Boeing can bill $61 million that Pentagon withheld for months

The Pentagon withheld $60.5 million in payments from a Chicago-based Boeing Co. unit from February to late last month after military managers concluded that its internal system to track costs and schedules was flawed.

The funds held back were for work on P-8A Poseidon and Awacs surveillance aircraft contracts managed by Boeing's Defense, Space and Security unit in Puget Sound, Washington, Mark Woodbury, a spokesman for the Defense Contract Management Agency, said in an e-mailed statement. Boeing's corrections were confirmed Oct. 29, and the company was allowed to resume billings, the agency and the company said.

Money wasn't withheld on the KC-46 tanker, a third aircraft produced by the unit, because its development contract was signed before the adoption of a Pentagon regulation requiring more rigorous enforcement of contractor compliance with systems to estimate costs for bids, purchase goods from subcontractors, manage government property and measure progress in meeting cost and schedule targets.

Data generated by Chicago-based Boeing's “earned value management system” and intended to track progress against cost and scheduling metrics was incomplete or inaccurate, the agency said. The agency also found that subcontractors' data “was not comprehensive or substantiated.”

All Puget Sound programs now use an approved system, and funds are no longer being withheld, Boeing spokeswoman Kimberlee Beers said in an e-mailed statement.

The Pentagon withheld as much as $221.9 million from Lockheed Martin Corp.'s aeronautics unit through December before determining that the company's earned value system was compliant, permitting a resumption of billings.