Pentagon to withhold 5 pct of billings for Pratt's F-35 engines


WASHINGTON, Oct 8 (Reuters) - Jet engine maker Pratt &Whitney said on Tuesday it is working to fix the system it usesto provide the Pentagon with cost and schedule information,after the U.S. government decided to withhold 5 percent offuture billings on four F-35 fighter engine contracts and a Navydeal.

Pratt, a unit of United Technologies Corp, said theDefense Contract Management Agency (DCMA) notified the companyabout the withholdings last week, citing problems with four of32 guidelines for Pratt's "earned value management system."

Earned value management (EVM) data is used to determinewhether companies are meeting cost and schedule goals. Fivepercent is the maximum the Pentagon can withhold from companybillings under federal acquisition rules.

"P&W is working an aggressive schedule to correct anydeficiencies," said spokesman Matthew Bates. "We are committedto having the best earned value management system possible, andto consistently and accurately track performance and executionto our contracts."

The DCMA in August notified Lockheed Martin Corp,the prime contractor on the F-35 fighter jet, that it wouldreduce withholdings on Lockheed's F-35 contracts to 2 percentfrom 5 percent, after the company made significant progress infixing problems with its earned value management system.

In recent years, the Pentagon has sharply increased itsoversight of the $392 billion F-35 fighter jet program, thecostliest U.S. weapons program.

The Pentagon's F-35 program supports DCMA's decision towithhold some funding from Pratt, said spokesman JoeDellaVedova. He said Air Force Lieutenant General Chris Bogdan,who heads the F-35 program, met with Pratt & Whitney executiveson Friday to discuss measures to improve the internal system.

"The EVM requirement is meant to protect taxpayers fromover-billing and focuses on the business systems defensecompanies use to estimate costs for bids, purchase goods fromsubcontractors, manage government property and materials, andtrack for costs and schedule progress," he said.

Bates, the Pratt & Whitney spokesman, said his company wasfocused on delivering a highly capable propulsion system for theF-35 on time, and at an affordable cost for our customers.

He said DCMA identified "room for improvement" in fourareas: updating documentation to better align with manufacturingprocesses; improving management and integration of schedulingtools; better estimating and forecasting of costs; and improvingwork package planning.

He said the company's corrective action plans to addressthose problems were being reviewed by the agency.

Bates said Pratt was also continuing to work with thePentagon to finalize details of the sixth low-rate productioncontract for more of the F135 engines it builds for the F-35fighter jet. A deal should be announced soon, he said.

DellaVedova said work on the Pratt engine contract wasbriefly interrupted by the government shutdown, but contractofficers and program lawyers returned to work on Monday.

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