Boeing pays $18 million to settle allegations of improperly charging labor costs

The Boeing Company has paid the United States $18 million to settle allegations that the company submitted false claims for labor charges on maintenance contracts with the U.S. Air Force for the C-17 Globemaster aircraft, the Justice Department has announced. 

Justice Dept. sealThe government alleged that Boeing improperly charged labor costs under contracts with the Air Force for the maintenance and repair of C-17 Globemaster aircraft at Boeing’s Long Beach Depot Center in Long Beach, California.  The C-17 Globemaster aircraft, which is both manufactured and maintained by Boeing, is one of the military’s major systems for transporting troops and cargo throughout the world.  The government alleged that the company knowingly charged the United States for time its mechanics spent on extended breaks and lunch hours, and not on maintenance and repair work properly chargeable to the contracts.

“Defense contractors are required to obey the rules when billing for work performed on government contracts,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Justice Department will ensure that government contractors meet their obligations and charge the government appropriately.”

Air Force SealThe allegations resolved by the settlement announced on October 14, 2015 were originally brought by former Boeing employee James Thomas Webb under the qui tam, or whistleblower, provisions of the False Claims Act.  The Act permits private individuals to sue on behalf of the government those who falsely claim federal funds, and to share in the recovery.  Mr. Webb’s share of the settlement has not yet been determined.

The case was handled by the Civil Division’s Commercial Litigation Branch, the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, the Defense Contract Audit Agency and the Defense Contract Management Agency.

The False Claims Act lawsuit is captioned United States ex rel. Webb v. The Boeing Company, CV13-000694 (C.D. Cal.).  The claims resolved by this civil settlement are allegations only as there has been no determination of liability.

Boeing, an aerospace and defense industry giant, is headquartered in Chicago.


Who’s the boss in government contracting?

he management structure of government procurement, where one of every six federal dollars is spent, has remained generally unchanged for many years, even as the volume and percentage of products and services performed by agencies has evolved to today’s outsourced, dependent model. One continuing characteristic of this model is decentralization.

For example, since its creation in 1971, governmentwide acquisition policy responsibility rests with the Office of Federal Procurement Policy (OFPP), residing within OMB. It helps shape the policy and practices governing over $500 billion of annual contract obligations. It does so with a very small budget and staff and relies on interagency cooperation to develop policy and workforce development planning in the form of memos, circulars, guides, or reports. OFPP chairs the FAR Council, consisting of senior procurement executives from GSA, NASA, and DoD (the largest contracting agencies at its creation), to manage cases (changes to the FAR) from civilian and defense agency councils, extensively relying on agency-provided “teams” for assigned subject areas. In addition, OFPP oversees the Federal Acquisition Institute (FAI), chairing its “board of directors” (agency procurement executives) to ensure training priorities are addressed, including development of a professional acquisition workforce. OFPP’s mandate relies on words like “collaborate,” or “assist” in describing its role over other civilian agencies. FAI itself has a small staff and relies on other, better-funded agencies, to develop training programs and schools, as well as private contractor-approved providers.

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Former security contractor CEO agrees to pay $4.5 million to settle civil claims

Keith Hedman, 55, of Arlington, Virginia, the former chief executive officer of a Virginia-based security contracting firm, Protection Strategies, Inc. has agreed to pay $4.5 million to settle civil claims relating to his involvement in a fraudulent scheme to create a front company to obtain contracts through the Small Business Administration’s Section 8(a) program.  The Section 8(a) program allows qualified small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia, made the announcement after the settlement agreement was signed by both parties. “The civil settlement illustrates the importance of not stopping at a criminal resolution when a defendant has pled guilty to fraud against the government,” said U.S. Attorney Boente.

The settlement resolves civil claims against Hedman relating to the criminal plea entered by him in U.S. v. Hedman,1:13cr74. According to court records, in or about 2001 Hedman formed PSI, which was approved to participate in the 8(a) program based on the 8(a) eligibility of its listed president and CEO, an African-American female. When the listed president and CEO left PSI in 2003, Hedman became its sole owner, and the company was no longer 8(a)-eligible.

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DoD IG: Some Defense contract audits rely on inaccurate pricing data

The Defense Contract Audit Agency (DCAA), which provides audit and financial advisory services to the Defense Department, hasn’t advised contracting officers on proper cost and pricing data, according to a recently released report from DoD’s inspector general.

As part of the IG’s oversight responsibility of the agency, it evaluated a cross section of 16 DCAA contract audits completed between October 2011 and February 2013.

The review included five audits of forward-pricing proposals as well as 11 audits of incurred cost proposals and other audit types, the report says. The IG identified one or more significant problems associated with 13 of the 16 audits.

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DFARS sets time DoD contractors have to request information release

Defense Department contractors must now submit requests to release  fundamental research from a project 10 days before doing so, an addition to the Defense Federal Acquisition Regulation Supplement (DFARS) says.

The DFARS says a DoD contractor can’t release to anyone outside its own  organization any unclassified information pertaining to the contract or the  program related to the contract unless the information was already in the public  domain or a request for approval is granted. Requests for approval should  identify the specific DoD information to be released, the medium to be used and  the purpose for the release.

The change regarding fundamental research was previously published as part of  a proposed  rule proposed in 2011 having to with safeguarding unclassified DoD  Information. Under the previously proposed rule, contractors would have had 45  days to submit the request before the information is to be released.

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