you found out that the other contractors were paid that entire premium price for all of the space, and you complained about that and even when you could show what they were paid in their contracts, you didn't get redress? Mr. LOWRY. Yes, sir, that is correct. And I was also second bidder on the succeeding contract for the same area. I later found that the low bidder actually received about $300,000 more than I would have in spite of the fact that-on paper at leasthis unit prices were about half those I bid. Senator CHILES. The public building service established an ad hoc committee to render a decision on your complaint at that time, and I am reading from the March 1975 audit report that reports on that decision. It says that the ad hoc committee decided since you thought you were being paid only for the area above 9 foot, 6 inches that is all that you were paid for, but since the other three contractors had billed from the floor up, they should get that amount because that is the way they read the contract. So you just didn't read the contract right. Mr. LowRY. I was neither fish nor fowl. Senator CHILES. That sounds like the kind of crackpot logic that can lead to the kind of situation we have got today. The auditors had to say about that later that GSA has been permitting contractors to independently interpret the provisions of their respective contracts and had created the condition that prevented like payment for like work. It sounds like Orwell's "Animal Farm." All us pigs are equal, but some of us are more equal than others. Mr. Lowry, how did you go about avoiding the requirement of having three bids? Mr. LowRY. Well, Mr. Chairman, you would go to the building manager and he would hand you three blank form 18's, which are bid sheets. You, then, would contact two friends of yours who normally bid in the same group. You would either go around the corner and say well, today is your turn, or you would fill all three forms out in different. names. In any event there may be $300 worth of work, at best. Senator CHILES. And the building manager would give you the forms, all three forms, when you would come up there? Mr. LowRY. Yes, sir, most other times. Senator CHILES. Did you ever decide who would get the bid over lunch? Mr. LowRY. Quite often. Senator CHILES. Who had to pay for the lunch? Mr. LowRY. The credit card. Senator CHILES. You told my investigators a story about 40 miles. of pipe that you couldn't find. Would you tell that to this committee? Mr. LowRY. Well, there are 40 miles of pipe in the Veterans Building on Vermont Avenue that according to form 147's were painted. However, in order to find them, you have to take the plaster walls down, so I don't know how these pipes got painted as it is not physically possible for a building of that size to contain anywhere near that much pipe, either exposed or imbedded in the walls. Senator CHILES. But it is in the contract to paint, to paint this pipe? Mr. LowRY. It was in the 147 form, the request form, and payment for that much pipe was made. That same exact circumstance has happened no less than seven or eight times. Senator CHILES. I understand that contracts have been comingled How did that work? Mr. LowRY. Well, under the term contracts, for instance, you have a partition contract, a ceiling contract, an electrical contract, a painting contract, a flooring contract, a roofing contract, and a mechanical contract. If you have the building manager on your payroll, or if you have him in your pocket, it would be very simple to be the low bidder on all seven to eight contracts within the same group. Each of these contracts has provisions to allow for items which are in the others to be performed, so that is very simple to cheat: the building manager just writes the same items under all seven contracts, then the contractor is paid seven times for the identical amount of work. And then they quadruple the square footage; meaning, naturally, that in these cases they are being paid 20 to 30 times for work actually performed. Senator CHILES. I understand that there is supposed to be, by the sort of contracts that have been let, nine coats of paint on the walls of the GSA headquarters building. How many coats would you estimate that are on those walls? Mr. LowRY. I know for a fact that the walls have one in most places and a second coat on about 30 percent of the area. That is since 1973, only. Senator CHILES. And yet they are supposed to have nine coats? Mr. LOWRY. According to the documents, yes, sir. Senator CHILES. The frauds and schemes that you have described are those schemes that went on in 1971 and 1972 and 1973. Are those going on just back there or have those continued? Mr. LowRY. Under the informals, they went on, but that more or less prohibited you from having control over more than maybe one field office. You may have control over doing work in two offices, two field offices, or three, but once they brought in the term contract, there was an unlimited amount of money allowed to be spent upon that contract. The building manager would then be the measurer, the writer, and the person who signed certification that it was performed, and issue it for payment. Senator CHILES. He was the judge and the jury, he did everything. Mr. LowRY. Yes, sir, and he hung you, too, if he desired. Senator CHILES. Well now, is any of that, again, going on in the past or is that continuing? Mr. LowRY. Today. Senator CHILES. Mr. Lowry, we are aware that you have considerable documentation to support your statements. We would be happy to hold the record open and let you submit that information to us as you would like to submit it. Mr. LowRY. No, Mr. Chairman. They have not shrunk since 1973. They have grown. In fact, half the Pentagon should now be sitting in the Potomac River. Senator CHILES. If you would furnish those documents for us for the committee files, I would like to have those. You mentioned that you would relate some statements and you would detail some of the items that would be easier for people to understand who didn't have complete knowledge. If you know of other illegal activities that have been going on or are going on, I would like to have you give that information to our staff so that we can follow up on that, and we Mr. Lovar. Senator Cas special counsel for Chief of the C Chief of the Do you swe truth, the whe Mr. ALTO. I to Mr. DAVIA. I ic. TESTIMONY OF VINCENT AT LOVE TE Senator CHILES. Mr. Atc. as the 1- to speak at length about what y I would like to discuss a few sped colleagues, if that is acceptable. Mr. ALTO. That's fine, Senator. Senator CHILES. Now first I would like Mr. Divia, how many auditors have you unle now every Mr. DIVIA. We have 90 professional allers the country. Senator CHILES. You have 90 auditors to keep an Senator CHILES. What is your audit cycle up to? Senator CHILES. Would you explain for me now what that means Mr. DIVIA. Sure. Let me back into it, if you will. We have wi professional auditors at the moment throughout the country. We have a perceived need for 273. Senator CHILES. 273? Mr. DIVIA. 273. yes. We are a one-third of the strength we think Senator CHILES. What woula Deyear a bhit ovle mean? staff needs for 5 Team To see 2 years, et ceter a 5-year period tank to of any pass and feel an year, and T 1 now. r. of auditors, open if the by me and ick and see a to sound reas which ', there are n auditor. me. urrent disure audits. · the chair that conat was the from 273 ts for just that time, ff because ived as in a 20-year How did that work? Mr. LowRY. Well, under the term contracts, for instance, you have a partition contract, a ceiling contract, an electrical contract, a painting contract, a flooring contract, a roofing contract, and a mechanical contract. If you have the building manager on your payroll, or if you have him in your pocket, it would be very simple to be the low bidder on all seven to eight contracts within the same group. Each of these contracts has provisions to allow for items which are in the others to be performed, so that is very simple to cheat: the building manager just writes the same items under all seven contracts, then the contractor is paid seven times for the identical amount of work. And then they quadruple the square footage; meaning, naturally, that in these cases they are being paid 20 to 30 times for work actually performed. Senator CHILES. I understand that there is supposed to be, by the sort of contracts that have been let, nine coats of paint on the walls of the GSA headquarters building. How many coats would you estimate that are on those walls? Mr. LowRY. I know for a fact that the walls have one in most places and a second coat on about 30 percent of the area. That is since 1973, only. Senator CHILES. And yet they are supposed to have nine coats? Mr. LowRY. According to the documents, yes, sir. Senator CHILES. The frauds and schemes that you have described are those schemes that went on in 1971 and 1972 and 1973. Are those going on just back there or have those continued? Mr. LowRY. Under the informals, they went on, but that more or less prohibited you from having control over more than maybe one field office. You may have control over doing work in two offices, two field offices, or three, but once they brought in the term contract, there was an unlimited amount of money allowed to be spent upon that contract. The building manager would then be the measurer, the writer, and the person who signed certification that it was performed, and issue it for payment. Senator CHILES. He was the judge and the jury, he did everything. Mr. LowRY. Yes, sir, and he hung you, too, if he desired. Senator CHILES. Well now, is any of that, again, going on in the past or is that continuing? Mr. LowRY. Today. Senator CHILES. Mr. Lowry, we are aware that you have considerable documentation to support your statements. We would be happy to hold the record open and let you submit that information to us as you would like to submit it. Mr. LowRY. No, Mr. Chairman. They have not shrunk since 1973. They have grown. In fact, half the Pentagon should now be sitting in the Potomac River. Senator CHILES. If you would furnish those documents for us for the committee files, I would like to have those. You mentioned that you would relate some statements and you would detail some of the items that would be easier for people to understand who didn't have complete knowledge. If you know of other illegal activities that have been going on or are going on, I would like to have you give that information to our staff so that we can follow up on that, and we Mr. LowRY. I thank you, Mr. Chairman. Senator CHILES. Now we will have a panel of Mr. Vincent Alto, special counsel for the Administrator; Mr. William Clinkscales, the Chief of the Criminal Division of GSA; and Mr. Howard Davia, the Chief of the Office of Audits. If you all will come forward, please. Do you swear that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth, so help you God? Mr. ALTO. I do. Mr. DAVIA. I do. Mr. CLINKSCALES. I do. TESTIMONY OF VINCENT ALTO, ACTING INSPECTOR; HOWARD R. DAVIA, DIRECTOR, OFFICE OF AUDITS; AND WILLIAM CLINKSCALES, CHIEF, CRIMINAL DIVISION; ALL OF GENERAL SERVICES ADMINISTRATION Senator CHILES. Mr. Alto, as the Acting Inspector General for the General Services Administration, I want to give you an opportunity to speak at length about what you want to do with the agency. First I would like to discuss a few specific issues with you and your colleagues, if that is acceptable. Mr. ALTO. That's fine, Senator. Senator CHILES. Now first I would like to sort of count noses. Mr. Divia, how many auditors have you under your staff? Mr. DIVIA. We have 90 professional auditors throughout the country. Senator CHILES. You have 90 auditors to keep an eye on 40,000 GSA employees that spend in excess of $4 billion? Mr. DIVIA. Closer to $5 billion. Senator CHILES. What is your audit cycle up to? Mr. DIVIA. Most recently it is 15 years. Senator CHILES. Would you explain for me now what that means? Mr. DIVIA. Sure. Let me back into it, if you will. We have 90 professional auditors at the moment throughout the country. We have a perceived need for 273. Senator CHILES. 273? Mr. DIVIA. 273, yes. We are at one-third of the strength we think we need to do the audit work that we perceive has to be done, and, of course, this does not include special requests for audits that are coming more frequently now from the Administrator, Mr. Solomon, Normally a 5-year audit cycle is considered ideal. Accordingly, a 15-year audit cycle means we are at one-third strength. Senator CHILES. What would a 5-year audit cycle mean? Mr. DIVIA. It is our judgment period, wherein we estimate total staff needs for 5 years. We select 5 years because it conveniently accommodates reviews that we only do once every 3 years, once every 2 years, et cetera. Some reviews are done every year. For example, a 5-year period tends to, if you will, level out our needs and take care of any peaks and valleys in that period. Assume, for instance, if we feel an audit area is particularly sensitive and must be done every year, and we estimate the audit need is 100 man-days per year. In our audit universe then, which is 5 years, we would put in 500 mandays. In that same 5-year period, where we perceive another area is not quite as sensitive, but does require some surveillance, we may |