June 25, 2012
Credit: Credit: Lockheed Martin
Continued flaws with a program designed to track the cost of the military’s largest weapon system are eating into Lockheed Martin’s bottom line.
Late last week, Lockheed learned the military is halting an ongoing review of its internal audit program, the earned value management system (EVMS). Along with that decision, the Defense Contract Management Agency (DCMA) will withhold 5% of the price of the fifth lot of fighter jets — the maximum penalty.
That withholding is an increase from earlier this year. DCMA had withheld just 2% of the contract in late February because Lockheed had submitted a plan to correct shortcomings of its EVMS effort. That amounted to about $600,000 per month, according to DCMA.
EVMS is the monitoring system that allows contractors to make the claim that a program is “on cost and on schedule.” Lockheed’s cost and schedule tracker has been under review since 2010, when the Pentagon opted to decertify Lockheed’s EVMS. At that time, DCMA found fault in 19 out of 32 areas; DCMA is still finding significant issues in 13 areas.
Between January and May, officials from DCMA, the Defense Contract Audit Agency and the F-35 joint program office visited Lockheed Martin’s Fort Worth facility to check on Lockheed’s plan to fix the cost-tracking system, not just for the F-35 but also for the F-22 and the F-16. And while DCMA noted that Lockheed has made progress, “EVMS implementation for F-35 System Development and Demonstration and production contracts remains a major concern,” according to a Pentagon summary statement.
The corrections were expected to be complete by June, but the DCMA suspended the review because it was unlikely that the problems could be corrected by the deadline.