of its friends, including President Carter, who pledged to strengthen the board as part of his first anti-inflation program early in 1977 but has mainly ignored it since.
The board's job is to review government contracts for defense and space equipment after all work on the contract has been completed. If it finds that the contractor has earned "excessive" profits on its government sales, the board can order that the excess be paid back to the government.
In fiscal 1978, the board spent $6.2 million to do its work, and reo work, and recouped $34.4 million in excess profits, for a yearly "profit" of $28.2 million. Some of the repayment orders, however, are likely to be challenged in court.
The General Accounting Office says the board is worth more to the government than its operating "profit" because, by its very existence, it deters contractors from inflating prices on sole-source contracts.
But the board's existence will end in 10 days unless Congress acts before then to reverse legislation passed last fall to cut off the agency's operating funds as of March 31.
The board's leading champion in the House, Rep. Joseph G. Minish (D-N.J.), has scheduled a hearing today before his general oversight subcommittee to try to stir some last-minute movement that might save the agency, but even he agrees that the chances are minuscule.
The Renegotiation Board was created in 1951 as a "temporary" response to the Korean War buildup. Its authorizing statute was extended by Congress 13 times until September 1976, when the last extension ran out. Since then, the board has continued to work on its backlog, with no authority to review new contracts, while Congress has battled over its future.
When Carter entered the White House in 1977, he gave the agency a tough new chairman and promised his "full support" to improve its operations. That April, he told the nation he would "insist upon a strengthened Renegotiation Board which bears down hard..."
But then Carter's budget office turned down the board's requests for staff and funding increases, and the president failed to nominate anyone to fill the board's two vacant seats. Despite appeals from the board's supporters in Congress, the White House never launched a sustained lobbying effort to extend the authorizing legislation.
Carter's hand-picked chairman, Goodwin Chase, undermined the board's credibility in Congress by publicizing what he called "classic case" of profit-gouging by a big defense contractor -- and then being forced to admit that he had the profit figures wrong. Chase also antagonized Congress by adopting regulations that considerably expanded the board's authority -- at a time when the agency did not have an authorizing statute.
Meanwhile, defense contractor associations organized a grass-roots lobbying effort, with participation from at least one contractor or subcontractor in every congressional district. The firms told their Congress members that the board was a useless engine of red tape and harassment that discouraged many companies from dealing with the government and thus drove up the cost of defense equipment.
In Congress, the campaign to abolish the board was pushed by such conservatives as Reps. John H. Rousselot (R-Calif.) and James H. Quillen (R-Tenn.) and Sen. Richard G. Lugar (R-Ind.), all of whom are advocates of a balanced federal budget.
The board had continued to receive appropriations to work on a $200 billion backlog of pre-1976 cases, but then, last year, Congress voted to end all funding as of March 31.
The board's demise may have an ironic twist for some defense contractors because its termination will automatically revive the Vinson-Trammel Act, a 1934 statute that prohibits profits above 10 percent on ship contracts and above 12 percent on planes. Any excess profits are to go to the Internal Revenue Service.
Accordingly, the IRS has ordered ship and plane manufacturers to start filing profit data as of April 15. Meanwhile, the contractors have started lobbying to abolish Vinson-Trammel.