Security Cuts Upset Industry : Slashing Clearances 10% Will Hurt Some Firms

Defense Secretary Caspar W. Weinberger’s recent order to reduce by 10% the security clearances held by defense workers has triggered an angry response in some quarters of the industry because the cutback is expected to lead to inefficiencies, schedule delays and higher costs.

The across-the-board cutbacks, which were ordered after the Walker naval spy case came to light, apply at every defense industrial site in the nation and are viewed by many in the industry as an arbitrary action that will have uneven effects.

‘Panic Set In’

“This is a Draconian measure,” said Daniel Nover, chief of industrial security issues for the Aerospace Industries Assn. of America, a trade group. “When the Walker spy case came . . . panic set in and this is what resulted.”

The inefficiencies and extra costs expected to result from the order will eventually be borne by taxpayers, industry executives said.

“There will be some additional costs associated with it,” said Louis F. Heilig, vice president of the Ford Aerospace & Communication’s defense group in Newport Beach. “To the extent that it is allowable overhead, the government will pay for it. If it costs more in direct labor dollars, then the government will pay for it either as an overrun or as a negotiated cost adjustment.”

There are 1.4 million defense industry workers who have security clearances, which are broken down into three categories: confidential, secret and top secret. Thus, 140,000 workers face revocation of their clearances, including many senior workers, who will undoubtedly regard the loss as a major blow to their defense industry careers.

Nevertheless, the Defense Investigative Service, which is implementing the Weinberger order, is using tough language in telling the industry that it must achieve the cutbacks by Aug. 15, leaving many firms little time to comply or to appeal.

“Virtually every contractor has enough fat built into the system to make these cuts,” said Dale Hartig, a Defense Investigative Service spokesman. “We have told the contractors that a minimum of 10% must be cut. There is the possibility that greater reductions will come later on.”

Some industry spokesmen say that the Defense Department is being inflexible in its approach.

“There doesn’t seem to be any room for negotiation,” said Robert Heimann Jr., director of industrial security and safety at Lockheed Missiles & Space Co. in Sunnyvale. “We have explored getting extensions or exceptions. We have concluded they are dead serious about this and they have a short fuse on the issue. They want it done.”

The order requires also that large defense firms with many divisions and geographic locations take a 10% cutback at each site, which will limit their flexibility in protecting certain divisions that do a large percentage of classified work.

Although many firms can easily make a 10% cut, some will be severely affected. And one unintended result is that the order is expected to cause the worst problems for contractors that have had the best security and the fewest superfluous clearances. The firms that sought to clear everybody--janitors, cooks, secretaries and public relations men, in many cases--will be able to comply easily with the reduction.

Robert Lyons, vice president of business development at Aerojet Ordnance, said that his Tustin-based firm has tried to hold its clearances to as few as possible.

“We think we already are near the irreducible minimum number of clearances now,” said Lyons. “This is going to make it harder to do our work. It is going to inhibit the flexibility of our employees.”

To work around the cutback, Aerojet Ordnance, a munitions manufacturer, will have to physically separate staff with clearances from those without, even though they are working on the same project, Lyons said. In the industry parlance, they will be “compartmentalized,” which “results in a loss of efficiency,” he said.

Moreover, Weinberger’s order was issued at an especially awkward time, some executives said: The continuing Reagan Administration defense expansion is increasing the workload at many defense plants, and that requires contractors to add workers, many of whom need security clearances.

“We are in a box with all the rest of industry, but it is worse for us, because we are in a hiring mode right now and the 10% is based on a given date some time ago,” said Heilig of Ford Aerospace.

Firm Adding Workers

Similarly, Hughes Aircraft’s electro-optical and data systems group is planning to add about 1,000 workers and hire an additional 500 to offset attrition during the next year, said George McKaig, a vice president at the Hughes group.

Hughes will accommodate the Weinberger cuts by selective downgrading, in which 10% of top secret clearances will be bumped down to secret and 10% of secret will be bumped to confidential. Hughes has so many workers on confidential clearance that trims at that level can be made without difficulty, he said.

The worst potential problems appear to be cropping up among small and medium-size contractors, which often have small staffs unable to accommodate even a modest cutback.

Take, for instance, Chester L. Richards, a consulting engineer in the defense industry, who said the Weinberger order threatens to put him out of business.

The security clearance for Richard’s one-man consulting firm in Irvine, Technology Concepts Associates Inc., is being revoked, he says.

Without a security clearance, Richards said, he cannot even bid for new contracts.

‘This Is Devastating’

“They have added another layer of glue to the bureaucracy that you have to overcome before you do a job,” he said. “This is devastating.”

Many industry executives worry also about the morale problem that will arise when the order is fully implemented.

“People who lose their clearance are going to feel their work is less important,” said Heimann of Lockheed. “The company is going to have to work to explain this to the employees. I am not infatuated with this, but I am looking at it as something that has to be done.”

For all the anxiety that Weinberger’s order is causing the industry, most executives doubt that it will do much to reduce foreign espionage. Nover, the security affairs expert, said that the cutback focuses on the quantity of those with access, rather than the quality of that access.

Breakdown in System

All of the notable defense spy cases in recent history--John A. Walker Jr. of the Navy, Christopher Boyce of TRW, William Holden Bell of Hughes Aircraft or Thomas Patrick Cavanagh of Northrop--have involved persons who had a legitimate requirement for their security clearance, Nover observed. The system seemed to break down in its ability to identify the potential security threats, he said.

Some industry executives are outspoken in their skepticism.

“I don’t know if it will do a damn thing to stop the spying that is going on,” said Heilig. “This is the bull-in-the-china-shop approach. It seems like a fast reaction.”

Some industry executives fear the Defense Department has instituted what amounts to a quota system that will regulate which companies have the resources to seek classified programs. It is viewed as a government intrusion into a historically private area.

“For companies that already have a large number of people cleared, it puts those companies in a better position to bid on classified contracts,” acknowledged L. Britt Snider, principal director of counterintelligence and security policy at the Pentagon.

Exemptions Possible

Snider said that the Pentagon will make sure the cutbacks do not inhibit contractors from fulfilling their contracts. He said that the Defense Department will adopt a flexible policy in enforcing the cutback and will permit certain exemptions.

So far, however, many contractors say they are not seeing that flexibility. They complain that there is no formal system for appealing the cutbacks.