Lockheed Martin Integrated Systems (“LMIS”), a subsidiary of Lockheed Martin, agreed on Friday, December 19, 2014 to pay $27.5 million to resolve allegations that it inflated labor costs and submitted false claims to the government in violation of the False Claims Act. Specifically, the Department of Justice (“DOJ”) alleged that LMIS overbilled for work performed by personnel who lacked the job qualifications required under Rapid Response and Strategic Services Sourcing contracts issued by the U.S. Army Communications and Electronics Command.
The overbilling allegations against LMIS are similar to the DOJ’s allegations in a separate case against DRS Technical Services Inc., which resulted in a $13.7 million settlement announced on October 7, 2014. The DOJ also alleged in that case that DRS Technical Services overbilled labor costs for under-qualified employees under the Rapid Response contract.
The two settlements are further examples of DOJ’s increased focus on contractor compliance with material performance components of government contracts. To ensure against such risk, compliance starts before contract award by confirming that the government concurs with labor category “cross-walks” and other methods to line up a contractor’s internal labor categories with the contract-prescribed categories and qualifications. In addition, due to high turnover and changing requirements, contractors should also adopt practices whereby routine reviews are conducted to ensure that the personnel actually performing the work and being billed against the contract comply with the contract’s labor qualifications and requirements.
The DOJ press release on the LMIS settlement can be found here.