BATH, Maine — Huntington Ingalls Industries, the only shipyard except Bath Iron Works to build Arleigh Burke-class destroyers, has agreed to repay $9.2 million to the Department of Defense to settle allegations that it overbilled the U.S. Navy and Coast Guard for work conducted at its Pascagoula, Mississippi, shipyards.
The Department of Justice announced Tuesday that Virginia-based Huntington Ingalls will pay $7.9 million in addition to earlier repayments of about $1.3 million. The settlement is the second largest in the district’s history.
[Read the settlement agreement here (PDF)]
The civil settlement resolves alleged labor mischarging on various U.S. Navy and Coast Guard contracts dating back to 2003. Huntington Ingalls allegedly overcharged for work incurred on particular contracts to other contracts, even though the costs were not actually incurred by those contracts. The settlement also resolves claims that Huntington Ingalls had billed the Navy and Coast Guard for dive operations to support ship hull construction that did not actually occur as claimed.
“Contractors that knowingly bill the government in violation of contract terms will face serious consequences,” Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division said in a statement. “This settlement demonstrates, once again, that we will not tolerate defense contractors who falsely charge the armed forces or any agency of the United States.”
“Our armed forces depend on defense contractors to follow the rules, and this civil settlement … should remind all those who conduct business with the United States government that they are expected to abide by the rules,” said Acting U.S. Attorney Harold Brittain.
The case was investigated by the Defense Criminal Investigative Service, the Department of Justice, Civil Division, Commercial Litigation Branch, and the U.S. Attorney’s Office for the Southern District of Mississippi.
According to a Department of Justice release, the allegations were originally brought forward in a whistleblowing lawsuit filed by a former Huntington Ingalls employee under the False Claims Act (FCA), which permits private individuals to sue on behalf of the government for false claims and to share in any recovery. The plaintiff will receive $1,590,144 as a result of the civil action he filed, the release states.
Loren Thompson, chief operating officer at Washington, D.C.-based think tank the Lexington Institute, said Tuesday that with billions of dollars in play every year, the “relatively minor violation of billing procedures” wouldn’t likely affect which shipyard is awarded how many ships in the next multiyear procurement. The Navy and Coast Guard “manage warship allocations carefully to make sure workloads at each yard are sufficient to sustain capabilities.”
However, he said, “Obviously a pattern of improper billing practices can undermine a supplier’s reputation with the government customer. In extreme cases, a company can even be barred from working with the government.”