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Cross Charging

This is one of the most common types of defense procurement fraud. A company may have one contract that is a "fixed‑price" contract, i.e., where the company receives a fixed price for a certain number of weapons no matter how much it costs to produce them. The company also may have another contract that is a "cost‑plus" contract, i.e., where the government pays the company for the cost of making the weapons, plus a percentage of its costs as a profit.

In this circumstance the company has a strong incentive to charge time it spends working on the fixed‑price contract (where it gets paid the same no matter how much time it takes) to the cost‑plus contract (where it gets paid for its costs plus profit). This may be accomplished by instructing employees to write down on their time cards that they worked on the cost‑plus contract when they actually worked on the fixed‑price contract.

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