Northrop Grumman Pays $5.2 Million for Fraudulent USPS Contract Labor Billing

Northrop Grumman Systems Corporation agreed to pay $5.2 million to resolve False Claims Act allegations that it fraudulently billed the United States Postal Service for personnel who lacked the required education and experience qualifications specified in their contract labor categories. The settlement resolved government allegations that NGSC knowingly charged for certain personnel working under the Enterprise Technology Support (ETS) Contract using inflated labor categories for which those workers did not possess the credentials, education, or experience required, systematically overbilling the Postal Service for lower-skilled labor presented as senior technical expertise.

The fraud scheme involved misrepresenting employee qualifications to bill at higher labor rates, a common form of government contract fraud that exploits the complexity of cost-plus contracts and the difficulty of verifying contractor representations about personnel credentials. Under typical government contracts, labor categories are priced based on required education levels, years of experience, and technical certifications, with senior engineers and architects commanding rates of $150-250 per hour while junior technicians might bill at $75-100 per hour. By billing for personnel in categories they did not qualify for, Northrop Grumman extracted premium payments for labor that should have been charged at much lower rates, pocketing the difference as illegitimate profit.

The case was handled by the Civil Division’s Commercial Litigation Branch, the USPS Office of the Inspector General, and the USPS Office of General Counsel, demonstrating cross-agency coordination required to detect and prosecute contractor fraud against civilian government agencies. The USPS Inspector General’s involvement highlights how defense contractors like Northrop Grumman extend their fraudulent billing practices beyond Pentagon contracts to exploit civilian agency procurement systems that often have even weaker oversight mechanisms than military contract monitoring.

This $5.2 million settlement represents Northrop Grumman’s second major fraud settlement within six months, following the November 2018 agreement to pay $31.65 million for overbilling the Air Force on battlefield communications contracts. The pattern of repeated fraud settlements demonstrates systematic contractor abuse rather than isolated incidents, revealing a corporate culture where fraudulent billing is an accepted business practice rather than a compliance failure. The consistent pattern across multiple contracts and agencies suggests that Northrop Grumman’s fraud is not the result of a few rogue employees but reflects institutional practices enabled by inadequate oversight, weak penalties, and a cost-plus contracting system that rewards inflated billing.

As with most defense contractor fraud settlements, Northrop Grumman did not admit wrongdoing despite paying $5.2 million to resolve the allegations, and no executives or managers faced criminal prosecution for the systematic misrepresentation of employee qualifications. The absence of personal accountability ensures that corporate leadership faces no deterrent against future fraud, as settlements are paid from corporate funds while executives continue to receive bonuses and stock compensation. The $5.2 million penalty represents a tiny fraction of Northrop Grumman’s annual revenue and likely a small percentage of the total overbilling across all contracts during the fraud period, making the settlement a profitable outcome compared to the cost of implementing genuine compliance systems and accurate billing practices.