Lockheed Martin to Pay $29.74 Million Over Alleged Overpricing on F-35 Contracts

Key Takeaways

• Lockheed Martin’s Settlement: Lockheed Martin has agreed to pay $29.74 million to settle allegations of inflating pricing on F-35 contracts, adding to a previous reimbursement of $11.3 million for similar violations.
• Violation of the Truth in Negotiations Act (TINA): The allegations stem from claims that Lockheed Martin withheld accurate cost and pricing data from the Department of Defense’s F-35 Joint Program Office between 2013 and 2015, violating TINA and leading to inflated contract costs.
• Government Scrutiny and Accountability: Federal agencies, including the Defense Criminal Investigative Service (DCIS) and the Naval Criminal Investigative Service (NCIS), have been involved in the investigation, emphasizing the need for transparency and fair pricing in government contracting.
• Whistleblower Involvement: Patrick Girard, a whistleblower, played a key role in exposing the pricing violations under the False Claims Act, and he is entitled to a share of the settlement proceeds.

Deep Dive

Lockheed Martin, the defense giant behind the F-35 fighter jet, has agreed to pay $29.74 million to settle allegations of inflating pricing on key contracts, marking another chapter in the ongoing scrutiny of government contracting. The payment comes on top of a prior reimbursement of $11.3 million to the Department of Defense (DOD) for similar violations involving undisclosed cost and pricing data.

These allegations date back to contracts awarded between 2013 and 2015. The core issue centers around claims that Lockheed Martin withheld accurate cost and pricing data from the DOD’s F-35 Joint Program Office (JPO), violating the Truth in Negotiations Act (TINA). Enacted in 1962, TINA was designed to ensure transparency and fairness in government contracting—especially when competitive pricing isn't available, as in sole-source contracts like those involving the F-35.

Inflating Costs on a Vital Defense Project

Court documents suggest that Lockheed Martin didn’t disclose critical cost and pricing data from its suppliers during negotiations for five contracts related to the F-35’s production and sustainment. If the government had received the correct data, it could have driven down contract prices, potentially saving taxpayers millions. This breach of trust is no small matter—it's a clear violation of the principle that those working with taxpayer money must be transparent and fair.

Acting Assistant Attorney General Brett A. Shumate didn’t mince words, stating, "Those who do business with the government must do so fairly and honestly. We will pursue contractors that knowingly misuse taxpayer funds." Abe McGlothin, Jr., Acting U.S. Attorney for the Eastern District of Texas, echoed this, emphasizing that the government depends on contractors to provide accurate pricing data to ensure fair negotiations.

F-35 Program Faces Extra Scrutiny

The F-35 Joint Program Office, tasked with overseeing the fighter jet program, has made it clear that integrity in business transactions is non-negotiable. Air Force Lt. Gen. Mike Schmidt, leading the JPO, stated, "We demand 100% accountability for every dollar spent on this program on behalf of U.S. taxpayers and international customers."

This case wasn’t pursued in a vacuum, however. Multiple federal agencies, including the Defense Criminal Investigative Service (DCIS) and the Naval Criminal Investigative Service (NCIS), have been involved in the investigation. DCIS Principal Deputy Director James R. Ives made it clear that the agency will continue to target TINA violations and fraudulent practices to protect taxpayer money. NCIS Special Agent in Charge Greg Gross added that inflating defense costs not only drains public funds but also poses a risk to operational readiness—an especially pertinent issue given the F-35's role in U.S. military operations.

Whistleblower Drives the Case

A significant player in this case is Patrick Girard, a whistleblower who filed the lawsuit under the False Claims Act’s qui tam provisions. Whistleblowers like Girard are entitled to a portion of any funds recovered, though his share of the settlement is still under review.

Although Lockheed Martin settled the case without admitting guilt, the fallout from this episode reinforces the government’s commitment to oversight—particularly in high-profile defense programs like the F-35. The settlement doesn’t affect Lockheed Martin’s existing contracts with the U.S. military, but it does bring the effectiveness of compliance programs within major defense companies into sharper focus.

As defense procurement comes under ever-greater scrutiny, contractors are expected to meet rigorous standards for financial integrity. For Lockheed Martin, a long-established name in defense, this settlement is a costly reminder of the reputational and financial risks that come with failing to comply with pricing disclosure laws.

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