The Navy gave Northrop Grumman as much as $300,000 in profit for filling out $3 million worth of travel expense forms–and some of those expenses should have never been approved, says the Defense Department inspector general.
In a Dec. 23 report on the Navy’s $1.8 billion Broad Area Maritime Surveillance system development and demonstration cost plus contract, auditors find that Northrop Grumman submitted at least $206,000 worth of travel vouchers for trips to golf outings and air shows in Washington, D.C., Paris and Singapore. While the Defense Department recovered that money from Northrop Grumman, a company official told auditors that they have not reviewed all travel vouchers or other charges related to the BAMS contract.
“There is a potential for additional unallowable expenses charged and paid to the BAMS contractor,” the report warns. BAMS is a unmanned aircraft system based on the Global Hawk meant to perform persistent intelligence, surveillance and reconnaissance within a range of 2,000 nautical miles. Naval Air Systems Command awarded in April 2008 Northrop a BAMS development contract with a fixed base award fee of 3 percent with an additional 7 percent award fee tied to performance. A “fee” is often how the government dubs “profit.”
Although legitimate travel is an allowable cost under cost plus contracts, auditors say they question giving contractors any fee at all tied to travel expenses, since “it is difficult to evaluate the contractor’s performance on travel.” But in the case of Northrop’s BAMS travel vouchers, the performance was arguably bad enough to preclude it from receiving any award fee, the report says. NAVAIR officials told auditors they’ll consider making travel just a cost reimbursement line item in future procurements.
The report also faults Navy personnel for not reviewing Northrop Grumman bills or going through the government acceptance process before issuing payment. Invoices from the company didn’t itemize amounts billed by labor hour, materials and other costs. For example, one invoice for $22.6 million simply stated that it was a bill for a “cost plus item” and that the unit of measure was “each” with a quantity of “one.”
For more: download the report, D-2011-028 (.pdf)
— Jan. 3, 2010, posted at www.fiercegovernmentit.com