In general most contracts with multiple delivers and thereby dates, like ERAM have performance incentives built in. It’s an archaic system left over from WWII on cost plus fixed fee contracts. The government needed material for the war effort so incentives were included in the contracts. The incentives portion as well as cost plus fixed fee still lives in government contracts today.

So as it pertains to ERAM; For B-level testing Lockheed was paid for a 60 percent pass rate. Since ERAM fell well below the 60 percent figure Lockheed and their lawyers got creative with the contract language. They were able to manipulate the pass rate by using a “NO TEST” NT category for test ERAM flat out failed. A second method employed was having tests categorized as “Working as Designed” WO so they actually were well below the pass rate of 60 percent but were paid in excess of a million dollars. You referred to people being under pressure to pass items that were obviously wrong, this is why. If they were one test case away from a million dollar performance bonus and you refused to sign certifying that the test meant a “Passed” criteria they found some else to sign. All of this had to be agreed to someone in the FAA program office, someone signed the change of criteria.

Another incentive area is IOC, when ZMP ran for 3 or 4 hours Lockheed was paid 1.2 million, that’s specially spelled out in the contract. Running from 1 am to 4 am on a Saturday morning with maybe a few hundred or less high altitude tracks isn’t a very high bar to have to clear for 1.2 million.

I’m not a contracts persons there maybe one that reads the blog but I have talked to enough to know there will be tremendous pressure for ERAM to be a “Go” whether it is ready or not.

We’ve heard vague discussions about the contractor performance bonuses for ERAM, but it would be interesting to see specifics about them.

Is Lockheed still meeting their performance deadlines right now even with the delays?

From past history, it appears the contractors are pretty savvy about the contracts they sign with the FAA. And big government contractors like Lockheed Martin know all the angles.

The last world wide parts survey indicated there was about a 5-year supply of parts for the Host computer systems. Problem with such a large parts buy is it cost big $$ that has to come out of someones budget and it’s unplanned which tend to draw attention. Of course the biggest concern the FAA has the target dates can only slip so far before they have to officially slip the schedule and there goes the performance bonus. Not only for the FAA managers but also Lockheed, that’s the issue, Host maintenance is minor in comparison.

All of this isn’t about ERAM, NexGen, ADS-B or Host parts, its all about money, always has been always will be. We’re not nicknamed the “Tombstone” agency for no reason!