With Labor, That Will Be...

Weapons manufacturers normally do not worry about competitive bidding when renegotiating Pentagon contracts. Their profits are generally fixed as a percentage of costs. Or supposed costs: an Air Force study of six major contractors, released to a congressional committee last week, disclosed that they routinely mark up labor expenses by-quite legally-computing in overhead charges more than ten times as high as those of civilian business. The cost may reach $50 billion a year. "When you see a beautiful military jet flying overhead," said the study's author, Air Force Analyst A. Ernest Fitzgerald, "you're seeing a collection of overpriced parts flying in close formation."

Fitzgerald, who exposed cost overruns on the C-5A transport plane in 1969, had been warned he risked arrest if he revealed the names of the contractors in his report. The names were duly omitted, but leaked out later. Among the findings: at Rockwell International, actual labor costs on the B-l bomber were $15 an hour, but the final charge to the Government was nearly $200. Boeing's cruise missile markup was from $14 to nearly $114 an hour.