broader. The reports have detailed misuse of Government credit cards and supply stores; a policy of freewheeling spending at the end of the last fiscal year has been revealed.

I find it very disturbing that there is no indication of how pervasive these problems may be. It seems as though a Pandora's box has been opened, and we can only hope that all the horrors have finally escaped.

The indignation felt by taxpayers over Government spending that is fraught with fraud and mismanagement is certainly somewhat justified by these apparent reports of GSA activities. I believe what has been called a taxpayer's revolt is not only a refusal to pay high taxes, but a concern to fund Government in which there are such practices.

We are indebted to the Washington Post for their excellent investigative reporting. It is unfortunate that once again Congress must rely so heavily upon the press to uncover wrongdoing in Government.

I believe the last time Congress had hearings on GSA was in the House in 1967. This is a classic example of the need for a systematic plan for program evaluation. If it provides Congress with a mechanism for responsible, meaningful oversight, I think it would help discourage these kinds of mismanagement and fraud, and certainly uncover it if they did occur.

Thank you, Mr. Chairman.

Senator CHILES. Thank you, Senator Roth.

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. LowRY. I do.

Senator CHILES. You are accompanied by your attorneys this morning, Mr. Thomas W. Holland and Mr. Lorin H. Bleecker. Before we ask you questions, I want you to understand that I will understand that your appearance here today is voluntary and that you are not being compelled to speak here. Is that correct?

Mr. LowRY. Yes, sir.

Senator CHILES. Do you understand that this subcommittee has not and will not offer you any kind of immunity for your testimony? Mr. LowRY. Yes, sir.

Senator CHILES. I understand that you have a generally outlined or prepared statement. Would you like to go ahead and begin with that?

Mr. LowRY. Yes, sir.

TESTIMONY OF ROBERT A. LOWRY, PRESIDENT, WIBCO, INC., ACCOMPANIED BY LORIN H. BLEECKER AND THOMAS W. HOLLAND OF THE FIRM OF HOLLAND AND BLEECKER

Mr. LowRY. Mr. Chairman, Senator, as I have already indicated, my name is Robert Lowry. I am currently a resident of the State of Maryland and have been a lifelong resident of the metropolitan area.

I am a painter by trade and have been engaged in the paintingcontracting field for most of my adult life. Moreover, my father was similarly employed.

Senator CHILES. You are going to have to pull that speaker up a little bit closer and speak a little more into it so that we will be able to hear

Mr. LowRY. Moreover, my father was similarly employed, and as a result, I used to enjoy a close personal working relationship with many of my competitors.

Before going into the heart of the matter for which you have invited me here today, I want to extend my thanks to you for providing this forum, this hearing. Your inquiry is the culmination of a 4-year effort on my part to bring before the U.S. Government the blatant thievery being carried on by certain Government employees in collusion with unscrupulous contractors.

In 1971, I ceased participating in the illicit activities. By 1974, I could no longer bid competitively on GSA contracts simply because I would not participate in the fraud. In early 1975 my company was, as a result, out of business and for the first time in 25 years in the trade, I was unemployed.

So that this record may be clear, I can sit here today and describe my course of conduct which regularly included the performance of numerous illicit activities in as great detail as you would like. As you probably are aware, my attorneys have obtained for me immunity from prosecution in the current investigation being conducted by the Federal Government.

Some 4 years ago, I began a letterwriting campaign in which I wrote letters to the General Services Administration officials, the Justice Department, the FBI, the U.S. Attorney, and even the President of the United States in an effort to bring this criminal conduct to the surface. Additionally, I initiated formal protests of these contracts prior to their award.

Mr. Chairman, today is the very first public forum in which these issues are being raised. This is most significant since I would estimate the cost to the taxpayer of these illicit activities to be millions upon millions of dollars per year.

Since I am aware of the time constraints imposed upon this committee, I have chosen to highlight a few examples of illicit conduct. which have regularly gone on over the years to substantiate my claims of gross criminal activity.

Moreover, since many of the schemes used to defraud the taxpayer are very sophisticated and since one must have a working knowledge of Government contracting procedures to fully comprehend the systematic bribery, I have chosen to bring before you the most elementary types of fraud which have been practiced.

However, I want to assure you, Mr. Chairman, that I stand ready to respond to any questions you may have today or in the future.

From 1968 until 1971, most GSA maintenance work had been performed through informal contracts. Informal contracts, as you may know, are contracts of a face value of $2,000 or less. These would be awarded by the building managers under an informal bid system. In practice, two or three contractors would decide among themselves who would get a contract on a given day, and each contractor would bid up to the $2,000 limit, their bids being separated only by a couple dollars or several dollars.

Until late 1970, in order to get work under such informal contracts, the contractors made a practice of paying off GSA building managers by taking them to lavish lunches, sponsoring parties, paying cash, picking up the bills for their vacation, and in many cases, providing

By late 1971, it became obvious even to GSA that such informal contracts actually spawned these fraudulent practices. In an effort to purge the system of such abuse, GSA devised a new system of term contracts for building maintenance whereby interested contractors would bid to perform maintenance on given buildings on an annual basis. In actuality, these term contracts did nothing to curtail the fraudulent practices which arose under the informal contracts. In fact, there can be no question that the fraudulent practices only increased with the advent of the term contract. This is because the individual building managers were reposed with the authority of specifying what work would be done under the contract, checking to insure that the specified work was done, and finally, authorizing payment for the work allegedly done.

This system made it possible for these dishonest building managers to function as judge, jury and hangman. By mid-1974, it was impossible to submit a successful bid without first having knowledge of what the involved building manager wished to take by way of cash, gifts, favors, trips and female companionship. Therefore, an arrangement would have to be made with the building manager before an actual bid was submitted.

In 1974, another new element was introduced into the bidding of these contracts, which provided a new scheme. At this time, unbalanced bids came into vogue in the area of term contracting. By their very nature, unbalanced bids are not responsive to the bid invitations. This kind of unbalanced bidding appears to yield the lowest bid, if one focuses only on the bottom line of the bid sheet.

In actuality, the unscrupulous contractors, acting in concert with the building managers, used this system to defraud the Government of millions and millions of dollars. This increased the fraud because the favored contractors were advised by the building managers in advance of bid day as to which items on a bid sheet would, in reality, be used, and which would not be.

Thus if you knew a building manager would never request you to perform a certain type of work, you could assign an unreasonably low unit price to that element, thereby lowering your aggregate bid price.

In addition, the unsavory relationship between the favored contractors and the building managers had by this time become so entrenched that it had become a widespread practice for building managers to authorize, allegedly inspect, and certify for payment literally millions of dollars of work which was never performed.

An example of the misuse of unbalanced bidding to which I refer no doubt will help you to understand this practice.

If by collusion a contractor knows that the building manager will not request one-coat painting, even though the invitation to bid specifies that 1 million square feet of one-coat work will be done, it will permit the contractor to place on the bid sheet an unreasonably low unit price for one-coat work, thereby getting the low bottom line and assuring the contract award. Once the contract has been awarded, the building manager will then authorize only two-coat work which in the bid solicitation was specified as 100,000 square feet, but which, in reality, will be written to 1 million or 2 million square feet. Naturally, this will increase the contractor's receipts dramatically if, as was normal practice, he bids two-coat work at excessively high prices.

Furthermore, I wish to stress that by the mid-1970's, it was commonplace for crooked building managers to issue procurement requests which inflated by three, four or five times the actual work which would be performed pursuant to the term maintenance contract. In many cases, the procurement requests were issued, certified as being completed and forwarded for payment when, in fact, no work whatsoever had been performed, provided the building managers were paid off.

For example, in 1973, I painted a third floor corridor of the Pentagon Building, which at that time contained 500,000 square feet of paintable surface. A year later, in 1974, the very same third-floor corridor was painted by a contracting establishment owned by Charles Bainbridge. The procurement forms, which your staff has in its possession, indicate that 70 percent, I say again 70 percent, of the same third-floor corridor was painted. However, the forms reveal an astonishing fact: in 1974, 70 percent of this corridor contained 1,063,000 square feet.

In March of 1973, while performing work at the Pentagon, I was told by Robert Jackson, a GSA employee, that if I wanted to get along, I would have to play ball. At that time, I responded that I would not, and after that contract was completed, I did no more general contracting work with GSA because I simply could not tolerate the graft.

That same month, I also requested of GSA an interpretation of a term contract specification which reads as follows: "extra for painting above 9 feet, 6 inches". I was told that the only area actually exceeding nine foot six would be paid for at the premium rate. In deference to this verbal interpretation, I requested payment at the premium rate for only such area as was above 9 foot, 6 inches. Subsequent to my completion of this contract, I learned that all of the other identical term contracts being performed by the favored contractors the year before, the year of, and the year after I performed my subject contract, were paid the premium rate for the entire surface, when any portion of that surface exceeded 9 foot, 6 inches in height.

Naturally, I filed a claim based on the interpretation afforded the favored contractors. GSA denied payment pursuant to the claim and the matter was appealed to the next level, where I again lost.

I am advised that there is a GSA audit report which substantiates my allegations in this regard, and which questions why eight other contractors were paid the premium rate for the entire surface when I, and I alone, was paid the premium rate for only such part of the surface that exceeded 9 feet, 6 inches.

As you can see, Mr. Chairman, it is impossible to make a living as a contractor when you are not among the favored group.

The foregoing will serve to illustrate some of the major abuses to which I have been privy, and from which I have suffered immeasurably both financially and economically.

I wish to conclude this portion of my statement by advising you, Mr. Chairman, as one nterested in "Government in the Sunshine," of something which has occurred more recently.

In 1978, while performing maintenance work as an employee of another general contractor, I requested of GSA under the Freedom. of Information Act all interpretations afforded other identical con

identical contracts were handled. Such information has been repeatedly denied me by Mr. Galuardi, GSA regional administrator. The reason for the denial, ostensibly at least, was that the contracts specified were under investigation-simply another whitewash.

In summary, I think it is quite fair to say that the kind of fraud which I have highlighted for you this morning is now the rule, not the exception. In 1970 I would estimate that fraud and fraudulent practices accounted for approximately 10 percent of the cost of a maintenance contract. Today that figure has escalated to the level of 60 to 70 percent of the actual cost of any maintenance contract, based on the work actually performed at the specified unit prices. For example, the minimum cost, including labor and materials, and not including overhead, of painting 1 square foot of wall space in an occupied area can be no less than 10 cents per square foot. Nonetheless, an examination of the bid documents under which work is being performed as we sit here today will reveal that all contractors performing such work are receiving, on paper, less than 5 cents a square foot. It is obvious that without fraud and collusion, no contract can be performed.

There is no question in my mind that if this committee checked into the performance of contracts and determined what work was actually performed, as opposed to the work actually paid for, it would find that the contractor involved was being paid 20 to 25 cents per square foot, four to five times the bid price.

I thank you again for calling me to testify before your committee, and to place these matters of great concern before the Congress of the United States and the public.

I will now gladly respond to any questions you would like to ask. Senator Chiles. Thank you for your statement, Mr. Lowry. I understand that you are saying that if I wanted to paint my livingroom wall, it would cost me at least 10 to 15 cents a square foot? Mr. LowRY. In labor and materials, yes, sir.

Senator CHILES. And yet we are seeing that these bids are coming in at 4 and 5 cents a square foot and you are saying the only way that can be done is if they are overstating the area covered or some other way, that there is collusion on the bid?

Mr. LowRY. Yes, Mr. Chairman. I am performing one myself right now for another general contractor.

Senator CHILES. I note that on some of the documents that you gave our staff, some of the firms recited were charging 4 cents a foot for the first coat, and 8 cents a foot for the second coat. I am not a painter. I detest painting, but I always found that it was a little easier to put on the second coat when my wife made me paint than it was to put on the first coat.

Why would we be paying for twice the amount for the second coat that we pay for the first coat?

Mr. LowRY. That was the matter of unbalancing the bid because all of the bid estimates always read, for example, 1,800,000 square feet, one coat, 250,000 square feet, two coats. So if you took 4 cents per square foot which was ridiculous-on the first coat, you could, then, effect in a very substantial way the bottom line of the contract as each penny that you deducted from the normal price would then