Air Force Details Ongoing Probes of Northrop Conduct : Overbilling on MX Contracts Among Chief Issues, Panel Told

Air Force investigators told a congressional committee Tuesday that they have opened a dozen investigations into Northrop’s conduct under its MX missile contract since 1985, and have already settled five cases that recovered $1.5 million in improper charges made by the firm.

The Los Angeles-based aerospace company is still facing four other investigations that allege it overbilled the government by $9.3 million, said Col. Patrick Letellier, commander of the Air Force’s Office of Special Investigations at Norton Air Force Base in San Bernardino. Three other investigations carry no specific dollar estimates, and the service plans to start two more inquiries, the official added.

Meanwhile, senior Air Force officials have assigned a team of 12 contracting specialists to oversee the Northrop Electronics division facility in Hawthorne, where the firm builds the MX’s inertial measurement unit (IMU), a complex electronic and mechanical device that is the heart of the missile’s guidance system.

The Key Question

Another group of officials are conducting an audit at a Northrop warehouse on Century Boulevard that was sealed last week after Air Force officials heard allegations that the firm was selling government-owned property stored at the facility, according to testimony Tuesday.

The disclosures came before a hearing called by Rep. Les Aspin (D-Wis.), chairman of the House Armed Services Committee, which has been conducting its own probe of the Northrop work in recent months. Aspin said the key question that he wants answered in a series of upcoming hearings is: “Can we have confidence in the MX missiles now being deployed?”

Air Force officials representing the organization that is responsible for the MX asserted that it is the most accurate nuclear missile in history and that the Northrop guidance devices have a better-than-expected reliability.

“We do not have a technical problem,” said Col. Thomas Speed, MX program manager at the Air Force’s Ballistic Missile Office. He added that Northrop’s production contracts are running under budget estimates as well.

But several committee members took sharp exception to the optimistic picture given by Air Force program officials.

“The report by the committee staff suggests this may amount to fraud. You haven’t mentioned anything about fraud,” Rep. Samuel S. Stratton (D-N.Y.) told Assistant Air Force Secretary Daniel Rak after his testimony.

The positive assessment of MX program officials also seemed to be contradicted by independent Air Force investigators and Air Force officials at the Northrop plant.

Among the many charges outlined by Letellier, which were summarized by a chart titled “typical allegations,” was an investigation into whether Northrop made 12,000 changes to manufacturing drawings that were never incorporated into the master blueprints. A Northrop spokesman said later the drawings were only for ground test equipment.

51 Changes Found

So far, Letellier said the Air Force had found 51 changes in the system design that were never incorporated into the master blueprints. Such a failure could have serious long-term consequences, because the master blueprints ensure that a record of the design exists. Air Force officials acknowledged that there are four different configurations of the IMU and that Northrop has made 21 major design changes since the Air Force held a “critical design review” that was supposed to finalize the IMU configuration.

Col. Samuel Hatfield, chief of the Air Force plant office at Northrop, recounted a five-year history of problems at Northrop. Hatfield disclosed that his office has just “disapproved” the Northrop government property management system, a serious action that will force Northrop to bear the cost of all missing government property.

Hatfield indicated that numerous audits and reviews at the company’s electronics division have documented “significant deficiencies in Northrop’s management system.” Northrop has been behind schedule in IMU deliveries ever since it delivered the first unit late, officials said. The Air Force is currently withholding $72.6 million in contract payments to Northrop, Hatfield said.

In the most heated exchange during the three-hour hearing, Rep. Andy Ireland (R-Fla.) asked Rak, “Why are you getting no results? The problems have been known for some time. Aren’t you embarrassed about it? Do you take personal responsibility?”

Rak, the senior Air Force official at the hearing, responded that he had been on his job only two months.

Committee members were also critical of a warranty plan on the IMUs. Under the warranty, the Air Force gave Northrop $5.5 million in 1984 and was supposed to receive in return free repairs worth up to $16.5 million. So far, the service has received only $200,000 worth of repairs, however.

“The twisted irony we are facing is that Northrop took money that taxpayers have given to them and has used that to dupe the taxpayers again,” fumed Rep. John G. Rowland (R-Conn.). “I am rather astonished by the whole process.”

Speed testified that Northrop had exceeded its cost-plus contract to develop the IMU by $40 million, but that assessment apparently did not include a $15-million overrun on an earlier development contract.