The Fifth Circuit Court of Appeals has revived the federal government’s False Claims Act case against Bollinger Shipyards, Inc. (“Bollinger”) in connection with a contract under which Bollinger was to modify eight vessels owned by the United States Coast Guard (“Coast Guard”). The $78 million in modifications ultimately rendered the vessels unseaworthy because Bollinger allegedly fraudulently miscalculated the hulls’ resistance to bending. The company had allegedly run three different calculations with false inputs and submitted the highest one to the Coast Guard. Bollinger also allegedly declined outside review of the calculations that it had made into preserving the integrity of the ships because of concerns that the review would reveal problems. Bollinger Shipyards specializes in new construction, steel fabrication, vessel repair, and conversion of a wide variety of Coast Guard and military vessels and commercial offshore and inland vessels. The company currently operates ten shipyards, all of which are located throughout South Louisiana and Texas.
In 1999, the Coast Guard began a program called Deepwater to upgrade or replace its aging fleet of vessels, aircraft, and electronics systems. One of the contractors competing for the project was Integrated Coast Guard Ship Systems (“ICGS”). ICGS’s proposal included converting existing 110-foot Coast Guard patrol boats into 123-foot patrol boats to extend the service life of the boats by adding a 13-foot extension to the hulls, among other changes. Under this proposal, the conversion of the 110-foot boats would be subcontracted to Bollinger, which had originally built the boats. In September 2000, the Coast Guard expressed concerns to Bollinger about the feasibility of converting the vessels and questioned whether the hulls of the converted vessels would have adequate structural integrity. In response, Bollinger prepared a longitudinal strength analysis describing the modified boats’ projected “section modulus,” a measure of longitudinal strength. Bollinger reached this calculated section modulus by allegedly inputting a thicker hull plating than existed in the 110-foot boats.
Bollinger advised the Coast Guard that the minimum section modulus required by the American Bureau of Shipping (“ABS”), an independent organization that develops standards for shipbuilding, was 3,113 cubic inches, and the calculated section modulus for the proposed modified boats would be 7,152. Bollinger did not, however, advise the Coast Guard that it used a thicker hull plating in making its calculations, and its proposal did not include a provision for replacing or thickening the hull in the boats. In August of 2001, Bollinger was notified that the Coast Guard would require the company to certify compliance with ABS structural standards In June 2002, the Coast Guard selected ICGS as the contractor for the Deepwater program and entered into a contract with ICGS. The contract required ICGS and its subcontractors, including Bollinger, to provide the Coast Guard with a “CDRL S012-11,” a Hull and Load Strength Analysis, to verify that the 123-foot boat design met the program and contract requirements. The contract also required Bollinger to obtain ABS certification of compliance with ABS structural standards.
In August 2002, the Coast Guard issued the first of four delivery task orders under the contract for the design and modification of the 123-foot patrol boats. At that time, Bollinger found that the actual section modulus, without an increase in hull plating thickness, was less than the 7,152 cubic inches it had initially reported to the Coast Guard. In September, Bollinger submitted a section modulus of 5,232 cubic inches and certified that the section modulus met ABS requirements. In October 2002, Bollinger met with Coast Guard officials during a Preliminary Design Review meeting. To address the Coast Guard’s concerns regarding the validity of the 5,232 cubic inch section modulus calculation in light of Bollinger’s original calculation of 7,152, Bollinger told the Coast Guard that it would have ABS review the calculation and the vessels’ longitudinal strength. Subsequently, during a Critical Design Review meeting with the Coast Guard in December, Bollinger maintained that it had engaged ABS to review compliance with ABS standards. ABS, however, allegedly never reviewed the section modulus calculation.
In March 2004, the first 123-foot boat, the Matagorda, was delivered to and accepted by the Coast Guard. In September 2004, it was discovered that the Matagorda had suffered a structural casualty, including buckling of the hull. An investigation by the Coast Guard and a recalculation of the section modulus by Bollinger revealed that the true section modulus of the completed ship was 2,615 cubic inches, well below the ABS minimum of 3,113 cubic inches required by the contract and also below any figure Bollinger reported to the Coast Guard prior to delivery. Before the Coast Guard realized that the section modulus number was incorrect, it had accepted delivery of four modified patrol boats. For the remaining four vessels, the Coast Guard and ICGS pursued structural modifications to increase the section modulus, and made two structural modifications to the vessels. In reliance on the feasibility of these modifications, the Coast Guard accepted delivery. In the end, the structural modifications proved inadequate and the Coast Guard removed all eight boats from service.