Defense Firm to Withdraw Some of Costs : General Dynamics Backs Off $23-Million Questioned Overhead

WASHINGTON — General Dynamics Corp. has agreed to withdraw $23 million of $63.6 million in overhead costs questioned by the Defense Contract Audit Agency, the company chairman said today.

General Dynamics Chairman David S. Lewis told the House Energy and Commerce subcommittee on oversight and investigations that the charges--those bills not directly linked to military hardware construction--are part of reimbursements for the years 1979 to 1982.

In addition, he told the panel in his second appearance that 200 people in the corporate headquarters are working to examine each overhead voucher and charge for the year 1979 to 1984 and that another 500 people are doing the same thing at the divisional levels.

Earlier this month, Defense Secretary Caspar W. Weinberger suspended the $40-million-a-month overhead payments the Pentagon had been making to the firm while its billing procedures were audited.

Checking ‘Every Voucher’

Lewis told the subcommittee, which is investigating allegations of fraudulent billings by the nation’s largest defense contractor, that the overhead charges totaled $170 million for the 1979-82 period, of which $63.6 million was questioned by the Defense Contract Audit Agency.

He said the headquarters staff is “looking at every voucher and every expense report, and they are designating every item that appears to have the slightest question of allowability.”

In defending his company, Lewis said the firm has checked its overall procedures on the submission of vouchers and found them satisfactory but found “that our implementation of those policies has left much to be desired because the policies were not supported by adequately defined written procedures.”

He said the firm has concluded that it needs to overhaul its policy statements, paper-work forms and provide proper direction and education to its employees on how the bills are to be handled.