Sikorsky and Lockheed Martin pay $70 million to settle accusations of overcharging Navy

Stratford-based Sikorsky Support Services Inc. (SSSI), and Dreco Aerospace, both wholly owned subsidiaries of Lockheed-Martin, agreed to pay  $70 million to settle allegations of overcharging spare parts and materials used on aircraft used to train Naval aviators.

SSSI is a division of the helicopter manufacturer Sikorsky, in turn owned by defense industry giant Lockheed Martin. Sikorsky produces a number of aircraft for the US military  including the UH-60 Blackhawk and its variants.

The companies are both accused of having engaged in overinflation of the cost of supplied parts, entering into an illegal contract where Sikorsky agreed to buy parts from Dreco at cost plus a fixed 32 percent markup which would then be passed along to the Navy. These cost-plus-percentage of cost (CPPC) agreements are illegal for government contractors since they incentivize increasing costs to the government.

“Government contractors must ensure their subcontracting arrangements comply with the law and with their contractual obligations,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates that the Justice Department will ensure that government contractors do not skirt the law and engage in self-dealing that may artificially inflate their charges at the expense of the American taxpayers.”