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Failure to Comply with Contract Specifications

Because reliability is critical with expensive and lethal weapons systems, the Defense Department requires its contractors to build those systems in accordance with very detailed product specifications. These specifications dictate not only the type of materials to be used for the contract, but other requirements such as the appropriate quality assurance steps that the company must follow to ensure the quality of the product. Although the burdens imposed by the specifications are costly, the government covers those costs as part of the contractor's payment.

If a company starts to overrun its budget on a contract, particularly a fixed‑price contract, or falls behind in its delivery schedule, it may be tempted to cut corners by omitting required testing, quality procedures or other steps in the production process.

Teledyne Relays paid the federal government $88 million to settle a qui tam lawsuit brought by Phillips & Cohen attorneys that alleged the company failed to properly test the reliability of electronic switches known as "relays" that it sold to the government. Those parts were used in the space shuttle, military satellites and in a wide array of sophisticated weapons systems including the Nike nuclear missile and the Patriot missile.

In a separate whistleblower case brought by Phillips & Cohen, Hughes Aircraft Company paid $4 million to settle charges that the company routinely lied about conducting important quality assurance tests of certain components used in missiles, fighter planes and other military systems.

P&C