Lockheed Wins the Long Running Case Against Nyle HooperLegal Compliance Resource
April 15, 2014 — 1,515 views
There have been many cases when organizations have deliberately underbid on projects to win government contracts. These contractors put forward exceedingly low bids for some projects, clearly knowing that in the end, the contract will cost a lot more to the government. The practice of underbidding is normally followed because these contractors feel that they can get access to a profitable market-space that will lead to higher revenue generation for the company.
However, underbidding which is also known as 'buying in' is a clear violation of the False Claims Act or FCA under the US Court of Appeals for the Ninth Circuit. Nevertheless, in case of Hooper vs Lockheed Martin the jury gave the judgment in favor of Lockheed Martin who was accused of underbidding.
The Hooper v. Lockheed Martin Corp which was filed in 2005 pertains to the accusation made by a former Lockheed employee Nyle Hooper. According to Hooper, the company deceitfully underbid an Air Force contract. The contract involved the supply of software and hardware for the space launch systems at Vandenberg and Cape Kennedy Air Force bases. Lockheed put forward a bid which was valued at $432 million but eventually, the government ended up paying $900 million. Mr. Hooper accused Lockheed of dishonestly underbidding the contract, so as to induce the government to grant the contract to Lockheed.
In such a contract, an organization is not compensated with a fixed price. Instead, they are refunded for real costs and also obtain grant fees based on their execution. For example, if the contractor completes the project way before the schedule, this would, more often than not, warrant a performance award fee.
In the trial, Lockheed was able to convince the jury by saying that there was no evidence whatsoever of the company holding its bid for the contract. Lockheed repeated the same point in their concluding argument clearly stating that there was hardly any indication of Lockheed making a “genuine estimate” while giving an “untrue estimate” to the government. Lockheed’s statements was good enough for the jury and it gave the judgment in favor of Lockheed with respect to the dishonorable underbidding claim along with Mr. Hooper’s retributive discharge claim.
This judgment now clearly indicates that the False Claims Act liability can develop even when the so-called fraud is founded on an estimate.