Contractor duels with Air Force over accusations of wrongdoing

Science Applications International Corp., a contractor specializing in information technology, is fighting back against an alert issued against the company by the Air Force late last year.

The Dec. 20 alert, which was sent to Air Force contracting officials, said the San Diego company violated the Truth in Negotiations Act, known as TINA, which requires government contractors to provide accurate pricing information to their federal clients.

SAIC said that the alert contained incorrect information. "The alert mischaracterizes the facts, issues and status of the case and unfairly impugns SAIC's ethics. SAIC vehemently disagrees with the content of the alert and is taking all appropriate actions to respond," the company said in a statement.

Being convicted of a TINA violation, or even just being associated with a violation, could translate into large dollar losses for the company, which gets about 90 percent of its revenues from the federal government.

"Most companies, when they're hit with this, work very closely with the government to resolve the issue," said Chip Mather, co-founder of Acquisition Solutions Inc. of Oakton, Va., which consults with federal agencies on acquisition issues. He said it was highly unusual for an agency to issue an alert against a company.

If a company is convicted of violating TINA, it can be disbarred or suspended, which means they can't get any new contracts with the government, said Mather.

While Air Force's alert did not explicitly prohibit contracting officers from dealing with SAIC, the company was concerned that it would make contracting officers less willing to work with the firm.

SAIC senior vice president Douglas Scott wrote a letter to the Air Force Dec. 22 asking it to clarify, "either by withdrawing the alert in its entirety or by issuing an amended version."

The letter said that some Air Force employees interpreted the alert as "a statement that SAIC has already been convicted of violating the False Claims Act and the Truth in Negotiations Act and is therefore ineligible to do business with the Air Force."

The letter said that while there is a pending False Claims Act case against SAIC, it has not yet gone to court. The case involves an environmental services contract at Kelly Air Force Base in San Antonio that began in 1995.

"The allegations in the complaint are nothing more than unsubstantiated allegations, which SAIC believes to be factually incorrect and legally unfounded," the letter states.

It continues, "By presenting such assertions to our Air Force customers in an inaccurate and conclusory fashion, the alert effectively 'convicts' SAIC without the benefit of a fair hearing and unjustifiably impairs our reputation and business interests."

The statement issued by the company said that while it does not usually comment on pending legal matters, "this is an unusual matter, however, in that we were compelled to respond to the Air Force's alert."

The complaint, filed Sept. 7, 2004 in the U.S. District Court in the Western District of Texas, accuses SAIC of violating the False Claims Act "based on false claims for payment, and false statements to get false claims paid and approved." It says the Air Force agreed to pay SAIC a profit of 8 percent to 10 percent on eight delivery orders, but that SAIC actually collected a profit of 27 percent, which amounted to $6.5 million, as a result of false cost and pricing data.

The complaint describes handwritten notes scribbled in the margins of a cost spreadsheet, which the plaintiff said represents the actual cost estimates that were not shown to Air Force contracting officials.

The judge denied SAIC's request for dismissal on Feb. 2.

The Air Force referred all inquiries to the Justice Department. A Justice Department spokesman said the agency doesn't comment on pending cases.