June 4, 2014 / 12:01 AM / 4 years ago

Pentagon seeks $211 million repayment from Pratt for accounting issue

WASHINGTON (Reuters) - The Pentagon is seeking $211 million from engine maker Pratt & Whitney for cost accounting problems on contracts dating back to 2005, according to a report released on Tuesday.

The report by Defense Department inspector general’s office was triggered by a complaint on the Pentagon’s hotline that alleged a 2006 settlement with Pratt, a unit of United Technologies Corp, for cost accounting issues was about $500 million less than required by procurement regulations.

The IG’s office said it substantiated the tipster’s claim the settlement was not consistent with federal regulations, but found no evidence top officials exerted pressure to settle for a lower amount.

However, while investigating the earlier settlement, the IG’s office said it found problems with Defense Contracts Management Agency’s (DCMA) handling of Pratt’s contracts, and how the company accounts for collaboration agreements with foreign suppliers, which could be driving costs higher.

It issued a “notice of concern” to DCMA in April 2013. In March, the agency notified the IG’s office that it had investigated the matter and asked Pratt to repay $211 million.

Pratt has appealed the decision to the Armed Service Board of Contract Appeals. No comment was immediately available from the company, which is negotiating a large contract with the Pentagon’s F-35 program office.

Air Force Lieutenant General Chris Bogdan and other F-35 officials have raised concerns about Pratt’s efforts to cut the cost of the single F135 engine it builds for the F-35 fighter jet.

Pratt insists it has been working diligently to drive down the cost of the engines, and blames the lack of further reductions on the Pentagon’s decision to scale back production of the new jets repeatedly in recent years.

It was not immediately clear which government contracts were affected by the cost accounting issues.

Reporting by Andrea Shalal. Editing by Andre Grenon

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