Aerospace and defense contractor Northrup Grumman will pay $11.4 million to settle government claims for Federal Acquisition Regulation (FAR) penalties and allegations that the corporation violated the False Claims Act (FCA). The Justice Department announced the settlement Monday, according to the Washington Post. Northrup was accused of violating the terms of a 2002 settlement agreement with the Defense Contract Management Agency (DCMA) by charging the government for costs based on deferred compensation awards to certain Northrup employees. In the 2002 settlement, Northrup promised not to bill the government for any deferred compensation in future contracts, but they allegedly did so anyway.
When the government’s contracting officer discovered that Northrup had billed for costs associated with deferred compensation, Northrup was hit with a penalty amounting to double the amount of unallowable costs. Northrup in turn challenged the government’s decision by filing a complaint in U.S. Court of Federal Claims, Washington, D.C. In response, the Department of Justice filed a lawsuit of its own against Northrup with counterclaims. In addition to the FAR penalties, the lawsuit included allegations that Northrup had violated the FCA by inserting deferred compensation costs in hundreds of government contracts. The government maintained that as a result of Northrup’s alleged contract misrepresentations, it paid out roughly $2 million in unallowable costs.
“Federal contractors must abide by the obligations they accept when contracting with the government, including compliance with federal regulations restricting the types and amount of costs they can charge to their federal contracts,” said Stuart F. Delery, Assistant Attorney General for the Department of Justice’s Civil Division. “The Department of Justice is committed to enforcing these fundamental obligations using every available tool, including FAR penalties assessed under the contract and, where appropriate, fraud-based counterclaims.” Northrup Grumman did not comment on the settlement.