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Pentagon Withholds Pratt & Whitney Funds Over Management

The Pentagon’s contract management agency will withhold 5 percent of billings on the next four F-35 jet engine contracts from United Technologies Corp. (UTX)’s Pratt & Whitney unit, according to a Defense Department spokesman.

The money will be held back by the Defense Contract Management Agency until the company fixes flaws with an internal business system used to track cost and schedule performance, the spokesman, Joe DellaVedova, said today in an e-mailed statement.

Pratt & Whitney had four deficiencies out of 32 guidelines under the Pentagon-required “earned value management system” that provides metrics to assess a company’s progress in meeting cost and schedule goals, DellaVedova said. The 5 percent is the maximum that can be withheld over flawed business systems.

The Pentagon’s F-35 program office “will continue to work closely with” the Defense Contract Management Agency “to ensure Pratt & Whitney corrects the four deficiencies,” DellaVedova said.

“Pratt & Whitney is committed to having the best earned value management system possible, and to consistently and accurately track performance and execution to our contracts,” company spokesman Matthew Bates said in an e-mailed statement.

“We have submitted corrective action plans to the DCMA and are working closely” with the agency, Bates said.

Management System

Through August, the Pentagon has withheld $195 million in payments to Lockheed Martin Corp. (LMT), the prime contractor on the F-35, because of flaws in its earned value management system for contracts on the fighter, the management agency said last month.

Kenneth Ross, a spokesman for Bethesda, Maryland-based Lockheed, said in an e-mailed statement that the company was recently informed by the agency that the amount withheld has been reduced to 2 percent of billings from 5 percent because the contractor “is making significant progress” on its corrective action plan.

The money withheld from Pratt & Whitney was reported earlier today by the magazine Aviation Week & Space Technology.

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

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