Lockheed may face penalty over launch

Wayward satellite blamed on software, failed quality tests

Aerospace industry

July 23, 1999|By BLOOMBERG NEWS

WASHINGTON -- A Lockheed Martin Corp. Titan IVB rocket's failure to put a $800 million military communications satellite in the proper orbit April 30 stemmed from faults in testing, quality assurance and software development procedures, the Air Force said yesterday.

The process didn't find and correct a software programming mistake made in early February by a software engineer for the No. 1 defense contractor's Denver-based astronautics sector, the Air Force said.

"The error went undetected by both the internal quality assurance processes and the independent verification and validation process," said the Air Force.

Lockheed, under a new contract arrangement, could be penalized as much as $135 million over the next three years if Air Force contracting officials find the company mostly to blame.

"We worked closely with the Air Force during the investigation and, together, we are implementing the necessary steps to prevent the recurrence of such a failure," said astronautics spokesman Evan McCollum.

Lockheed Martin has taken more than 200 specific actions to prevent a repeat problem, he said. "We also have exhaustively reviewed other design, manufacturing and quality control processes," McCollum said.

The most immediate penalty could be the loss of a $37 million bonus for Lockheed for performance on the program during the six months that ended June 30, officials said.

The Air Force didn't specify who was mostly to blame. The Titan rocket program office in Los Angeles will determine that and to what extent Lockheed will face financial penalties.

The company has taken the potential loss of its $37 million in award fees into account. "The potential impact of this launch failure was included in the revised financial outlook we issued on June 9," said Lockheed Martin spokesman James Fetig.

Lockheed Martin's decision to set aside from its earnings estimates money in anticipation of a penalty blunts the impact on investors, an analyst said.

"It's kind of water under the bridge," said Byron Callan, a defense analyst for Merrill Lynch & Co. who rates Lockheed Martin a short-term "neutral."

"We knew when they took a reserve they were looking for financial flexibility to ensure that they didn't hurt earnings," Callan said.

Beyond the $37 million in award fees for good performance in the first half of the year, Lockheed could lose as much as $98 million by 2002 related to potential savings it would share with the Air Force, according to the terms of its new contract with the service.

Lockheed Martin forfeited $29 million of another $37 million performance bonus for the six months that ended Dec. 31. Titan was also involved in that case: An August satellite launch failure.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.