Overseas Civilian Contractors

News and issues relating to Civilian Contractors working Overseas

Defense Contractors Face Withheld Payments Over Systems Flaws

Tony Capaccio Bloomberg August 29, 2011

The Pentagon is imposing a new contract provision which calls for withholding as much as 10 percent of payments to defense companies when it finds“significant” shortcomings in any of six business systems used to track performance and cost of weapons programs or services.

The Defense Contract Management Agency in October decertified the Earned Value system used by Lockheed's Fort Worth, Texas aircraft unit to track costs and schedules, a Pentagon spokeswoman said. Photo: Lockheed Martin

The measure is intended to protect taxpayers from overbilling. It focuses on the systems that companies such asLockheed Martin Corp. (LMT), the No. 1 defense contractor, use to estimate costs for bids, purchase goods from subcontractors or manage government property and materials.

A rule, which took effect Aug. 16, requires that all new contracts include language that spells out the potential for withholding payments due to deficiencies, such as those involving the standard “Earned Value Management” system used to determine whether companies are meeting cost and schedule goals

As initially drafted, the Pentagon would have been empowered to withhold as much as 20 percent of billings. After industry complaints, that was cut to a 10 percent maximum in the fiscal 2011 defense policy bill.

The rule resulted from an August 2009 hearing of the congressionally mandated Commission on Wartime Contracting at which major business-system deficiencies were described within companies working in Iraq and Afghanistan.

“These changes are long overdue and reflect potential risk associated with longstanding and continuing contractor business system deficiencies,” said commission Co-Chairman Michael Thibault in an e-mail

Please read the entire story here

August 29, 2011 - Posted by | Civilian Contractors, Contingency Contracting, Department of Defense, Government Contractor | , , , , , ,

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