General Dynamics Asked For Excess Billings On $3.1 Billion Job
Air Force auditors said they identified as much as $379 million in “excessive profit” that may track in part to inflated billings for labor.
Pentagon auditors are now investigating and General Dynamics has given them “all the records requested,” Air Force spokeswoman Lieutenant Colonel Karen Platt said. If improper billings are found, the contract “allows us to reduce future payments to exclude non-allowable costs or to recoup prior overpayments,” Platt said in an e-mailed statement.
General Dynamics Needham, Massachusetts-based Network Systems unit won a $1.9 billion contract to provide computer repair, network management and software support of U.S. military intelligence systems at 500 locations in 150 countries.
The contract, which started in July 2003 and runs through 2010, has grown in cost to $3.1 billion. General Dynamics “excessive profit” contributed “significantly” to this increase, said the April 2 Air Force audit.
The Air Force also is responsible, auditors said. The service “did not effectively manage contract costs” and “did not verify that the fixed labor rates continued to be fair and reasonable throughout the performance periods,” the audit said.
“Typically, the contracting officers maintain oversight of labor costs and negotiate appropriate adjustments,” it said.
Platt said the service, based on the recommendation of its auditors, negotiated new labor rates that could save as much as $141 million through the contracts duration.
Mark Meudt, spokesman for Falls Church, Virginia-based General Dynamics, said the company is “confident that our labor billings are not excessive and are consistent with the terms of our contract.”
The company “has not been provided with the draft or final copy of the Air Force audit report so we cannot comment or confirm any details” in it, Meudt said in an e-mail.