Pentagon urges sanctions against Honeywell

Maryland unit found to lie about management system

May 20, 2004|By BLOOMBERG NEWS

WASHINGTON - Honeywell International Inc. should face criminal prosecution or civil penalties for false statements made in a bid proposal that helped it win a $1.2 billion Air Force contract to provide satellite ground station services, the Pentagon inspector general's office said yesterday.

Its subsidiary, Honeywell Technology Solutions Inc. of Columbia, Md., misled the Air Force when it said it had in place a management system that tracks the amount of dollars spent on a monthly basis against what was budgeted, the inspector general said in a March audit report.

Honeywell billed the Air Force $300,000 for the system, which the inspector general said doesn't exist.

The "earned-value management system" (EVMS) that Honeywell said it was using would have allowed the Air Force to spot the cost overruns earlier. The first two years of work on the project are 48 percent, or $26.3 million, over budget, the inspector general said in an e-mail message.

"The Air Force Space and Missile Systems Center should initiate appropriate civil or criminal proceedings, or both, against Honeywell for violating false claim and false statement statutes," wrote Mary Lu Ugone, director for acquisition management in the inspector general's office, in a March 10 report.

Technology Solutions is part of the Honeywell aerospace division's defense unit, which provided $4.2 billion of the company's $23.1 billion in sales last year. The subsidiary has more than 4,500 engineers, technicians, programmers and support personnel worldwide, according to its Web site.

More than half its work is contracted with the National Aeronautics and Space Administration, 18 percent with the Navy, 8 percent with the Air Force, 7 percent with the Marine Corps, and 14 percent with other government and commercial customers, it said.

Christina Greer, spokeswoman for the Air Force missile center, said in an e-mail message that the center "will not initiate action concerning Honeywell's violations" until the Defense Contract Audit Agency assesses the inspector general's report within 60 days.

Honeywell spokeswoman Cathy Gedvilas said the company is "cooperating with the government and providing information to the audit agency as requested by the Air Force."

The Air Force estimates Honeywell will incur another $33 million in overruns through 2009. The Air Force had budgeted $275 million for those years; the overruns increase the estimate to $335 million, the inspector general said.

The overruns were attributed to two work stoppages the Air Force ordered after Honeywell had problems performing on the contract.

In December 2001, Honeywell Technology Solutions received an initial six-year contract, with three three-year options worth as much as $1.2 billion over the next 15 years to replace outdated communications gear and antennas for ground stations at nine worldwide locations.

The ground networks track as many as 100 U.S. military communications, navigation, surveillance and weather satellites. They also receive and process data and send commands to satellites.

The Air Force awarded the contract "before identifying technical omissions" in Honeywell's proposal, the inspector general said.

"As a result, the Air Force will continue to maintain an outdated, 50-year-old technology as well as expend monies for modernization while it renegotiates the contract," the inspector general said.

The inspector general's review was done after a tip was left on a Pentagon hot line for whistleblowers.

An earned-value management system allows daily tracking of costs on contracts. Many companies have used such a system for about a decade.

"This condition occurred because Honeywell stated that it had EVMS capabilities when it did not and the Air Force did not conduct an evaluation of the proposed system before contract award," the inspector general said.

"Neither Space and Missile Center officials nor the [government] administrative contracting officer formally addressed whether or not Honeywell made a false statement by asserting that it had a compliant earned-value management system or that Honeywell had submitted a false claim," the audit said.

The inspector general recommended that the Pentagon's audit agency review Honeywell's records and that the Air Force recover any money paid for the EVMS system.

Honeywell's shares rose 5 cents to close at $33.29 yesterday on the New York Stock Exchange.

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.