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B-172650 1 (1972-01-27)

handle is hein.gao/gaobablcg0001 and id is 1 raw text is: RESTIMTED N ot to be r.Iemsed outside XQfiener7, ... COMPTROLLER GENERAL OF TH IT so 0* RELEASED wAsHNoTON.DOc ZfU B- 17 26,50 77 Dear Mr. Heistoski: As requested in your letter of April 8, 1971, we have reviewed charges made by your constituent that, through irreg- p I ular labor practices, Burns and Roe Western Hemisphere Corpora-- 2of tion has made excessive profits under a Department of the Navy / -contract for operating and maintainung a water desalinization and-ower plant at Guantanamo Bay, Cuba. The contract was awarded for 1 year, beginning July 1, 1968, and had two 1-year renewal options which were exercised. The total negotiated contract price for the 3 years was approx- imately $1.8 million. The contractor, a subsidiary of Burns and Roe, Inc., is engaged primarily in water development engi- neering services. Its principal activities are located in Puerto Rico and Guantanamo Bay. Approximately 74 percent of 1970 sales were made to the Federal Government. We estimated that the contractor's profit rate was 6.6 per- cent compared with a negotiated rate of 5 percent. Included in the estimated profits was about $75,000 due to payment of wage rates lower than the rates which had served as a basis for con- tract negotiations. Under the contract adjustment provisions, the lower labor rates actually paid should have resulted in a contract price reduction of about $60,000. We called the lower rates to the attention of the cognizant Navy command, and we plan a further meeting with Navy officials to provide them with additional information as may be needed for a recovery of con- tract costs. Burns paid about $4,600 less in food allowances than the amount negotiated. The contract did not provide for recovery of unpaid food allowances. Consideration should be given to this matter in future negotiations. Our findings relating to each of the constituent's charges are discussed below. EMPLOYEE QUALIFICATIONS AND WAGE RATES Allegation--Unqualified people were hired locally at Guantanamo Bay and were paid at wage rates lower than called for in the contract. Personnel files showed no evidence that employees had been unqualified or that any employee had been terminated for technical incompetence. In addition, the desalinization plant was reported by the Department of the Interior to have been operated at about 95-percent efficiency.

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