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September 18, 2015 By AMK

United Technologies in Pentagon’s penalty box on business systems

The Pentagon often feuds with defense contractors about billion-dollar weapons that are over budget or underperforming. But it also holds back millions of dollars over flaws in everyday business systems.

United Technologies Corp. tops the most recent target list of 15 companies whose payments are being withheld for inadequate systems to manage subcontractor purchases, estimate costs or keep track of schedules.

DCMAAs of Aug. 12, the Defense Contract Management Agency was holding back almost $180 million in billings, or as much as 5 percent, from the company’s two military units. That’s up from $130 million in May.

The recent total includes $123.4 million from Sikorsky Aircraft — the helicopter maker that United Technologies has agreed to sell to Lockheed Martin Corp. — and $56.1 million from the Pratt & Whitney engine unit.

The withholdings signal steady Pentagon enforcement of a three-year-old regulation calling for contractor compliance with six internal systems that the government says are necessary to measure a company’s progress in meeting cost and schedule goals for weapons contracts.

Keep reading this article at: http://www.bloomberg.com/news/articles/2015-09-08/united-technologies-in-pentagon-penalty-box-on-business-systems

Filed Under: Government Contracting News Tagged With: business systems, DCMA, DoD, internal control, Pentagon

October 22, 2012 By AMK

Pentagon not properly monitoring sole-source contracts, audit finds

The Defense Department is inadequately following guidance on single-bid contracts and failing to encourage the type of competition that saves taxpayer dollars, the inspector general’s office found in a recent audit.

In a review of 107 contracts valued at nearly $1.4 billion, along with another half-billion dollars’ worth of contract modifications, the IG determined that the military’s competition advocates failed to follow single-bid guidance in 31 cases. The Pentagon also neglected to “develop adequate plans to increase competition because Defense Procurement and Acquisition Policy (DPAP) did not provide effective oversight of the plans,” the report said. And Defense officials did not develop specific steps to improve competition rates in their plans or “develop specific steps to prevent 39 of 47 contract modifications, valued at $390.9 million, from exceeding the three-year limitation on awarding contract modifications without first recompeting.”

The IG recommended improved monitoring and creation of an overall schedule on altering contracts. The service largely agreed.

Keep reading this article at: http://www.govexec.com/contracting/2012/10/pentagon-not-properly-monitoring-sole-source-contracts-audit-finds/58819/?oref=national_defense_nl.

Filed Under: Government Contracting News Tagged With: audit, competition, DoD, DPAP, IG, negotiation, Pentagon, sole source

June 20, 2011 By AMK

Pentagon: No more big defense mergers

The Defense Department will try to stop consolidation among the nation’s biggest weapons contractors, who are bracing for potentially far-reaching cuts in defense spending because of the nation’s yawning budget deficit, a top Pentagon official said in an interview.

Ashton Carter, the Pentagon’s top acquisitions official, said he expected the defense industry to go through a period of profound change as it adjusts to a new era of austerity. But he cautioned that the department would take steps to prevent mergers and acquisitions within the ranks of major defense contractors like Raytheon and Boeing, whose numbers have fallen sharply since the end of the Cold War.

“We would not allow any further mergers of the big ones,” Carter, the Pentagon’s undersecretary of Defense for acquisition, technology, and logistics, told National Journal. “On occasion we will intervene by blocking a transaction if we thought it was excessively short-term focused and had done a poor long-term risk analysis.”

In 1993, during a very different era for defense contracting, Carter was one of the participants at what came to be known as the “Last Supper.”

Then-Defense Secretary Les Aspin summoned the chief executive officers of the nation’s 15 biggest defense contractors to the Pentagon and bluntly told them they needed to start consolidating.

Carter, who served as an assistant secretary of Defense during the Clinton administration, noted that the industry had roughly 40 major players during its Cold War peak. Within a few years of the Last Supper, the industry had shrunk to barely a half-dozen large companies players.

In the interview, Carter said the number of major defense firms shouldn’t be allowed to fall any further, particularly since the coming cuts won’t be as pronounced as had been the case after the end of the Cold War.

“It won’t be like in the 1990s,” he said. “I don’t expect [the industry] to contract any further.”

Still, Carter said it could no longer be business as usual at the Pentagon. The Defense Department’s base budget has nearly doubled since 2001, but the Obama administration and Congress have made clear in recent months that the Pentagon budget will be held steady – and possibly even cut – in the years ahead. On Monday, for instance, the House Armed Services Committee recommended cutting $9 billion from the department’s fiscal 2012 request.

In the interview, Carter said the department will work to reduce the $200 billion it spends each year on logistics and maintenance by about 5 percent, savings he described as “real money.” He estimated that such efficiencies could save the department as much as $100 billion in coming years.

One weapon the Pentagon will use in its fight to rein in runaway spending is what Carter refers to as a “share line,” an agreement allowing contractors who bring their projects in below budget to keep some of the savings. If an aerospace firm manufacturer delivered a next-generation drone for $200 million less than had been projected, for instance, it might be allowed to keep $100 million for itself. The government would keep the rest.

“Businesses all over the country are constantly, ruthlessly routing out unnecessary costs and making themselves leaner,” Carter said. “We have to provide incentives for [defense contractors] to do that. ”

In the end, though, Carter said major defense firms will have to find ways of delivering their products for less money for the simple reason that there is less money to go around.

“The alternative to adaptation is just canceling programs,” he said in the interview. “The programs that survive will survive in part because they are being economically managed. And if you’re a poorly-run program and you’re not performing, that ipso facto puts you on the potential cut list.”

— by Yochi J. Dreazen – National Journal – June 15, 2011 – located at http://www.govexec.com/story_page.cfm?articleid=48014&dcn=e_gvet

Filed Under: Government Contracting News Tagged With: acquisitions, AT&L, budget cuts, DoD, mergers, Pentagon, spending

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