Lockheed: The Ultimate Pay-to-Play Contractor

Lockheed: The Ultimate Pay-to-Play Contractor

Loren Thompson is one of those people in Washington, DC, circles that
wears several hats. He is the chief operating officer for the
nonprofit Lexington Institute, a think tank that promotes defense
contractors and large Pentagon budgets, and is also chief executive
officer of Source Associates, a for-profit consultancy that advises
defense contractors. He also writes opinion pieces for AOL Defense
that are also posted on the Lexington Institute web site. Although the
Lexington Institute does not disclose its donors on their web site,
Thompson does disclose that the Institute receives funding from
Pentagon defense contractors. (The founder of the Lexington Institute,
James Courter, was a lobbyist for Lockheed in 2000.)

He is an unabashed promoter of Pentagon contractors and wrote a
disturbing article this week for AOL Defense talking about how
Lockheed has not only survived the most recent defense cuts, but
actually has set itself up to be the most successful defense
contractor despite the cuts. He hints at what most of us already
suspect - that Lockheed has a lock hold on a large portion of the
Department of Defense (DoD) budget and has set itself up to have undue
influence over government decisions.

However, in classic Washington-speak rationalizations, he insists that
it is because Lockheed is a better-run company than most and dismisses
that it is because they are, and have been for a long time, one of the
most successful pay-to-play operators on Capitol Hill and in the
Pentagon.

From his recent article: If you are one of those people who believes
the various conspiracy theories making the rounds about Lockheed
Martin's excessive influence over government decisions, the Pentagon's
fiscal 2013 budget request probably won't make you feel any better.

Having served as an advisor to Lockheed and many of its competitors
for a long time, I don't take the conspiracy-mongering very seriously
because I frequently see up close how frustrated company executives
get with their military customer. However, I have to admit I was
surprised at how well the nation's biggest military supplier made out
in the Obama Administration's reordering of Pentagon priorities....
Lockheed Martin is poised to be by far the biggest beneficiary of the
new military spending priorities articulated by the Obama
Administration. It has lost little in the trade-offs leading up to the
budget release and it is actually gaining ground from the setbacks
dealt its rivals. Termination of Northrop Grumman's Global Hawk Block
30 unmanned aircraft will result in the Air Force relying on Lockheed
Martin's U-2 spy plane for decades to come.

Besides being better at execution than many of its competitors,
Lockheed Martin has also done a very good job of positioning itself in
the military marketplace. Company executives didn't over commit their
business mix to short-lived opportunities like military transformation
and stability operations, preferring instead to concentrate in areas
where Lockheed traditionally excelled such as military space and naval
electronics. Thus, Lockheed Martin is less exposed as the military
customer begins shifting back to the investment priorities that
prevailed before 9-11. It has also been aggressive in cutting costs
since the first signs of softness in military demand began to appear.
So even though Lockheed's revenues are not expected to grow much in
the years ahead unless it diversifies or buys other defense companies,
its profit margins have strengthened across all major business units.
Some observers will interpret this trend as further evidence that
Lockheed Martin has a special relationship with its government
customer. Investors are likely to conclude it is just better run than
its competitors.


It is ironic that he claims that Lockheed has been aggressive in
cutting costs with the so-called soft defense budget. They may have
been cutting their costs internally without the government's
knowledge, but they certainly are sticking it to the Pentagon with
massive cost overruns for their new plane, the F-35. They know that
they have the DoD over a barrel despite the overruns because they will
soon be the only company that builds the Pentagon fighter planes.

The Government Accountability Office (GAO) has just released a report
about that the overruns in the newly configured F-35 and, according to
Reuters, the "first four procurement contracts were more than $1
billion over budget combined, with the government to cover about $672
billion of the cost and Lockheed to cover the rest. The government
also faced $373 million in retrofit costs to fix deficiencies
discovered in testing on planes already produced."

This will cause the Pentagon to get fewer planes for more money - the
classic "more bucks, less bang" problem that has plagued defense
spending for years. The Air Force secretary claims that they will get
tough with Lockheed in the future. Secretary Michael Donley, "told the
Senate Armed Services Committee that the F-35 program office and
Lockheed had been told there was 'no more money to put against
contract overruns or problems.'" This will be a hard promise to keep
because the Lockheed influence machine will soon crank into gear to
get more and more money as the problems of the F-35 continue to plague
this fighter - you can bet that the government will pay for most of
the mistakes of this on-going fighter plane disaster.
However, Mr. Thompson tries to make us believe that this powerful
Lockheed pay-to-play machine is just airy conspiracy theories. As they
say in sports broadcasting, let's go to the stats. According to
Sunlight Foundation databases, since 1989,

Lockheed has:
Given $23,097,580 in campaign financing.
Spent $125,580,880 on lobbying and hiring some of the biggest
Republican and Democratic lobby firms in Washington.
Received $20,180,000 in earmarks.
Received 31 grants and 15,358 contracts from the federal government.
Had 257 of their people on 135 government advisory committees.

And, despite Mr. Thompson's glowing view of the management of
Lockheed, according to the Project on Government Oversight's
Contractor Misconduct Database , Lockheed has had 66 instances of
contractor misconduct, making them No. 1 on the list of errant federal
contractors. And they have had 12 Environmental Protection Agency
enforcement actions.

Mr. Thompson may claim to see the great management of Lockheed on the
inside. but I have done hand-to-hand combat with Lockheed and their
abuse and fraud over the years. I revealed an Air Force memo on one of
their plane's estimated overruns that forced them to suspend their
stock trading for a day, exposed an illegal and extremely collusive
plan to lobby the Congress with the Air Force and the DoD to sell
another run of the notorious C-5 cargo plane (see this Solutions
column, uncovered their selling of a $7,622 coffee brewer and other
outrageous spare parts to the Pentagon, been threatened by Lockheed
attorneys to put me in jail for refusing to reveal my sources within
their company (they lost), gone through 250,000 documents in a
whistleblower lawsuit that showed they were mischarging timecards and
cheating the government, and have had to deal with this company
threatening their employees and DoD personnel who wanted to tell the
truth about their management. One of their whistleblowers in the past
had to have federal marshals protect him and his family when there
were threats to throw acid in his daughter's face.

So, I know the true character and corporate climate of this company
from an up-close-and-personal view to know that their real game is to
soak an often willing Pentagon for every dime they can while
delivering problem-plagued weapons that they then get to fix with
government money. Lockheed is still the best pay-to-play company in
the government and continues to lobby in collusion with the Pentagon
for their weapon systems such as the F-22 fighter as outlined in
William Hartung's book, "Prophets of War."

My biggest frustration after years of exposing their frauds and
outrages is that they get away with it by just paying the fines to a
complacent federal government and continue to just go about business
as usual. They can get away with it more than any other DoD company I
know because they do invest by making large payments for pay to play
with campaign contributions, and snatching the most influential former
government employees as they twirl through the revolving door out of
government services. They have mastered the art of the Washington fix
despite the fact that they have the largest misconduct rate.

Their corporate motto says it all. "We never forget who we're working
for." That is supposed to make the public think it is the taxpayer and
the soldier, but it really is code because the "who" are their
executives with high salaries, their stockholders and members of their
board. The statistics above and their sordid history of influence
peddling with large sums of money make sure that the submissive DoD
and other parts of the federal government will continue to walk into
their corporate lair. But how can we truly discipline them or suspend
them when they now have cornered the government as the sole
manufacturer of our fighter fleet? It will be interesting to see if
they can keep this advantage if the budget sequestration goes through
and more defense spending is to be cut ... seriously cutting their
budget may be the only way to keep them from shafting the government
as they have been doing for decades.

Once again, it appears that the only successful reforms that will work
here are to slam the revolving door shut and keep their money out of
the hands of a willing Congress. Despite my frustrations of past
expos�s, I will continue to expose them whenever Mr. Thompson
continues to pretend that their success is due to their great
management for the government.
http://truth-out.org/news/item/8035-lockheed-the-ultimate-pay-to-play-contractor