Lockheed Martin subsidiaries agree to pay $70 million for overcharging Navy for parts

Two Lockheed Martin subsidiaries, Sikorsky Support Services and Derco Aerospace, have agreed to pay the federal government $70 million for overcharging the Navy for aircraft parts. The U.S. Department of Justice revealed that the companies knowingly engaged in an improper subcontract for spare parts and materials used in training Navy pilots. Sikorsky purchased parts from Derco at a marked-up cost and then billed the Navy in violation of federal regulations, leading to increased government costs. The settlement aims to prevent government contractors from engaging in self-dealing practices that harm American taxpayers, according to Brian Boynton of the DOJ's civil division. Lockheed Martin, the parent company of the subsidiaries, expressed satisfaction with the settlement, emphasizing that there was no admission of wrongdoing by Sikorsky or Derco Aerospace. The resolution stemmed from a lawsuit filed by a former Derco employee under the whistleblower provision of the federal False Claims Act dating back to 2011, before Lockheed Martin acquired Sikorsky in 2015. The U.S. Department of Defense's Office of Inspector General highlighted the importance of deterring exploitation of the agency's procurement process, citing the negative impact of inflated costs on naval air training and the American taxpayer. The case underscores the consequences of overinflating parts and material costs for aircraft maintenance, particularly in the context of government contracts. The improper billing practices by the Lockheed Martin subsidiaries were deemed detrimental to the Navy's operations and financial interests. The settlement serves as a reminder of the legal obligations that contractors must adhere to when dealing with federal agencies, aiming to uphold transparency and fairness in government procurement processes.