Northrop Grumman settles overbilling claim for $60 million

Northrop Grumman will pay the government $60 million to settle claims that one of its shipbuilding subsidiaries overcharged the Navy tens of million of dollars.

The Justice Department sued the defense contractor in February, claiming its subsidiary, Newport News Shipbuilding, had overbilled the Navy $72 million on shipbuilding contracts in the 1990s.

The settlement stemmed from an investigation into allegations that Newport News Shipbuilding, which Northrop Grumman purchased in 2001, had "falsely and fraudulently mischarged and claimed costs as 'independent research and development' on government contracts," the Defense Department said in an official statement. Federal procurement rules only allow for the payment of independent research and development costs if the work falls outside the scope of the contract.

Northrop Grumman, in a prepared statement, denied any liability and said it only agreed to settle the case to allow its managers "to focus on the ongoing business operations."

The investigation, led by the Defense Criminal Investigative Service, covered contracts Newport News Shipbuilding held from 1994 to 1999 to design and develop double-hulled tankers for the Navy. An audit by the Defense Contract Audit Agency first raised questions about whether certain charges under those contracts were permissible.

The audit led to the lawsuit, which charged that the shipbuilder had violated the 1863 False Claims Act, passed during the Civil War to combat fraud by suppliers to the Union army.