Admirals Punished for Not Airing Jet Program Flaws : Military: Captain also removed. Cheney was upset about not being informed of $1-billion overrun, delays.

The Navy said Tuesday that it has removed three senior military officers, including a vice admiral who oversees naval aviation programs, because they failed to report serious flaws in the secret A-12 attack aircraft program.

An investigation report released by the Navy concluded that information about a projected $1-billion overrun and a one-year delay of the A-12 development program never reached Defense Secretary Dick Cheney when he undertook a major review of the A-12 and other programs last March and April.

Within weeks of issuing upbeat findings and testifying to Congress in late April that the program was in good shape, Cheney was left embarrassed by the disclosure by the A-12’s prime contractors that the aircraft program faced major financial and schedule problems.

The punishment issued against the three Navy officials is among the most severe in recent history. Vice Adm. Richard C. Gentz, commander of the Naval Air Systems Command, will retire no later than Feb. 1, 1991, the Navy said. The A-12 program executive officer, Rear Adm. John F. Calvert, and the program manager, Capt. Lawrence G. Elberfeld, have been reassigned to other duties and received letters of censure from Navy Secretary H. Lawrence Garrett III.

The Navy report found that senior Navy officers erred by failing to anticipate substantial cost overruns on the A-12 and failing to warn of greater risks in the program in meetings with Defense Department officials. An independent Pentagon analyst found after two days of study that the program would incur a $1-billion overrun, but that information did not reach Cheney either.

A little more than a month after Cheney completed his rosy review of the A-12, the two firms jointly developing and producing the attack plane, McDonnell Douglas Corp. and General Dynamics Corp., warned the Pentagon of impending financial disaster. The companies then disclosed to investors on June 11 that they would post major losses in the program when they reported their second-quarter results.

The Navy report concluded that the two firms were “overly optimistic” in their cost projections to the Navy before their disclosures. It said the companies’ program managers “perceived significant pressures from upper management” to keep up the flow of cash to the program by being optimistic about its progress.

The controversy goes to the heart of a longstanding problem in defense procurement, in which deficiencies in weapons programs are suppressed and left to fester secretly, until their disclosure creates political bombshells.

Despite repeated reforms, critics contend that the military services chronically withhold politically damaging information in an effort to protect their budgets and their programs. Indeed, the Navy report concludes: “Unless means can be found to solve this abiding cultural problem, the failures evidenced in this report can be anticipated to occur again in the same or similar form.”

“This is a clear signal to anyone in acquisition that the bad news has to come up the ladder,” a senior Navy official said Tuesday. “If it doesn’t, then you’re out of here.”

McDonnell Douglas and General Dynamics, the nation’s two largest defense firms, are developing the A-12 under a fixed-price contract awarded in June, 1986, which carried a ceiling price of $4.78 billion. Costs above the ceiling were to be borne by the two firms.

The carrier-based A-12 Avenger, which will use stealth technology to evade enemy radar, would replace the existing A-6 Intruder fleet in attack bombing missions. The aircraft, which is being assembled in Tulsa, Okla., could eventually cost $100 million each to produce.

The overruns and the high price tag are expected to generate increasing political pressures against the program.

The Defense Acquisition Board, a panel of senior defense executives that controls major programs, will review the future of the A-12 program Friday.

McDonnell Douglas and General Dynamics have been pressing for major concessions in their contracts that would essentially bail them out of losses that will reach more than $500 million for each firm. With the schedule problems facing the two firms, a delay in full-scale production is likely.

A McDonnell spokeswoman said the company “is in the process of reviewing the inspector general’s report with our partners at General Dynamics. We have solved the technical issues in the program and believe we have an excellent aircraft and plan to deliver that aircraft under the direction of the Navy’s new management team. We remain committed to progress and successful completion of this very critical program.”

But the Navy report indicates that the program was long troubled and remained so until earlier this year.

The report found that “there was early evidence of trouble affecting the production schedule.” By the summer of 1989, the Navy’s program manager had indications that the first flight date of June, 1990, would be missed.

Aircraft tooling should have been in place by December, 1989, and aircraft assembly started, but they were not. The firms, meanwhile, overestimated their ability to recover, displaying at best “a plain lack of objectivity,” the report said.

The aircraft was much heavier than designed. Stop-work orders were issued to redesign parts for lower weight. Production was continually delayed. Parts were in short supply. Although production reports going to the Navy should have indicated all of these problems, nobody was paying attention, the Navy probe found.

The Navy even paid the firms for work that was not complete, the study found. And finally, the Navy exercised a $1.2-billion production option for six aircraft on May 31, 1990, even though senior officials were “aware of recent information indicating significant cost schedule and technical risk not previously displayed to senior management.”

Garrett blamed the failure to provide accurate cost and scheduling estimates to Cheney not on the Navy’s procurement system but rather on “errors of judgment and failures within the program management chain of supervision,” according to a memorandum he sent to Cheney Nov. 29. The memorandum was released Tuesday.

Congress is sure now to question whether Garrett himself, along with Undersecretary of Defense John Betti, exercised poor judgment or may have been involved in a cover-up.

Cheney, who said he found the Navy investigation report disturbing, asked Donald J. Atwood, deputy defense secretary, to review the A-12 program and the individuals involved. Recommendations are expected as early as next week.

Also released Tuesday were findings by the Defense inspector general that were highly critical of Betti for putting too much credence in “general assurances” by the contractors that the project could be completed on time and within the cost ceiling.

Gaylord Christle, deputy director for cost management under Betti, was asked March 26 to conduct an independent cost analysis of the A-12. Within two days, he concluded that it was headed for a $1-billion overrun, according to a letter from Inspector General Susan J. Crawford to Rep. Andy Ireland (R-Fla.).

But Christle’s analysis--completed about one month before Cheney’s public announcement April 27 of the upbeat findings in his so-called major aircraft review--was never provided to the defense secretary, Crawford’s letter says.

The Navy report referred to Christle’s analysis as a “last-minute effort” and said that, even though Christle briefed Navy officials on his finding, they were not aware of its significance.

It was Ireland who called for the probe after he questioned why Cheney testified to the committee that the A-12 was in good shape only weeks before the contractors disclosed that the program was a year behind schedule and far over its contract ceiling. Ireland said Tuesday that the House Armed Services Committee would hold hearings on the incident as early as next month.

Ireland said the inspector general’s report illustrates fundamental flaws in the practice of military program managers relying on contractors for their cost estimates. In an interview, he said that suppressing negative information is a widespread problem.

“It is very typical of the Defense Department,” Ireland said. “You have all these people with vested interests--not only their personal careers. So many of our programs are literally jobs programs that they have a life of their own.

“Within the bureaucracy, nobody wants to take responsibility. So they don’t pass the information on.”