PAE Applied Technologies: Wage Caps and Award Fees

The PAE Applied Technologies Air Force settlement called for a $4.2 million payment to resolve allegations of billing wages above contract caps and receiving related award fees. The wage allegations covered government fiscal years 2009 through 2014. The government alleged that disclosing the above-cap charges would have cost PAE those fees. If you work with payroll, contract billing or performance reviews, that connection matters: the wage charge can affect both the government’s bill and the contractor’s claim to an additional payment.

What the Air Force Was Allegedly Billed For

PAE provided aircraft maintenance, airfield management, aircrew life support and base operating support at Vance Air Force Base in Enid, Oklahoma. The Justice Department’s June 28, 2019 announcement described a civil settlement concerning employee wage claims under that service contract.

The government alleged that PAE knowingly submitted false claims for wage rates above the applicable contract caps. We examine that connection with you, including who knew which cap applied and who approved the charge that reached the Air Force.

Why the Wage Caps Mattered to Award Fees

The award-fee allegation reached a separate financial benefit: PAE allegedly received fees it would have lost if it had disclosed the wage billing. The Justice Department described the connection directly:

On the government’s account, PAE billed taxpayers above the wage caps and collected award fees it would have lost by disclosing that billing. We see the absurdity: the alleged overbilling also carried an award fee.

That is why we examine what the fee reviewers were told alongside what the accounting records showed. A wage-cap discrepancy can matter beyond the amount on a labor invoice when the contractor’s entitlement to a fee depends on disclosure of that discrepancy.

The contract’s payment terms determine how a labor record reaches government money, and different line items can use different pricing arrangements. Under a cost-plus-award-fee arrangement, cost reimbursement and performance evaluation are separate payment channels. That distinction explains why examining a labor bill may also require examining the performance record used to obtain a fee.

What Evidence Is Needed to Prove Fraud?

The useful evidence connects the contract’s wage limit, the charge submitted and what the company knew about the difference. For the award-fee allegation, it also connects that difference to the information the government used when deciding to pay the fee. We work through that connection between the records and the government’s bill with you.

The insider’s contribution is knowing what those documents mean in the operation. A payroll employee may understand the wage entry, a billing employee may know how it reached the invoice, and a contract manager may know what the fee submission said. We connect those views to the payment terms and the alleged false claim.

When Labor Records Also Protect an Incentive Payment

A whistleblower’s complaint against Huntington Ingalls Industries alleged a similar connection between labor records and additional government payments in Navy and Coast Guard shipbuilding. It alleged that supervisors directed employees to charge work to hulls and orders other than those actually worked on, concealing overruns that would have reduced incentive payments.

The complaint tied managers’ incentives to the same hour limits governing the company’s payments:

The shipbuilding complaint concerned hours allocated to work, while PAE’s settlement concerned wage rates charged above caps. The shared pattern is the connection to an additional payment: what the labor record says can determine whether the contractor receives an incentive or award fee. Someone who understands the underlying work can explain why the reported number tells the government a different story.

Compliance Has to Reach the Charge

A 2022 study in the International Journal of Management and Humanities examined compliance and ethics programs in a nonrandom sample of 49 defense contractors. Its comparison of penalties with government contract dollars found a higher penalty ratio among companies with programs than among those without them.

For us, the useful question is how a control worked on the transaction. In a wage-cap inquiry, that means whether the billing review compared the charge with the contract limit and whether people reviewing the award fee learned about the discrepancy. The practical value of compliance lies in what happens to that information before the government pays.

A Former Employee Brought the Case

A former PAE employee brought the False Claims Act whistleblower lawsuit in federal district court in Oklahoma City. The government joined the case and resolved all its allegations through the settlement. The Defense Criminal Investigative Service, Air Force Office of Special Investigations and Defense Contract Audit Agency investigated it, and the United States Attorney’s Office for the Western District of Oklahoma handled the civil case.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Here, a former employee’s whistleblower case brought both the wage charges and the related award fees into the government’s settlement. If you know how the labor bill was prepared and what the fee reviewers were told, we can assess that connection with you.

When You Know What the Fee Review Missed

If you have seen wage charges exceed contract caps while the company continued collecting award fees, speak with our whistleblower experts about the billing and fee decisions. We help build your strongest case around the connection you can explain and bring in defense contractor whistleblower lawyers who understand labor charges and performance fees. We stay alongside you as your knowledge of the contract becomes the foundation of the case.