16 Defense Firms Facing Contract Curbs

In a reaction to the Pentagon fraud investigation, the Defense Department announced Friday that it is requiring “special procedures” for future contracts with 16 defense firms.

The procedures will include a certification that none of the companies improperly obtained inside information relating to contracts, the Pentagon said.

Recapture of Profits

The contractors will also be required to include a clause in contracts permitting the government to recapture profits if it is determined a company obtained a contract through “illegal or improper activity,” the Pentagon said.

The action results from the investigation into allegations that private defense consultants, many of whom are former military or Pentagon officials, paid bribes to current Pentagon employees for inside information about contracts.

That information could be crucial in winning contracts worth hundreds of millions of dollars. No charges have been filed in the case, which became public a month ago when search warrants were served across the country on a number of contractors and consultants.

The Pentagon announcement said the procedure will affect future contracts worth more than $100,000 and is “an interim measure designed to protect the government’s interests.”

List Could Grow

The Defense Department said the list of 16 companies could be expanded “as additional information becomes available.”

The Pentagon said it is acting because the contractors, or their subsidiaries, “either were the subject of search warrants in connection with the ongoing procurement investigation or (because of) other official information currently available that requires certification of business integrity prior to awarding of future contracts.”

Two weeks ago, Defense Secretary Frank C. Carlucci announced that he was suspending contracts in nine military programs worth $1 billion because of the possibility that they had been tainted. He said he was acting on the basis of information contained in an affidavit unsealed by a federal court in Dallas. Carlucci rescinded that action Monday and told Congress that a review of the contracts had found no problems.

Affected Companies Listed

The firms affected by Friday’s announcement are Armtec Inc., Palatka, Fla.; Cubic Corp., San Diego; Emhart Corp., Hartford, Conn.; Executive Resource Associates, Arlington, Va.; Hazeltine Corp., Commack, N.Y.; Kane Paper Corp., Baldwin, N.Y.; Litton Data Systems, Van Nuys, Calif.; and Loral Aircraft, Akron, Ohio.

Also, McDonnell Douglas Corp., St. Louis; Northrop Corp., Newbury Park, Calif.; Teledyne Electronics, Newbury Park, Calif.; Unisys Corp., Detroit; United Technologies Corp., Hartford, Conn.; Varian Associates Inc., Palo Alto, Calif.; Whittaker Corp., Farmington, Ariz.; and Zubier Enterprises, Harrisburg, Pa.