Lockheed Martin, Boeing aerospace venture bilked U.S. for $90 million, lawsuit says

Source: Kirk Mitchell, The Denver Post, January 8, 2018

A whistleblower has settled a lawsuit filed against a Centennial aerospace company formed by Lockheed Martin and The Boeing Company that claimed the company defrauded the U.S. government out of at least $90 million by grossly overcharging for employee work hours. Whistleblower Joseph Scott filed the lawsuit on behalf of himself and the government against United Launch Alliance and United Launch Services, under the Federal Civil False Claims Act. Scott is a former ULA employee. … This wasn’t the first time ULA practices have come under scrutiny. In December 2016, ULA paid the government $100,000 to settle allegations that a subcontractor paid its employees kickbacks in order to win contracts. As a result, the U.S. paid higher costs to subcontractor Apriori Technologies between 2011 and 2015, Troyer has previously said. …

… ULA used a system called the Keith Crohn model that creates a grid using the cost of equipment to reach an employee cost. A labor value was placed on the grid for every item ordered through the company’s purchasing department. For example, any item that cost between $1 and $1,000 would be assigned a labor value of 8 hours. It didn’t matter what part it was, the lawsuit said. The U.S. bans arbitrary cost estimates when actual data is available that establishes the cost. ULA took advantage of the government’s practice of not auditing smaller projects. On projects above $100 million, the government audits bids and can reduce the contract price if the Defense Contract Audit Agency discovers discrepancies, the lawsuit says. In the first five to seven years of its existence, ULA often failed those audits. For larger audited launches, ULA began using historic data of actual prior labor costs, the lawsuit says.
But for smaller bids, ULA continued using its flawed estimates, knowing that it wouldn’t be audited, the lawsuit says. …