The resignation of Deputy Defense Secretary W. Paul Thayer, under fire for alleged financial wrongdoing, comes at a particularly awkward time for the Reagan administration.
It leaves the Pentagon without an experienced No. 2 man - the post that oversees budget and procurement matters - just as Congress is about to dig into defense spending with deficits on its mind and an appetite whetted for reform.
Mr. Thayer's departure also refocuses attention on a long-term criticism of the ties between industry and the military as well as the inevitable appearance of conflict of interest that these ties present.
In his letters of resignation this week, Thayer acknowledged that the US Securities and Exchange Commission (SEC) is charging him with violating the law by providing ''insider'' information on business matters that financially benefited friends and associates.
The incidents are alleged to have happened while Thayer was an executive with the LTV, Allied, and Anheuser-Busch corporations before he was appointed to his Pentagon post a year ago. Noting that he is not alleged to have gained anything financially in the matter, Thayer called the charges ''entirely without merit'' and has decided to fight them rather than come to an agreement with SEC investigators.
The administration's multitrillion-dollar plan to bolster substantially US defenses was accompanied by promises to improve Pentagon management, especially the procurement of weapons systems.
And while critics have had no lack of targets (exorbitant spare-parts prices, for example), it is generally acknowledged that progress had been made by Reagan-appointed officials.
Whatever his culpability in the company stock matter, Thayer has been known as a tough manager who did not hesitate to criticize procurement policy and practices.
He upbraided defense contractors for their failings and raised doubts about the wisdom of pushing for a bristling 600-ship US Navy fleet. A former naval aviator, test pilot, and combat ace, he felt more resources should be directed to the Army.
In the three years that Reagan-appointees have managed the Pentagon and armed services, Congress increasingly has become involved in the management of defense procurement. Over the protests of the Defense Department, it has established an independent weapons-testing office, publicized the work of whistle-blowers, and set limits on some weapons purchases.
Much of the criticism has come from Republican lawmakers, and this trend is expected to continue, especially with Pentagon civilians distracted over the Thayer episode.
The departure of Defense Secretary Caspar W. Weinberger's principal deputy also illustrates the difficulty of finding expert appointees in this complex area of defense without tapping industry officials or consultants who are members of the so-called military-industrial complex. The General Accounting Office (GAO) and the House Government Operations Committee recently raised questions about appointees to boards and panels that advise the Pentagon on weapons selections. For example, in reviewing financial disclosure statements, the GAO found that 32 of 117 appointees to advisory panels (some 27 percent) had financial ties to companies that could benefit from their recommendations.
Even the Defense Department's inspector general last year warned that the Defense Science Board - many of whose members have ties to companies doing business with the Pentagon - gives at least the appearance of conflict of interest in its deliberations. Since then, there have been efforts to improve the procedures and oversight of the Defense Science Board, including the appointment of an ''ethics counselor.''
''We take our responsibilities in this area very seriously, and would support the prosecution of persons violating these criminal laws,'' Thayer told lawmakers last September.
Speaking of advisory board appointees, however, he added: ''In most cases, their commercial experience is the source of their valuable expertise to the government. While 'appearances' are matters of great concern, and 'potential' conflicts flash a warning and are judiciously evaluated, they do not in themselves warrant automatic disqualification of an individual from a task force to which he can make an important contribution.''
Thayer is not the first senior defense official in the Reagan administration criticized for past business practices. Assistant Secretary Richard N. Perle denied wrongdoing in representing an Israeli arms maker just before taking his Pentagon post. Navy Secretary John F. Lehman Jr. came under fire for failing to sever all ties with his defense consulting firm before joining the administration.