In a story yesterday about consultant contracts awarded by federal agencies, Sen. David Pryor (D-Ark.) was quoted as saying the Defense Department is "a giant laundering acency" that passes out billions of dollars of contracts annually.An aide to Pryor yesterday said the senator meant to refer to the Energy Department, but inadvertently said "DOD" instead of "DOE."
A General Accounting Office investigation of contracts awarded by federal agencies to private consultants -- a $5 billion to $6 billion a year industry -- has uncovered "serious, pervasive" abuses, the GAO said yesterday.
In a 10-month study, the GAO sampled 111 contracts, awarded by six agencies and valued at $19.9 million, and found mismanagement and waste nearly everywhere it looked.
The study was conducted at the request of Rep. Herbert E. Harris II (D-Va.), chairman of the House subcommittee on human resources. It was unveiled at a press conference at the Capitol yesterday by Harris and Sen. David Pryor (D-Ark.), chairman of the Senate subcommittee on civil service and general services.
GAO investigators said they found:
"Revolving door" abuses, in which former federal employes are given preferential treatment in obtaining contracts.
Extensive awards in which no competitive bids are sought, and ideas for contracts come unsolicited from consultants.
Significant modifications of contracts after they are awarded, which boost costs and delay completion of the job.
Questionable value or use of the finished product.
Little or no consideration given to doing the work within the agency.
Use of consultants to perform policymaking or managerial work that should be done by agency officials.
Year-end spending sprees, in which agencies award contracts on the last day or two of a budget year.
Inaccurate reporting of consulting contracts, arising from confusion over guidelines issued by the Office of Management and Budget.
"This is big business," said Harris, who estimated that federal agencies are "wasting millions, probably billions of dollars, every year. If we want to balance the budget, this is a place to start."
Although the GAO looked at only six departments -- Engery, Commerce, Transportation, Labor, Health, Education and Welfare and Housing and Urban Development -- the report said the problems uncovered "are probably common to most federal agencies."
Pryor called the Defense Department "a giant laundering agency" that passes out billions of dollars in contracts annually, causing him to wonder what DOD's 19,000 employes do."
The Department of Energy, Pryor noted, "spends 80 percent of its entire budget (about $8.2 billion) on consultant contracts.
One DOE contract, worth $343,000, Pryor said, was awarded to "the same consultant utilized by the giant oil companies." Pryor said such an action results in federal regulations being "spawned" by the oil industry.
Of the 111 contracts studied, GAO found 20 of them, worth $2.7 million, were unsolicited.GAO said most of the contracts in the category "appeared to result from the contractor's unique experience with and/or knowledge of the particular agency."
For example, the report cited a $200,000 contract awarded by the Federal Aviation Administration to Booz, Allen and Hamilton, Inc., one of the international consulting giants, for the purpose of "identifying improvements in the agency's organizational effectiveness and management control."
The GAO said the contract was awarded after a Booz, Allen representative "who was an industry acquaintance of the agency head" (FAA chief Langhorne Bond) submitted the unsolicited proposal in a meeting with Bond.
The FAA justified the award, which it made without competitive bidding, on the basis of Booz, Allen's "unique ability and time urgency." GAO said, "In our opinion, this contractor is not the only contractor who can do organization studies." It also noted that Booz, Allen did not finish the job on time, but got a six-month extension.
Bond is in Europe and could not be found for comment. An FAA spokesman said Bond "did a lot of reorganization" after getting the report, "and I'm sure some of the genesis was in the Booz, Allen study."
The FAA also was cited for awarding a contract to a former agency employe. Last summer, according to the GAO, the agency gave a $136,212 order to Acumenics Research and Technology Inc. to study "economic consequences of proposed changes" in agency regulations.
Included in that award was a subcontract for $32,622 to Chevy Chase Research, a firm whose president, C. Wesley Carson, recently had quit the FAA.
The GAO added that Carson "also had been proposed as a consultant on two earlier orders at $375 a day for nine days."
Carson could not be reached yesterday, but an employe at Acumenics, located at 4340 East-West Hwy, in Bethesda, said Carson is an employe of Acumenics who runs Chevy Chase Research out of his home.
Not all of the eyebrows raised by Pryor and Harris over the GAO report resulted from big spending.
GAO reported that Ada Wrigley, a retired Commerce Department employe who lives in Alexandria, received a succession of seven small contracts from Commerce beginning in March 1975. The most recent was a $9,900 purchase order, which was $100 under the limit required to meet contract standards. All seven awards were given without bidding, on the contention that "no other contractors had sufficient background."
Investigators said there was evidence that Wrigley "supervised government employes as well as performed work she was doing prior to her retirement."
Vincent Traviglini, director of Commerce's office of international finance, investment and services, who signed at least four of the contracts, called the GAO finding "a bum rap." He said charges that Wrigley used Commerce employes to carry out the contract, and that the work was what she did before retirement, were "baseless."
Traviglini said he was "burned up" about the report, saying that Commerce got "a bargain" by hiring Wrigley, whom he called an expert in international economics. In fact, Traviglini added, "she won't accept any more work from us because she feels she was not adequately compensated."
The Department of Energy was questioned by GAO for awarding a noncompetitive contract to the Mitre Corp. last April 6 for $1,100,598. The contract was boosted by another $379,857 before the work was completed Jan. 1. c
The department said Mitre was uniquely qualified because the contract was a consolidation and continuation of two previous contracts to the firm. That prompted GAO investigators to report, "in essence, the contractor has bought into a long and friendly relationship with the agency."
Modifications similar to the one that increased the value of Mitre's contract were found in nearly two-thirds of the contracts studied by GAO. Not only did the modifications add to the cost, but they also resulted in more than half of the contracts running beyond the deadline, from one month to 3 1/2 years.
Typical of the problem, GAO said, was an Office of Education contract to the National Opinion Research Center to survey recent college graduates. The original contract was awarded on Sept. 30, 1977 -- the last day of the fiscal year -- and was due to be completed a year later, in time to be incorporated in a report due to Congress last June.
The contract was modified seven times increasing its cost by 103 percent to $325,920, and delaying completion far beyond the deadline. GAO said the report still had not been completed by December, 1979.
Finally, the GAO said it uncovered "the use of consultants by consultants."
In 53 instances in which a consultant was considered the "sole source" -- the only firm capable of fulfilling the contract -- the GAO found the work was passed on to another consultant acting as a subcontractor. In some cases, this was because the original consultant did not have the expertise to perform the job, GAO said.
Investigators found that an Office of Education contract for $70,000 was awarded to the American Association of School Administrators because AASA was "the only firm that can reasonably and economically meet the contract requirements."
AASA then subcontracted $55,000 of the job to another consultant.
Pryor and Harris will hold joint Senate-House hearings on consultant contracts Thursday, March 27, and Tuesday, April 1.