Pentagon withholding payments from six weapons makers

WASHINGTON (Reuters) - The U.S. Defence Department is withholding payments from six arms makers for problems with their internal business systems, including Lockheed Martin Corp (NYS:LMT), Northrop Grumman Corp (NYS:NOC) and two United Technologies Corp (NYS:UTX) units.

The Pentagon's Defence Contract Management Agency (DCMA) stepped up enforcement of rules for the business systems that companies use to track cost and schedule information under a 2011 change in federal acquisition rules.

U.S. Navy Commander Bill Urban, a Pentagon spokesman, said DCMA had "consistently maintained rigor in making determinations on all contractor business systems" since the change in the law, and there had not been a recent change in enforcement.

Congress and top Pentagon officials have tried to increase oversight of major weapons programs in recent years after billions of dollars of cost overruns and schedule delays that affected nearly every major weapons program.

Urban said the agency was withholding payments ranging from 2 percent to 5 percent from two Lockheed units, two United Technologies units, Northrop, and AAI Corp, a unit of Textron Inc (NYS:TXT), for problems with their respective "earned value management systems," or EVMS.

The latest company to have funds withheld is Pratt & Whitney, a unit of United Technologies, which builds engines for the F-35 fighter jet, and is facing a 5 percent withhold rate, Urban said.

DCMA began withholding 5 percent of payments from Sikorsky Aircraft, another United Technologies unit, starting September 6, for issues with direct costs and material accounting, he said.

The agency started holding back 5 pct of payments from Northrop's Global Hawk program beginning August 27, for seven deficiencies involving direct costs and changes associated with revisions to its "estimates at completion," he said. The total amount withheld thus far was $584,000 (365,983 pounds), Urban said.

Textron Inc (NYS:TXT) has faced a 2 percent withholding since March 2013.

Lockheed's Aeronautics division is having 2 percent of payments withheld, effective August 30, when the rate was lowered from 5 percent, after the company made "significant progress: toward fixing the deficient system.

Lockheed's space systems unit was hit with a 5 percent withholding beginning in March 2012, Urban said.

(Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)