Wednesday, June 5, 2019

Contractor Pleaded Guilty in Product Substitution Case

The Justice Department recently announced a guilty plea by a company involved in product substitution. DLA (Defense Logistics Agency) put out a solicitation to purchase oil absorbent mats - mats that because they are used to absorb flammable liquids, are required to dissipate electrical charges to the ground. The solicitation stated that there were only two approved manufacturers for these types of mats, both located in Pennsylvania and required mats to be purchased from one of the two manufacturers.

Enco, a company in New Hampshire was one of the bidders for the mats, proposing to buy mats from one of the designated suppliers. Ultimately Enco won the award and between 2012 and 2013, sold 21 thousand mats to the Government and collected nearly $700 thousand.

There was a problem however. These mats that Enco was selling to the Government were not manufactured by one of the approved manufacturers. Someone raised suspicions and DLA brought in an independent company to test the mats for compliance. The testing company concluded that the mats did not meet the contract requirements.

Once Enco's scheme was uncovered, Enco wrote to DLA admitting that it did not purchase the mats from one of the two approved suppliers because their prices were prohibitive. When interviewed by Government investigators, Enco's president stated that at the time of award, the company had fully intended to purchase mats from one of the two approved manufacturers but after award, decided to seek out other sources. Here's what's interesting however. The investigator already had documents showing that even before contract award, Enco had already decided and committed to purchasing mats from a non-approved source so Enco's president was caught in a lie. That 'lie', according to the Justice Department press release, proved intent which is a crime.

Sentencing is scheduled for later this year. The company is most certainly already debarred from Government contracting and could also face significant fines.

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