The Air Force notified the General Services Administration yesterday that it cannot buy light bulbs or other civilian products from General Electric Co. under new contracts until the firm corrects conditions that prompted the Pentagon to put it off limits.
The Defense Department on Thursday banned GE from future defense contracts on grounds that its recent criminal indictment for fraud raised the question of whether the corporate giant is a responsible contractor.
William Howard Taft IV, deputy secretary of defense, said in an interview yesterday that regulations governing procurement gave the Pentagon no choice but to suspend GE temporarily from future work. Defense Department officials said the same regulations require that the entire executive branch, not just the Pentagon, stop writing new contracts with the firm.
The GSA buys light bulbs and other civilian products from GE for other government agencies. It could not be learned immediately how much GSA's business is worth to GE.
Taft said GE could obtain new contracts before its fraud trial ends if it makes changes to prevent recurrence of what the government said were more than 100 instances of fraudulent statements and claims.
The firm is accused of doctoring employe time cards without their consent so that nonreimbursable work on the Minuteman missile warhead was charged to other projects funded by the government.
"We felt that, under our policies and regulations, this was the proper thing to do to protect the public until we determine that this is a responsible contractor," Taft said in discussing suspension of GE, the nation's fourth-largest defense contractor and 10th largest corporation.
"The regulations are very clear that an indictment calls the responsibility of the contractor into question," Taft said. "It doesn't establish that the contractor is not responsible, but it calls it into question and that is the purpose of the suspension."
He said the suspension is "not punitive action" against GE but a move to protect taxpayers until there are changes in the situation that led to the indictment.
"Punishment is something for the Department of Justice" to decide upon, Taft, a lawyer, added.
"It's not a hitting over the head," Taft said in discussing the suspension, "or an execution or a slap on the wrists. It's doing our job of protecting the taxpayer."
He called the suspension one of the "ugly fruits" of putting defense contractors under closer scrutiny, an effort that he said began in 1981 when more auditors and investigators were put on the job under the Defense Department's inspector general.
Taft said a GE executive has been in touch with the Air Force as a first step toward discussing changes in its contracting procedures and mechanisms.
Taft did not say when the firm would meet with Pentagon officials but indicated that he thought the suspension would be lifted long before the criminal case is resolved, perhaps on a contract-by-contract basis.
"They'll be eager to establish their responsibility," Taft said of GE officials when asked if he expected the firm to make speedy changes.
GE, he continued, has offered to repay money the government says was collected fraudulently. GE collected $800,000 it did not deserve, according to the indictment.
The suspension "stays in effect until we're satisfied that they're responsible contractors," Taft said. "That can be established as to divisions. That can be established as to specific contracts or can be established as to the whole company."
Other Pentagon officials said forthcoming missile tests require GE's expertise under new contracts that would be forbidden under the suspension order. They predicted that the ban will be lifted temporarily for the tests.
Air Force Secretary Verne Orr, in issuing the suspension order Thursday, said it could be lifted for "compelling" reasons.
Taft said there are "many ways" GE could reestablish its credentials as a responsible contractor eligible for government business.
He cited as examples installing better contract-review processes in GE and changes in its accounting system to prevent the filing of fraudulent claims, as GE has been accused of doing.