Firm Sues Pentagon Over Loss of Contract

Precision Aerotech Inc., a La Jolla-based high-technology defense contractor, announced Monday that it is filing a $20-million lawsuit against the government, accusing the Department of Defense of unlawfully closing its subsidiary, Micronics International.

The lawsuit is the latest exchange between Precision Aerotech and the Pentagon, which have been involved in a yearlong dispute over the production of a $4,500 firing mechanism used in several major tactical missile systems.

Last month, the Defense Contract Administration Service, which administers contracts for the military and oversees contract and quality compliance, said the Pentagon would no longer accept the device manufactured by Brea-based Micronics because tests had proven the components to be faulty. That decision forced Precision Aerotech to shut down Micronics and lay off more than 100 employees.

Bankruptcy Filing

Cancellation of the $38-million contract also led Micronics, which at its peak had 180 employees and posted $12 million in revenues, to file for protection Monday under Chapter 11 of the U.S. Bankruptcy Code.

G. Addison Appleby, chairman of the board and chief executive officer at Precision Aerotech, could not be reached for comment Monday. In earlier statements, Precision Aerotech officials have accused the government of unfairly harassing the company.

Gay Maund, spokeswoman for the Defense Contract Administration Service, denied the Precision Aerotech contention.

“The government regrets that the company has taken such action,” Maund said. “We have been trying to work with them to help them meet specifications. If they could do that, we would still want their products. It was never our intention to close them.

She added: “They have not been fulfilling the terms of the contract. They haven’t been measuring it, they haven’t been testing it. In essence, they’re not producing the product that they agreed to produce.”

Sole Supplier

According to officials of the Department of Defense service, Micronics was the Pentagon’s sole supplier of the critical firing mechanism, or fuse, used in the Phoenix, Sidewinder, Sparrow and other missile systems. The fuse is used to trigger a missile’s launch as well as to prevent it from firing prematurely.

The rejection of Micronics’ component will temporarily interrupt the production of such missile systems, Maund said. But she added that the Defense Department is looking for other contractors to supply the device.

According to the Defense Contract Administration Service, the Pentagon became disenchanted with Micronics after enduring production delays and receiving faulty products from Micronics in recent years. In 1988, the Pentagon initiated a criminal investigation of the company to assess whether it used a substandard production process in manufacturing the missile component. The investigation is continuing, Maund said.

Also last year, the Navy was forced to scrap 500 Phoenix air-to-air missiles worth $425 million because of faulty manufacture of the component, according to the General Accounting Office.

Micronics executives have continuously denied charges of shoddy workmanship and have instead blamed the Naval Air Systems Command for forcing Micronics to manufacture the missile component from what it describes as NAVAIR’s faulty plans.

Micronics officials have said that they advised NAVAIR to correct more than 30 design flaws but that their recommendations were ignored or rejected. Manufacturing the device while correcting such design flaws has slowed production, the executives have said.

But, according to a written statement released by Micronics, “NAVAIR has persistently attributed the resulting delays and cost increases to shoddy workmanship, rather than acknowledge and correct the obvious faults in the NAVAIR designs.”