The Justice Department yesterday urged Rep. John D. Dingell (D-Mich.) to drop a subpoena for an FBI agent scheduled to testify today about questionable billings by Pratt & Whitney Aircraft Group, but Dingell rejected the request.
Stephen S. Trott, assistant attorney general in charge of the criminal division, took his request to Dingell after failing to persuade the staff of the House Energy and Commerce subcommittee on oversight and investigations, which Dingell chairs.
The panel last week subpoenaed James Cavanaugh, an FBI agent who heads an investigation of questionable billings by a Pratt & Whitney plant in West Palm Beach, Fla. At issue is more than $1 million in billings for such items as lavish parties, fishing and golfing trips for Air Force officers and luxury cars for executives.
The company, a subsidiary of United Technologies Corp., said it has corrected questionable billings. But Cavanaugh is expected to testify that the Justice Department has dragged its feet during the 2 1/2-year probe and that there is sufficient evidence to take the company to court.
Subcommittee counsel Michael F. Barrett said Trott argued that the hearing might jeopardize the criminal investigation of Pratt & Whitney.
Barrett said Dingell responded that Congress has "different obligations" and wants to use Cavanaugh's testimony to demonstrate that improper billings are a problem throughout the defense industry.
Barrett said that there is precedent for such testimony and that the panel will not inquire about secret grand jury testimony. The Justice Department had no immediate comment.
At today's hearing, the subcommittee plans to unveil a study that found that Defense Department officials routinely pay military contractors more than half the overhead costs challenged by Pentagon auditors.
The unreleased 1983 study by the General Accounting Office examined a year's audits for 11 major defense contractors, including United Technologies, General Dynamics, LTV Corp., Martin Marietta and Hughes Aircraft.
The report found that the Defense Contract Audit Agency had questioned $31 million in overhead costs, but Pentagon contracting officers later agreed to pay the companies $16.5 million, or 56 percent of the costs. The audits cover 1977 to 1980.
Defense contractors are paid 80 to 90 percent of their costs before the lengthy negotiations over audit findings, which often are not resolved until years later.
"Contracting officers allow contractors millions more in indirect cost reimbursements than DOD auditors recommend," the report said.
The result, the GAO said, is that "costs which we believe are unallowable . . . are charged to government contracts year after year."
The report found that Pentagon negotiators rarely disallowed an entire bill questioned by the auditors. Instead, it said, the negotiators "compromise and allow the contractor some part of the cost."
For example, when auditors questioned $358,000 for one company's model airplanes and giveaway items, the contracting officer allowed $250,000. In another case, a contracting officer allowed $202,000 of the $532,000 in disputed company advertising costs.
The problem with this approach, the report said, is that it does not yield final rulings on which costs are allowable.
The report said that Pentagon negotiators often fail to document their position adequately or to explain their rationale for settlements. In some cases, it said, the negotiators must rely on inadequate audit reports.