Tuesday, April 19, 2016

Use of Non-compliant Part Leads to $450 Thousand Settlement

A Defense subcontractor out of Colorado has agreed to pay the Government $450 thousand to settle civil charges in violation of the False Claims Act. The investigation and subsequent settlement arose when a whistleblower notified the Department of Defense through the OIG (Office of Inspector General) Hotline.

The case involved parts that did not meet Government specifications. In this case, the parts were phenolic insulating washers used to prevent electronic shorts and catastrophic failures of the Bradley Fighting Vehicle.

During testing of one of the units, the washer failed and production was halted until washers that met Government specifications could be procured. The issue that got the subcontractor in trouble was that these faulty or noncompliant washers had been used in more than 100 units manufactured and shipped during a six month period in 2013 and the subcontractor hadn't disclose the fact. Based on the whistleblower's claim, all 100 units were ultimately recalled and during retrofit, the Government found that 96 out of the hundred units had cracked washers.

In the charging papers, the Government stated: "Despite knowing that over 100 (units) manufactured and shipped between April 1 and September 19, 2013 contained washers not manufactured to the contract specification, and despite knowing that a failure of a washer could result in an electronic short and catastrophic failure of the (unit), the (subcontractor) did not notify the Prime Contractor or the United States of the defective parts."

Phenolic washers meeting MILSPEC standards cost less than $2 and less than $1 in bulk. Quite possibly, the subcontractor was trying to avoid the cost of the retrofitting process. In the end, it cost them much more.

The DOJ (Department of Justice) press release did not say whether the whistleblower shared in the amount recovered. You can read the entire press release here.

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