Northrop Grumman will have to pay the U.S. government $30 million as a settlement for falsely billing hours to the Air Force between 2010 and 2013, the Department of Justice announced Friday.
The issue stems from two Northrop contracts, the Battlefield Airborne Communications Node, an airborne communications relay, and the Dynamic Re-tasking Capability. Per the Justice Department, between July 1, 2010, and Dec. 31, 2013, Northrop employees stationed in the Middle East billed hours they did not work to the government.
“Federal contracts are not a license to steal from the U.S. Treasury,” U.S Attorney Adam Braverman said in a statement. “DOJ is firmly committed to vigilantly weeding out abuse and will swiftly pursue all available remedies when egregious fraud occurs.”
From DefenseNews.
I’ve heard stories about other cases of fraudulent labor charging. One program that everyone knew had severe cost growth and poor cost accounting was also a destination for a “standing army” of labor awaiting other contract work.
Rather than fire them or carry them on overhead, they were charged to a multi-billion dollar contract.
This was told to me in passing by the Government program manager at the time. The company wasn’t charged, but it appeared like people on both sides knew what was happening.
Accounting games like this was the reason that Admiral Rickover was so adamant about creating Cost Accounting Standards. Unfortunately, the CAS does little to solve these kinds of problems for many legitimate reasons.
Two questions:
(1) How much overbilling actually occurred in this particular case? Specifically, how much more or less in fraudulent billing in comparison to the $30 million settlement?
(2) How does DOJ define "egregious fraud"?
Both good questions that I do not know the answer to. But I tend to believe that outright fraud of this sort, like the Navy Fat Leonard scandal, that this stuff isn't as big an issue as most people think.
Rather, the big sink hole is a proliferation of unproductive processes and central planning.