Loral, Army Relive FAA Nightmare

A $474 million Army deal could clone Loral's ill-fated FAA revamp

When Loral Corp. mastermind Bernard Schwartz completed the purchase of IBM Federal Systems Co. Jan. 1, 1994, he knew he had inherited a problem-plagued air-traffic modernization program. Whether he knew about the troubles that had just started to emerge on a $474 million Army systems development contract remains a mystery.

Now the Sustaining Base Information Services contract, as it is known, has all the telltales signs of complex government procurement gone bad. It is plagued by delays and cost overruns, prompting finger-pointing from both Loral and Army program managers. In the meantime, documents obtained by Washington Technology show only a fraction of the systems originally promised have been developed.

The contract was to have outfitted Army installations with standard computer hardware and software to support daily administrative tasks. To contain costs, the Army has reduced the number of software applications to be developed from 89 to 53. But as with the Federal Aviation Administration modernization, officials appear to have been far too optimistic about the money and time needed to develop software.

The service originally wanted the winning contractor to deliver the first 20 systems by the end of the contract's first year and all 89 by the third year. Two years into the contract, Loral will deliver a mere seven of the 53 applications by December.

Plans for reusing chunks of already developed software appear to be a major stumbling block. In a draft of its bid, then-IBM promised the Army 40- to 50 percent reuse in the first year of the contract. But John Florio, development manager for Loral Federal Systems, said in a June 27 affidavit that "Loral is currently achieving a 23 percent rate of software reuse in connection with these first seven applications." He pointed out that "the software development effort required under the SBIS contract is far greater than originally described."

Nevertheless, sources said Army officials based their evaluation of the company's bid on the 40- to 50 percent reuse projection.

But Loral officials, in a written response to questions submitted by WT, contend their proposal "stated that during the development of the first software increment, reuse was expected to be 15 percent."

Despite the recent conflicting statements, the program's troubles began shortly after the June 1993 contract award to then-IBM Federal.

Before her retirement in the spring of 1994, Jean Lakey gave an official account of her three-year tenure as program manager for the Army.

In July 1993, the Army provided the contractor with a master schedule that had been developed before the award was made.

Loral [then-IBM] was told to review and, based on their solution, provide any necessary changes.

The Loral program manager was told in numerous meetings that now was the time to change the schedule, if necessary," Lakey wrote.

Meanwhile, software development problems also began to emerge. The Army got a cost estimate from the contractor for the first set of software applications that was much higher than expected. To contain costs, the program office turned to Army engineers to see whether they could build some of the first set of applications for less.

By the end of 1993, the Army still did not have cost-performance reports, system plans and site survey reports.

The contractor, Lakey wrote, "never gave any indication that there was a problem in spite of being asked several times about rumors received in the [program office] and a letter requesting verification of delivery by the contracting officer."

Clearly frustrated, Lakey, with support from her contracting officer, wanted to force then-IBM Federal to explain the reasons for the delays.

In an unusual move in government contracting, Army officials overruled Lakey and her staff and suggested she ask the company to outline corrective measures instead.

The contractor, she wrote, "continued to ignore [the contracting officer's] request for action on various issues and to respond to the terms and conditions of the contract."

By January 1994, the Army and the contractor finally agreed on a master schedule, work that had begun six months earlier. By then, IBM Federal had changed hands.

"I found that Loral would not report known changes in the master schedule in advance of the event until the [program office] would question a delivery. All requests from the Army in this area were ignored," she said.

In February 1994, Loral submitted a system design that was 70 percent complete "due to the inability of the contractor to produce a workable integrated [system] infrastructure," Lakey said.

Once again, she turned to the Army's own engineers to resolve the deficiencies in Loral's design plan.

"If the Army must continue to make major increases in [its] engineering support, one must question the need for Loral in this and other areas," she wrote.

Loral officials, in a written response to WT, said Lakey's points "were incorrect and unsubstantiated."

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