Bloomberg News

Pentagon Withholds Sikorsky Payments for Business System Flaws

October 11, 2013

The Defense Department is withholding 5 percent of billings for a Navy helicopter contract until United Technologies Corp. (UTX:US)’s Sikorsky Aircraft unit fixes deficiencies with an internal business system, a Pentagon spokesman said.

The 5 percent withholding is the maximum that can be temporarily docked from companies for shortcomings in a system to track cost and schedule performance, under regulations the Pentagon adopted in August 2012.

Sikorsky was notified Sept. 6 of three deficiencies on a contract for the Navy’s CH-53K heavy-lift helicopter related to guidelines for the recording of direct costs and material accounting, Navy Commander William Urban, a Pentagon spokesman, said in an e-mailed statement. A corrective action plan is expected from the company by Oct. 21, he said.

Sikorsky spokesman Paul Jackson said in an e-mailed statement that the company was cited for three “significant issues” of which “two have been resolved, one remains open.”

“We do not anticipate that this issue will affect our execution of that contract/program in any manner,” Jackson said.

It’s the second time in a little more than a month the Pentagon has taken a similar action against Hartford, Connecticut-based United Technologies. The Pentagon’s Defense Contract Management Agency notified the company’s Pratt & Whitney unit in September that it was withholding 5 percent from billings on three F-35 jet engine contracts and another Navy engine contract.

Pentagon Crackdown

Separately, the agency also is withholding $195 million from Lockheed Martin Corp. (LMT:US) for long-standing deficiencies with its business system. The Pentagon has reduced the amount to 2 percent, citing improvements.

Together, the withholdings signal a Pentagon crackdown on contractor compliance with internal systems that the government says are necessary to measure a company’s progress in meeting cost and schedule goals for multibillion-dollar weapons contracts.

“We are working very closely and collaboratively” with the Defense Contract Management Agency “on our response” to the withholding action, said Jackson, the Sikorsky spokesman. “Our objective is not only to provide the best flight solutions but also to do so by utilizing robust business systems and processes to ensure we provide value to our U.S. Government customer.”

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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Companies Mentioned

  • UTX
    (United Technologies Corp)
    • $109.09 USD
    • -0.59
    • -0.54%
  • LMT
    (Lockheed Martin Corp)
    • $176.52 USD
    • -0.09
    • -0.05%
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