Tuesday, March 8, 2016

Failure to Meet Specifications Results in $3 Million Settlement

ArmorSource, an Ohio company was awarded a contract to produce helmets for the Army. It subcontracted the work to Federal Prison Industries (FPI) also known as UNICOR. In 2010, a batch of 44,000 potentially defective helmets were recalled. According to a Congressman at the time, FPI did not meet protective standards, nor did it meet required deadlines in its production of helmets. The helmets failed ballistics testing.

From 2008 to 2010, FPI was awarded contracts for 100 percent of the military's needs, effectively shutting out private industry. Congressional investigations at the time concluded that FPI utilized poorly paid and often indifferently supervised prisoners to produce products that are in direct competition with private-sector businesses. As a result of the investigations, FPI no longer gets preferential treatment when it comes to helmet production (though it continues to receive preferential contracting treatment on many other products the Government buys).

Fast forward six years to this week when the Department of Justice (DoJ) announced that Armorsource has agreed to pay $3 million to settle false claims act allegations related to helmet subcontract to FPI. The investigation found that ArmorSource had delivered Advanced Combat Helmets (ACH) that were manufactured and tested using methods that did not conform to contract requirements and that failed to meet contract performance standards.

The DoJ press release noted that the allegations of poor performance were brought by two whistleblowers who worked for FPI (prisoners, we presume) and that as a result of the settlement, received $450 thousand as Qui Tam relators.

You can read the full DoJ press release here.

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