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Sun, Nov 28, 2004 - Page 12 News List

US military contractor's tentacles reaching farther than ever

Lockheed Martin, the top recipient of Pentagon contracts, has branched out far beyond making state-of-the-art fighter jets

By Tim Weiner  /  NY TIMES NEWS SERVICE , New York

An undated company photo showing a command and control system by Lockheed Martin for air warfare. The company receives 80 percent of its revenue from government contracts, and some former officials hold posts at the White House or Pentagon.

PHOTO: LOCKHEED MARTIN CORPORATION

Lockheed Martin doesn't run the US. But it does help run a breathtakingly big part of it.

Over the last decade, Lockheed, the nation's largest military contractor, has built a formidable information-technology empire that now stretches from the Pentagon to the post office. It sorts your mail and totals your taxes. It cuts Social Security checks and counts the US census. It runs space flights and monitors air traffic. To make all that happen, Lockheed writes more computer code than Microsoft.

Of course, Lockheed, based in Bethesda, Maryland, is best known for its weapons, which are the heart of the US arsenal. It builds most of the nation's warplanes. It creates rockets for nuclear missiles, sensors for spy satellites and scores of other military and intelligence systems. The Pentagon and the CIA might have difficulty functioning without the contractor's expertise.

But in the post-9/11 world, Lockheed has become more than just the biggest corporate cog in what Dwight D. Eisenhower called the military-industrial complex. It is increasingly putting its stamp on the nation's military policies, too.

Lockheed stands at "the intersection of policy and technology," and that "is really a very interesting place to me," said its new chief executive, Robert Stevens, a tightly wound former Marine. "We are deployed entirely in developing daunting technology," he said, and that requires "thinking through the policy dimensions of national security as well as technological dimensions."

To critics, however, Lockheed's deep ties with the Pentagon raise some questions.

"It's impossible to tell where the government ends and Lockheed begins," said Danielle Brian of the Project on Government Oversight, a nonprofit group in Washington that monitors government contracts. "The fox isn't guarding the henhouse. He lives there."

No contractor is in a better position than Lockheed to do business in Washington. Nearly 80 percent of its revenue comes from the US government. Most of the rest comes from foreign military sales, many financed with tax dollars. And former Lockheed executives, lobbyists and lawyers hold crucial posts at the White House and the Pentagon, picking weapons and setting policies.

Obviously, war and crisis have been good for business. The Pentagon's budget for buying new weapons rose by about a third over the last three years, to US$81 billion in fiscal 2004, up from US$60 billion in 2001. Lockheed's sales also rose by about a third, to nearly US$32 billion last year, from US$24 billion in 2001. It was the No. 1 recipient of Pentagon primary contracts, with US$21.9 billion in fiscal 2003. Boeing had US$17.3 billion, Northrop Grumman had US$11.1 billion and General Dynamics had US$8.2 billion.

Lockheed also has many tens of billions of dollars in future orders on its books. The company's stock has tripled in the last four years, to just under US$60.

"It used to be just an airplane company," said John Pike, a longtime military analyst and director of GlobalSecurity.org, a research organization in Alexandria, Virginia. "Now it's a warfare company. It's an integrated solution provider. It's a one-stop shop. Anything you need to kill the enemy, they will sell you."

The melding of military and intelligence programs, information-technology and domestic security spending began in earnest after the Sept. 11 attacks. Lockheed was perfectly positioned to take advantage of the shift. When the US government decided a decade ago to let corporate America handle federal information technology, Lockheed leapt at the opportunity. Its information-technology sales have quadrupled since 1995, and, for all those years, Lockheed has been the No. 1 supplier to the federal government, which now outsources 83 percent of its IT work.

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