Law360, New York (August 26, 2014, 2:56 PM ET) — A whistleblower shot back Monday at Northrop Grumman’s motion to dismiss a federal False Claims Act suit, saying the case contains genuine issues of fact and strong evidence that the company failed to meet benchmarks in delivering mail-sorting machines worth $874 million to the U.S. Postal Service.

Former Northrop employee Beau Michaud, suing in Virginia federal court on behalf of himself and the federal government, said the company knew it would experience delivery delays following multiple design changes, but lied about it.

Whistleblower Says Northrop Knew It Would Miss USPS Order – Law360.

According to court documents:

Northrop Grumman suggests that irrefutable facts show that it could not have known of any delay in the program prior to the award of the Production Contract.  This suggestion ignores testimony for Northrop Grumman’s program manager stating that it knew of delays before award of the Production Contract but disclosed those delays to the USPS. One of these statements logically must be false.

Northrop Grumman stood to make zero profit, and potentially lose not only a chance at the largest postal contract it had ever seen, but also a substantial amount of money that it spent on the FSS project during the first two phases. Thus, it was critical that Northrop Grumman convince the USPS to award the Production Contract. As demonstrated herein, Northrop Grumman made fraudulent misrepresentations and omissions, including assuring the USPS that it could meet the 95% availability requirement on time, in order to induce the USPS to award the Production Contract. Northrop Grumman knew that it would experience schedule delays, and at the very least had a reckless disregard for its actual ability to meet contractual requirements. The USPS’s contracting officer explained that the USPS awarded the Production Contract based on Northrop Grumman’s representations. Northrop Grumman’s false and fraudulent conduct directly violates the FCA. When viewed in the light most favorable to the Plaintiff, the evidence in the record supports a fraudulent inducement claim under the FCA and demonstrates material issues of fact that are in dispute.

Northrop Grumman’s suggestion that uncontroverted facts completely debunk Count I of the TAC ignores and manipulates the record. Evidence shows that Northrop Grumman made false and fraudulent statements concerning its ability to meet the performance and schedule requirements of the Production Contract, its ability to develop the software necessary to facilitate the FSS machine, and the status of the Preproduction Contract. Likewise, the record shows that Northrop Grumman knew its representations were fraudulent and that those material misrepresentations caused the USPS to award the Production Contract. At a minimum, there are substantial material facts in dispute; thus, Northrop Grumman’s Motion for Summary Judgment with respect to Count I is due to be denied.

Northrop Grumman made multiple fraudulent misrepresentations and omissions for the purpose of securing the Production Contract from the USPS. Despite redesigning the FSS machine and greatly increasing the complexity of the software, Northrop Grumman assured the USPS that it would be able to meet the performance and schedule requirements of the Production Contract.  Fully aware of these developmental and technical challenges, Northrop Grumman proposed and ultimately agreed to contractual commitments that it knew it would be unable to keep. Exhibit 26 at 35. By misrepresenting its ability to develop an FSS that facilitates second pass automation and meets schedule and performance requirements, Northrop Grumman fraudulently induced the USPS to award the Production Contract.

The USPS manager of the automation division, Mark Guilfoil, testified that “at the time of, and prior to, the award of the production contract to Northrop Grumman no one at Northrop Grumman identified risks concerning ITC performance.” Guilfoil further indicated that at the time of the Production Contract award, and prior to, Northrop Grumman did not identify or make the USPS aware of risk as it related to second pass automation. Id. Moreover, in a management proposal submitted to the USPS, Northrop Grumman expressly identifies the Production Program as “low risk.” To the extent that Northrop Grumman vaguely identified any risk in the program, it continually assured the USPS that it could mitigate any risks and meet the requirements of the Production Contract. Id. Northrop Grumman fails to address its repeated assurances to the USPS that it was capable of mitigating the risks.

The negotiation memorandum on which Northrop Grumman substantially relies is hardly as clean cut as Northrop Grumman attempts to imply. Northrop Grumman suggests that eight words included in a negotiation memorandum provide uncontroverted evidence that it fully and truthfully disclosed all risks associated with second pass automation. Def.’s Mem. at 26. The argument that a few words exemplify full disclosure holds no water, especially in light of evidence to the contrary. Moreover, Northrop Grumman takes the negotiation memorandum out of context as Guilfoil explained that this statement in the memorandum primarily dealt with Northrop Grumman’s attempt to justify the highest price possible for the Production Contract, as opposed to a warning about Northrop Grumman’s capability to mature the process. Exhibit 1 at 107. The Negotiation Memorandum also shows that in Northrop Grumman’s initial proposals, it assured the USPS that it would meet Statement of Work detail about how, when, and what tasks would be performed to deliver the requirements. Def.’s Mem. at Exhibit 17. Rather than focusing on whether it was actually capable of delivering a system that met requirements, Northrop Grumman’s myopic focus was getting the contract signed by the USPS.