The Department of Health, Education and Welfare paid $440 for one day's work performed by William Ewald, a consultant, on Sept. 31, 1978.
Thirty days hath September.
At the Department of Commerce, a program officer approved a bill from a contractor for 144 Mickey Mouse ties and scarves to be distributed at the firm's Miami convention.
And at the Environmental Protection Agency, a project officer was bewilded when a consulting firm submitted data as part of a $360,000 contract showing the average speed of trucks driving the streets of Manhattan was 68 miles an hour.
Billing for phantom days, spending governmant money frivolously, coming up with useless results or no results at all -- these have come to be accepted ways of doing business in the world of federal contracting.
Many of these research and consulting contracts are intended to address serious questions. Some are intended to help the poor, the victims of crime and those addicted to drugs; some are to help solve the problems of air and water pollution and to find new sources of energy.
But these issues often seem of only secondary importance in a system that places its highest priority on billing for more and more federal funds.
Federal officials, faced with confusing regulations and an endless stream of invoices from contractors, express frustration, as do many legislators and investigators on Capitol Hill.
Sen. Max Baucus (D-Mont.) has held several hearings in the past two years on waste and fraud in contracts. His conclusion: "The extent and seriousness of these problems is pervasive. Obviously there is a pattern of abuses throughout the agencies."
Sen. David Pryor (D-ark.) and Rep. Herbert Harris (D-Va.), held joint hearings earlier this year on wasteful contracting practices. And the General Accounting Office, the investigative arm of Congress, has cited abuses in contracts for the past two decades.
But the problems persist.
In an eight-month investigation, The Washington Post interviewed more than 600 government officials and found that more than $9.3 billion was spent in 1979 on federal research and consulting contracts.
In articles today and tomorrow, 13 contracts totaling $15 million will be examined.
Most of the money in these contracts, according to both government officials and contractors, was completely wasted. Over half of it produced nothing that was used.
The case studies follow.
The non-existent agency:
A few weeks before he was going to retire from the Department of Health, Education and Welfare in 1976, after 30 years of federal service, Charles Silvester received in his mail an "unsolicited proposal" for a consulting contract.
"I opened the envelope, looked at the proposal and tossed it in the wastebasket," Silvester recalled. "I'd been around a long time. I knew waste when I saw it."
On the day Silvester received the letter, he spoke to Harold Weinberg, the man who was to replace him as an administrator for the social and Rehabilitative Services (SRS) agency with HEW.
"I reached into the wastebasket to show Weinberg the contract proposal," said Silvester, "I said: 'You're going to get a lot of these when you take over. Read them with care.'"
Weinberg looked at the letter. He liked the contract idea. A month later, he set in motion the process which led to a $130,000 contract to a local consulting firm, Moshman Associates, Inc.
The contract was to evaluate the Center for Social Statistics within the SRS. Said Weinberg later: "It made an awful lot of sense to me at the time to get an outside expert to come in and examine this thing with an objective eye."
Jack Moshman, a well-respected Washington consultant, gathered a panel of experts to begin the study in late 1976 and early 1977.
Unknown to Moshman -- and to Weinberg -- new HEW Secretary Joseph Califano was conducting a study of his own at the same time to reorganize parts of the HEW. Califano announced his reorganization plans in February 1977. One of his suggestions: the elimination of the SRS and its Center for Social Statistics.
By the time Califano's announcement came, much of the Moshman study had been completed.
"We had absolutely no idea that HEW was planning to abolish SRS," said Moshman later. "No one at SRS told us about it . . . We got caught somewhere in this squeeze."
But Moshman did not want the contract killed. Instead, he requested an additional $20,000 to continue the study and, since the agency no longer existed, refocus the work. "Our report could be helpful if the findings were looking at a system, not an agency," Moshman explained.
Silvester, who was still at HEW at the time, recalls going to Weinberg then and saying. "Hey, let's cut out losses on this thing."
That did not happen. The department granted the extra $20,000 and, in August 1977, the consulting firm completed two neatly bound reports costing $148,712 and sent them on to HEW.
The report began with a quotation from the roman philosopher Petronius. It said: "We tend to meet any new situation by enlarging and reorganizing, and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralization."
Neither Silvester nor Weinberg ever read the report. Nor, they said, did anyone else at HEW. "It was never used for anything," said Weinberg. "This was not unusual, it was common. Nobody ever wants to read these studies."
Weinberg, like Petronius, was philosophical about the whole thing.
"Generally, people believe that fact and logic play into these major decisions," he mused. "That's not the way it works. The decisions are political. Every four years you have a change -- and all the great studies in the world won't make any difference.
"That's what you learn in government . . . The whole thing is a big laugh . . . It's a big joke." Boxes in a Warehouse
All day and night for a week late last August, lawyers for HEW and for a contractor negotiated the fate of an intensive five-year study to develop a new drug to treat heroin addiction.
In the end, the government terminated a contract and both sides were numbed. The government had spent more than $3.4 million and it received nothing. Almost all the research had been completed -- and the work was found to be very good -- but the new drug was not to be developed.
Research on the drug was not stopped because of medical reasons. Those issues weren't even discussed in the negotiations. The problem was a legal, contractual dispute, attorneys on both sides say.
"I have become sort of discouraged with the whole situation," said John Weisner, head of Medical Research Applications, which collected data from 6,000 patients over five years. "Let's face it, there comes a point where you don't want to bang your head against the wall any more."
The program began in 1975, when HEW'S National Institute on Drug Abuse decided to collect clinical data on a drug known as LAAM. The drug had been used in Germany to treat heroine addicts. It was said to be more effective than methadone, which is now used routinely in the U.S.
While the government had already contracted for laboratory studies on the drug, it needed major clinical trials of it before it could receive approval from the Food and Drug Administration.
Medical Research Applications, responding to an advertisement for bids, asked to do the study. No pharmaceutical firms sought the contract, apparently because there was very little potential profit in selling the drug, according to HEW officials.
As part of the contract with Medical Research Applications, the government allowed the firm to keep all of the data it would gather. The firm would then have exclusive rights to sell the drug if it won FDA approval. The purpose of this agreement was to provide an incentive for the firm to produce the drug, since no one else seemed interested in doing so.
The contract as awarded on June 27, 1975, for $1.5 million. It called for testing the drug on 6,000 heroine addic ts for 40 weeks. Shortly after the project began, it was expanded to a 120-week study, and the cost more than doubled. The expansion was caused by changes in FDA clinical data requirements.
By last year, most of the research was completed.
But as the project was winding up, HEW's drug abuse institute was coming under pressure from columnist Jack Anderson and from Congress. In a series, Anderson attacked several of the institute's programs, including the LAAM contract. He pointed out that the government was giving drug production rights to a firm it was paying for research.
Following the articles, the House subcommittee on health and environment -- which was considering whether to reauthorize funding for the institute -- criticized it for the $2 million cost overrun in the LAAM contract.
As a result of the political pressure and publicity, the officials involved in the program grew weary of the controversy.
"They felt they were giving away too much," Weisner said. "It was political. They just didn't want to take any more heat."
Jack Blaine, a federal program officer on the contract, said in an interview: "It was the government bureaucracy that botched it up. It was politics. The thing is, the contractor did a very good job."
Last August, when the drug abuse institute was negotiating whether to continue the project, the government attempted to rewrite the contract, asking Weisner to give up the rights to the drug. He declined, HEW refused to continue the contract under those terms.
"Everybody was afraid," Blaine said of the atmosphere at the institute. "People were saying, 'If we do this wrong. Anderson will write an article about us.'"
In September, the contract was terminated. Weisner said that about 400,000 pages of data were placed in a warehouse at Tyson's Corner in Virginia. The project stopped.
The pages are still in the warehouse, unused.
"I can't do anything with the data without the research the government has done," Weisner said. "I've asked them to give it to me, but they said 'no.'"
Pierre Renault, an HEW project officer, said: "As far as I know, we don't have anything to show for the contract. But we might -- if we invest a lot more money and redo some of the research -- we might be able to salvage some of it."
Marvin Snyder, director of the drug abuse institute's division of research, said that to date, HEW has spent about $10 million on research for LAAM, including the contract with Weisner. He said he was uncertain about what the government's next step would be.
Stefanie Weldon, an HEW attorney who worked on the contract, said "I'm not sure I'll ever understand what happened. . . .Sometimes we're prpared to make a silk purse out of a sow's ear. Other times we're not." "A Lot of Gobbledygook"
In the summer of 1976, bureaucrats in the federal Office of Education went out looking for someone who could "develop an Interpretive Structure Model (ISM) and strategies for implementation based on a descriptive and prescriptive analysis of resources for environmental education and struggles."
A firm in Los Angeles, Social Engineering Technology, heard the call, understood the language, apparently, and bid for and won the contract. For $449,000, it would develop an Intepretive Structure Model, known in the trade as an ISM.
At the beginning, Walter Bogan, the HEW program officer, and Sam Scheele, head of the consulting firm, thought they understood what this ISM was all about. Bogan had asked Sheele to explain his ideas for the project, and Scheele had done so in a 45-page proposal.
"This proposal is not like other proposals," the proposal began. "Social Engineering Technology is uniquely suited to the proposed project."
In explaining why Social Engineering Technology was well-qualified, the proposal said that the firm would avoid "the so-called 'dogma of immaculate perception' which suggests that fresh vision is anchored in a source of original truth. We are more inclined to adopt Thorsrud's dictum, 'There is more free space between the forbidden and the prescribed than you think.'"
Bogan at HEW was excited about the prospect of receiving an ISM.
"They promised to generate the ISM within the first quarter of the project," he said in an interview. "That way the government would know early on whether they were doing a good job."
Three months after the project started, Bogan recived what he called "a pile of unintelligible papers" from the Los Angeles firm. It was their first progress report.
Scheele insisted in meetings with Bogan that his work was not at all "unintelligible;" in fact, he told Bogan, SET was well on it way to developing an ISM.
"It was clear the contractor was not performing and was not able to perform," Bogan said. "What they accomplished wasn't wasn't recorded in any coherent way. So it was difficult to determine if there was anything useable."
In December 1976, four months after the project began, Bogan decided to terminate the contract. He said the firm had "defaulted," had not delivered what it had promised. He took steps to force the firm to repay the money it had collected from HEW.
William Deurk, an attorney for the consulting firm, immediately challenged HEW. He argument was simple: "How can the government say my client didn't deliver what he promised, when the government can't say what it is that they asked for?"
HEW lawyers agreed with the argument.
"How in the world can we say they defaulted," asked David Webb, the HEW contract officer in charge, "when it was never clear what the heck we were expecting?"
So the government agreed to pay out the money, although the contract was still to be terminated. Two weeks ago, in an informal settlement agreement, the government agreed to pay the firm at least $250,000 for the never-completed project.
"I attribute the settlement not to my advocacy," attorney Deurk said, "but to the weakness of their case."
Webb, the contract officer, said in an interview that all of the educational issues involved were "above my understanding."
"I look at it this way," he said. "Nothing was received, and we paid thousands for it. It really is a lot of gobbledygook. . . . As a taxpayer, I'm sick."
But Bogan, the project officer at HEW, disagreed with the lawyers and with the contract officer. He insisted that the Office of Education needed an ISM. After the SET contract was terminated, Bogan had the HEW award a second contract for an ISM -- this one for $417,000 to a consortium of educators.
Last year, their work was completed successfully and they delivered the ISM to Bogan. "A Neat Idea"
George Catsiapsis, an economics graduate stutdent at the University of Chicago in 1978, selected as his doctoral thesis the subject of the availability of financial aid to students.
For Catsiapsis, the subject was close to home.
"His fellowship funds had run out and he was in dire need of support," recalls his professor, Arnold Zellner.
At Zellner's suggestion, Catsiapsis decided to apply for a contract from the HEW Office of Education to study the availability of financial aid and its effect on students' decisions to continue their education.
On March 9, 1978, Catsiapsis submitted his proposal for an HEW contract. On June 29, 1978, the Office of Education awarded Catsiapsis a $17,940 consulting contract. Hewas to begin work on the contract the next day.
"This was a stop-gap measure to get him through his doctoral study," said Zellner. "Financing graduate study is very expensive."
In awarding the contract, HEW officials said that Catsiapsis was "uniquely qualified to undertake this study" because he had direct experience with student aid programs, and familiarity with "the Hechmanesque techniques for truncated data tests."
James Hechman -- the source of "'hechmanesque" -- was one of Catsiapsis' professors.
But not everyone at the Office of Education supported the contract idea.
William Pierce, executive deputy commissioner, learned of the contract a month after it had been awarded. On July 26, 1978, he wrote in a memo that he was uncertain about the need for such a study. He also cited the risk of setting a "precedent" for every graduate student "who might have a neat idea."
Deputy Commissioner Edward T. York learned of the contract two months later. On Oct. 5, 1978, he wrote in a memo: "It is really too late to cancel the contract." He said HEW had two options: approve it "after the fact" or "do nothing." HEW chose the latter.
Capsiapsis completed his study and turned it over to the HEW. He said in an interview that the study answered his question: "What determines the amount parents will contribute toward their children's educationl expenses?"
His answer: "When parents decide how much to give their kids, they take into account what the government has given to their kids and they reduce the amount they give accordingly. "
"That," said Catsiapsis, "confirmed my hypothesis."
To what use will the study be put?
"They will use it in other studies," Catsiapsis said. "A Big Headache"
About the only thing the lawyers and participants seem to agree on is that the taxpayers got very little -- some say nothing at all -- for the $1.4 million that HEW spent on a contract with Roy Littlejohn Associates.
"Don't ask me to explain that one. It's just a big headache," said Al Riskin, an HEW contract officer who was asked to help unravel the Littlejohn contract.
The contract, originall for $2.3 million, was intended to provide the HEW's Office of Environmental Education with films, brochures, and programs to enhance the public's awareness of the environment.
It was terminated in February 1979, and no one was happy with the results.
"They (HEW) spent a lot of money and didn't get the products they wanted, that's essentially what happened," said Roy Littlejohn, president and owner of the Washington D.C. consulting firm.
"I kept telling the government, 'Look, at least let's finish up the products we can deliver. But don't walk away without anything.' But they did."
Added Vincent Villa, a former Littlejohn consultant: "It was totally mismanaged. I don't think there was a clear determination of what the project was. . . The government was at least as much to blame for the confusion as anyone."
HEW's contract monitor, Walter Bogan, was the man who decided to terminate the contract midway.
"We weren't getting timely delivery of a quality we could accept." he said in an interview. Bogan noted the contract did produce at least two conferences on environmental education.
More than half of the work under the Littlejohn contract was to be done by subcontractors. At least six of them say they were never paid by Littlejohn for work they did under the contract. They claim Littlejohn owes them $200,000.
Instead, he said, the money was deposited in his firm's bank account. He said the money will stay there until government auditors determine who should be paid how much.
In reviewing the finances of the contract, the auditors came up with some unusual findings of their own.
For one, they learned that William Ewald, one of the major subcontractors under the Littlejohn contract, billed for consulting work on 211 consecutive days in 1978. He averaged 11 1/2 hours per day at a rate of $40 an hour.
That, noted the auditors in an internal report, was "an abnormally intensive rate of effort."
Ewald, in an interview, said that he generally puts in those long hours "whenever I'm thoroughly involved in a project."
One of the days Ewald billed for was Sept. 31, 1978. In the interview, Ewald said: "That must have been an accident on my part. I don't know. I guess maybe I was very tired on that day that didn't exist." CAPTION: Picture 1, John Weisner, head of a private research firm paid $3.4 million to do a drug study for the federal government, stands next to unused files on data in a warehouse at Tyson's Corner. For technical reasons, the study was abruptly stopped last September and the government received nothing for its money -- not even these files, which the firm insists on keeping, as indeed its contract provides. By Gerald Martineau -- The Washington Post; Picture 2, This diagram of an ISA' was used in a proposal that won a $449,000 HEW contract. After spending $250,000, the government terminated the contract because it could not agree with the contractor on exactly what an ISM is suppposed to be. Picture 3, George Catsiapsis, a business lecturer at the University of Chicago, ran out of fellowship funds in 1978 while a graduate student. He then turned to HEW, which gave him a $17,940 contract to study the availability of financial aid to students, a subject that Catsiapsis also had chosed for his doctoral dissertation. AP; Picture 4, The file room at the office of Education, at 7th and D streets in SW D.C. By John Mcdonnell -- The Washington Post