Labor mischarging on shipbuilding contracts

Brief

The U.S. government alleged that supervisors at a large shipyard were responsible for mischarging labor costs to boost profits on U.S. Navy and U.S. Coast Guard contracts. Covering a period of some 10 years, the allegations under the False Claims Act generated intense political and media scrutiny and posed a potentially serious threat to the business of this very significant government shipbuilder. HKA was commissioned to investigate the allegations, identify the scope of the overbilling, and quantify the excessive costs charged to the shipbuilder’s clients.

What we did

HKA rapidly assembled and deployed a team of more than 20 consultants with the appropriate blend of expertise in finance and forensic accounting, plus relevant experience in the shipbuilding industry and government contracting. In addition to analyzing terabytes of data, we also performed the following:

• Interviewed the shipbuilder’s personnel to develop a detailed understanding of its timekeeping and earned value management systems
• Assisted in interviewing suspected perpetrators
• Analyzed trends in time charging and developed methodologies for identifying fraudulent labor records
• Examined more than 100 million labor records over multiple years
• Compared hard-copy timesheets to electronic labor records to identify discrepancies
• Identified false progress reports and misallocation of labor costs from one contract to another
• Estimated the impact on individual contracts of labor mischarging
• Liaised with multiple government agencies (including the Navy, Coast Guard, Defense Contract Audit Agency, Defense Criminal Investigative Service, and Naval Crime Investigation Service) to present and explain our findings and methods
• Prepared evidence detailing suspected mischarging
• Assisted with compliance measures to improve recording practices

Outcomes

Our investigation ultimately revealed that the mischarging was perpetrated by several bad actors during specific time periods, rather than systemic. The ability to mobilize a thorough large-scale investigation promptly and efficiently was crucial, while the rigor of our analysis and the clarity of the findings we reported were favorably received by the government agencies.