To some critics, the Pentagon's announced crackdown this week on improper billings by military contractors was reminiscent of the police inspector in the movie "Casablanca," who was "shocked" to find gambling in Rick's cafe shortly before pocketing his winnings.
"It seems a little disingenuous to do a big audit now when we've known this kind of thing has been going on for years," said Richard A. Sauber, who headed the Justice Department's Defense Procurement Fraud Unit during President Reagan's first term. "Many of the people who are complaining now have been going to these entertainments and affairs for years. Who did they think was paying for it?"
But a spokesman for Defense Secretary Caspar W. Weinberger said that the "get-tough policy" -- and particularly the suspension of some payments to General Dynamics Corp. -- is more than a budget-time public relations gesture. Michael I. Burch, assistant secretary of defense for public affairs, said Weinberger focused on the problem of improper billings more than two years ago and that tougher regulations have been winding through the drafting and approval process ever since.
The differing perceptions, and the delays in implementing changes, reflect the trouble that even a defense secretary can have in trying to penetrate and shape the Pentagon's massive procurement operation. Weinberger's suspension of $40 million in overhead payments to General Dynamics in the next month, for example, is a radical move by Pentagon standards -- but during that month the company will still receive an average of $23 million a day from the Pentagon in other payments for weapons "in progress."
The suspension is "totally insignificant" to General Dynamics financially, according to Paul H. Nisbet, an analyst with Prudential-Bache. He said the St. Louis-based company, the military's most active weapons maker -- with $7.2 billion in sales last year -- has quadrupled its earnings within the last four years.
"I don't think there was much question that there were ulterior purposes for the action that was taken," Nisbet said. "I think it was more of a message to the American people than it was to the industry: 'The Department of Defense is being tough on contrators. Don't worry about all the stories you hear about $6,000 coffee makers.' "
Weinberger's action was prompted by revelations in Congress that General Dynamics had charged the Pentagon for entertaining government officials, boarding an executive's dog and flying company Chairman David S. Lewis to and from his farm on a corporate jet. Defense contractors are permitted to charge the Pentagon for a share of salaries, fringe benefits, electricity and other overhead expenses, but some costs -- including entertainment, lobbying and most advertising -- are not supposed to be reimbursed.
Many of the expenses that Weinberger is questioning have been challenged by Defense Department auditors in the past but subsequently allowed by Pentagon contracting agents and higher officials.
The House Government Operations Committee last fall studied 12 Pentagon audits that challenged billings for air show costs, ceremonies, gifts and promotional brochures. It found that more than half of the challenged expenses eventually were allowed.
The committee also reported that the Pentagon has appointed panels four times to consider tougher rules on reimbursement of public relations costs but each time decided to take no action.
Burch said that two years ago Weinberger ordered his procurement chief to draft regulations banning reimbursement for most public relations costs. Those regulations are in draft form and will be published for comment, Burch said.
The Pentagon has suspended "progress" payments to two other large contractors within the past year, General Electric Co. and Hughes Aircraft Co., because of quality problems in weapons production. Payments to Hughes for the Navy's Phoenix missile, for example, were suspended in August -- but started again in November with reimbursements for past costs even though Hughes did not resume delivery of missiles until February.
That experience led some congressional critics to react cautiously to Weinberger's action even though they praised it.
"It's a beginning," Sen. William Proxmire (D-Wis.) said. "But if this is all there is to it, it's not going to be enough."
"These problems are not going to be solved by just withholding payments," Rep. Barbara Boxer (D-Calif.) said. "These problems are institutionalized in the very core and heart and soul of the way the Pentagon operates."