Northrop Difficulties With MX System Told : FBI Reportedly Investigating Charges That Firm Used Defective Parts in Guidance Mechanism

An Air Force contract to build a key part of the MX missile guidance system has encountered a series of technical setbacks at Northrop Corp., and questions about the firm’s performance have led to an investigation by the FBI, The Times has learned.

The aerospace firm, headquartered in Century City, has overrun its engineering development contracts by $65 million, Air Force officials said, as it has struggled to produce the MX’s inertial measuring unit (IMU), a basketball-sized device that represents the “brain” of the missile. The overruns occurred on cost-plus type contracts, in which the government pays the overrun.

Interviews with Northrop engineers and internal Northrop documents indicate that the firm has encountered serious manufacturing problems that have caused high rejection rates of parts, making deliveries late.

Four Months Behind

Northrop is four months behind schedule and has suffered the wrath of Air Force officials, who are withholding $11.25 million in contract payments because of delays, Air Force officials said.

The reliability of the missile guidance devices also has been called into question, but Northrop asserts that the IMU’s reliability exceeds Air Force requirements.

Although the FBI refused to comment, individuals close to the program confirmed that they had been interviewed by FBI agents on the subject of Northrop’s alleged use of defective parts. The reliability of the MX guidance system is crucial to its potency as a strategic deterrent to war.

The Justice Department granted immunity from prosecution to Northrop engineer Brian Hyatt, who left the firm earlier this year, taking with him documents suggesting that the Northrop Electronics Division in Hawthorne, where the IMU work is going on, is beset by disorganization and technical problems.

On Friday, Hyatt and John King, a Northrop stock clerk, filed suit against Northrop in U.S. District Court in Los Angeles under the False Claims Act, alleging that the company “knowingly manufactured defective parts for the Peacekeeper (MX) missile program in that their fabrication of the IMU is comprised of componentry which is defective and will cause major catastrophic failure at indeterminable times. . . .”

The suit goes on to allege that “Northrop engages in a regular practice of selling to the government as ‘new’ components which were previously rejected as defective and which should have been destroyed.” Under the False Claims Act, the plaintiffs and the government would share any damages awarded.

Allegations Disputed

Northrop and Air Force officials disputed all of the allegations regarding the reliability of the inertial measuring units. Also, they said the program is now on the road to recovery as regards the delivery schedule. Northrop also said it is not aware of the existence of an FBI investigation.

Maj. Gen. Aloysius G. Casey, commander of the Air Force’s Ballistic Missile Office and director of the MX program, said in a recent interview that he has heard reports that defective parts have been used in IMUs but that the reports have not been substantiated by his office.

Casey said the inertial measuring units have performed well and are surpassing classified Air Force requirements that cover their frequency of failure. Once the MXs are placed in their missile silos, the IMUs will be powered and operating continuously, ready for launch within moments’ notice. Thus, reliability is critical.

Reliability Warranted

A Northrop spokesman added that the company warrants the reliability of each IMU. Even if the IMUs were not meeting Air Force requirements, the company would fix them at no cost to the government, he said.

Casey said the MX has been test-fired 14 times and performed successfully each time.

Hyatt said in an interview, however, that on three occasions IMUs failed prior to test launches and had to be replaced. Casey acknowledged that one test had been delayed by the failure of an IMU prior to launch. He said he is not aware of any other failures but he added “maybe it’s a difference of when people are calling it (a failure).”

Hyatt said in an interview that the IMUs are defective because they have two critical technical flaws that may make themselves known only over time and possibly only during launch, when they are subject to forces many times greater than the force of gravity.

Fired Earlier This Year

The flaws are highly technical and are not detailed in the lawsuit. Hyatt said they involve impurities in the manufacture of circuits and problems with metallic bonds inside circuit packaging.

Hyatt said he was fired from Northrop earlier this year after Northrop said his work performance was not satisfactory. He contends that the company was attempting to silence his criticism. His lawsuit, which is being pressed by attorney Herbert Hafif, also alleges wrongful termination. Hafif said Hyatt was granted immunity before he was discharged.

“Every time Brian Hyatt attempted to show his superiors at Northrop that their manufacturing process was going to produce a defective guidance system, he was stonewalled,” said Robert Kilborne, an attorney working with Hafif on the case. “It became evident that the attack on Hyatt was going to be their only response to the problem.”

Defective Circuits Claimed

Whatever Hyatt’s motivation in bringing the suit, documents in his possession indicate that Northrop had problems dating back to the early 1980s with defective hybrid circuits, which are electronic parts that have high densities of electronic components placed in a package only a few square inches in size. Each IMU contains 260 hybrid circuits.

A July 1, 1981, evaluation of hybrid circuit failures found that a faulty gauge on an oven that Northrop used to “burn in” the circuits--a common procedure in electronics manufacturing--had exposed them to too high a temperature. The report cited an earlier informal agreement among engineers to X-ray all of the hybrids subjected to the excessive heat.

“It was determined that the 100% X-ray requirement . . . had never been implemented and that there were no X-rays of the failed parts,” the report said. The report issued a firm order for X-rays.

By 1986, engineers were still turning up problems with the hybrid circuits. Other reports in Hyatt’s possession raise questions about whether scrap parts were used in IMUs.

‘Potential for Failure’

The suit says, “Northrop Corp. intentionally puts contaminated or deteriorated components, such as integrated circuit chips, diodes, resistors, and capacitors into hybrids for sale to the government. . . . The potential for catastrophic failure of these components is increased because these contaminated or deteriorated components do not meet the contract specifications.”

If such incidents occurred, they would be serious breaches of regulations on a project as critical to the nation’s security as a nuclear missile--and the MX, with its 10 nuclear warheads, is the nation’s most lethal weapon.

Casey said the incident, along with other reports of such practices, was looked into and “as far as we know we have not been able to verify any reuse of improper material.” He said he has no indication of “culpability on Northrop’s part to cheat the government.”

A Northrop spokesman said random reports, removed from company files over a long period of time, might not portray an accurate picture of the company’s operations. He said the single report would not necessarily identify whether remedial action was taken and whether the problem was resolved.

Accurate Traceability

The spokesman said Northrop’s operations provide for accurate traceability of parts. He also pointed out that the IMUs overall have a reliability that would refute the idea that defective parts were used in them.

But Hyatt insists that the problem was never resolved and that it is representative of a practice in which defective parts were poorly controlled.

A 150-page secret report by the Air Force Office of Special Investigations (OSI), which is not under Casey’s command, reportedly raised serious questions about the reliability of the Northrop IMU, according to a source who has read the report.

OSI officials at Norton Air Force Base in San Bernardino, where the report was written, refused to comment on the report. An investigation is understood to have been completed and the case closed, but whether it prompted any remedial action is not known.

Letter to Chairman

The investigation turned up a letter written to Northrop Chairman Thomas V. Jones by an attorney representing a former Northrop supervisor, in which the supervisor alleged that sensitive microelectronic parts for the MX were not stored in an atmospherically controlled nitrogen environment as required under the Air Force contract.

An internal Northrop “action request” obtained by The Times cited in March, 1985, a lack of proper nitrogen gas in a microelectronic storage area and ordered that it be installed. Another report told of sensitive hybrid circuits that had been found misplaced in an ordinary office desk.

The MX is a cornerstone of the Reagan Administration’s strategic modernization plan and any uncertainty about the reliability of its guidance system would raise questions about its potency as a strategic deterrent, according to Kosta Tsipis, a physicist and nuclear weapons expert at the Massachusetts Institute of Technology.

‘System Can Be Fixed’

“If these were operational missiles, I would be very, very worried,” Tsipis said. “After they are deployed, if you have a defective MX, then you have a defective land-based strategic deterrent. But since we are still early in the program, the system can be fixed if there is a problem.”

Meanwhile, Northrop’s problems in meeting its schedule for production of the IMUs recently prompted the Air Force to bring in another contractor, Rockwell International, to duplicate Northrop’s role.

Casey said the decision to award Rockwell a $9.7-million contract to develop a capability to produce IMUs was based in part on what the Air Force saw as the need to provide Northrop with “a strong incentive to improve performance.”

AF Pressure on Northrop

Northrop, which received its first advanced development contract for the IMU project in 1975, was supposed to have delivered 23 prototypes of the guidance units to the Air Force by now. But it has delivered only 10, leaving it four months behind schedule. As early as last year, the Air Force was exerting pressure on Northrop to meet its commitments.

In a letter last year to Northrop Vice President David N. Ferguson, Casey said Northrop’s failure to deliver IMUs on schedule “raises the serious question of your corporation’s capacity to manage and perform under the contract, and its tenacity in support of the Peacekeeper missile program.”

In the letter, which was obtained by The Times, Casey wrote that Northrop’s late deliveries had forced cancellation of the nuclear qualification tests of the IMU, a procedure that all subsystems in a nuclear weapon must undergo to ensure that they will work if they are called upon to do so in the conditions of nuclear war. The Air Force was forced to test the IMU as part of a larger MX system, which was successfully completed.

‘Keystone of Our Defense’

“These problems are a direct consequence of inadequate planning and management responses,” Casey wrote. “Be advised that the BMO (Ballistic Missile Office) will not forbear on these issues. My command will assess . . . your corporation’s past performance in any future source selection.

“It is not in passing that I remind you that the Peacekeeper missile system is the keystone of our nation’s strategic defense,” Casey added. “Deployment must not be endangered by further IMU delivery failures.”

Casey said in the interview last week that initial deployment of the MX will be conducted later this year on schedule with 10 MX missiles going into their silos as planned. Casey also said that his most recent assessment of Northrop is that it has passed the point of its worst problems and is now on the road to recovery.

Casey also defended the Air Force’s overall program management of the MX, saying that the cost of the program is under budget forecasts made internally at the Ballistic Missile Office and under the forecasts of cost provided to Congress several years ago.

‘We Have Saved Money’

“Believe me, we have saved money overall,” he said. “It is a matter of record that we have done the research and development for less money than that which is in the selected acquisition report to the Congress.”

A selected acquisition report is a formal quarterly report to Congress, in which the Pentagon details the cost of its major weapons systems.

Casey said the IMU is a sophisticated device that has advanced the state of the art in missile guidance and that it has not been an easy project. The IMU was designed by the Charles Stark Draper Laboratory at the Massachusetts Institute of Technology, the Pentagon’s primary design center for nuclear missile guidance systems.

The Air Force has paid Northrop about $1 billion since 1975 just to develop an IMU production capability and to build 41 test units, Casey said. The IMU contains a series of gyroscopes and accelerometers inside a sphere that is suspended in liquid. The 260 hybrid circuits are mounted on dozens of circuit boards.

Little Expense Spared

A Northrop spokesman said the company’s engineers in Hawthorne “are down here working like hell to get back on schedule.”

Indeed, Northrop has spared little expense in getting back up to speed. A subcontractor who builds parts for the IMU provided The Times with a copy of a purchase order by Northrop in which the firm agreed to pay a 36% premium on a large purchase just to get the parts as quickly as possible.

But, after Northrop paid the charge, the parts sat on a loading dock for weeks because the company was late in delivering the paper work to authorize shipment, said the subcontractor, who agreed to be interviewed on the condition that he not be identified.

Another indication of Northrop’s determination to recover from the delays is the addition of a third work shift at some of its operations, according to one supervisor at the Northrop Electronics Division.

Problems Remain

Despite such efforts, interviews with half a dozen current Northrop engineers and technicians indicate that the company is continuing to experience some problems. Reject rates in some cases remain too high, they said.

One disgruntled engineer said the company is experiencing reject rates of more than 50% on some circuit boards due to a condition called “measling,” in which bubbles develop when components are soldered to the boards. The engineer said the firm is seeking a waiver of a requirement that forbids excessive measling.

Casey said the Air Force has held firm in its insistence that Northrop meet specifications and that the firm has not been granted extensive waivers enabling it to reduce requirements.

But Casey did acknowledge granting one waiver, in which he said Northrop had not told the truth to the Air Force when it said it had conducted a reliability test. The test, he said, had not been conducted.

Checking for Leakage

The test involved checking for fluid leakage by taking pressure up to 100 pounds per square inch in one part of the IMU. Casey said the gauge that Northrop was using was not capable of testing that pressure, but the firm had told the Air Force that the test had been conducted.

“It really doesn’t matter,” Casey said. “It was one of these places where we had an overspecification. Nonetheless, they should have told us, rather than write it off as having been properly checked.”

Although Congress has authorized deployment of only 50 MX missiles, the Air Force is procuring equipment on the basis that the 100 missiles sought by President Reagan will eventually be deployed. Including test units and spares, the Air Force plans to buy 223 IMUs.

The Air Force’s efforts to qualify Rockwell as a second source for IMUs should take about 45 months. By the time Rockwell is qualified, the Air Force will still need to buy 81 more IMUs, Casey said.

“It is tough to save enough money on that (competition) to pay for a second source,” the general added. “In fact, I had quite a time going through the economic arguments with my own command and the Air Force that it made sense to compete, but nonetheless I argued that during the whole time of the qualification there is a very strong incentive on Northrop to improve performance.”

Hyatt said in his lawsuit that inclusion of Rockwell will cost the Air Force $200 million. His suit against Northrop asks for at least $230.35 million.