Army Examines Gouging Reports at Missile Base : Orange County Firm, Partner Investigated

The Army is investigating allegations that an Orange County firm and its partner in a $250-million contract have overcharged the government for work at the Army’s missile headquarters in Huntsville, Ala., government officials said Wednesday.

The company, Holmes & Narver Corp. in Orange, shares prime contractor duties with Morrison-Knudsen Corp. of Boise, Ida., under the five-year maintenance and food services contract at the Redstone Arsenal.

The Redstone inquiry is not related to the wide-ranging investigation of defense contractors that began recently.

A preliminary investigation by the General Accounting Office found evidence of “a pattern of abuse by the contractor and its subcontractors, including illegal activities,” GAO investigator David C. Williams said Wednesday in testimony before the House Government Operations national security subcommittee.

According to Williams, the Army’s Criminal Investigation Division has taken over the inquiry. Army CID officials contacted at the division’s headquarters in Virginia late Wednesday declined to comment.

Officials at Holmes & Narver and at Morrison-Knudsen issued brief statements acknowledging the GAO investigations and reserving further comment until Williams’ testimony has been reviewed.

Holmes & Narver is an international architecture, engineering and construction management firm with several thousand employees worldwide, including about 300 in Orange County. According to a former executive, the company was founded as an engineering and design firm in Santa Ana in 1933 and formed its services division in the 1960s to handle maintenance contracts on military bases.

International Company

Morrison-Knudsen is an international engineering, construction and shipbuilding company with about 15,000 employees.

Williams testified Wednesday that the GAO’s investigation found instances in which the Army was overcharged for services and supplies under the Holmes & Narver/Morrison-Knudsen contract.

In one case, he testified, the Army was billed for 23 hours of work for a job that took 45 minutes. In a separate incident, two men were assigned to stripe the parking spaces at a base parking lot--while eight other workers drew pay for watching.

A subcontractor in Huntsville, Williams testified, charged the government for the wages of employees who never worked at the Redstone Arsenal and also billed the government $86,000 for nonexistent repair parts.

Testimony Listed Abuses

Other improprieties cited by Williams in his testimony included:

- Throwing paint away--in at least one case dumping it into the Tennessee River--to cover inflated contract costs.

- Giving building materials to workers and to government employees to help cover inflated labor charges.

- Overcharging the Army by 262% for oil changes and lube jobs on Army vehicles at the base.

In their prepared statements, Holmes & Narver and Morrison-Knudsen said they “are aware the GAO has been auditing these operations for some time, and we have been fully cooperating with GAO representatives. We have just received the GAO congressional testimony and are reviewing the matter.” The companies used identical wording.

A GAO spokesman said Wednesday that the investigation began as an offshoot of a wider inquiry into Redstone contracting activities.

In his testimony Wednesday, Williams said the bids for a large number of contracts awarded to small businesses for work at Redstone came in “within 1% of the government’s cost estimates, suggesting there might have been unauthorized releases of government estimates.”

GAO Found ‘Criminal Activity’

He said the GAO audit found “criminal activity within the system” and said the CID is investigating.

Williams also revealed in his testimony Wednesday that Lt. Gen. John Wall, commander of the Army Strategic Defense Command, was reprimanded two months ago and has since retired in reaction to a GAO investigation that “revealed apparent favoritism in two contract awards” to BDM International of McLean, Va.

In one of the contracts, Williams said, Wall shifted 240,000 hours of support work to BDM after the company lost a bidding war for the $500-million contract to Teledyne Brown Engineering.

BDM charges $15 per hour more for the support work than does Teledyne Brown, Williams said, which “could result in an expected increase in cost of approximately $3.6 million.”

BDM was recently acquired by Ford Aerospace, a major aerospace and defense firm with headquarters in Newport Beach and Washington.