Lockheed Martin Resolves Pricing Allegations with $29.7 Million Settlement

Key Takeaways

• Settlement Amount: Lockheed Martin has agreed to pay $29.74 million to resolve allegations of defective pricing on F-35 contracts, adding to a previous payment of $11.3 million for the same issue.
• Violation of TINA: The U.S. government claims that Lockheed Martin inflated pricing proposals and failed to provide accurate, complete, and current cost data during contract negotiations, violating the Truth in Negotiations Act (TINA).
• Whistleblower Role: The settlement stems from a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act, which allows private citizens to bring forward cases on behalf of the government.
• Accountability for Taxpayer Funds: Government officials emphasized the importance of holding contractors accountable for misusing taxpayer funds, especially in high-stakes defense contracts like the F-35 program.
• National Security Impact: The F-35 program is critical to U.S. defense, and ensuring transparency and fairness in its contracts is vital to maintaining the trust of taxpayers and safeguarding national security.

Deep Dive

Lockheed Martin, one of the largest defense contractors in the world, has agreed to settle allegations under the False Claims Act by paying $29.74 million. This settlement addresses accusations of defective pricing practices in contracts related to the production and maintenance of its F-35 fighter jets. The settlement adds to the $11.3 million Lockheed Martin already paid to the Department of Defense (DOD) for similar pricing issues in these same contracts.

The allegations stem from the period between 2013 and 2015 when Lockheed Martin is said to have submitted inflated pricing proposals for the F-35 contracts, failing to provide accurate and complete cost data during negotiations with the DOD’s F-35 Joint Program Office (JPO). This violation of the Truth in Negotiations Act (TINA) – a law designed to ensure fair pricing on sole-source contracts – raised questions about whether the DOD was paying more than necessary for these essential defense contracts. The government claims that had the pricing data been fully disclosed, the contracts would have been awarded for a lower price.

Acting Assistant Attorney General Brett A. Shumate from the Justice Department’s Civil Division made it clear that the settlement sends a strong message: “We will pursue contractors that knowingly misuse taxpayer funds.” Shumate’s statement highlights the commitment to ensuring fairness in government contracting, where the stakes are high, and the money involved is taxpayer-funded.

Abe McGlothin Jr., Acting U.S. Attorney for the Eastern District of Texas, echoed these sentiments, emphasizing that the government will not overlook failures to disclose accurate data, especially when it affects the integrity of contracts. “The Eastern District of Texas will take steps to ensure that the contractor is held accountable,” McGlothin remarked.

Integrity at the Heart of National Defense
Lt. Gen. Mike Schmidt, Director of the F-35 Joint Program Office, added his voice to the conversation, reaffirming the program’s importance to national security. "The F-35 Joint Program Office will continue to insist on integrity and honesty in all business transactions. We demand 100% accountability for every dollar spent on this program,” he stated, underscoring the need for full transparency when dealing with military contracts.

The settlement marks a significant step in ensuring that defense contractors remain accountable, particularly in the F-35 program, which plays such a critical role in the defense capabilities of the United States and its allies.

The road to the settlement began with a whistleblower lawsuit filed in 2017 by Patrick Girard, a private individual who took action under the qui tam provisions of the False Claims Act. This law allows private citizens to bring forward cases on behalf of the government, and in return, they can share in any financial recovery. The details of Girard’s share of the settlement are yet to be determined, but his role highlights the importance of vigilance and integrity in government contracts.

Pursuit of Accountability
The investigation, led by the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service (DCIS) and the Naval Criminal Investigative Service (NCIS), reflected the dedication of these agencies to holding contractors accountable for non-compliance and violating the law. James R. Ives, Principal Deputy Director of DCIS, noted that the settlement serves as a reminder that government contractors must be transparent and honest in their dealings.

Greg Gross, Special Agent in Charge of NCIS’s Economic Crimes Field Office, added, “Overinflation of production costs for an aircraft critical to our national defense undermines operational readiness and erodes the trust placed in the Department of Defense by the American people.” Gross’s words underscore the broader impact of such misconduct on national security.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.