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Weinberger Opposes Bulldozer Contract to Company With Libyan Interest

May 14, 1986

WASHINGTON (AP) _ Defense Secretary Caspar W. Weinberger has made ″a political judgment″ that the Pentagon will not award a contract for combat bulldozers to the Fiat- Allis Co. because it is partially owned by Libya, Pentagon sources say.

Defense Department attorneys are still investigating how to deny the contract to Fiat-Allis since it was the low bidder on the program. But Weinberger has personally intervened in the case and is now ″taking a real hard line,″ the sources added.

″The more he’s looked at it, the more concerned he’s become,″ one ranking official said of Weinberger. ″There is still no determination as yet that we have the legal authority (to block the contract), but a political judgment has been made by the secretary that there will be no contract until this issue of Libyan ownership is cleared up.″

The sources spoke only on condition of anonymity.

Robert Sims, the Pentagon’s chief spokesman, declined to discuss Weinberger’s role in the matter Tuesday but confirmed the Pentagon had sidetracked the $7.9 million deal.

The Pentagon, Sims said, ″is concerned that no profits (from defense contracts) are paid to Libya.″

″This contract has not been awarded,″ he continued. ″The Department of Defense does not intend to award that contract until our concerns regarding the Libyan ownership of Fiat-Allis have been satisfactorily resolved.″

The disclosure that the Pentagon was backing away from a deal with Fiat- Allis follows earlier testimony to the contrary on Capitol Hill. It also came on the same day that the House voted without dissent to approve a resolution asking Weinberger to delay award of the contract.

The resolution said U.S. anti-terrorist efforts against Libya ″would be undercut by the inadvertent transfer of United States tax dollars to the government of Libya.″

The sources said Weinberger had personally intervened in the case following testimony on Capitol Hill by Fred C. Ikle, the undersecretary of defense for policy.

Ikle informed a Senate Armed Services subcommittee on May 1 the Defense Department did not appear to have the authority to reject a valid low bid from Fiat-Allis, even though it is a subsidiary of Italy’s Fiat SpA, which is 15 percent owned by Libya.

″The (Pentagon) attorneys are busily searching for ways to avoid awarding that contract,″ one official said Tuesday. ″And I can assure you they will find a way. It’s being held up now because they found a technical reason to do so.″

According to Ikle, the Pentagon has awarded contracts totaling $23.6 million to Fiat or its subsidiaries since 1984. The government-owned Libyan Foreign Investment Co. has held a 15 percent interest in Fiat SpA since 1977 and has two seats on the company’s 15-member board of directors.

The sources said Weinberger had been aware of the controversy before Ikle’s testimony, but had restudied the matter following his deputy’s Capitol Hill appearance.

Ikle’s testimony produced expressions of disbelief by senators that the Pentagon could not block a contract to a company partially owned by a country that the United States had just bombed.

U.S. Air Force and Navy bombers conducted aerial raids against Libya on April 15 following a determination by President Reagan that Libya had sponsored a terrorist attack on a West Berlin nightclub frequented by American servicemen.

Fiat-Allis submitted a low bid of $7.9 million to provide the Marine Corps with 178 crawler tractors. That was well under the $9.1 million bid submitted by the J.I. Case Co. of Racine, Wis., which filed an unsuccessful appeal with Congress’ General Accounting Office.

The GAO, despite a series of economic sanctions imposed on Libya by Reagan earlier this year, ruled May 5 that the minority interest held by Libya in Fiat did not provide grounds for prohibiting award of the contract.

The Pentagon sources said Weinberger knew of the GAO ruling but had decided the contract had to be blocked by some method, perhaps on the grounds of national security.

The secretary’s decision follows a determination by Reagan earlier this month to order American oil companies out of Libya by June 30.

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