Lockheed Martin and Leidos have allocated liabilities between themselves should the Department of Justice pursue a claim in connection with an ongoing false claims investigation of Mission Support Alliance, the support services contractor at the Hanford Site, according to a quarterly Securities and Exchange Commission filing from Lockheed Martin.
In August 2016, Lockheed completed the separation of its Information Systems & Global Solutions business segment and merged it with a subsidiary of Leidos Holdings.
The July 20 SEC filing said the Department of Justice has issued a number of civil investigation demands to Mission Support Alliance, Lockheed Martin, and the Lockheed Martin subsidiary that performed information technology services for Mission Support Alliance, as well as current and former employees of the businesses. It is continuing a False Claims Act investigation and a parallel criminal investigation, according to the SEC filing.
The Department of Energy said in April 2016 that Mission Support Alliance improperly awarded $63.5 million as profit to a subcontractor with which it shared ties. Lockheed Martin then was a principal owner of Mission Support Alliance, which starting in 2010 subcontracted work to Lockheed Martin Services to provide information technology services at the DOE site in Washington state.
The issue came to light when the Energy Department’s Office of Inspector General issued an audit report last year that said that while the Federal Acquisition Regulation required that all noncommercial goods and services sold or transferred between affiliates not be subject to additional fee or profit, profit appeared to be included in rates charged to Lockheed Martin Services. The audit found that $63.5 million was the difference between reported costs incurred by Lockheed Martin Services and what it was paid.
The Energy Department told auditors that it made clear from the start that the subcontract was not eligible for separate profit payments and that Mission Support Alliance ignored the directive. The matter remains in dispute, with Mission Support Alliance bringing the issue to the federal Civilian Board of Contract Appeals. The board has yet to rule on the matter.
