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Lockheed gives up IRS contract fight

The aerospace and defense firm decides against filing an appeal for an internal IRS review of the decision to award its contract to CSC.

Kim Girard
Kim Girard has written about business and technology for more than a decade, as an editor at CNET News.com, senior writer at Business 2.0 magazine and online writer at Red Herring. As a freelancer, she's written for publications including Fast Company, CIO and Berkeley's Haas School of Business. She also assisted Business Week's Peter Burrows with his 2003 book Backfire, which covered the travails of controversial Hewlett-Packard CEO Carly Fiorina. An avid cook, she's blogged about the joy of cheap wine and thinks about food most days in ways some find obsessive.
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Kim Girard
Lockheed Martin will not fight its lost bid for the huge IRS computer modernization contract.

The 15-year contract--worth an estimated $3 billion--was awarded December 10 to a team of vendors led by Computer Sciences (CSC).

After a standard debriefing with the IRS, Lockheed Martin ruled against filing an appeal for an internal IRS review of the decision.

"We're not going to protest it," said Judith Gan, spokeswoman for the Bethesda, Maryland-based aerospace and defense giant. "We were satisfied with the explanation we received."

Work on the huge IRS modernization project is expected to start in January. CSC, the third-largest U.S. provider of computer consulting and maintenance services, will work with its team to improve the IRS's customer phone and Internet-based service, provide faster access to tax forms, expand electronic tax filing capabilities, and install faster and more secure workstations.

Analysts say the contract, which sent CSC's stock soaring earlier this month, could be worth as much as $5 billion to $10 billion over its duration. The IRS has not disclosed the exact value of the deal.

In the meantime, Lockheed Martin today said it expects fourth-quarter earnings per share will fall 10 percent due to delays in space launches and aircraft deliveries. That would put earnings at about 1.61 per share, well below analyst expectations of 2.06.

In response to the news, the company's stock fell 8 to 87 per share in trading this afternoon.

Reuters contributed to this report.