A California-based defense contractor has agreed to pay $435 thousand to settle false claims allegations involving labor mischarging and for including unallowable costs in its indirect rate computations.
The company, Silvus Technologies, specializes in wireless communications, and held at least three cost-reimbursable contracts with the Air Force. Somewhere along the line, the Government got word that Silvus was billing for work not performed and for including indirect costs that are unallowable under FAR Part 13 Cost Principles. We don't know how this was discovered because the Justice Department press release announcing the settlement did not get into that level of detail. However, since DCAA (Defense Contract Audit Agency) was assisting in the investigation, the genesis was likely a result of audit findings during one of the Agency's incurred cost audits.
According to the press release, the overpayments "were due to Silvus's failure to track accurately its direct labor costs and certain indirect costs (including tax payments). Silvus improperly attributed some employee labor costs to the contracts and included certain unallowable charges in its incurred cost proposals.
Were these "inappropriate" charges inadvertent? Based on the information available, it's hard to say. However, the press release also chastised Silvus for lacking adequate internal controls in place to ensure that cost-based billings are fair and accurate. Poor internal controls probably played a key role. Otherwise, the settlement might have been more significant.
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