On Aug. 7, 2012, PRNewswire published a story entitled: “Court Rules that Lockheed Martin Can Be Sued For Submitting False Underbids to Obtain Air Force Contracts, says The Cullen Law Firm, PLLC.”
On August 2, 2012, the U.S. Court of Appeals for the Ninth Circuit confirmed that submitting a low bid to secure a federal contract knowing that the contract will cost the government more when it becomes fulfilled violates federal law.The ruling allows the False Claims Act (FCA) case to proceed to trial.The case alleged that Lockheed Martin Corporation submitted false underbids to secure contracts related to the Range Standardization and Automation IIA (“RSA”) program administered by the Air Force.
The case was filed on behalf of a Lockheed employee that was involuntary terminated after investigating Lockheed’s fraud and threatening to report the fraud to the government.
The RSA contract was cost-plus contract, which means the government pays the actual cost of producing the product plus a certain amount over.The article states that “[m]any military contracts are cost-plus contracts and many of them are underbid” “because contractors like Lockheed know they can go back to the government and ask for more money to cover their actual costs.”Thus, Congress does not know the true cost of the program and are often hit with cost overruns.
The decision could encourage more whistle-blowers to come forward with information and document showing that the bids for cost-plus contracts were knowingly underbid.