Columb,
This raises a couple of issues:
Firstly, your security guys should be testing systems AND processes. If they are filling your failedlogin file then they are performing a brute-force attack. If they are testing the system then they should just be testing to determine whether or not the system actively prevents this type of attack using mechanisms such as fail2ban or account lock-outs, etc. If they are testing processes then they should be checking to determine whether or not the appropriate person notices and responds to this sudden jump in failed login attempts. Another check of processes is to check for enforcement of password strength - a brute-force attack is a very, very messy way to do this. They should ask you for the shadow password file and run it through an offline cracker to check that all passwords meet requirements.
Following on - delve a little deeper - are they attempting a brute-force of different users' accounts, or simply a list of default/likely accounts (root, mail, ftpuser, etc.). If the former then you have to question the validity of this test - where would an attacker get this information and what are they attempting to prove/disprove?
All in all, this sounds a little suspect for a test, UNLESS they are testing your response to this kind of attack...
Regards,
Alex