Pentagon bombs $400M Lockheed outsourcing contract

The Pentagon this week said it was taking back the veterans pay and administration service work in had outsourced to Lockheed Martin in what some say is also a blow the former President Bush administration's government work privatization efforts.  

The return of the veteran's contract to government employees will save up to $25 million over the next 10 years according to the Defense Finance and Accounting Service (DFAS) that will run the program.

Spearheading the effort to remove the contract from Lockheed was Congressman Dennis Kucinich (D-OH) who had led an investigation into the contract which Boeing had been handling since 2002.  Had the current contract run its course through 2001, it was worth over $400 million.

"This is a great day for veterans and a victory for government oversight. This decision will finally end the six-year nightmare of privatization of retired and annuitant pay services that resulted in the degradation of services to veterans and an increased cost to taxpayers," Kucinich said in a statement. "I hope that this experiment in privatization will demonstrate to other agencies the costs, both financial and otherwise, of outsourcing the responsibilities of government," stated Kucinich.

According to Kucinich, Lockheed's performance of the pay functions of DFAS was characterized by mishandling, delay, poor quality and exorbitant charges.  An investigation by Chairman Kucinich's Domestic Policy Subcommittee published in July 2008 revealed that 8,763 disabled veterans died before their cases were even reviewed for eligibility in a program that allowed retired veterans with severe combat-related disabilities to receive concurrent disability and retirement pay.  Almost 30,000 veterans were denied the benefit based solely on the determination of Lockheed employees with about six weeks of training.

For its part, Lockheed told Reuters it was very proud of its performance under the contract and that the company delivered more than $400 billion in benefits "accurately and on time under this contract."

DFAS told Reuters a provision in the 2008 National Defense Authorization Act had been the "driving factor" in the plan to phase out Lockheed's role effective early next year. The law directs the Defense Department to consider hiring civilians rather than outsourcing, particularly for functions performed by civilian employees any time in the past 10 years.

Despite this setback, Lockheed is the government's largest contractor.  Last year for example it won the $1B the $1 billion, 10 year services contract to expand the FBI's biometric Criminal Justice Information Services (CJIS).

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