Herley Industries Inc. announced June 27 that two of its eight manufacturing facilities have been suspended from receiving new contract awards from the U.S. government pending completion of a full investigation of certain deliveries by the company under a program with a U.S. defense contractor. The affected operations include facilities in Lancaster, Pa.; Woburn, Mass.; and Chicago. The Chicago location is a two-person marketing office.
The suspension arises out of certain discrepancies in the automated test equipment (ATE) test data for certain equipment manufactured by Herley at its Lancaster facility for a U.S. defense contractor. After notification from the U.S. defense contractor of these discrepancies, Herley conducted an initial investigation which resulted in the recalling and retesting of certain equipment and immediately notified the Department of the Navy that it had reason to believe that certain non-management employees at its Lancaster facility had misrepresented test results on the equipment. At the same time, Herley engaged a third party to conduct an analysis of the test data recorded on the ATE for the equipment provided to the U.S. defense contractor and conducted interviews of its employees working on this program. During the course of these interviews, two technicians stated that they had manually modified certain test results with the approval of a test supervisor.
The order of suspension noted that, within the past year, Herley had developed and begun implementation of an ethics and compliance program that included the appointment of an ethics and compliance officer, a corporate hotline for the reporting of suspected misconduct, a corporate code of business ethics and employee handbook, government contracting policies and procedures, audit and compliance and review procedures and recurring training for its employees on each of these topics. The employees in question, including their supervisor, had participated in this training. Accordingly, the U.S. government is concerned that the policies and training program in place at Herley Lancaster were not able to prevent and/or identify these acts.
Commenting on this suspension, Myron Levy, the company's chairman and chief executive officer, stated, "We have been fully cooperating with the U.S. defense contractor and the U.S. government since this conduct came to our attention, and we will continue to cooperate so that this investigation can be concluded as expeditiously as possible. The investigation conducted by Herley to date has revealed that no one from Herley management was involved. The three non- management employees involved have been suspended pending the outcome of this investigation. Herley intends to take the appropriate remedial measures necessary and to satisfy the U.S. government that more substantial procedures are now in place to prevent the activity that caused the suspension."
While the suspension remains in place, the named facilities will not be solicited for or awarded new contracts or contract extensions without special exceptions. The suspended facilities may receive contract awards or subcontracts from the Federal Government if the head of the agency states in writing the compelling reason to do so. A significant portion of Herley's business is received where the company is the only qualified supplier on critical defense programs. Currently, Herley has a funded backlog of approximately $150 million, which is not affected by this action, and which will be delivered to customers within the next year or two.
Herley facilities which are not included in the action and who are free to contract with the U.S. government are its facilities in Farmingdale, N.Y. (Herley Farmingdale); Whippany, N.J. (Herley-CTI); Jerusalem (Herley-Israel); McLean, Va. (Innovative Concepts Inc.); Fort Walton Beach, Fla. (Micro Systems Inc.); and Farnborough, United Kingdom (EW Simulation Systems).
Herley Industries is a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide. Based in Lancaster, Pa., Herley has eight manufacturing locations and approximately 975 employees.
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