DynCorp Sued for Overcharging Anti-Terrorism Program

Last week, the public learned that DynCorp International was named in a lawsuit accusing it of defrauding the U.S. Army on a contract to fight international drug-funded terrorism. The complaint, filed in June 2013 by two DynCorp employees, was unsealed last week after the federal government declined to intervene.

DynCorp worked as a subcontractor to Northrop Grumman on a contract supporting the Counter Narco-Terrorism Technology Program Office (CNTPO). In May, the Project On Government Oversight obtained a Pentagon Inspector General (IG) report finding that both companies might have billed as much as $123 million in improper costs on the contract from 2007 to 2013. The IG found that Northrop and DynCorp charged the Army for hundreds of DynCorp employees lacking the required qualifications and billed for employees who reported working more than 24 hours in a day. The IG put some of the blame on the Army for relying on Northrop to verify employees’ qualifications and for not adequately reviewing contractor invoices. The IG report made no mention of whether the Army planned to hold the contractors accountable—aside from seeking a refund for the improper charges—or whether the Army personnel who managed the contract would face discipline.

The IG had been tipped off in October 2012 by the two plaintiffs who filed the lawsuit, DynCorp employees Adele Hollis and Xavier Egan. They claim DynCorp knowingly inflated labor costs on several CNTPO subcontract task orders, the largest of which involved providing flight operations, maintenance, logistics support, and training services in Afghanistan.

“Instead of trying to achieve the lawful profits that were permitted under the Contract and Subcontract,” they allege in the complaint, “DynCorp made its profits another way—by cheating.”

They allege that DynCorp regularly hired workers who were not qualified for the positions DynCorp specified in the invoices it submitted to prime contractor Northrop Grumman, which in turn billed the government. In so doing, the plaintiffs claim, DynCorp was able to reap nearly $45 million in illicit profits from 2008 to 2012. (Taking into account the mark-ups Northrop added to DynCorp’s charges, the lawsuit estimates the government suffered more than $50 million in actual damages, which is tripled under the False Claims Act.) The plaintiffs only allege employee misclassification—they make no mention of the egregious time card padding found by the IG. Also, they claim DynCorp kept Northrop in the dark about its labor pricing shenanigans.

Hollis and Egan explain in the complaint that they contacted the Pentagon IG through its fraud hotline only after they were brushed off by DynCorp’s upper management and it became clear the company would not comply with its duty to report to the government the overbilling. Interestingly, they don’t claim whistleblower retaliation, even though they allege DynCorp eliminated their job positions after they reported the alleged wrongdoing to management.

“DynCorp International has cooperated with investigators throughout their inquiry into this issue, has complied fully with our obligations under the subcontract, and nothing improper was submitted by DI to our customer,” the company told POGO in an emailed statement

When POGO blogged about the Pentagon IG report in May, we recounted the troubled history of the CNTPO program. Inspector General audits in 2009 and 2011 found weak contract oversight and management by the Army and hundreds of thousands of dollars in contractor overbilling. In 2011, Wired magazine reported that this $15 billion program—which funds activities throughout Asia, Africa, and Latin America—was being managed by just ten Army personnel stationed in Hunstville, Alabama. With oversight spread so thin, we worry about the extent of contracting abuses throughout the program. Could the recently unsealed whistleblower lawsuit against DynCorp signal an oncoming wave of similar legal actions?