The Defense Department paid General Dynamics Corp. $244 million more than it should have for overhead expenses on weapons systems over the past 12 years, a Pentagon spokesman said yesterday.
The Pentagon has already recouped $120 million of that amount, said spokesman Michael I. Burch, and it plans to recover the balance "to adequately protect the government's interest." General Dynamics either will be assessed a lump sum or will lose its monthly overhead payments for current projects, he told reporters.
A spokesman for General Dynamics, the nation's largest defense contractor, declined to comment, saying the company has not been formally notified of the Pentagon findings.
The overpayments are the latest in a string of revelations involving the billing practices of defense contractors. Congressional investigators said yesterday that the overpayments represent the "tip of the iceberg" of the General Dynamics case.
Of the overpayments disclosed yesterday, $90 million had been previously uncovered by the Pentagon and recovered from General Dynamics.
The rest of the overpayments were uncovered over the past month by a team of 20 Pentagon auditors, Burch said. The auditors had been ordered to review General Dynamics' earlier billings after company officials acknowleged at a congressional hearing that they had improperly charged the government for such expenses as a chili cookoff, country club dues, liquor bills and housing a corporate executive's dog in a kennel.
Burch said he was uncertain of the precise items included in the $154 million worth of excess payments cited by the auditors in the study they completed most recently. But he said he had heard they covered billings for workers' compensation and company use of computers.
The $90 million in overpayments included such items as the kennel fees, the spokesman said.
Burch was unable to pinpoint the dates of the overpayments but said auditors went through General Dynamics' billings for its Electric Boat division as far back as 1973. Billings of other divisions were examined for periods of two to six years.
The overpayments cover overhead expenses, a vaguely defined class of "administrative and general" costs related to weapons production. Contractors recently have been found to pad their overhead billings sometimes with a wide array of expenses for public relations, political contributions, entertainment and lobbying, and personal travel.
Overhead payments are made to contractors every month before they actually spend the money. Only after the bills are submitted to and reviewed by auditors -- a process often taking years -- can they be judged for propriety.
According to Burch, the $90 million of overpayments to General Dynamics found in earlier audits has already been withheld from the company's overhead account. But he said he was unaware of the exact timing and process of the withdrawal.
Another $30 million, representing General Dynamics' overhead payments for a single month, was frozen by Defense Secretary Caspar W. Weinberger on March 5 when he ordered the audit.
Burch said defense officials are still debating how to recoup the remaining $124 million. Among other things, he said, the Pentagon could demand full payment or continue the suspension of the $30 million monthly overhead fee until the amount is fully reimbursed.
"We will collect," he said. "If the corporation wants to contest the amount, they may do so but we will be holding the money."
Last month, General Dynamics agreed to withdraw $23 million in disputed overhead charges. Burch said he was uncertain whether that amount was included in the total overpayment figure cited by auditors.
The spokesman said similar audits are being done for other major contractors, but he added, "We think there are a lot of contractors who handle their billings in a responsible manner." He said abuses do not appear to be "widespread."
Rep. John D. Dingell (D-Mich.), whose House Energy and Commerce subcommittee on oversight and investigations has reviewed General Dynamics' contracting practices, questioned whether Weinberger plans to punish the company for "this enormous abuse of taxpayers' money."
Dingell noted that auditors focused only on overhead expenses, and failed to examine overrun and waste problems in weapons production, which he described as "multibillion-dollar accounts where the real money is."