The Government Gets Tough

For the second time this year the government has suspended General Dynamics Corp. from obtaining any new federal contracts. The action came one day after indictments for fraud were handed down against three executives of the company and one former executive, James M. Beggs, who left General Dynamics in 1981 to become administrator of the National Aeronautics and Space Administration. The four are accused of illegally billing the government for cost overruns on a prototype of the Sgt. York antiaircraft gun, resulting in a $3.2-million loss to the Defense Department.

The suspension is much tougher than the step taken last May, when the Navy froze contracts with two General Dynamics divisions in a crackdown on contracting policies. This time the entire company is affected by the freeze--a condition that is supposed to remain until the indictment is disposed of. Depending on how the charges are litigated, that could be some time. A lengthy process would of course be a blow to General Dynamics’ balance sheet. But it could also make things difficult for the Defense Department.

The reason--and the problem--is that General Dynamics, like many other defense contractors, has virtual monopoly status as a military supplier. It is, for example, the sole builder of the nuclear-powered Trident submarine, as well as the sole producer of the mainstay F-16 fighter. In addition, it makes a lot of other things that the military plans to buy for many years to come. Existing contracts aren’t affected by the suspension. But extensions of those contracts are, and that could raise problems.

Without prejudging the case, it seems to us that this week’s indictments are an encouraging indication that the government intends to begin moving more vigorously when it suspects fraud and abuse in defense contracting. Every industry, of course, attracts its share of swindlers. An industry that is permitted to function in what is essentially a non-competitive environment needs particularly close watching. And when the watchers find wrongdoing, what then? Cheating the government is and ought to be regarded as a serious offense. For those convicted of that crime, a stretch in jail is the most appropriate punishment.