Lockheed Martin Integrated Systems: Qualified Rates, Underqualified Staff

In the Lockheed Martin Integrated Systems settlement, the company agreed to pay $27.5 million to resolve False Claims Act allegations that it knowingly billed the government for underqualified employees at rates for more qualified staff. The alleged gap sat between the people supplied and the qualifications behind the rate. If you worked with staffing records or invoices, that is a gap your own work may have made visible.

The Justice Department announced the settlement on December 19, 2014. Lockheed Martin Integrated Systems, also called LMIS, was a Lockheed Martin subsidiary, and the allegations concerned work under Army contracts supporting Iraq and Afghanistan.

The CR2 and S3 Task Orders

The Army’s Rapid Response contract, known as CR2, and Strategic Services Sourcing contract, known as S3, provided rapid access to products and services for the Army in Iraq and Afghanistan. The Army Communication and Electronics Command issued the contracts. That command, CECOM, was based at Fort Monmouth, New Jersey, and Aberdeen, Maryland.

Individual task orders were negotiated separately under those contracts to meet CECOM’s needs quickly. The government alleged that LMIS violated the contract terms by supplying underqualified employees and billing them at rates for more qualified workers. It also alleged that the overbilling increased LMIS’s profit.

That is the payment issue in underqualified labor on defense contracts: a qualification attached to the price becomes a claim for government money. We see an upside-down bargain in the allegation. The government was charged the higher rate while, according to the government, the people supplied lacked the qualifications that rate required.

What a Labor Category Does to the Bill

A labor category connects the qualifications required for a job to the rate charged for doing it. The task order, worker’s qualifications and billed category therefore belong in the same comparison.

The broader contract payment terms explain why the rate matters. In time-and-materials contracting, the federal acquisition rule for that contract type describes fixed hourly rates that include wages, overhead, general and administrative expenses, and profit. Qualifying labor hours are billed at those category rates. The wage is one part of the cost, while the qualification is part of the basis for charging the category.

A time sheet can put an employee on the job without showing whether that employee met the billed category’s requirements. That is why we look beyond false hours or work charged to the wrong contract when an insider raises a qualification problem.

What Evidence Is Needed to Prove Fraud?

The useful evidence connects the qualification requirement, the worker and the government bill. For a claim like the LMIS allegation, we compare the relevant task order and its changes with the employee’s resume and credentials, then the category and rate charged for the same assignment. Payment and acceptance records connect that billing representation to the government’s response.

The government’s LMIS allegation was knowing overbilling. That makes the decisions behind the category important: who checked the qualifications, who assigned the rate and what happened when a mismatch became known. A staffing specialist may understand the credentials, while a billing employee may understand how the category reached the invoice. We work with the insider to connect those observations to the request for taxpayer money.

Other CECOM Cases Put Qualifications Behind the Rate

DRS Technical Services agreed to a $13.7 million settlement announced on October 7, 2014, over alleged labor-category overbilling on Army CECOM and Coast Guard work. The government alleged that personnel did not satisfy the qualifications for the rates charged. The shared issue with LMIS was the qualification behind the labor charge, on work involving the same Army command.

Computer Sciences Corporation agreed to a $1.1 million settlement announced on April 15, 2014, over allegations involving falsified resumes on an Army CECOM information-technology task order. The government alleged that those resumes qualified personnel for higher-paid labor categories. That allegation puts a particular staffing document at the point where the price changes: the resume supported the category, and the category supported the higher charge.

The Audit and Investigative Teams Behind the Settlement

The Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of New Jersey announced the LMIS settlement. The department credited Defense Contract Audit Agency labor auditors, the Army Criminal Investigative Command’s Major Procurement Fraud Unit and the Defense Criminal Investigative Service in the coordinated effort. For an insider who saw a staffing discrepancy become a billing discrepancy, that combination matters: the qualifications and the accounting charges belong in the same case.

A Compliance Program Has to Reach the Bill

A 2022 study in the International Journal of Management and Humanities compared defense contractors with and without compliance and ethics programs. Having a program did not put companies on the lower-penalty side of that comparison:

The paper suggested greater government scrutiny as one possible explanation for higher penalty occurrences. Its comparison did not examine how individual programs operated, including the experience of their compliance staff or the organization’s culture and budget. We care about that distinction when an insider describes a billing problem: having a program and checking the charge are different questions.

For someone handling labor-category billing, the important question is whether qualification checks reached the particular invoice and what the business did with any discrepancy. We examine those decisions with you when assessing a defense contractor whistleblower claim. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know the People Behind the Rates

If you saw employees billed at rates their qualifications did not support, speak to one of our Whistleblower Experts about how the staffing and billing diverged. We build your case with you around the contract’s promise, the worker’s qualifications and the decisions behind the charge, bringing in defense contractor fraud whistleblower lawyers who understand labor-category cases. You gain partners who stay beside you as the facts you know become a case for recovering government money.