Navy Officials Paid for Northrop Golf Outing, Air Shows Travel, Audit Says

Northrop Grumman Corp. was paid at least $206,000 by Navy contracts officials for “questionable” travel billings to a golf outing and international air shows, according to an audit by the Pentagon’s inspector general.

While Northrop Grumman subsequently reduced its billings by that amount after inquiries by the inspector general, “there is a potential for additional unallowable expenses charged” by the contractor, according to the Dec. 23 audit report.

The billing and payment of travel to a golf outing and to air shows in Paris and Singapore are emblematic of “serious problems with the overall management” of a $1.8 billion contract to develop the Navy’s first high-altitude drone for long-range surveillance, the report said. The development contract is the first part of a potential $19 billion program for 68 aircraft.

Altogether, Navy contracting officials didn’t thoroughly review or validate 39 bills to ensure Northrop Grumman was entitled to $329.3 million in payments so far, and haven’t made sure the contractor has an adequate inventory system to safeguard millions of dollars in government-furnished equipment, according to the audit report.

“As a result, the program is at risk for increased costs, schedule delays and not meeting the needs of the warfighter,” it said.

“Northrop Grumman is aware of the audit report and is working with the Naval Air Systems Command to fully understand its recommendations and potential changes to the program,” Randy Belote, a company spokesman, said in an e-mail. Belote didn’t comment specifically on the challenged travel vouchers.

More Drones

Defense Secretary Robert Gates has pressed the military to make greater use of drones. The Pentagon’s aviation plan calls for increasing -- to more than 800 by 2020, from 220 today --the number of high-altitude drones like the new one from Northrop.

Los Angeles-based Northrop Grumman in 2008 beat out Boeing Co. of Chicago, and Lockheed Martin Corp. of Bethesda, Maryland, for the $1.8 billion contract to develop and build the first two demonstration aircraft in the Navy program. Northrop will also build an additional three advanced models.

The aircraft has been flying over the Persian Gulf region since February 2009 on experimental patrols.

Navy officials have said they are satisfied with the drone’s performance so far.

Still, the Naval Air Systems Command contract officials for the Broad Area Maritime Surveillance program “did not properly perform all their assigned duties, comply with federal and Pentagon policies or complete required training,” said the audit, signed by Richard Jolliffe, assistant inspector general for acquisition and contract management.

Review Recommended

The inspector general recommended an “administrative review” by the Navy for potential disciplinary actions against contract officials.

In a written response to the report, Diane Balderson, the Naval Air Systems assistant commander for contracts, rejected the recommendation for an inquiry, saying the officials have been reviewed during annual and semi-annual appraisals.

“Based on these reviews, there have been no actions identified that would warrant further review,” Balderson wrote.

Jolliffe asked Balderson to reconsider because “our report discloses serious problems with overall management” that were not known during the most recent personnel appraisals of the officials.

‘Best Value’

Naval Air Systems spokesman Victor Chen said in an e-mail that Navy officials will work with the Pentagon’s Defense Contract Audit Agency and Defense Contract Management Agency “on an ongoing basis to ensure program objectives are met, ensure billing accuracy and taxpayers receive best value for their funds.”

Pentagon auditors identified 17 “unallowable” vouchers, eight of which were submitted by one unnamed Northrop Grumman official at its Bethpage, New York, Aerospace Systems facility.

Northrop so far reduced its billings by $206,000 to reflect the unallowable payments, said the audit.

Still,“a Northrop Grumman official said that they did not review all travel vouchers or any other charge related to the contract,” said the audit. “Therefore, there is potential for additional unallowable expenses charged and paid” to Northrop Grumman.

The audit recommended the Navy increase scrutiny of Northrop Grumman travel vouchers.

To contact the reporter on this story: Anthony Capaccio in Washington at acapaccio@bloomberg.net;

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net

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