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(Updated) A Pentagon Sized Billing Error

10:32 AM, Aug 10, 2007 • By MICHAEL GOLDFARB
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The Sky Talk blog reported yesterday that Lockheed Martin had worked out a deal to repay the Pentagon $265 million, plus interest, for a "billing error" that had resulted in the company overcharging the government. The error was not a one off, but rather Lockheed had been overcharging the government in each of eleven separate billing periods over nearly six years. That's an extra $24 million and change on each bill--roughly half the estimated cost of an F-35 Lightning II Joint Strike Fighter.

The WWS emailed John Smith, the communications director for the F-35 program, for information on how such an error could have occurred. His response:

"This was an inadvertent coding error that was discovered by our own internal review. The government will be totally reimbursed, with interest, very soon so the taxpayers are not out of any money, and LM [Lockheed Martin] did not gain from it. We are certainly examining our processes so it won't happen again."

Smith also passed along an FAQ on the matter, much of which dealt with the potential impact on the company's bottom line. The document says that Lockheed is currently working to determine the appropriate amount of interest, that the company has "initiated a thorough review to determine why the error was not detected sooner," and that "the government will be reimbursed within the next several days."

Here's the key question though:

Q9. How could you make such an error?

A9. This was an error in the way we coded some costs in our billing system. Lockheed Martin employees discovered the error and corrected the problem. We are working with our customer to ensure that enhanced controls will be put in place to prevent this from occurring in the future and will meet with their satisfaction.

And isn't that the most disturbing part--at the end of the day, it was Lockheed employees who discovered the error. Wouldn't you like to see the FAQ from the Pentagon:

Q. Does anyone look at the bills before cutting a check?

A. What for?

HT Defense Tech

Update: Click here to see the DEW Line's top 10 guesses for where all the money went...