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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of New York

FOR IMMEDIATE RELEASE
Thursday, January 12, 2017

SRCTec, LLC To Pay Over $6.3 Million To Resolve False Claims Act Allegations

SRCTec will pay $2,127,221.15 in cash and provide $4,256,586.15 in-kind equipment at no charge to the Army. Company has separately agreed to perform a remediation of affected parts at its own expense.

SYRACUSE, NEW YORK - SRCTec, which manufactures a lightweight counter mortar radar system (the “radar system”) and associated replacement parts pursuant to contracts with the Department of the Army, will pay over $6.3 million in consideration to resolve False Claims Act allegations concerning its invoicing for the radar system and spare parts, announced United States Attorney Richard S. Hartunian. SRCTec has separately agreed to a remediation plan, to be performed at its own expense, with respect to previously delivered products.

 

The radar system serves an important function for America’s warfighters by providing early warning of incoming mortar and rocket fire and information about the location from which that fire emanated (“source-of-fire”). This source-of-fire data enables a targeted counter-fire response. The radar system provides continuous 360-degree monitoring and source-of-fire data through a non-rotating 24-column array. Among other replacement parts, SRCTec produces column spares for use when a column for the radar system fails or is damaged or destroyed. Pursuant to SRCTec’s contract with the Army, “initial spares and ancillary items shall be form, fit and functionally interchangeable with the parts they are intended to replace.”

 

SRCTec became aware of anomalies in source-of-fire accuracy data in certain combinations of initial system columns and column spares in March 2013. At that time, SRCTec summarized the issues in a Problem Report uploaded to a database shared by SRCTec and the Army. SRCTec designated the Problem Report at a priority level that indicated that a work-around existed for the identified problem. Higher level priority designations were available but were not selected, although SRCTec did not know in March 2013 what caused the anomalies or have a solution that would eliminate them. Problem Reports at the priority level selected by SRCTec are part of the normal life cycle of the program, and problem reporting is not the exclusive method (under the applicable contracts or otherwise) for SRCTec to notify the Army of issues with the radar system.

 

Over the ensuing months after March 2013, SRCTec learned more about the circumstances in which the source-of-fire accuracy anomalies would manifest themselves and how they might be mitigated in the field. By August 2013, SRCTec described an increased risk of degraded source-of-fire accuracy as a “known” problem in an internal memorandum that was not shared with the Army. SRCTec did set forth certain additional material details concerning degraded source-of-fire accuracy in various additional Problem Reports also uploaded to the shared database, all of which were designated at the same priority level as the initial Problem Report, although SRCTec had not actually identified a work-around through at least the summer of 2013. A potential solution was eventually identified by SRCTec in March 2014, and in the fall of 2014 SRCTec began testing what would become the solution for newly manufactured systems and column spares.

 

In March 2015, SRCTec requested a meeting with the Army, which was held in April 2015. At the meeting, SRCTec disclosed how it learned of and ultimately solved the increased risk of degraded source-of-fire accuracy from the use of column spares and original system columns in certain combinations, explained the circumstances under which the increased risk was such that source-of-fire accuracy could potentially fall outside the required accuracy performance specification, explained how the increased risk of degraded source-of-fire accuracy could be mitigated, and advised that the systems’ ability to perform their sense and warn function was never impacted. Since April 2015, the Army has ensured that all fielded systems are operating without any increased risk of degraded source-of-fire accuracy, and all fielded systems are currently functioning within their source-of-fire performance parameters. There have been no reported field failures.

 

During the time period covered by the Settlement Agreement, SRCTec invoiced the Army for radar systems and column spares (which were verified as operable by the Army) at a cost of tens of millions of dollars. The increased risk of degraded source-of-fire accuracy from the use of column spares in certain combinations with original system columns would not have been identified by the fielded systems’ self-diagnostic testing nor necessarily been recognized by soldiers.

 

United States Attorney Hartunian said: “Our office is committed to ensuring that federal programs receive products that perform as paid for, and we pursue False Claims Act claims vigorously. The stakes are particularly high when the procurement involves protection for our nation’s warfighters. This settlement reflects the importance of the case, the fine work of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit and the Defense Criminal Investigative Service, and SRCTec’s disclosure of the problem and cooperation in addressing it.”

 

“The ability of our equipment to function as required is essential when it comes to purchase of equipment that protects the very lives and limbs of one of our most precious resources - our military members,” said Frank Robey, director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.

 

“This settlement demonstrates the continued commitment of the Defense Criminal Investigative Service (DCIS), partnering with Army CID, Major Procurement Fraud Unit, and the United States Attorney’s Office in the Northern District of New York, to protect the military services and its members from potential failures of warfighting systems,” said Special Agent in Charge Craig W. Rupert, DCIS Northeast Field Office, U.S. Department of Defense Inspector General. “DCIS will continue to tirelessly pursue cases like this in its mission to protect the warfighter and safeguard our national defense.”

 

The investigation and settlement were the result of a coordinated effort among the United States Attorney’s Office for the Northern District of New York, the United States Army Criminal Investigation Command, and the Defense Criminal Investigative Service. The United States was represented by Assistant U.S. Attorney Michael D. Gadarian.

Updated January 12, 2017