Pentagon Revokes Security Clearances of 6 Employees

The Defense Department has revoked the security clearances of six Pentagon employees implicated in the procurement fraud scandal, Defense Secretary Frank C. Carlucci announced Monday.

The officials whose clearances were lifted include high-ranking Navy purchasing officer James E. Gaines and Air Force procurement official Victor D. Cohen, whose Pentagon offices were searched by FBI agents in June.

After the Justice Department defense fraud investigation was disclosed last month, Carlucci immediately removed the six officials from contracting duties and said their access to classified materials was under review.

Federal investigators have said that the massive inquiry involves the payment of “bribes and gratuities” to Pentagon officials by defense consultants in exchange for confidential data on military contracts. Documents in the case have suggested that Gaines, Cohen and at least four other Pentagon officials may have been sources of such information.

Civilian Navy Employee

One of the six, Navy civilian employee George G. Stone, has been suspended without pay on the basis of allegations in a federal search warrant that he provided privileged data to a defense consultant and to a Texas firm bidding on a Navy electronics project.

In a press conference Monday, Carlucci outlined a number of other steps the department has taken in response to the Justice Department investigation.

In a move to curb the use of consultants by suppliers, the Pentagon now is requiring that 15 major defense contractors certify that they did not use consultants to illegally acquire inside information about Pentagon contracts, Carlucci said.

The Defense Department edict, which affects contracts worth $100,000 or more, applies to most of the companies named so far in the investigation, including such major defense suppliers as Litton Data Systems, McDonnell Douglas Corp., Teledyne Electronics, Unisys Corp. and United Technologies Corp.

In addition, the affected firms will be required to include a clause in all Defense Department contracts exceeding $100,000 which will allow the government to recover any profits earned as a result of illegally obtained information.

“Let me emphasize, this is a rifle action; it is not a shotgun action,” Carlucci said. “We are directing this at certain contractors. We do not intend to apply it indiscriminately because it does impose a burden on people, and where there are burdens, there are costs.”

In addition, Pentagon legal officers are reviewing contracting procedures in an effort to eliminate weak points where consultants or contractors can corrupt the process. One of those points is the so-called “best and final offer stage” at the end of the contract-awarding process.

Numerous Revisions

Carlucci said a review of the system had found contract competitions in which firms were allowed to revise their best and final offers a number of times. Federal prosecutors have alleged in court documents that Pentagon purchasing officers have provided details of bidders’ best offers to rival companies, which then underbid their competitors.

Carlucci said the department would move to eliminate multiple best offers.

“It is the best and final offer that seems to us to create the most intensive point in the competitive cycle,” he said. “And that means that information is at a premium.”