The House Armed Services Committee is studying "some type of penalty" for overhead claims filed by defense contractors that Pentagon auditors find to be unacceptable, according to congressional sources.
Members are in broad agreement, one source said, that there "should be fines and perhaps criminal penalties for gross violations."
Two subcommittees' joint two-month investigation of overhead claims filed by seven major defense contractors has found "millions of dollars of absolutely inexcusable claims filed with the government," Rep. Charles E. Bennett (D-Fla.), cochairman of the inquiry, said in a statement yesterday.
Under the present Defense Department system, companies' overhead expenditures are reimbursed before the companies are audited. If items later are ruled out, the company must return the funds. Under that system, however, the company has use of the money for a period with no penalty for overcharging.
Last week, Defense Department Inspector General Joseph Sherick told a House Energy and Commerce subcommittee that he would recommend that General Dynamics be barred from further defense business as long as Chairman David S. Lewis and Executive Vice President Gordon E. MacDonald were with the company. General Dynamics has agreed to repay $244 million in improper charges.
The Pentagon, however, said later no study was under way that could lead to such a step against General Dynamics. Sherick alone cannot impose such a penalty. And Lewis has said he has no intention of stepping aside.
Fourteen House Armed Services subcommittee auditors have been reviewing seven contractors' vouchers that Defense Department auditors have questioned. Of $3.663 billion in claims submitted covering various 12-month periods, auditors questioned $109.7 million worth, the committee said.
Among the items:
* A company billed the Defense Department $950,698 for expenses related to its displays at the Paris Air Show. The Pentagon ruled years ago, the committee said, that Paris Air Show expenditures are not allowable.
* A company claimed $12,333 for two season tickets to the Los Angeles Forum, site of sporting and other events.
* A company billed the government $62,071 to enhance its "public image" after the crash of a plane it manufactured. Charges included a public relations firm's arranging a news conference, rehearsing company executives and researching crashes of competitors' airplanes.
Rep. Bill Nichols (D-Ala.), cochairman of the investigation, said, "The problem is broader than one company, and the volume of questionable billings already found shows that the problem goes deep -- it's not just a matter of an occasional and isolated wrong bill."