The Navy suspended General Dynamics Corp. yesterday from receiving any new federal contracts because of the company's indictment on charges of conspiring to submit fraudulent bills on development of the Divad antiaircraft gun.
Administration sources said yesterday that they expect NASA Administrator James M. Beggs, a former General Dynamics vice president indicted in the case, to step aside in the next few days. They said details will be worked out today.
Rep. Don Fuqua (D-Fla.) issued a statement late yesterday saying Beggs was "relinquishing his duties" pending resolution of the charges against him. Fuqua, chairman of the House Science and Technology Committee, which oversees the National Aeronautics and Space Administration, said he talked to Beggs yesterday afternoon and that "he informed me of his decision to step aside."
NASA refused to confirm reports that Beggs plans to take a leave of absence. But one White House official said, "He will not be with us too long."
White House spokesman Larry Speakes said that President Reagan "believes Mr. Beggs will do the right and proper thing as far as his government service, whether to continue or not to continue." Beggs, 59, remained out of public view yesterday. He was scheduled to lead a news conference on the Voyager 2 mission to Uranus, but an aide delivered his presentation.
The suspension of General Dynamics, which applies to new contracts with all federal agencies, is the second such action this year against the nation's third-largest defense contractor. In May, Navy Secretary John F. Lehman Jr. barred General Dynamics from receiving new Navy contracts because of improper billings and payment of illegal gratuities. But the company received nearly $1 billion in Navy work when it was reinstated in August.
A Pentagon spokesman said the new suspension -- which does not affect existing contracts but would bar any extensions -- "is for a temporary period pending completion of the legal proceedings initiated by the indictment." But General Dynamics has been given 30 days to present information showing why the Navy should lift the suspension.
Lehman made the decision because the Navy is the government's lead agency in dealing with the firm. When the Navy dropped the earlier suspension, it cited the company's agreement to adopt an ethics program and to withdraw $111 million in improper billings. If convicted in the Divad case, however, General Dynamics could face a long-term debarment with no right of appeal. A General Dynamics spokesman called the suspension "inappropriate, since the issues in the case should not have resulted in indictments against the company or its people." He said the charges "involved highly sophisticated regulatory and accounting matters" that "should have been resolved in a civil forum."
The St. Louis-based company, which was awarded $6 billion in defense contracts last year, receives more than 90 percent of its revenues from the federal government. It remains the subject of several federal investigations on charges ranging from deliberately underbidding on submarine contracts to billing the military for lavish entertainment.
General Dynamics, Beggs and three company executives were indicted in Los Angeles Monday for trying to hide cost overruns on an Army contract to develop the Division Air Defense (Divad) gun from 1978 to 1981. They were charged with illegally shifting $7.5 million in excess costs to two other General Dynamics accounts that were also funded by the Pentagon, and with making false statements.
General Dynamics lost the $5 billion competition to produce the weapon, which the Pentagon canceled in August.
Beggs has denied wrongdoing. But Sen. Charles E. Grassley (R-Iowa) and Rep. Robert G. Torricelli (D-N.J.) called for his resignation yesterday, with Torricelli saying, "When a man is indicted on a charge involving fraud in spending taxpayer dollars, it's difficult for him to continue with any confidence."
Beggs would be replaced by William R. Graham, 48, who was confirmed by the Senate two weeks ago as NASA's deputy administrator. Graham has no experience at NASA, having worked at the Rand Corp. in California and for the last three years as chairman of a White House advisory commission on arms control.
The suspension of General Dynamics has rekindled a debate over whether it is realistic to bar a major defense contractor from work for long periods. The government relies on General Dynamics for such key weapons as the Trident missile submarine, Los Angeles-class attack submarine, M1 tank, F16 fighter and antiaircraft missiles.
The Pentagon suspended or debarred 454 companies last year, but critics say that such penalties are always temporary when major defense contractors are involved. General Electric Co., for example, was suspended in March after pleading guilty to filing $800,000 in false claims on missile contracts, but was reinstated in September.
Air Force Secretary Verne Orr is scheduled to decide soon, perhaps this week, whether to carry out his proposal that Rockwell International Corp. be debarred from government contracts. Rockwell, the second-largest defense contractor and the top contractor at NASA, pleaded guilty in October to falsifying time cards and submitting $480,000 in overcharges on an Air Force contract.