by Ben Vernia | October 20th, 2014
On October 16, the Department of Justice announced that it had filed a complaint-in-intervention against defense contractor Sikorsky Aircraft Corp., and two subsidiaries, alleging that the parent company entered into illegal type of contract with the subsidiaries. According to DOJ’s press release:
The Department of Justice announced today that it has filed its complaint in intervention in a case against defendants Sikorsky Aircraft Corporation and two of its subsidiaries, Sikorsky Support Services Inc. and Derco Aerospace Inc., for violating the False Claims Act. Sikorsky Aircraft Corporation is a wholly owned subsidiary of United Technologies Corporation, with headquarters in Stratford, Connecticut.
The government’s complaint alleges that Sikorsky Aircraft Corporation approved an illegal cost-plus-a-percentage-of-cost subcontract between Sikorsky Support Services Inc., and Derco Aerospace. A cost-plus-a-percentage-of-cost contract is one where the cost of performance is unknown in advance and compensation is determined based on the cost of performance plus an agreed-to percentage of such costs. Such contracts are prohibited because they give contractors no incentive to control the cost of performance. The complaint further alleges the defendants used this illegal subcontract to overcharge the Navy on parts and materials that were used to maintain Navy aircraft.
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The case was originally filed as a qui tam suit by a former employee of one of the subsidiaries, DOJ announced.
