Curb Consultants, Carlucci Telling Big Defense Firms

Defense Secretary Frank C. Carlucci said Tuesday that he is sending a letter to the chief executives of the nation’s 200 largest defense contractors warning them to rein in their consultants and to help prevent abuse of the Pentagon procurement process.

In an appearance before the Senate Armed Services Committee, Carlucci said also that, although he has resumed payments on nine Navy contracts that were questioned in the procurement fraud investigation, he has not ruled out reimposing the freeze on those programs or halting payments on other contracts that may have been obtained as a result of fraud or bribery.

Taking Restrained Action

Carlucci’s comments fit the pattern of tough talk and relatively restrained actions he has followed since the procurement scandal broke on June 14 with the serving of 38 search warrants at the homes and offices of Pentagon officials, defense industry consultants and major military suppliers.

Two weeks ago, Carlucci ordered all payments suspended on nine Navy contracts worth $1.2 billion after search warrant affidavits unsealed in Dallas indicated that the contracts might have been won through use of inside information provided by a Navy contracting officer. But, on Monday, Carlucci ordered payments resumed immediately, saying that a detailed review of the programs “does not indicate that any of the current contracts in the affected programs are tainted.”

The investigation has focused intensive scrutiny on the consultants who assist the Pentagon and contractors in the contract process, with some accused of buying and selling inside information to benefit customer firms.

Carlucci acknowledged to the Senate panel that the Defense Department has “no controls over contractors’ consultants,” although many supplier firms charge their consultant costs to the Pentagon.

But the defense secretary said a “crackdown” on those advisers and middlemen could do more harm than good by denying industry and the Defense Department access to their expertise on weapons programs.

Can Impose Sanctions

Carlucci added that the department has a wide range of sanctions it can impose on firms that abuse the weapons-buying process, including termination of contracts, debarment from working on Pentagon jobs and fines. He said he would support legislation that would allow the Pentagon to recover profits from a firm that obtained a military contract illegally.

But Carlucci cautioned the senators against adopting “hasty or piecemeal reforms, which could do more harm than good.” He said that “no amount of rule-making can eliminate rule-breaking.”

Justice Department officials have said that their investigation of contract corruption is the broadest of its kind in government history, involving possible fraud and bribery of Pentagon officials in at least 85 military contracts worth tens of billions of dollars.

The Defense Department has initiated action to bar three individuals and two companies from future military contracts as a result of allegations raised in the court documents.

Official Suspended

In addition, Navy contract official George G. Stone has been suspended without pay for allegedly passing privileged information to two defense industry consultants.

Sixteen lawyers for individuals and companies linked to the inquiry have asked the Justice Department to investigate news leaks stemming from the inquiry. But department spokesman John Russell said officials had not decided whether to open such an investigation.