The Defense Department, after increasing complaints from contractors, has agreed to change some of the procedures it announced last month in requiring company officials to swear that their billings are proper.
Defense Secretary Caspar W. Weinberger said March 5 that military contractors would not be paid unless their senior officials certified, under penalty of perjury, that their bills covered only costs permitted by Pentagon regulations. The announcement was touted as part of a "get-tough policy" after disclosures that General Dynamics Corp. had improperly billed the Pentagon for entertainment, personal travel and boarding an executive's dog.
But several large defense contractors have refused to comply, saying the new certificates are too ambiguous and expose them to prosecution for perjury. This has held up billings on a number of contracts and prompted Pentagon officials to issue two letters seeking to clarify the policy.
Pentagon spokesman Michael I. Burch strongly denied a report in The Wall Street Journal that the department had "watered down" the rules. Burch said the letters were meant to clear up "misunderstandings" by contractors.
"Neither the language nor the purpose of the certification has been changed," Burch said. "There has been no weakening of the secretary's certification requirement."
In one letter, Pentagon general counsel Chapman B. Cox said the department does not intend to seek perjury prosecutions for billings later found to be improper if an official certifies them in "good faith" based on his "actual knowledge and belief." Cox said the signing official "is required to certify that in good faith he believes they are allowable and that he has reviewed the claim to satisfy himself that this is so."
In another letter, Defense Deputy Undersecretary Mary Ann Gilleece said it is "not necessary" for contractors to certify each overhead bill on current contracts if the indirect cost rates have previously been approved. She said a single certification will be required at "final settlement" unless the billing rates are changed.
But an aide to Rep. John D. Dingell (D-Mich.) called this a major relaxation of the rules. He said a certification at "final settlement" means little because by then Pentagon auditors have reviewed the expenses and contractors have been able to bank the Pentagon's advance payments during the years that negotiations drag on.
The Council of Defense and Space Industrial Associations, which plans to lodge further objections to the new rules, had complained to the Pentagon that the policy was too ambiguous and "imposes an unreasonable and impractical burden" on corporate officials. The group said it was unfair for companies to have to certify that their overhead costs "benefit the Department of Defense and are demonstrably related to" their military contracts.
Pentagon officials said this did not amount to a change in overhead billing rules.