Pentagon Increases Pratt & Whitney Penalty Over Business Systems

  • United Technologies' engine unit has 5% of billings withheld
  • A lack of progress cited for increase from 2% held back

The Pentagon agency that oversees contracts is again withholding 5 percent of billings from United Technologies Corp.’s Pratt & Whitney engine unit, citing a long-running dispute over shortcomings in business systems that track costs and schedules.

The Defense Contract Management Agency is currently withholding $40 million in billings from Pratt & Whitney, the sole supplier of engines for Lockheed Martin Corp.’s F-35 fighter, agency spokesman Mark Woodbury said in an e-mail. That’s up from $26 million withheld in April 2014.

Five percent, the maximum the Pentagon can withhold for major shortcomings in any of six business systems, was assessed against Pratt & Whitney in September 2013. It was reduced to 2 percent in June 2014 because of progress in improving the contractor’s “earned-value management system,” which tracks costs, schedules and how much work is performed for every dollar spent on a contract.

Last month, the agency reimposed the five percent because of Pratt & Whitney’s continuing difficulties in estimating the costs to complete contracts and its broader performance in meeting contract goals, Woodbury said.

Pratt & Whitney spokesman Matthew Bates said in an e-mail that the company understood the government’s action and has “root-cause corrective action plans in process. We believe we have done a good job executing on” those plans.

The approach “includes integrating our legacy tools, improving our processes, and maturing the proficiency of our teams,” Bates said. The company has resolved about half the issues with the contracting agency and is working closely with it “to resolve these remaining items as quickly as possible,” he said.

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