The Reagan administration's war on fraud and waste (including mismanagement) is long overdue. But how productive are the proposed across-the-board cuts in the many public entitlement programs? A reduction in eligibility may be justified. However, reduction of fraud is not necessarily ensured by a reduction in funding. Unless considerable money is spent on investigation and enforcement, the same number of fraudulent claimants will continue to drain funds from the programs, leaving a smaller amount from the reduced funding for the deserving and needy. There is a more productive area where fraud and waste should be eliminated -- the methods of federal procurement.
By far the largest expender of the federal procurement dollar is the Department of Defense with its $194 billion budget -- projected within the next year to $250 billion. Today we are locked into a "sole-source" weapons production system that can be suppied only by specialized industrial giants. It is not surprising that over 60 percent of Defense contracts are non-competitive (i.e., sole-source contracts). Five major civilian agencies awarded 64 percent non-competitively. The Office of Federal Procurement Policy estimates that up to 25 percent savings could be realized for every dollar that is moved into the area of competition. This means that the government could save up to $8 billion by returning to the basic benefits of effective competition in the Department of Defense alone.
In the procurement of major weapons systems, design proposals are "negotiated competitively" but are usually awarded to the major defense contractors. The production contract is a sole-source procurement -- usually with the successful designer -- because it has the facilities to do the job quickly. During performance, the original price may increase tenfold. tThe final price amounts to a cost bail-out of the contractor, plus a guaranteed profit.
In December 1972, the Commission on Government Procurement recommended more effective competition in negotiated procurement. For the past five years Congress has had before it three bills to implement the commission's recommendations; none has passed. It will be particularly difficult to introduce competition into weapons system acquisition, but there is no reason a cost bail-out should pay for inefficiency, fraudulent claims and other costs that are unallowable customarily in commercial transactions. Let's give government auditors, lawyers and contracting officers a mandate in this area to determine what price is right and then act on their decisions.
Reagan's cutback in consultant contracts by 5 percent is not a good solution. The federal system needs consultant expertise, but it does not need the rip-offs perpetrated at the end of each fiscal year by the "beltway bandits." Again, it is the method of procurement that must be controlled. Discipline of procurement officials during year-end buying is essential. Each year billions of dollars are wasted on contracts for services that are not needed and never used. Programs should be developed for agency needs that are mission-oriented; there should be a cost-benefit analysis of each major procurement and time to obtain competition. Late appropriations make it imperative that all agencies have multi-year procurement authority. The orgy of fiscal year-end spending and irresponsible commitments must somehow be stopped. It is during these last few months of the fiscal year that sole-source proposals flood the procurement offices to tempt contracting officers with easy ways to reduce the funds that agency heads dictate must be receptive to additional funding for the ensuing year. I would require procurement to be scheduled over the entire fiscal year and prohibit any sole-source procurements in the last four months of a fiscal year.
Why are federal officials so eager to commit funds but too lazy to collect debts owing to the federal government? Some years ago, a spot check by the comptroller general of six federal agencies showed $4.2 billion in overpayments to contractors and grantees that had not been collected because federal officials were "too busy." An apropriate sanction would be for the Office of Management and Budget to reduce the annual budget of each department or agency by the outstanding total of overpayments or uncollected debts that did not require lengthy legal intervention.
Congress has established penalties for fraud against the government that are more than adequate deterrents (in the False Claims Act and, more recently, in the Contract Disputes Act of 1978). Unfortunately, the sanctions require recongition of the fraud by the agency against which it is perpetrated; and these agencies have been reluctant to become involved. Such referrals as are made to the Department of Justice for prosecution find its claims department understaffed and unable to give them priority. As a solution: if dollars were withheld from the contractor immediately upon the detection of fraud, the onus would be on him to pursue recovery of the funds if he felt he could be successful. The deterrence to defraud would certainly be more effective.
If the budget can be reduced substantially by such procurement reforms, would this not be better than cutting worthwhile publilc entitlement programs? We are fortunate that the new administration is determined to explore all avenues and not to compromise where savings can be made.