Two large government contractors are paying tens of millions of dollars in fines to settle False Claims Act lawsuits.
The Justice Department announced Friday that Lockheed Martin Integrated Systems would pay $27.5 million to resolve allegations that it overbilled the Army for an employee who was under-qualified for the position.
Justice also said on Friday that Iron Mountain paid the government $44.5 million to settle claims that it overcharged agencies through its General Services Administration’s schedule contract for 13 years.
Both cases continue DoJ’s aggressive pursuit of vendors under the False Claims Act. In fiscal 2014, Justice announced in November that it recovered almost $5.7 billion from companies in civil actions. That total is up from the $3.8 billion that DoJ collected in 2013.
Overall, Justice said it recovered $24 billion in civil and criminal fines last year.
Among the government contractors, Hewlett-Packard and Boeing were part of two of the largest settlements with Justice. HP paid $32.5 million to resolve claims involving a contract for IT products and services with the U.S. Postal Service. Boeing paid $23 million to settle alleged false claims for labor on maintenance contracts for the C-17 Globemaster aircraft with the Air Force. Justice also intervened in cases with CA Technologies and Symantec.
The Lockheed and Iron Mountain cases have a similar ring.
Iron Mountain got dinged because of a common problem many national and international companies face: how to ensure the government always is getting the lowest price.
Many acquisition experts have called for the removal of the price reduction clause for commercial products because it’s an outdated regulation that causes more trouble than good.
Justice said Iron Mountain “overcharged federal agencies for record storage services under GSA contract” because it didn’t provide GSA “with accurate information about its commercial sales practices during contract negotiations, and failed to comply with the price reduction clause of the GSA contracts by not extending lower prices to government customers during its performance of the contracts.”
Justice said the fine also resolves an allegation that Iron Mountain charged the United States for storage meeting National Archives and Records Administration requirements when the storage provided did not meet such requirements.
“We worked collaboratively with both the GSA and Department of Justice during the course of their investigation of the GSA-pricing issues, fully cooperating with them at every stage,” said Ernest Cloutier, Iron Mountain’s executive vice president of U.S. federal, security and legal, in a press release. “We are pleased to have reached this resolution and put the matter behind us, and we look forward to continuing to support our federal government customers.” Lockheed’s case was a bit different.
“Contractors that knowingly bill the government in violation of contract terms will face serious consequences,” said Acting Assistant Attorney General Branda in a release.
Justice said the aerospace giant’s alleged labor mischarging was against two Army Communications and Electronics Command (CECOM) contracts — Rapid Response (R2) and the Strategic Service Sourcing (S3).
DoJ claims Lockheed Martin “violated the terms of the contracts by using under-qualified employees who were billed to the United States at the rates of more qualified employees. The overbilling allegedly resulted in greater profit for LMIS.”
“Lockheed Martin settled to avoid the distraction and risks of litigation and to allow us to focus on the critical and important work we are performing now and will perform in the future for our customers,” said Shannon Booker, a Lockheed Martin spokesperson, by email. “We voluntarily disclosed the issues to the government and have fully cooperated with the government in their resolution. Lockheed Martin and the Department of Justice agree that the settlement is not an admission of liability or wrongdoing.”