Lockheed cost controls deficient, DCMA says

By Alice Lipowicz

| June 3, 2008

Lockheed Martin failed to implement a large share of its required cost controls for its major aeronautics contracts with DOD, according to a 2007 Pentagon report.

If Lockheed Martin cannot resolve its EVMS deficiencies, it may affect the company's ability to win additional government contracts, the group said in a news release."We can't continue to trust Lockheed with billions of taxpayer dollars or we'll end up with less bang for more bucks," Nick Schwellenbach, the group's national security investigator, said in the release. "Affecting Lockheed's bottom-line is the only thing that can cause them to clean up their act."A Lockheed Martin spokeswoman said the company has implemented all recommended corrective actions and is enhancing its controls."Lockheed Martin takes all audits of our processes and programs very seriously," said Cheryl Amerine, a spokeswoman for Lockheed Martin."We have worked closely with the DCMA team since November, resulting in an approved corrective action plan. With approval of our corrective action plan from our local Defense Contract Management Agency and its Earned Value Center in March, we've addressed every recommendation and are putting improvements in place that both Lockheed Martin and the USG Earned Value Management Center believe will be effective in achieving full integration of cost and schedule," she said.

Lockheed Martin Corp. failed to implement a large share of its required cost controls for its major aeronautics contracts with the Defense Department, according to a November 2007 Pentagon report made available today by the Project on Government Oversight.

The Defense Contract Management Agency's report said Lockheed Martin's jet fighter division in Fort Worth, Texas was not compliant in 19 of 32 industry guidelines for Earned Value Management System cost controls. As a result, significant corrective actions were recommended, the report said

Defense acquisition officials looked at Lockheed Martin's management of the F-35 Joint Strike Fighter, F-22 Raptor and F-16 programs, according to the non-profit watchdog group, which posted the executive summary of the report on its Web site.

The report found substantial deficiencies. "Key Lockheed Martin Aeronautics EVMS processes and procedures are below standard and do not provide the requisite definition and discipline to properly plan and control complex, multibillion dollar weapon systems acquisition programs," the report stated.

Lockheed Martin viewed its earned value management responsibilities in a "superficial" manner, with little management control, the report added.

"This undisciplined approach to program management and towards the maintenance of the EVMS, will ultimately jeopardize the long-term stability of Lockheed Martin Aeronautics programs at Fort Worth, Texas, facilities and diminishes the purchasing power of the Department," the report stated.

The defense contracting report found that Lockheed Martin fell short of earned value management guidelines by:

Using vague and confusing EVMS documentation;
Failing to clearly define roles and responsibilities;
Using management reserve to alter internal and subcontract performance
levels and overruns;
Using work authorizations that did not extend to the appropriate levels;
Experiencing problems in integrating cost and schedule that undermine data validity;
Using inappropriate earned value techniques to assess material subcontracts and rework.

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