September 9, 2003

Sabrina Eaton; The Plain Dealer

Washington - A company that took over more than 500 federal jobs in Cleveland last year at the Defense Finance and Accounting Service plans to turn the jobs over to defense contracting giant Lockheed Martin as early as next month, the firms have announced. Dallas-based Affiliated Computer Services, which won the Cleveland contract through a bidding process that the Defense Department later acknowledged was botched, plans to sell many of its federal government contracts to the nation's largest defense contractor for $551 million, the firms said.

As part of the deal, Maryland-based Lockheed will turn over its commercial information technology business to ACS. If federal antitrust officials approve the transactions, approximately 5,800 ACS employees throughout the country will start working for Lockheed Martin in October or November, and 1,000 Lockheed Martin workers will join ACS.

"This is a win-win deal for both companies," ACS Chief Executive Officer Jeff Rich said in a news release. "Lockheed Martin is a premier player in the federal market, and ACS is a premier player in the commercial market. These transactions build on our respective strengths."

A Defense Department Inspector General's report released this spring found that the Defense Finance and Accounting Service used mistaken calculations to award ACS its contract to process payments for military retirees and their survivors. The report said taxpayers would have saved $30 million if government workers kept doing the work.

DFAS has withheld more than $500,000 in payments to ACS for failing to meet performance standards in its contract, and several local congressmen have asked that the work be returned to federal employees. DFAS is renegotiating the performance standards and has asked the Virginia-based Center for Naval Analyses to evaluate whether ACS should keep the contract.

Lockheed will have to meet the same contractual conditions as ACS if it takes over, said DFAS spokesman Bryan Hubbard, adding that the Defense Department would have to approve the switch. He said such changes are routine.

"Mergers and acquisitions happen all the time in the contracting world," said Hubbard.

The change also won't affect Cleveland Democratic Rep. Dennis Kucinich's bid to return the jobs to federal employees, his spokesman said. But John Threlkeld of the American Federation of Government Employees union predicted Lockheed's political influence will "make it more difficult for the Congress to finally take action to make DFAS more accountable to the taxpayers."

The Center for Responsive Politics ranks Lockheed 37th among the nation's organizational donors to politicians, with $10.5 million in contributions to federal candidates since 1989.

Lockheed spokesman Jeffrey Adams said it would be premature to comment on specific contracts the switch might affect until the deal closes in October or November. He said Lockheed now employs about 550 workers in Northeast Ohio at Akron-based Lockheed Martin Maritime Systems and Sensors, which develops naval weapons and training systems.