Micronics vs. the Pentagon : Defense: The bankruptcy of the Brea contractor responsible for a key missile component points to flaws in Pentagon procurement and accountability procedures.
On a still, abandoned, shipping dock at the Micronics International Inc. plant in Brea sits a pile of cardboard cases, neatly packed with rows of 10-inch-long, odd-shaped, aluminum devices.
Known as “fuzes,” the devices look harmless, a bit like an axle poked through a thick wheel. But put to their intended use, they are the triggers that unleash the destructive power of the warheads in Phoenix air-to-air missiles, the primary weapons for “Top Gun” pilots in Navy F-14 jets.
The Phoenix fuzes--in Navy lingo, the FSU-10--may also have destroyed Micronics. And therein lies a story of institutional conflict, costly misjudgments, bureaucratic shortsightedness and investigative zeal.
The demise of Micronics--a 175-employee company swept into bankruptcy court in mid-September after the Defense Department declared that the firm’s quality-control systems had collapsed--is also a story of a procurement system that can make crushing demands on small businesses and then let accountability slip away.
One employee calls the FSU-10 the “demon baby” of Micronics. Born in the tumult after the Shah’s fall in Iran, the fuze bound Micronics, the Pentagon and Navy engineers in the Mojave Desert in a rancorous tryst. Today, the reverberations sweep from Orange County to Washington.
Production has been halted at Micronics on not only the FSU-10, but also on safety-and-arming mechanisms for the Sparrow and Sidewinder missiles--both stalwarts of the nation’s air defense system. A bankruptcy judge has allowed Hughes Aircraft Co. to temporarily reopen a corner of the plant to complete a set of fuzes for the AMRAAM, the proposed new-generation missile for F-15 and F/A-18 fighters. Preparing other companies to replace Micronics as the supplier to these programs will be costly and will take years, Pentagon officials say.
In Baldwin Park, meantime, the Navy has put a Micronics subcontractor out of the defense business. Near Dayton, Ohio, a tiny firm is trying to recover from the onslaught of investigations that began when Micronics merely proposed using it as a subcontractor.
And while criminal investigators pick through the rubble of Micronics in Brea, careers are on the line in Washington as the military and Congress sort out the mess.
For all the turmoil, the parts that Micronics’ workers assembled get the job done. The company didn’t follow every specification, the investigators say. Its quality processes may have been muddled. The paper work may be wrong. Over time, missiles will need more testing to make sure that they haven’t deteriorated prematurely. But government testing agencies say virtually everything that Micronics delivered works just fine.
So it’s no surprise that Micronics’ laid-off workers feel jilted. Each day, they marched into work past a plaque that reads, “The Best Damned S-A Devices and Fuzes in the World Are Manufactured Behind This Door.” They believed the motto, even when the Pentagon didn’t.
“The girls on the line gave it everything we had, and I don’t think we deserve this,” said Cheryl Breneman of La Habra. “We’re not the enemy.”
The Beginning
The FSU-10 fuze was a problem child right from its start in 1977, when the Navy proposed development of a radical new safety-and-arming device for the Phoenix missile. Micronics’ old version simply ignited the missile warhead. The new fuze was meant to prevent premature firings, too.
Hughes, the prime contractor on the Phoenix, opposed the Navy proposal, arguing that it seemed too risky. Yet the Navy not only went ahead with the project but also assigned the task to Micronics, which had little experience in design work.
Normally, the job would have gone to Navy engineers at China Lake, the sprawling Naval Weapons Center in the Mojave Desert. The design was conceived by the engineers, iconoclastic wizards often at odds with the Pentagon bean counters in the Naval Air Systems Command, or NavAir. But China Lake’s engineering staff had recently been cut, so the work was handed to tiny Micronics.
The redesign was far from complete when Islamic fundamentalists drove the Shah of Iran from power in 1979, leaving the original version of the Phoenix in enemy hands. NavAir rushed a new version--including the FSU-10--into production. And disaster unfolded.
Once production began, the Navy initiated hundreds of changes to the fuze’s specifications, Micronics officials say. “There was an awful lot of pressure to hurry up development,” said Gerry Chalmers, China Lake’s chief engineer on the program from 1983 to 1986. “They skipped the prototype step and went from engineering development right into production. They were trying to hold the Naval Weapons Center and Micronics’ feet to the fire and make this thing work without a prototype.”
China Lake engineers said they repeatedly warned NavAir that the fuze could not be produced in large numbers because the design wasn’t workable. Indeed, the FSU-10 never passed Navy qualification tests. Nonetheless, the Navy rewarded Micronics with new contracts--at least $8.5 million in contracts from 1984 to 1988, when the Navy finally concluded that, since the fuze worked, the design was adequate.
Chalmers says China Lake’s own shortcomings contributed to the problems. “We should have taken a stronger position with NavAir once we found out there were problems,” he says. “But then, China Lake’s livelihood comes from NavAir. We have to be responsible to them.”
Micronics’ mistake, perhaps, was in getting so deeply involved in the Phoenix program that it couldn’t pull back.
“Maybe where they went wrong was in the very beginning, where they (agreed) to do something they thought there were problems with,” says Danielle Brian-Bland, an analyst at the Project for Military Procurement, a Washington watchdog group that has monitored Micronics’ problems.
Meanwhile, the seed of potentially bigger problems for Micronics and the Pentagon was being planted 15 miles north of Brea in Baldwin Park.
There, Asher Engineering Corp. fabricated $15 electronic switches used by Micronics and most of the other companies that made arming systems for U.S. missiles.
Year after year, Asher’s production and testing programs won the blessings of the Pentagon’s electronics czars at the Defense Electronic Supply Center in Dayton, Ohio--what a center spokesman described as “the Good Housekeeping Seal of Approval.”
What investigators didn’t learn until this spring, though, was that the 35-employee company may not have been conducting required tests on the switches or building them to military specifications.
Although unaware of Asher’s troubles, China Lake employees were feeling the toll of working on the FSU-10. One engineer after another was worn down by bureaucratic bickering and intractable problems.
One former Phoenix program manager says health problems forced his retirement in 1985. And former Phoenix chief engineer Chalmers believes that the job may have contributed to the heart attack that led to his retirement in 1986.
“It was a damn stressful program, the hardest job I ever had in my life,” Chalmers says. “I still am frustrated by it and think about it.”
Micronics was having turnover of its own. Between 1982 and 1987 the company had three owners--International Signal & Control, a Pennsylvania electronics firm; Gardena machine shop owner Walter Neubauer, and La Jolla-based Precision Aerotech. Each new owner brought in new managers--some more competent than others.
Neubauer bought Micronics in 1982 for $2 million. A jowly man with a thick German accent, he says he was sure that there was money to be made in the company because Micronics had been willing to buy parts from his machine shop for triple the going price.
Neubauer guessed right: He sold the firm to Precision Aerotech in 1987 for $5.3 million. But the new owners inherited a mess at least as large as the one that Neubauer took on, as the events of the next two years would make clear.
A 1987 report by three China Lake engineers listed some of the main problems with the FSU-10 program: Micronics’ inexperience at product design; its “serious managerial and financial problems . . . during critical phases of the program”; a speeded-up development program that didn’t allow adequate time for testing and changes; the fuze’s “complicated” design.
“We found just incredible things that had transpired,” said Wayne Thurston, whom Precision Aerotech installed as president in February, 1988.
The Investigator
The arrival of a new quality inspector at Micronics in March, 1988, made certain that the problems wouldn’t be ignored. Joseph Selfinger, a heavyset man with a bulldog face and wavy brown hair that curls over his shirt collar, had clear marching orders for his first assignment as an on-site inspector for DCAS, the Defense Contract Administration Service: Clean up the mess at Micronics.
During the next 11 months, Selfinger would lead teams that uncovered a breakdown in manufacturing procedures and quality controls in Micronics’ mainstay programs, the fuzes for the Navy’s Sidewinder and Sparrow missiles, according to DCAS reports. He set government inspectors and investigators on the path to discovering an array of deficiencies in the FSU-10: fuze covers not made to specifications, the use of below-grade Asher switches and more.
But Precision Aerotech and Micronics officials have portrayed Selfinger as a zealot obsessed with shutting down Micronics.
G. Addison Appleby, chairman of Precision Aerotech, says Selfinger was verbally abusive, threatened workers with the loss of their jobs and removed Micronics products and documents from the plant.
Micronics officials contend that after Selfinger joined the company, the number of critical quality problems identified by DCAS soared. Where in past years DCAS--the agency that monitors compliance with the terms of military contracts--had issued 10 to 35 “Quality Deficiency Reports” to Micronics, there were 110 during Selfinger’s tenure.
Micronics maintains that many of the reports were frivolous and that Selfinger was firing them off faster than company managers could reply.
In one instance, Micronics officials said Selfinger issued a deficiency report because labels on devices about to be shipped were facing “the wrong way.” They say the company previously had sent out 7,000 of the items with the labels applied the same way--without objection from government inspectors.
After months of complaints from Micronics, DCAS transferred Selfinger out of the Brea plant last January--but only as a courtesy to the company, says Gay Maund, a regional spokeswoman for DCAS in El Segundo.
“We find no reason to suspect the credibility of anything he says and we do find reason to suspect the credibility of what Micronics has alleged,” Maund said.
Maund specifically denied Micronics’ allegations that Selfinger removed property from the company, threatened employees with loss of their jobs, claimed to have closed down other companies or promised to put Micronics out of business. Selfinger declined through Defense Department spokesmen to be interviewed for this story.
DCAS’s position gets support from Wayne Thurston, the former Micronics president, who says it’s wrong to paint Selfinger as the company’s enemy.
“The guy was somebody who was brought in to say, ‘Either clean up your act or you are not going to be in the business,’ ” said Thurston, now president of Space Ordnance Systems in Canyon Country. “(He) had a lot of knowledge about the manufacturing process and he uncovered a lot of the crap that was going on.”
Nonetheless, it is Selfinger’s zeal that Micronics officials have made the focal point of their effort to vindicate the company. They brought their complaints to the attention of the area’s congressman, Rep. William Dannemeyer (R-Fullerton), who met with a group of Micronics employees last month to hear their allegations firsthand.
Ben Naslund, a senior legislative assistant to Dannemeyer, says the Micronics employees substantiated the company’s claims of “high-handed, arrogant and obnoxious behavior” by Selfinger. Dannemeyer has requested a meeting with DCAS to discuss the employees’ allegations.
The Micronics story provides a vivid example, Naslund says, “of what everyone has been crying about military procurement for years--the Byzantine manner in which the Pentagon concocts these requirements” for its contractors.
Appleby and Micronics officials see Selfinger as the instigator of an ongoing criminal investigation of the firm by the Defense Criminal Investigative Service, to which he was detailed after leaving Micronics. Criminal investigators have recommended that the U.S. Attorney’s Office in Los Angeles file charges against Micronics and Asher.
Prosecutors haven’t moved on the recommendation in months, though. And skeptics wonder if the investigators’ zeal has painted them into a corner.
DCIS “is in it so deep that they can’t walk away from it without egg on their face,” says a NavAir contracting official familiar with the situation. “And they don’t know what to do with it.”
Adds Precision Aerotech Chairman Appleby: “There are a number of people now whose careers are in jeopardy if they can’t actually prove Micronics is a crook.”
The Pentagon
As Micronics failed, competing interests within the military skirmished over the nature of the damage inflicted by the problems with the fuzes and Asher’s switches. Was national defense imperiled? What would be the consequences of a crackdown?
On the first score, the DCIS--busy trying to establish criminal cases against the two firms--painted the bleakest picture.
In April, a month after it began probing Asher, the agency’s deputy director sent a memorandum to the armed services’ top legal and investigative officials warning that the switches “could present a serious hazard to both the missile system and to national security.”
Later in the spring, Navy officials said, the agency pressed to pull out of service for testing every missile thought to contain an Asher switch--a sweeping demand that would have stripped the Navy of most of the air-to-air missiles put in service since 1981 and a large share of the air-to-surface and surface-to-surface arsenal as well.
The Navy officials responsible for equipping the fleet would have none of that.
Their test data--from examination of Asher switches and Micronics fuzes by China Lake, the Naval Avionics Center in Indianapolis, the Pacific Missile Test Center at Pt. Mugu and independent testing firms--indicated that the products worked, even if they weren’t made to specification, according to Navy memos and officials.
So, Navy quality officials told the contract officers in charge of missile programs that, from a technical standpoint, there was no reason not to keep accepting and using missiles containing the suspect parts. NavAir concurred, allowing some contractors, including Micronics, to use Asher switches, despite the shortcomings in the Baldwin Park firm’s manufacturing processes.
The investigative service and its allies in the bureaucracy were in a fury.
At a June 1 meeting with missile program officials, investigators said they wanted all shipments from Asher stopped because its switches were not up to specifications, according to a DCIS memo leaked after the meeting. The Navy, however, wanted the switches used because they worked.
At the Pentagon, W. J. Willoughby, the Navy’s top quality-control official, seemed to side with the investigative service. In a memo to NavAir, he warned of “the potential serious hazard to personnel, aircraft and missiles” stemming from the Asher switches and scolded a Navy lab for concluding that the switches posed little risk.
Within days, Willoughby’s memo was in the hands of the House Energy and Commerce Committee, whose chairman, Rep. John D. Dingell (D-Mich.), is known as one of Congress’ fiercest investigators. Dingell fired off--and simultaneously released to the media--a letter to Defense Secretary Dick Cheney stating that the problems with Asher switches could force the “recall of seven years of missile production.”
It wasn’t until after the flurry of news stories generated by Dingell’s letter that it became clear that Willoughby’s staff had not been fully briefed on the tests conducted by the Navy. Once he got the details, according to a NavAir official familiar with the test results, Willoughby agreed that the switches and missiles were safe to use.
“They’re in the higher level management and sometimes they don’t have the day-to-day insight into the technical details,” the official explained. “One might say we just failed to keep them fully informed.”
The Fallout
Neither the consensus that the switches and fuzes work nor the closure of Micronics has cleared the Pentagon’s decks of its problems with the Brea firm.
Half a dozen weapons programs have been delayed or forced to rely on single sources by the shutdown of Micronics’ production line. And two weeks ago, when the Navy suspended all dealings with Asher, it eliminated the only government-qualified manufacturer of switches used in most of the its tactical missiles.
Hughes Aircraft Co. says it fell behind schedule in delivering AMRAAM missiles to the Air Force before a Santa Ana bankruptcy judge gave his OK on Oct. 3 for Micronics to resume limited production of AMRAAM fuzes.
Phoenix missile production, meantime, may have to be halted for six months after the existing stock of FSU-10s is depleted, the Navy says. By February, the Navy plans to resume using fuzes from the old version of the Phoenix. But the Navy doesn’t expect to be able to qualify a Connecticut firm, Raymond Engineering, as the new producer of the FSU-10 fuze until May, 1991.
Meanwhile, the company that could offer the military a new source for switches is reeling from the forces unleashed by the Micronics debacle.
Pentagon inspectors, not wanting a replay of the problems with Asher, swept through Kemp Precision Circuit Inc.’s plant in Dayton, Ohio, this summer. They cited the tiny firm for more than 120 quality deficiencies. Although no serious problems were found, Kemp was required to undertake a costly quality improvement program.
Perhaps the costliest fallout from the Micronics episode, though, is the years of testing that the Navy will conduct to assure that none of the shortcuts allegedly taken in making the switches and fuzes has shorn the missile arsenal of its long-term reliability.
NavAir plans to take apart as many as 1,458 missiles containing Asher switches--Phoenix missiles, Sidewinders, Sparrows, Tomahawks, HARMs and Harpoons--to study the fuzes. Tests, including firings, will determine whether quality problems have shortened the effective life of the fuzes.
“If they had been manufactured to the full specification,” a top NavAir official said, “we would not need to do this.”
The Future
Twelve years have passed since the conception of the demon baby, 12 months since the Defense Department launched its criminal investigation of Micronics.
The missile builders in the Pentagon would like to get the production lines in Brea restarted. The Navy’s Configuration Control Board, which grants waivers to contract specifications, has given its OK for Micronics to use Asher’s below-grade switches, Navy spokeswoman Susan Supak confirmed.
But the stances adopted by the key players at this juncture--Micronics’ owner, Precision Aerotech, and DCAS--seem to guarantee that Micronics won’t be back in business any time soon.
In a series of bitter meetings and cross letters, DCAS has told Micronics officials that, in addition to correcting all the other deficiencies that led to the company’s shutdown, they must verify that the thousands of parts in inventory at the Brea plant conform to military specifications before DCAS will resume inspections of Micronics’ products.
That demand, Micronics said in a Sept. 29 response, “constitutes an enormous, almost impossible task with prohibitive costs.”
Precision Aerotech, in fact, has no plans to reopen Micronics. “We want to sell it,” explained Appleby, Precision’s chairman.
It’s easy to understand why. Precision’s reputation has taken a battering, Appleby says, in the two years that it has owned Micronics. And dumping the company into Chapter 11 has brightened Precision’s financial picture significantly. While losses last year at Micronics produced a loss for Precision as a whole, Appleby says the La Jolla firm expects to show a profit this year.
Rather then trying to meet the government’s demands, Precision has turned to the task of assigning blame for Micronics’ fall. The company is readying a $20-million claim charging that government misconduct destroyed Micronics.
The Navy, however, pins responsibility for the FSU-10 debacle squarely on Micronics.
The Brea firm “was unprepared for the type of sophisticated product processes and management controls required for the manufacturing of this device,” the Navy said in a written response to questions from The Times. The problems could not be corrected, despite the Navy’s “extraordinary efforts.”
Out in the Mojave Desert, though, the engineers say no one can duck responsibility. “With all our successes, we really screwed this one up,” says Chalmers, now retired from China Lake. “It’s like icing on a cake. There’s enough blame to cover everything.”
FSU-10 FUZE ON THE PHOENIX AIR-TO-AIR MISSILE The AIM-54 Phoenix missile is the U.S. Navy’s primary air-to-air missile for the F-14 fighter.One of the main missions of the Phoenix is attacking bombers before they launch cruise missiles aimed at U.S. ships. THE FUZE’S FUNCTION The FSU-10 fuze is the device that detonates the Phoenix warhead and also prevents the warhead from detonating prematurely. PHOENIX DESCRIPTION The Phoenix missile can hit a target more than 100 miles away. It scores hits on supersonic, high-altitude planes as well as high-and low-altitude cruise missiles. The Phoenix can survive against sophisticated counter-measures. More than 3,500 Phoenix missiles have been delivered to the Navy since 1974. SPECIFICATIONS DIAMETER: 15 in WEIGHT: 1,020 lb WARHEAD: 133 lb LENGTH: 13 ft Source: Jane’s All the World’s Aircraft
