Vector Planning and Services: Already Paid, Billed Again Through Overhead

In the Vector Planning and Services settlement, the company agreed to pay $6.5 million to resolve allegations that it billed Navy contracts for costs already paid and for other costs never incurred. The government’s central allegation followed the same expense through different accounts: paid as a direct cost, then included in indirect-cost pools and billed again. Someone who knows the original charge and the later overhead submission can see what either bill alone leaves out.

Vector Planning and Services Inc. provided information technology, systems engineering, program management and consulting services. Headquartered in Chantilly, Virginia, with its West Coast operations in San Diego, VPSI held contracts with the Navy and its contractors. The Justice Department announced the agreement to pay on February 18, 2014.

How Direct Costs Became a Second Navy Bill

The government alleged that Vector Planning inflated its indirect-cost billings from 2005 to 2009 by including direct costs for which it had already been paid. Those costs allegedly entered indirect accounts, were allocated across government contracts and reached the government for payment again. The company was entitled to bill indirect costs under its contracts, which gave those accounts a route into the Navy’s bill.

Federal acquisition rules tie the allocation of costs to the work that benefits from them. For a services contractor, that makes the connection between project work and shared expenses central to what the government pays.

In the alleged Vector Planning scheme, a cost that had already produced a payment reappeared among those shared expenses. Dividing that pool among contracts would carry the duplication into their bills, even if the calculation used to divide it was accurate. We see a simple problem beneath the accounting: a paid expense allegedly became another bill for taxpayers. Same cost. Twice.

In the TRW case resolved by its successor, Northrop Grumman, the government alleged that commercial automotive work was misclassified as marketing and that a private satellite proposal was charged to general and administrative accounts. Vector Planning’s alleged duplicate costs had already been reimbursed directly before they entered the indirect accounts.

The government also alleged that Vector Planning claimed costs it never incurred. That allegation asks a different question: whether the expense existed at all.

The Records Behind the Overhead Rate

The useful evidence of defense contractor fraud connects an original expense to the government claim that includes it. In a duplicate-cost case, we examine the original invoice or time record, the project or account to which it was assigned, and the payment attached to that direct charge. We then connect that expense to the indirect pool, its allocation across contracts and the resulting submission for payment.

A pool reconciliation can show which costs entered an overhead total. The allocation base can show how that total was distributed, while the proposal or voucher shows what reached the government. Read together, those records let us examine the movement from an expense inside the business to a charge on a particular contract.

The arithmetic can add up while the government’s bill is wrong. Following the original cost checks what the pool contains, whether the expense was incurred and whether the government had already paid it. An insider who recognizes a transaction across those records brings knowledge the totals cannot supply.

The broader cost-reimbursement system gives annual cost records particular importance. Under the cost-reimbursement clause, estimated overhead billing rates are reconciled against actual annual costs. For an overhead case, we connect the annual cost submission with the underlying transactions and the bills it supports.

The Whistleblower and the Investigation

A whistleblower brought the Vector Planning allegations in a False Claims Act qui tam case in the U.S. District Court for the Southern District of California. The Justice Department named federal prosecutors, the Defense Criminal Investigative Service, the Naval Criminal Investigative Service and the Defense Contract Audit Agency as participants in the coordinated effort.

The Defense Contract Audit Agency’s work includes accounting and pricing audits, financial advice and investigative evidence. Its participation in the Vector Planning case connects contract auditing and false-claims enforcement.

The Settlement’s Whistleblower Award

The Justice Department announced that the Vector Planning whistleblower would receive $1.28 million. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For someone who knows a direct charge was later included in overhead, the starting point for a defense contractor whistleblower claim is the connection between that knowledge and the government’s bill.

You Know Where the Cost Went

If you recognize an expense that was paid directly and then returned in an overhead pool, talk with our whistleblower experts about the charges you saw. We bring cost records and your knowledge of the work together to build your case, then bring in defense contractor fraud whistleblower lawyers who understand cost allocation. We stay beside you from the first review of the company’s books through the pursuit of a government recovery.