Lost in the commotion of the Persian Gulf war was a heartwarming gesture by the Pentagon, showing its concern for the financial well-being of two of its favorite defense contractors. The Pentagon should be so concerned about the well-being of the taxpayers.
General Dynamics and McDonnell Douglas owe the government a disputed amount of $1.35 billion for an aborted contract to develop the A-12 Avenger warplane. But when the Pentagon sent the bill, it included a courteous provision that the companies didn't have to pay up right now if "immediate payment is not practical or if the amount is disputed."Wouldn't we all love to get such a note from the Internal Revenue Service this week?
Not surprisingly, the two companies said that indeed the amount was disputed and the payment was impractical. They don't feel they owe anything and want time to prove it. The deferral agreement gives them until December 1992 before the Pentagon will again bother them for money. The deal amounts to a $1.35 billion loan with the taxpayers as the unwilling lenders.
Pentagon spokesman Pete Williams said the deferral was made "to avoid putting extreme financial pressure on these companies which are, after all, two of the largest defense contractors in the country."
That's not good enough for Congress. Our associate, Jim Lynch, has learned that some members want to know more about this sweetheart deal involving billions of dollars spent on a plane that was never built.
Rep. John Conyers, D-Mich., said, "Secretary Cheney's job description does not include loan officer, nor is the Pentagon a credit union for defense contractors." Conyers chairs one of two congressional committees that will grill Pentagon officials in hearings this week.
The story of the A-12 Avenger is short and ugly. In 1988, the Navy gave General Dynamics and McDonnell Douglas a $4.4 billion contract to develop a Navy fighter jet with Stealth technology to fly into battle from aircraft carriers. By June 1990 it was obvious that the A-12 was in trouble. It was more than a year behind schedule and expected to be at least $1 billion over budget. In the next six months, four Pentagon officials lost their jobs over the bungled contract and in January the Navy put the A-12 out of its misery and canceled the contract.
At that point, the two contractors had been paid $2.6 billion, but the Navy figured it had only gotten half of that amount in actual work - although what the Navy got for its money is still vague. The Pentagon said the two companies had to pay back $1.35 billion - eventually. With a stage in Congress this week, General Dynamics and McDonnell Douglas will say that the Pentagon didn't give them all the information they needed to finish the project, and that the Navy knew all along that it was taking longer than expected.
Other defense contractors will keep a close eye on the hearings to find out if the Pentagon has set a precedent for generosity.
The controversial deferral agreement is only 31/2 pages long. "My lease agreement on my apartment is longer than that," said one congressional staffer.