The Air Force is defending its deal with a major defense contractor for $68 million in kits to repair crash damage to C-5 cargo aircraft despite overpriced parts and the ineffectiveness of the kit on a damaged plane.

"We in the Air Force Logistics Command remain firmly convinced that the decision to buy C-5 crash-damage repair kits and the methodology of the acquisition for these kits is correct and appropriate," Major Gen. Richard D. Smith told the House Energy and Commerce subcommittee on oversight and investigations Wednesday.Testimony by Air Force officials and members of the General Accounting Office revealed that Lockheed Aeronautical Systems Co. proposed prices of $229.94 for a nickel-size washer and $211.13 for an inch-long aluminum shim that was an excess part from production of the C-5B. The part originally was valued at $22.09.

"It looks to me that no matter how we look at the matter, we're being taken and the taxpayers are being skinned here," said Rep. John Dingell, chairman of the subcommittee.

Smith defended the price of the washer, saying: "It's not a common washer. It's critical for the structure of the aircraft."

The Air Force based its need for the kits on two crashes and a lightning strike, according to the GAO. But a C-5A that was damaged in a fire at Travis Air Force Base in California on Dec. 30, 1988, cannot be repaired with the kit, which is for repair to the underbelly of the aircraft.

The damaged C-5A has a hole about 13 feet by 33 feet in the upper fuselage.

The GAO, Congress' investigative arm, also found that retired Air Force Col. Anthony Diferdinando negotiated the Pentagon contract with Lockheed and later went to work for the company.

Diferdinando "did not comply with provisions in a conflict of interest law requiring that he report his employment contracts and disqualify himself from procurement functions involving Lockheed," the GAO said.

"However, we did not find any evidence to indicate that his actions regarding the purchase of the kits were influenced by employment."

Dingell said the Air Force Office of Special Investigations began a criminal investigation of the colonel for conflict of interest last Thursday.

A spokesman for Lockheed, Hugh Burns, said the company "has complied with all conflict of interest laws and to the best of our knowledge so did Mr. Diferdinando." Diferdinando remains an employee at Lockheed.