Highlights

Newsweek
Lockheed Martin’s specious approach to saving taxpayers defense dollars

Lockheed Martin’s announcing acquisition of Standard Aero’s employees
Lockheed Martin’s press release giving the appearance that it intends to save the U.S. Air Force money

Standard Aero’s theft allegations against Lockheed Martin
Standard Aero describes Lockheed's unethical, if not unlawful behavior

Texas Court findings
Judge issues order restraining Lockheed Martin from stealing Standard Aero’s propritary intellectual property

Lockheed Code of Ethics and Business Conduct
The code of ethics document that is required reading for Lockheed employees.











































































































































































































































Defense Contractor Watch is dedicated to a strong but fiscally responsible military. Fundamental to a successful military is a sound strategy. Strategy at its most basic is the creative application of resources to goals. Since September 11th, 2001, the war in Afghanistan and Iraq has cost (in constant dollars) what taxpayers paid for the Korean War. At our current spending rate, we are probably a year or two away from equaling what we spent on the Vietnam War. There is no end in sight. We cannot help but reflect on what Sun Tzu said 2,500 years ago, “… if the campaign is protracted, the resources of the State will not be equal to the strain.” Since money is finite, we thought it makes sense to see if America’s arsenals of democracy are acting, as former Secretary Larry Garrett testified “as stewards of the resources that the American people give us.” So we sent our scouts out on patrol.

The first violation of the public trust to hit our radar screen is a development between Lockheed Martin and its dealings with a major subcontractor, Standard Aero. Lockheed Martin’s behavior represents a high water mark in a corporation’s self-interest at the expense of the war fighters. The contract between the two companies was issued as a “FAR Part 12” contract, which is theoretically designed to save the taxpayers money by encouranging contractors to buy commercial products and services. The contractor is not required to show its costs and in theory, the taxpayer would pay less because the contractor would not have the additional overhead associated with the burdensome regulations associated with justifying its cost. (Lockheed has previously demonstrated that it can run up costs to the taxpayer when its contracts are open to public scrutiny.)

As Newsweek wrote in its January 28, 2006 edition, “One of Lockheed’s subcontractors, engine-builder Standard Aero, is now suing it, claiming the bigger company has grabbed its proprietary information under cover of the contract—and again, without Pentagon oversight—a move that it says could hold up needed transport planes for U.S. troops.” (See side bar for complete story.)

The C-130 Hercules is a critical link in the logistic train for war fighters in Afghanistan and Iraq. The harsh environment of these two countries makes engine repair in a timely manner more critical than ever.

As part of the peace dividend from the fall of the Berlin Wall, the Department of Defense began transferring military functions into the civilian world. This was done in the name of saving money. One of the recommendations of the Base Closure Commission resulted in Lockheed Martin becoming a prime contractor for a former U.S. Air Force depot facility at Kelly Air Force Base in San Antonio. Among other things, the Kelly Air depot would be responsible for maintaining the T56, an engine used on many civilian turoboprop aircraft. Most critical to the U.S. military, was keeping a ready supply of the Rolls Royce-designed and manufactured T56 engines for the venerable Lockheed Martin C-130 Hercules. But neither Rolls Royce (the T56’s manufacturer) nor Lockheed Martin were certified to repair the T56 engine. For that function, The U.S. Air Force held a competition, in which both the winning and losing teams asked Standard Aero to be a subcontractor on the their proposal. Both teams acknowledge that Standard Aero was the industry leader in T56 engine maintainence, repair and overhaul (MRO) business. Lockheed won, in large part due to Standard Aero’s expertise in repairing T56 engines.

The Lockheed Martin-Standard Aero contract was born with suspicion when it was approved in early 1999 by Darleen Druyun, a senior U.S. Air Force acquisition specialist who was later conviced of directing contracts toward major defense contractors in exchange for favors. The Lockheed Martin-Standard Aero contract was for seven years with options for additional years. Those options were to be based on Standard Aero’s performance.

Once Standard Aero was under contract, it took them 16 months to become qualified by the U.S. Air Force to repair the T56 engine. Once approved, Standard Aero approached its work with gusto. It earned the prestigeous Charles B. Ryan award for maintenance, repair and overhaul (MRO). The award said in part—

Standard Aero’s program, which integrated a proprietary Best Build program with a proven enterprise Lean-Cellular MRO approach, resulted in what it calls a “Best Value Readiness” for T56-engined warfighters, including the USAF’s C-130 Hercules fleet. Reduced cycle times, increased average time on wing (ATOW), and increased number of spares all resulted from implementation of its program.
Even more important to the taxpayer, however, is that Standard Aero was able to reduce costs which it turned over to Lockheed Martin as a savings to the U.S. Air Force. But did the Air Force see any of the money. What do you think? Remember, Part 12 contractors don’t have to divulge their costs. Even worse, the Air Force extended the contract, awarding several option years, valued at $700 million, to Lockheed Martin because of the work performed by Standard Aero. But Lockheed Martin has refused to flow down the money to Standard Aero. Instead, Lockheed Martin terminated its contract with Standard Aero and brought in Rolls Royce.