The Pentagon yesterday banned the General Electric Co. from obtaining new defense contracts until a pending criminal case against the corporate giant is resolved or the secretary of the Air Force lifts the suspension.
Pentagon officials said last night they think that it is the first time such action has been taken against a contractor.
At the same time, the Defense Department demanded that General Electric and Pratt & Whitney, a division of the United Technologies Corp., refund to the government $208 million in what the Pentagon considers excessive profits.
Air Force Secretary Verne Orr, in requesting $168 million from GE and $40 million from Pratt & Whitney, said the companies made excessive profits on spare parts for Air Force and Navy aircraft engines from 1978 through 1983. He did not charge that these profits were unlawful but said refunding them would shore up public confidence in military purchasing.
"National support for building military strength has been severely battered by public perception that we pay too much for the goods and services we acquire," Orr wrote the chief executive officers of GE and Pratt & Whitney. "It is in our mutual interest to recognize the problem and solve it on a voluntary basis."
General Electric said yesterday that it would have no comment on being suspended from future contracts. Pentagon officials said they could not estimate how long the case would remain in court or the suspension would last.
Orr based his suspension on GE's indictment in Philadelphia Tuesday on charges of filing false claims for payment for work on the Air Force's Mark 12A warhead for the Minuteman missile. He said the indictment "provides adequate evidence" that GE did not act as a responsible defense contractor and therefore did not qualify for new work.
"The indictment provides adequate evidence of the commission of offenses indicating a lack of business integrity or business honesty that seriously and directly affects General Electric's present responsibility as a government contractor or subcontractor," Orr wrote John F. Welch Jr., GE's chief executive officer, in a letter sent and released to the news media yesterday.
The indictment charges that GE fraudulently billed the government for $800,000 by changing timecards at the company's Reentry Systems Division without employes' knowledge. According to the indictment, GE had employes submit blank timecards to be completed by managers so that work that is not reimbursable could be charged to other contracts that the government would pay.
GE is the nation's 10th-largest corporation and fourth-largest defense contractor, with military contracts totaling $4.3 billion in fiscal 1983.
Orr's ban is sweeping but provides a loophole for the government to accept items from GE if there is a "compelling reason."
Orr wrote Welch: "During the period of this suspension, offers shall not be solicited from, contracts shall not be awarded to, existing contracts shall not be renewed or otherwise extended and contracts shall not be approved with General Electric by any agency of the Department of Defense unless the head of the agency or his designee determines there is a compelling reason for such action."
While GE declined comment on the suspension, it issued a statement denying wrongdoing in the profits it made on spare parts.
"There were no cost overruns and no overcharging," said Brian H. Rowe, senior vice president of GE's Aircraft Engine Group. "The government did not pay one cent more than it contracted to pay for the parts in question. The parts were delivered on schedule or ahead of schedule."
Pratt & Whitney also issued a statement denying that it made excessive profits on aircraft engine parts in the disputed six-year period: "The profits earned were reasonable and are consistent with the Department of Defense's own guidelines." The profits at issue came as a result of contracts where the government and the contractor agreed in advance on how much the aircraft parts would cost. If the price comes out higher, the contractor can lose money. If the price is lower than anticipated, the contractor makes more money.
While GE did not disclose how much profit it made, Pratt & Whitney said its profit averaged 14.6 percent over the six years, or 1.6 percent more than the government had anticipated.
Derek J. Vander Schaaf, the Pentagon's deputy inspector general, said one way GE increased its profits was to set down one delivery schedule at the outset of negotiations and then deliver the parts much earlier than the Air Force and Navy expected them in order to save money set aside for inflation.
Vander Schaaf said Air Force, Navy and Pentagon contract officials should have discovered that practice and put an end to it. He said that persuasion, not legal action, was the most promising way to recover what he considered excessive profits. Vander Schaaf said this unusual recovery effort was the biggest ever attempted by the Defense Department.
The suspension and requests for refunds come as Congress is marking up President Reagan's defense budget and a growing number of lawmakers are protesting what they regard as waste in the Pentagon.
Defense Secretary Caspar W. Weinberger was in Paris yesterday, but aides said he had kept abreast of the actions taken against the contractors.