Business & Real Estate

Sacramento drone maker pays $2 million in Pentagon contract probe

Aerial target drone BQM-167A from Composite Engineering, Inc. The U.S. Air Force uses this type of drones for fighter traning.
Aerial target drone BQM-167A from Composite Engineering, Inc. The U.S. Air Force uses this type of drones for fighter traning.

A Sacramento manufacturer of target-practice drones will pay $2 million to settle charges that it overcharged the Pentagon for spare parts.

Composite Engineering Inc., which makes unmanned aerial targets for the Air Force, agreed to the payment Monday in an out-of-court settlement with the Defense Department. The agreement was announced by U.S. Attorney Benjamin Wagner in Sacramento.

In making the deal, Composite Engineering didn’t admit to any wrongdoing.

The investigation centered on a 2007 contract to supply spare parts for the Air Force’s Subscale Aerial Target program, which consists of 20-foot-long unmanned airplanes used as target practice. Composite Engineering, which has since become a subsidiary of a San Diego company, also makes the airplanes themselves, which can approach the speed of sound.

Under the contract, the Air Force paid Composite Engineering more than $5.6 million for the parts.

According to the settlement agreement, federal officials said Composite Engineering violated the False Claims Act by overcharging for labor and materials, “resulting in a windfall” to the company.

Lauren Horwood, a spokeswoman for the U.S. attorney, said the government believed it was overcharged by nearly $1.6 million. Under the False Claims Act, the company could have been forced to pay triple the disputed amount plus penalties, totaling more than $4.8 million, if the government had won at trial.

The settlement came a month after Composite Engineering won a $72 million Air Force contract to supply additional target drones.

Composite Engineering, founded 30 years ago, was purchased in 2012 by Kratos Defense & Security Solutions Inc. of San Diego for $155 million in cash and stock.

Officials with Kratos couldn’t be reached for comment.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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