Product Substitution

In 2012, the U.S. government spent $778.57 billion on national defense. It should come as no surprise that the Department of Defense (“DOD”), which is the world’s largest employer and responsible for coordinating and supervising all agencies concerned with national security and the U.S. Armed Forces, demands that its products meet high levels of safety and performance. To that end, defense contracts often require the contractor to use products or parts of a certain quality or condition (i.e. new, used, or refurbished), or that are produced in the United States.

Since DOD orders vast amounts of supplies and weaponry, it cannot reasonably perform a quality check on each and every item. Therefore the DOD heavily relies upon defense contractors to provide equipment and products as promised in a contract. Defense contractors may seek to increase profits by substituting inferior or older products, or foreign-made goods. If a defense contractor fraudulently certifies to the government that these specifications are met, it may be liable under the FCA.

Example

Thomas M. Greene filed a whistleblower lawsuit against GTE Government Systems Corporation and Marconi Corporation for violations of the False Claims Act by selling defective radios to the U.S. Army during Operation Desert Storm. In 1995, these companies agreed to settle with the government for $3.2 million, and to separately pay for the retesting and repair of the defective radios. In 1985, GTE was awarded a government contract to manufacture field communications equipment related to the U.S. Army’s non-development production Mobile Subscriber Equipment (“MSE”) program. In 1986, Marconi entered into a subcontract with GTE to supply radios as part of the MSE communication system. The relator had disclosed to the government in the lawsuit that after conducting internal testing in 1990, he discovered that many of the 2,500 radios delivered to the U.S. Army failed to properly perform in the hot weather climate of the Middle East. The army was not made aware that much of the equipment it purchased was faulty. For his efforts, the relator was awarded $1.8 million.

Example

In November of 2009, the federal government filed a complaint under the FCA against Kaman Dayron Inc., alleging that the company improperly substituted non-conforming parts while constructing hard target penetration warheads or “bunker busters.” The complaint alleged that the company used non-conforming bellows motors which could cause the fuses to fire prematurely, creating a major safety risk for the United States military.

Example

In 2012, ATK Launch Systems Inc. agreed to pay $36.9 million to resolve allegations that it sold dangerous and defective illumination flares to the U.S. Army and U.S. Air Force from 2000 to 2006. The products in question, LUU-2 and LUU-19 illuminating para-flares, burn in excess of 3,000 degrees for over five minutes and are used for nighttime combat and covert and search and rescue operations. The government alleged that ATK’s flares exploded or igniting after sustaining a drop of only ten feet, and that ATK was aware of this dangerous defect. The government has committed to aggressively pursue contractors who recklessly endanger our men and women in uniform.

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