Defense probe hits consultants. Pentagon contractors rethink policy on consulting firms

The defense scandal appears to have taken its first victims. Unisys Corporation, a major defense contractor whose offices were searched in connection with the probe, has fired all of its marketing consultants, as many as five dozen.

Now, almost every defense company in the business is reviewing its policies toward consultants. While there haven't been any wholesale layoffs yet, companies including McDonnell Douglas, General Dynamics, and Varian Associates are at least looking hard at whom they hire and why.

``All the large companies are doing top-to-bottom reviews'' of their use of consultants, says one lawyer who represents defense companies. ``They are trying to figure out if they are doing anything unsound.''

This week Defense Secretary Frank Carlucci told the Senate Armed Services Committee that he plans to send a letter to the top 200 defense contractors urging them to ensure strict control on the use of consultants.

Defense consultants, who provide a wide range of advice to defense companies bidding for government contracts, appear to be the hub of a massive government probe into the procurement process. At least 15 have been subpoenaed or had their offices searched by federal agents looking for evidence of possible collusion, bid rigging, bribery of government officials, and trading of inside information in the defense procurement process.

In laying off some 60 or so marketing and political consultants, Unisys - which had hired several of the consultants under government scrutiny - appears to have taken the most drastic action so far. Spokesman William Beckham says the contracts will be reviewed individually, and some may be renewed.

Formally, Unisys is telling consultants that the move is for financial reasons. ``The tightening of the defense budget has caused reexamination of our use of consultants in assisting us in marketing our products,'' reads a Unisys letter firing a consultant.

Leonard Maley, who received the letter, scoffs at the notion that Unisys canceled consulting contracts because of budget cuts. ``It's my opinion they found a handful of consultants'' who may have violated the law, ``and now out goes everybody - baby, bath water, bathtub, bath soap, everything,'' he says.

Mr. Beckham concedes that the probe ``was an impetus'' to the cutback.

Varian Associates may take a similar cleansing approach, spokesman Gary Simpson says. While cautioning that it is ``premature'' to outline specific steps it is taking to tighten its consulting policies, one step might include ``terminating all consulting agreements and having them re-signed where appropriate,'' he says.

Work with consultant Mark Saunders, who appears to be a target in the probe, is being suspended, according to a spokesman. An employee in Varian's Continental Electronics division, who hired Mr. Saunders and whose office was searched last month, is on administrative leave.

At McDonnell Douglas, the contracts with two central characters in the probe - consultants James A. Lyons and Melvyn Paisley - are also ``under review,'' says a spokesman.

Many companies seem to be undertaking general reviews rather than firing consultants.

Consultants have felt the impact in different ways. One Army general who now works for a consulting company said he was recently contacted by a former company client who ``wanted to refresh its memory on what I did for them a year ago.''

Others, however, haven't felt any squeeze. ``As of yesterday, I was as popular as ever,'' says Michael Beltramo, a Los Angeles-based consultant.

Many are worried about consultant-bashing. ``If you are a consultant, everyone sort of assumes something shady is going on,'' one Washington industry lawyer says. ``They've all been painted by the same broad brush.''

While Congress is weighing new controls on consultants, the Pentagon opposes any sweeping regulations. In his testimony this week, Mr. Carlucci warned against a ``crackdown on consultants without considering the inescapable tradeoffs, such as diminished expertise'' available to the Pentagon and industry.

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