The contractor that operates the U.S. Strategic Petroleum Reserve, where the government is creating a stockpile of 750 million barrels of oil for use in a national emergency, is providing its 500 executives and employes with excessive salaries, bonuses and fringe benefits, according to an audit report released yesterday.
The audit, conducted by the Defense Contract Administration, said that workers are being hired by the government contractor at salaries "as much as 48 percent" above their prior wages, which were supposedly market rate. In addition, the auditors found that an eighth of the employes have received salary increases "ranging up to 25 percent" well before they even completed their 180-day probationary period.
Compensation for the executives and employes ultimately comes at taxpayer expense, although they work for a private contractor, Petroleum Operations & Support Services Inc., which operates and maintains for the government the oil-storage facilities located in salt caverns along the Texas-Louisiana Gulf Coast.
"The review revealed that the contractor's employe-compensation system does not conform to sound business practices and is not adequate to generate total compensation costs which meet the tests of reasonableness," the audit agency said.
It also criticized the fact that a number of executives employed by the contractor have agreements calling for annual bonuses of up to $150,000. These agreements, the audit agency said, do not spell out the basis for deciding how large a bonus -- if any -- each executive should receive.
The auditors also reported that some laid-off employes had agreements that called in one case for a lump-sum termination "payment of one year's salary plus 10 percent," and in another case for a "lump-sum cash payment of $50,000."
"This practice compares to none other evaluated by this agency," the audit report said.
The auditors also were highly critical of the contractor's policy of providing some relocating executives with free country-club memberships, a furnished apartment for up to six months, private-school tuition for their children for up to two years, and up to $12,000 as a lump sum toward the down payment on a home.
"These special considerations provided executives are considered to be unreasonable," the audit agency said.