The Air Force said yesterday that it had reduced its Lockheed Corp. contract for the C5B transport plane by $439 million by adjusting the inflation rate downward, but did not disclose what it had done regarding warnings about excess company profits.
Because inflation has declined since it signed a $7.8 billion contract in 1982 for 50 planes, the price from the sixth plane onward will be lowered, the Air Force said.
It did not say what it had done about the warnings sounded by its auditor general, J.H. Stolarow, in an Aug. 20 internal memo detailing how Lockheed stood to make 29 percent profit, "nearly twice the 15 percent profit rate negotiated at the time of the contract award" for the first five planes.
Stolarow added that "we estimate the 'excess' profit will amount to about $162 million for the fiscal year 1985 option and $315 million for the fiscal 1986 and 1987 options" because experience has demonstrated that Lockheed's costs will be less than were anticipated when the contracts were negotiated.
The cost of the aircraft to be bought under the fiscal 1985 through 1987 options "could possibly be reduced significantly if the contract was renegotiated," Stolarow said.
Deputy Defense Secretary William H. Taft IV told The Washington Post after it published the Stolarow memo that future purchases of the C5B would take into account the profit made on the first five planes.
Taft could not be reached yesterday for comment on what adjustments had been made. An Air Force spokesman, asked about the negotiations on profits, said that the Air Force Systems Command was preparing its response.
Yesterday's Air Force news release said only that "Lockheed and the government have agreed to a profit-sharing arrangement for the C5B aircraft."