Pentagon to Call for Freeze on New Arms Production : Defense: The plan halts weapons programs after the research, engineering stage to save billions of dollars. But Southern California contractors would be hard hit.

In a move with major implications for the Southern California defense industry, a Pentagon initiative would freeze virtually all future defense programs after the research and engineering stage, avoiding production of the weapons indefinitely, sources said Wednesday.

The plan, to be unveiled when the Pentagon submits its 1993 budget this month, would allow savings of billions of dollars in procurement costs for big-ticket projects at a time when the Department of Defense is under extreme pressure to reduce its budget.

Officials said that the proposal is a response to changes in the world that give U.S. war planners, for the first time since the Cold War began, at least a year’s warning of any significant need for advanced U.S. combat capabilities.

In the event of a crisis, a Pentagon official said, new weapon designs could be rushed into production, allowing the nation to preserve its technological edge over a potential adversary.

The initiative has received tentative White House approval as part of the budget process. Although it is likely to get a more critical reception from lawmakers wary of job losses in their districts during an election year, it does not require congressional approval.

Under the proposal, the Pentagon would continue to contract with defense firms to develop and engineer new weapons.

But instead of following the traditional route of putting those weapons quickly into production, in all but a few cases the Pentagon would direct the contractor to leave the blueprints on the drawing board--or the prototype on the test range. The weapons then could be produced on short notice if circumstances warranted.

Pentagon and defense industry officials familiar with the initiative said that it would mark the end of an era in which defense contractors maintained large forces of skilled production workers and counted on the production phase of a weapons program for the bulk of their profits.

Defense industry analysts said that the initiative’s largest impact is likely to be in Southern California, where there are believed to be more skilled and unskilled production workers involved in weapons’ manufacturing than anywhere else in the country.

Statewide, some 300,000 workers, including 175,500 in Los Angeles County, are employed by defense and aerospace firms, according to the UCLA Business Forecast Project.

In California, virtually every type of aircraft, missile, spacecraft, radar, navigation system and electronics are produced. The best known include the B-2 Stealth bomber, the C-17 cargo jet, reconnaissance satellites, military communications satellites, fighter radars and guidance systems.

While defense firms probably would keep highly paid engineers on their payrolls in response to the initiative, armies of production workers probably would be thrown out of work as the new acquisition strategy takes effect.

The initiative has sparked concern among defense industry officials, who have begun to hear reports of it.

“Research and development clearly is something we want to see continued at a high level,” one senior defense industry official said. “But we’d like to see it continued in a way where we could make some money on it, which clearly hasn’t been the case in a long time.

“And if they’re going to back off the production line, where historically the industry has made money, that would be a concern.”

For weapons that ultimately are produced and fielded, research and development traditionally has accounted for a large fraction of a program’s cost--sometimes as much as half, as in the case of the radar-eluding B-2 bomber.

For defense contractors, it has traditionally been a weapon’s production phase, and not development, that has brought profits. But for taxpayers, a decision to forgo the production of a weapon could bring huge savings.

As Pentagon leaders last fall revised their assessments of military threats to U.S. interests, Defense Secretary Dick Cheney directed Donald J. Yockey, undersecretary of defense for acquisition, to prepare a plan that responded both to new budget pressures and to the expanded warning time the Pentagon believes it would have. Yockey is expected to outline the plan to lawmakers later this month.

Cheney, speaking on a CBS interview program last Sunday, alluded to the Pentagon’s proposed new approach. Defense officials said that the defense secretary has embraced the Yockey proposal as one that would save substantial sums of money while protecting the United States from losing its technological edge over potential adversaries.

“What we’re looking at now, obviously, is a situation in which our capabilities are good enough that we can have a different set of concepts in terms of how we pursue the procurement and acquisition process in the future,” Cheney said.

“The technology is clearly something we want to continue to pursue very aggressively to maintain our edge,” Cheney added. “But it’s possible, I think, to do that in a way without buying, for example, 8,000 new tanks for the Army and fielding all of those tanks in the Army, at this point.”

In the last two years, Cheney has said that he was reluctant to sacrifice weapons acquisition programs, which he called the “seed corn” of the nation’s future combat capability. Accordingly, in the past Cheney has said that he preferred to make cuts in the military’s manpower rolls.

But this year, Cheney has argued that the Pentagon cannot cut personnel faster or deeper than already is planned. Under pressure from Congress to cut further, Cheney has chosen to save about $50 billion by cutting back and canceling production of weapons systems. Among the systems affected by Cheney’s strategy is the B-2 bomber, which would be canceled after 20 aircraft are built, according to Pentagon officials.

Cheney’s new willingness to cut programs, rather than people, also reflects his confidence in the superiority of existing U.S. weapons in the hands of a well-trained force, Pentagon officials said.

That confidence grew markedly after the performance of U.S. weapons in the Persian Gulf War. Many defense analysts argued that the performance demonstrated the value of continued modernization of the American arsenal. But others drew the opposite conclusion: that demonstrated American weapons superiority means that little additional investment is required.

Cheney, defense officials said, has sided with analysts of the latter school.

“The competition is just not nearly as great,” a senior Defense Department official said. “We still want to develop great technology but the pressure to deploy it just isn’t as urgent. Nobody’s pressing us on the technology anymore.”

Industry analysts said that the initiative also would reverse a trend during the Ronald Reagan Administration--the compression of development and production schedules, called “concurrency,” in the acquisition of weapons.

During the 1980s, urgency over the feared march of Soviet technology caused the Defense Department to put many weapons, such as the B-1 and B-2 bombers, into production well before development and testing were completed.

“There will be virtually no concurrency” under the new initiative, a Defense Department official said. “There will be strict adherence to development milestones. . . . “

To make the development of weapons lucrative for defense contractors, the Pentagon also is expected to make greater use of contracts in which the government takes responsibility for unforeseen cost growth in a program.

During the 1980s, the Defense Department increased the use of contracts that made defense firms pay for cost overruns. Since the defense contractors could expect to make vast profits during the production run of a weapon, many defense firms continued to do business with the Pentagon. But without that prospect, officials said, the Pentagon will have to shoulder more of the risk and financial burden of high-tech research.

Times staff writer Ralph Vartabedian contributed to this story from Los Angeles.