Putting a Tighter Rein on the Pentagon's Private Consultants

IN early 1987 a defense industry consultant named William Parkin was hired by a United States Navy office to write a report on managing major purchases. He recommended employing an outside company to handle key parts of the deals. He even steered Navy officials toward a company named TCASY that he said met their needs. What he did not tell them was that he had a financial interest in TCASY.

Mr. Parkin later told TCASY's president that he had the inside track on the job and could thus raise his price, ``and then pay Parkin 10 percent,'' according to a federal affidavit.

One of the bigger catches of the Justice Department's ``Ill Wind'' investigation into defense procurement fraud, Parkin has since been convicted of related charges. His profession, the free-wheeling one of consultants who advise contractors and the Pentagon alike, has emerged as a central area of the Ill Wind probe.

Though it sounds narrow and technical the fight over consultants could have widespread implications for defense procurement. Consultants are ubiquitous in the Pentagon. For the armed services, they do everything from preparing the charts and overhead-projector slides beloved of military briefers, to drafting sensitive weapon specifications. For contractors, they advise how to market their products in the maze of the Pentagon bureaucracy, as well as engineering support and other technical services.

The criminal action of individuals does not mean a whole profession is corrupt. But a recent investigation by the Defense Contract Audit Agency (DCAA) concludes that there may be some systemic problems with the way defense consultants do business.

A series of audits by the DCAA found that 20 percent of the consultant fees charged to the Pentagon by contractors as overhead costs were ``questionable.'' The audits were a follow-up to a more-limited probe last year that reached a similar conclusion.

DCAA officials scrutinized 27 top defense companies. They found $53.7 million in fees that they felt were suspect, out of $269 million in total consultant charges.

The primary reason for questionable costs was ``the contractors' inability to provide adequate evidence of the nature and extent of the services received from the consultants,'' according to the audit. In other words, no one could prove what the consultants had done for their money.

William Parkin allegedly used this technique on occasion to cloud what he had actually done for clients. In August 1987 he was hired by Teledyne to help land a Pentagon electronics contract. His influence was such that he was able to eliminate the possibility that the contract would be set aside for only small businesses, and he convinced defense officials to eliminate Teledyne's only competitor for the work, as technically unqualified. Yet in an intercepted telephone call ``Parkin said that they deliberately did not detail in the agreement what Parkin would do for his money.''

The mind-set of the consultant world is ``let's keep things loose, let's not put too much on paper,'' charges a Senate staff aide who works on the issue.

The DCAA audit also found that consultant fees for lobbying Congress and the White House, and unallowable advertising activities, had been passed back to the Pentagon as overhead costs.

Last year, in an effort to understand better the consultant business, Congress voted to have the Reagan administration recommend whether defense consultants should register with the government and disclose their clients.

One thing lawmakers wanted to try to prevent was blatant conflict of interest, such as Parkin incurred when working for both the Navy management office and the firm he recommended that it hire.

The administration published its proposed contractor regulations on June 7. They call for limited consultant registration.

When detailing the proposed rules before Congress, Allan Burman, acting head of the Office of Federal Procurement Policy, pointed out that Parkin and other ``Ill Wind'' malefactors clearly broke US laws. Thus even if registration had been in place, it ``would probably have had little effect on the actions of these individuals,'' Mr. Burman says.

Congressional critics quickly blasted the proposed new rules as full of loopholes. For instance, an agency head, or anyone he designates, can grant waivers to the rules. Consultants and contractors who say they have internal ethics programs are exempt if the contract in question is for less than $500,000. Many consultant contracts are under the half-million-dollar mark, charge critics.

``If the administration doesn't tighten this proposal ... I will probably begin moving my own legislation through Congress once again,'' says Sen. David Pryor (D) of Arkansas, who has long pushed for more action on this issue.