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STATEMENT

Pratt & Whitney Statement on DCMA Audit Findings

EAST HARTFORD, Conn., Friday, October 11, 2013

The Defense Contract Management Agency recently concluded an audit of Pratt & Whitney's Earned Value Management System (EVMS) – a business tool that is used to track cost and schedule performance on certain types of U.S. Government contracts.

As a result of inadequate compliance with 4 of 32 EVMS guidelines, the DCMA notified Pratt & Whitney that it will immediately begin withholding 5 percent of billings against several contracts on the F135 engine program. This is a step that is available to the customer under the terms of the contract, but negotiations with the government on F135-related contracts should not be impacted by this finding.

The DCMA concluded the audit of Pratt & Whitney's EVMS in mid-April, and in the course of the audit DCMA had open and transparent access to company personnel and data. Although the audit focused on F135 contracts, EVMS is a company-wide system.

There are merits in many of the audit findings. DCMA identified four specific areas for improvement: updating documentation to better align with company processes, improving how to manage and integrate scheduling tools, better estimating and forecasting costs, and improving work package planning.

Pratt & Whitney is working closely with the government to correct deficiencies in these four areas, restore compliance, and achieve approval of our EVMS as quickly as possible.

Under the terms of federal acquisition regulations, the government may withhold a maximum of 5 percent of billings of F135-related contracts, but the DCMA may reduce the withholding if Pratt & Whitney shows significant progress on our corrective action plans.

Our customers expect flawless performance and execution to our contract obligations, supported by an EVMS that provides accurate cost and schedule status for use in managing our programs. We are committed to having the best earned value management system possible, and to consistently and accurately track performance and execution to our contracts. We are likewise committed to delivering a highly capable propulsion system for the F-35 on time, and at an affordable cost for our customers.