Pentagon Action Against Lockheed Part of Larger Crackdown on Contractors

Over the last few days, word got out that defense industry giant Lockheed Martin has lost government approval for its cost and schedule tracking systems on the Joint Strike Fighter (JSF) and F-16 programs. The Pentagon has said problems with Lockheed’s system are part of the reason there have been 80 percent cost overruns in the estimated $382 billion Joint Strike Fighter program.

But the stakes are even larger. A spigot of defense spending opened up after 9/11, yet for years, there has been dismal oversight of contractors handling hundreds of billions of dollars in contracts for weapons and other goods and services. In the last few years, Defense Secretary Robert Gates has embarked upon numerous initiatives to control the often spiraling growth in the cost of weapons programs. Increased pressure on defense contractors is part of the effort to turn “fat into muscle,” as Pentagon industrial policy chief Brett Lambert put it in July, according to The action against Lockheed for its deficient tracking system has to be viewed in context of this overall effort.

The tracking system is known in the industry as the Earned Value Management System, or EVMS. EVMS is supposed to help companies manage large, complicated projects and measure performance against a baseline. Lockheed’s EVMS was deemed deficient in 19 of 32 areas in a November 2007 report by the Defense Contract Management Agency (DCMA), which was made public by POGO in 2008. The report concluded that Lockheed does “not provide the requisite definition and discipline to properly plan and control complex, multibillion dollar weapon systems acquisition programs.”

But Lockheed isn’t the only contractor with problems. “There’s a crackdown on contractors” for having non-compliant EVM systems, a Defense Department employee told POGO.

The crackdown has been a long time coming. For a while, there was a decline in Pentagon and contractor emphasis on EVMS that was due to “an unintended consequence of 1990s acquisition reform,” Dr. James I. Finley, the then-Deputy Under Secretary of Defense for Acquisition and Technology, told POGO back in 2008. “EVMS is getting more attention throughout industry now that the DoD [Department of Defense] is stressing compliance,” Finley said.

One company, at least, appears to be benefitting. Humphreys and Associates, Inc., an EVMS consulting firm based in Orange, Calif., was hired by Lockheed to help it fix its EVMS problems, the Defense Department employee told POGO. And Lockheed isn’t Humphrey’s only client. According to Humphrey’s website, “9 of the 10 largest US defense contractors are among our current or recent clients.”

Although Lockheed has made progress since 2007, the Pentagon apparently decided Lockheed wasn’t acting fast enough. It’s still not totally clear what’s going to happen to Lockheed—at a minimum it will have to disclose its EVMS is not approved when it bids for government contracts.

The decertification this week was “really a slap in the face to Lockheed,” one knowledgeable Defense Department employee told POGO.

Lockheed appears to have been caught off guard. “We were surprised by this action,” Joe Stout, a Lockheed spokesman, told Aviation Week. Stout added that Lockheed is working to get into compliance.

The Pentagon noted Lockheed’s deficient EVMS system this June when it issued a report on the staggering cost overruns in the Joint Strike Fighter program, which the report estimates will cost $382 billion—an 80 percent increase in the program’s initial projected cost. The Pentagon report called Lockheed’s non-compliance “disappointing and unacceptable” and a “systematic corporate level problem.”

An email obtained by POGO shows that the EVMS problems exist at Lockheed beyond its Fort Worth, Texas, facility, where the Joint Strike Fighter and F-16 programs are based, and extend to its Marietta, Ga., location where the C-130J cargo plane is built.