A FEW WEEKS ago the Northrop Corp. offered to sell the Air Force the new F20 for less than the Air Force is paying for General Dynamics' F16. Northrop said that for the most part the fighters are comparable, so its offer amounted to equal bang for fewer bucks. Now General Dynamics has countered by offering to sell a somewhat stripped-down F16 for less than an F20. The company said it was responding not so much to Northrop as to general "budget pressures" and to an apparent new willingness by the Air Force to have its planes customized according to their specific missions. A customized plane needs less equipment than one such as the existing F16, which has multiple roles.

It is not every day that you have two defense contractors competing downward; competition works, just as defense reformers said it would. Northrop's offer, born of an inability to sell the F20 abroad, and General Dynamics' response created a buyer's market. We taxpayers are the buyers. The home team wins one for a change.

The Air Force could also win. The prices of tactical aircraft have increased mightily in recent years. A fully equipped F16 now costs about $20 million (the Air Force's fanciest fighter, the F15, costs still more). General Dynamics says that on customized planes, it can cut that cost about $6 million. The Air Force is in the process of buying more than 700 F16s. The new proposals would let it buy the same number of planes for fewer dollars or, as General Dynamics hopefully noted in its offer, more planes for the same dollars. Who can be against that?

There is, however, another dimension to this competition. The companies are not simply squeezing their prices on a product; they are squeezing the product. They are offering to sell the Air Force lesser airplanes. What you have here is competition acting as a check not just on the contractors but on the ambitions of the service as well. To those who think too many weapons are gold-plated, this may be good news. But military arguments ought to be heard along with fiscal ones. Defense Secretary Caspar Weinberger warned against buying the F20 last year on grounds it "cannot meet scenarios our pilots may have to face." That issue is to be reviewed by defense planners next month. The Pentagon ought to buy the cheapest possible planes. But it should not be driven by good procurement PR to make bad weapons decisions.