Inchcape Shipping Services: The Supplier’s Price and the Navy’s Bill

In the Inchcape Shipping Services settlement, the company agreed to pay $20 million to resolve allegations of Navy husbanding overcharges through inflated quantities, rates above the contract and duplicate billing. The whistleblowers’ complaint described the gap between what happened at the port and what appeared on the Navy’s bill: a sewage barge moved to look full, food deliveries with different prices on different paperwork, and supplier costs hidden behind matching invoices.

What Navy Husbanding Put on the Bill

Inchcape supplied Navy ships with food, waste removal, telephone services, ship-to-shore transportation, force protection and local transportation. The United Kingdom-based marine services contractor supplied those services at ports across several regions. The Justice Department’s settlement announcement described alleged overbilling from 2005 through 2014.

The contractor and its local suppliers occupied different places in the transaction. A supplier provided the food or service, Inchcape arranged it, and the Navy received the charge.

The whistleblowers’ complaint described husbanding contracts with different payment terms on the same bill. Some services carried an agreed unit price, such as sewage removal. Port tariffs and certain services procured from local vendors were reimbursed at cost, with the daily husbanding fee providing the contractor’s compensation for arranging them. Under that account of the contracts, adding a hidden margin to a supplier’s cost meant charging the Navy for compensation the daily fee already covered.

How the Alleged Overcharges Worked

The government’s allegations concerned the quantity supplied, the rate charged and whether a service had already been billed. The complaint supplied examples of how those differences could arise during an ordinary port visit.

A Sewage Barge That Only Looked Full

The complaint alleged that an assistant port manager in Bahrain described using barge movements to create a false impression of sewage volume. It called the sewage CHT and described the operation this way:

The alleged trick gave the Navy something to see: a barge leaving the ship. What mattered to the bill was the volume removed. Someone who knew whether the barge was full and whether it had been emptied could explain the difference between the apparent work and the quantity charged.

The Contract Rate and the Added Charge

For a port call in Cozumel, the complaint alleged that Inchcape charged $550 per day for vans when the contract price was $250 per day. In Mazatlan, it alleged a charge of $180 per line handler against a contract price of $30.

The complaint also described duplicate charging within a port bill. Inchcape allegedly charged the fixed price for a contract line item, then added charges for services that the contract required that price to include.

The complaint also alleged that Inchcape inflated Panama Canal tolls for Navy ships. Here the comparison was with the canal authority’s bill, rather than a contract’s fixed rate.

Food at One Price, Delivery Tickets at Another

For food provisions, the complaint alleged that local supplier United Supplies & Logistics prepared invoices showing what it actually charged Inchcape. Inchcape allegedly paid those amounts while directing the supplier to prepare a second set of documents for the Navy:

According to the complaint, the supplier presented the inflated delivery tickets to the Navy supply officer, and Inchcape used those prices to bill the Navy. Inchcape allegedly kept the difference between the billed amount and the supplier’s actual charge. We see the absurdity in the paperwork: the same food acquired a different price depending on who was allowed to see the invoice.

Overpayments That Stayed With the Contractor

The complaint’s allegations also reached overpayments and credits after the initial bill. It described estimated charges that required reconciliation with actual invoices and a credit to the Navy. For the southwest Asia contract, the complaint put that deadline at 30 days after the ship’s departure.

The whistleblowers alleged that an audit identified $5,449,000 in overpayments, but Inchcape returned only $362,000. The comparison came from the complaint’s account of estimated bills from Dubai and Bahrain. It raised a different question from the price on the original invoice: what did the contractor do once it knew the actual cost?

The Records Behind the Navy Invoice

The evidence behind a Navy bill connects the contract’s payment terms to the service, the supplier’s charge and the amount presented to the government. Different line items can have different pricing arrangements, so we start with the executed contract, its changes and the particular item being billed. A fixed unit price, an at-cost reimbursement and an estimated charge awaiting reconciliation each call for a different comparison.

According to the complaint, when senior colleagues pressed for repayment, Inchcape’s chief executive asked how the division would make up the lost money. He also said Navy auditors would find only invoices matching the amounts billed. Those colleagues responded that records of actual payments to vendors would reveal the improper billing. A tidy invoice file offers little comfort when the alleged scheme is to keep the real prices somewhere else.

Supplier identity mattered, too. The complaint alleged that Inchcape failed to tell the Navy it owned Harbor Couriers, a delivery company it routinely hired for Navy deliveries. The allegation connects vendor selection and ownership to the same payment trail as the invoice.

Transparency International Defence and Security’s 2022 report, Hidden Costs: US Private Military and Security Companies and the Risks of Corruption and Conflict, explains why the subcontracting chain deserves attention. Its analysis of corruption risks includes this point:

The report recommends disclosing subcontractors, their ownership and the itemized value of their services with invoices. In the Inchcape allegations, that is the whole trail: who supplied the service, who owned that business, what it charged and what the Navy was shown.

Other Military Bills, Separate Cases

APL Limited faced allegations of inflated and duplicate military-shipping charges. Maersk Line Limited faced allegations that included storage rebates not passed through. Those separate civil settlements show why a shipping bill can require both a rate comparison and a check on credits owed to the government.

Inchcape’s settlement is also separate from the Glenn Defense Marine Asia husbanding case. In his criminal guilty plea, that company’s owner admitted using cash and benefits to secure port calls, sensitive information and protection for overbilling, as the Justice Department’s account describes. Purchased influence was part of that case’s explanation for the inflated port bills. Inchcape’s civil settlement addressed the quantity, rate and duplicate-billing allegations described here.

The Settlement and the Whistleblower Share

The Justice Department announced the Inchcape settlement on May 29, 2018. Three former Inchcape employees brought the False Claims Act qui tam case, and the government joined it. The Navy and the Naval Criminal Investigative Service assisted the Justice Department.

The announcement said the whistleblowers would receive approximately $4.4 million combined. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The complaint described a Government Services chief operating officer and a manager responsible for North and Central America among the insiders raising concerns. Their account reached the operational details of port visits, supplier invoices and the payments made behind the Navy’s bill.

You Know What the Port Actually Supplied

If you know why a supplier’s invoice, a service quantity or a credit differs from the Navy’s bill, talk with our whistleblower experts about the charges you saw. We work beside you to build your strongest Navy husbanding whistleblower case and bring in defense contractor whistleblower lawyers who understand Navy billing and port services. We stay with you through the case.