Northrop Grumman improperly charged government more than $100 million, IG says

Northrop Grumman improperly charged the U.S. government more than $100 million in “questionable” costs on a contract, according to a Defense Department inspector general’s report.

The report found that from October 2007 through March 2013, the major defense contractor “did not properly charge labor rates” for a counter-narcoterrorism contract, and that the Army agency in charge of the contract did not ensure that the people performing the work had the necessary qualifications. The agency also did not review invoices for millions of dollars of overtime, the report said.

The IG found $21.7 million in “potentially excessive payments” for overtime, including one employee who billed $176,900 for 1,208 hours in a 12-day period. That caught investigators’ attention, since the employee was billing for more than 100 hours a day.

The IG found that out of the charges submitted over nearly six years for 460 DynCorp employees working for Northrop Grumman, 360 did not meet the specified labor requirements, leading to $91.4 million in questionable costs. In one case, a program manager who billed 5,729 hours over a year and a half, totaling $1.2 million, did not have a bachelor’s degree, which was a requirement of the position. Another employee billed 16,270 hours worth $2 million over five years but was qualified for only 161 hours of the work.

Pentagon investigators also said that $10 million was spent on 33 employees who may not have been qualified. DynCorp told the IG that it couldn’t determine the employees’ qualifications “because some personnel files were archived and extremely difficult to obtain.”

The report, marked “for official use only,” was obtained by the Project on Government Oversight, which published it on its Web site Tuesday. It was first reported last week by Bloomberg News.

In a statement, Brandon R. “Randy” Belote III, Northrop’s vice president of strategic communications, said the company “has been cooperating with the DoD’s OIG for some time on their investigation into the conduct of one of our subcontractors on the . . . contract. We have no further comment at this time.”

Ashley Vanatsdall Burke, a senior vice president of communications at DynCorp, said that “given that we have not seen the full report, we cannot comment on its contents. I can say, however, that DynCorp International has co­operated with investigators throughout their inquiry into this issue, has complied fully with our obligations under the subcontract, and nothing improper was submitted by [DynCorp] to our customer [Northrop Grumman].”

DynCorp was a Northrop subcontractor, supplying spare parts, maintenance and training for the Afghan Defense Ministry, the Afghan Army Air Corps and the Afghanistan Interior Ministry’s Counter-Narcotics Air Squadron.

The IG faulted the contracting agency, the Army Contracting Command-Redstone Arsenal, for not verifying that minimum labor requirements were being met and instead relying on Northrop Grumman “to verify that those employees were qualified to accomplish the required work.” The IG also said that the Army contracting agency “did not adequately review invoices prior to approving payments for labor charges.”

The investigation was launched after a whistleblower called the IG’s hotline in 2012 to complain that DynCorp “incorrectly and knowingly applied labor rates and categories for DynCorp employees” on the contract, according to the report.

The report follows a 2011 inspector general investigation that found that Army contracting officers did not vigorously oversee the contracts and that hundreds of thousands of dollars were incorrectly billed.

Neil Gordon, an investigator at the Project on Government Oversight, wrote in a blog post on the watchdog’s Web site that the report “makes us wonder how extensive contractor overbilling and other abuses are throughout the program. If oversight staff is indeed spread so thin that contractors are basically being left to their own devices with regard to billing, the Army has two choices: either significantly beef up contract management or insource the work.

“The report makes no mention of sanctions or legal actions against Northrop or DynCorp, aside from seeking a refund for the improper charges,” he wrote. “Nor is there an indication that the Army personnel managing the contract faced any sort of discipline.”

The Army contracting command did not immediately respond to a request for comment.

In written responses to the IG, the command said it would work “to ensure all necessary audits are conducted to assist in the potential recovery of funds.”

Christian Davenport covers federal contracting for The Post's Financial desk.
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