Evening star., 1946-08-12
Continued From First Page !

i Stricted nelo IN which the Genera
Accounting ONCE was permitted t,
function.
l The story told in the GAG
reports is SAD tale. of reckless ex,
lpenditures, sheer stupidity by pro,
tcurement officers, lax supervision o
procurement by the Army. Nav,
land Maritime Commission and greet
or downright chiseling by war con.
TRACTORS.
4 These elements were extensiv,
enough. or untold billions woult
not have been wasted, but Mr.. War.
rem is anxious to make clear tina
they are not characteristic of al
procurement officers and contract.
ors. The large majority, he thinks
served well and patriotically.
Cost-Pius Deals Expensive.
/ Channels in which the controllel
/ general thinks the greatest sum!
were squandered were in cost plu.
/ fixed-fee contracts. conversion ol
cost-plus contracts to negotiated
f1xed-price contracts without com.
petitive bidding. and contract termi-
nations excessively favorable to the
contractor.
The cost-plus contract he dc.
scribes as The greatest device evel
invented for pumping money oil,
of the Treasury" Bad as it is, thu
law did permit a GAO audit of such
contracts, and it was through these
audits that the 200 million men
toned previously was recovered
But even there, GAO auditors were
restricted to determining whether
the money paid was in accordance
with the contract. They couIdn1
60 into the question of whether the
provisions of the contract were pru.
dent Or reasonable. They did, how
ever, make reports to the RESPONSE
BILE agencies on contracts which
seemed utterly unreasonable, and
subsequent articles in this series viii
deal with some of these reports.
Bad as the cost-plus contract is
even worse is the negotiated fixee
price contract with the handy pro.
vision contained In the First Wal
Powers Act which authorized pro,
curment officers to modify contract.
whenever, in their judgment, modi
fication would facilitate the wal
effort"
| This device was used repeatedly
to bail out contractors when il
developed that they were losing
money or not making as much a.
they expected. Facilitate the wal
effort like charity, has covered I
multitude of sins.
Some of the cost-plus contract.
were converted to lump sum con.
tracts as long as year after tn.
contract had been completed. II
at least one instance the Martini,
Commission converted a contrac
after cost-plus ships were sailing th'
seas with cargoes.
1t is interesting to note that con.
version could not be done withou
the consent of the contractor. Afte,
all, he had a contract, which bount
the Government. even though it dis
not bind him. Mr. Warren, in con
versation with this reporter, wouls
not draw the conclusion that tn,
switchorers from cost plus to fixee
price were for the benefit of con.
tractors rather than the Govern.
ment, but stopped with the query
What do you think?" :
He did, however, tell a Senator
who asked what he thought WA
the reason for s,'ch changes:
For two purl,oses--to avoid or
audit possible under cost plus bu
impossible under f1xed price, ane
the other was to pay the contractor
more money"
The reason contractors and pro.
curement officers could avoid a GAG
audit in fixed price contracts wa.
that the controller general was re.
stIicted here even more than HI
was in dealings with cost-plus con-
tracts. His agents could do no more
than establish that the Government
didn't pay any more than the stip.
ulated price, however extravagan,
or improvident that price may have
been.
Couldn't Probe for Frauds.
There was one loophole-if he hac
evidence of fraud, the controller
general was authorized to make ar
audit. But the means to discover
fraud, If any. were denied him. The
way to discover fraud. obviously
is to make an audit-but unless
the GAO knew in advance OF
fraud it couldn't make the audit
So it happened, for instance
in the notorious Carson case tha,
the GAO was excluded until the
Mead Committee dug up evidence
which now makes possible an audit
Similarly, no contract termina-
tions, the GAO is virtually excluded
from any role. In fact, Mr.. Warren
told the Mead Committee l0-year-
old moron, in 10 seconds, could per-
form the functions assigned to GAO
in passing on contract examinations
many OF which involve very sub
stantial payments to the contractor
What GAO gets is two pieces OF
paper. One Is the voucher or check
which shows how much the Govern
ment is paying out. The othe,
states how much the Government
should pay.
Mr.. Warren cites a Hypothetical.
instance of how it works: They
| terminate a contract for a million
dollars. The voucher is for a mil
lion dollars. Check. The audit Il
over, as far as the records they
send here"
Nothing 10 Work With.
Here again, if the controller gen.
eral knows OF fraud, he can make
an audit. But how can he, on the
basis of these two sheets of paper
discover whether there is fraud ir
the settlement? The Mead Com
mittee asked him that question anc
he replied: That's a joke, whai
/ is transmitted to u.s." Only ar
accident, he says, could bring te
the attention of his office evidences
of fraud.
/ The reason. OF course. for the
wartime enactments which circum
scribed the powers OF the controlle,
General in eyocoiY,i,,sY nny,fcc 49, -.