Overhead Costs

GAO testified that $1.6 million of the $2.3 million in overhead costs that McDonnell Douglas Corporation tried to bill the government for was either unallowable or questionable. This amount includes charges for liquor, golf outings, symphony tickets, and public relations and lobbying activities. GAO also questions a $1.3 million charge for the quarterly distribution of more than 100,000 copies of a corporate videotape. In particular, McDonnell Douglas tried to write off the costs of the notorious 1991 Tailhook convention. McDonnell Douglas executives on travel have been getting around the government's cap on meal reimbursements by charging the meals as a business conference expense. One breakfast at a Washington D.C. hotel, for example, was described as a "Glass Ceiling Task Force Meeting." GAO also questions more than $100,000 billed for employee recreation clubs, such as the Beer Can Collectors Club. Although McDonnell Douglas' controls for spotting unallowable costs clearly need to be beefed up, the larger issue remains the reasonableness of the costs that taxpayers should have to bear. For example, when contractor employees are on travel, why should they not have to abide by the maximum allowance spelled out by the General Services Administration?