Defense budget: $30 billion wasted?

Independence Day is a week away, but fireworks already are popping and sizzling on Capitol Hill. The man with the match is famed Pentagon whistle blower A. Ernest Fitzgerald and the fuel is overpriced, inefficient weapons procurement that may be costing billions of dollars more than it should.

In pyrotechnical testimony yesterday, Mr. Fitzgerald told a packed Senate hearing room that as much as $30 billion in weapons-buying funds are being wasted, that the military establishment has frustrated his efforts to determine what proper costs should be, and that fundamental changes - not just expressions of concern about cost overruns - are necessary to reform the system.

''Too many of our procedures and too much of our activity in the acquisition-management business is aimed at cost and budget justification instead of cost reduction,'' the mild-mannered and affable Air Force official said. ''Too many of the administrators in this end of our business instinctively react to protect budgets and the interests of big contractors. . . . There is a widespread belief within the Department of Defense that we have an obligation not to 'embarrass' the DOD by disclosing such things as excessive prices because such disclosures might have an impact on the defense budget.''

When Ernest Fitzgerald says such things, policymakers and legislators pay especially close attention. Fitzgerald made his mark by disclosing substantial cost overruns in the C-5A transport aircraft program 16 years ago. He was fired for that breach of Pentagon etiquette and spent more than a decade in a legal battle to finally regain his civil-service job overseeing financial management systems for the Air Force.

Twice in recent weeks he has been prevented from testifying in his official capacity by senior defense officials who don't agree the situation is as bad as he describes. His Capitol Hill appearance yesterday came only as a result of a subpoena issued by the Senate.

Fitzgerald acknowledges that Defense Secretary Caspar W. Weinberger and Air Force Secretary Verne Orr have taken steps to improve weapons procurement. The Pentagon's Office of Inspector General (established two years ago) has been especially helpful in ferreting out fraud and abuse, he says.

But Fitzgerald says fraud and abuse are only a small part of the problem.

In essence, he says, the Pentagon accepts as fact what weapons builders say an item costs, rather than determining what a system should cost based on common industrial engineering practices, then adding the special costs inherent in weapons and other battlefield supplies.

He cited as an example the troubled and controversial Maverick missile, a so-called ''smart bomb'' designed to destroy tanks by homing in on their infrared image. Mavericks now are costing nearly $1 million apiece, and the contractor (according to Fitzgerald) is charging 17.2 hours for each ''standard hour'' of work the missile should have required.

''The insidious thing is, once someone gets away with a rip-off it becomes the standard,'' he says.

Under the terms of settlement of his case against the Pentagon, a federal court ruled not only that Fitzgerald should be reinstated, but also that the Air Force ''provide him with the appropriate resources'' to carry out his job of controlling procurement costs. The court also ruled that he should have ''direct access to information . . . necessary to perform his duties.''

But Fitzgerald and his fellow financial analysts within the Defense Department and military services say they have been particularly frustrated by the inability to obtain necessary data to figure ''should-cost'' prices. And they charge there have been deliberate and often-successful attempts to delay and sometimes prevent such information from being made available from within the Pentagon establishment.

Since Fitzgerald works for the Air Force, he calls this a ''blue curtain . . . the military part of the Air Force simply clamming up.

''We have to go through layer after layer after layer of requesting information,'' he says. ''Sometimes it's altered and sometimes we don't get it at all.''

Part of the problem, many critics say, is the so-called revolving door between the Pentagon and defense contractors. Military officers who manage weapons-procurement programs often are recruited by defense industries who offer them high-paying jobs after they retire. Thus, there is a built-in incentive not to be critical of such companies or the systems they produce.

In 1982 alone, 799 retired senior officers and Pentagon civilians went to work for the top 10 defense contractors, according to Defense Department figures.

In an attempt to slow this military-industrial revolving door, two California lawmakers yesterday introduced legislation to prevent companies from hiring federal employees who had supervised contracts with that company during the previous five years.

A bill introduced by Democratic Reps. Barbara Boxer and Mel Levine also requires federal contractors to reveal all former federal employees hired during the same period. The lawmakers cite the President's Private Sector Survey on Cost Control (the Grace commission) and published comments of White House Budget Director David A. Stockman in estimating annual Pentagon waste as much as $30 billion.

Says Ernest Fitzgerald: ''Bad management has shot down more airplanes, sunk more ships, and immobilized more soldiers than all our enemies in history put together.''

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