Government Contractor Fraud

Although fraud by defense contractors is one of the most common types of government contractor fraud, government contractors involved in a wide array of industries and sectors have engaged in fraudulent activity against the government. Some of the most common forms of government contractor fraud include: purchase and procurement fraud, contract compliance violations, and kickbacks. Regardless of the manner in which the fraud is procured, all forms of government contractor fraud violate the False Claims Act.

Purchase and Procurement Fraud:  As the name implies, when the government needs a good or service it “procures” it by way of purchasing. To do so, the government most often solicits bids from interested contractors, though competitive bid solicitation is not the only means of procuring goods and services. Purchase and procurement fraud can occur at every stage of the contracting process.

When a company engages in bribery to win a contract, for example, even when it did not make the lowest or best bid, governmental contractor fraud has occurred. Purchase and procurement fraud includes delivering goods of inferior quality or in violation of inspection, testing, or other technical requirements. Deceptively charging the government higher labor rates than called for in a contract, false billing and collusive billing schemes between contractors are also types of procurement fraud. Other examples of contractor fraud include billing the government for incomplete work, inflating the cost of labor or supplies, and issuing kickbacks.

Contract Compliance Violations:  When a contractor makes a false certification of regulatory and statutory compliance necessary to obtain a contract, all claims for payment under that contract may be deemed to be false and subject to liability under the False Claims Act. Likewise, a contractor’s failure to meet contract performance requirements and failure to provide goods and services in conformance with federal statutes and regulations, as set forth in the contract, may support a claim under the False Claims Act.

Presentation of a claim for payment, when the failure to abide by contract requirements has not been affirmatively disclosed to the government, is deemed equivalent to false certification of compliance with such laws, rules, and regulations. Thus, submission of claims for payment when the contract requirements have not been fulfilled in all respects, if federal funding is conditioned on compliance, is a form of governmental contractor fraud that gives rise to a viable False Claims Act case. Claims may be false, even though goods or services otherwise fulfill contract specifications.

Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations:  The False Claims Act is an enforcement device for contract terms requiring compliance with other federal laws. Government contractors must abide by certain public policies such as environmental protection laws, equal employment opportunity, small business procurements, federal wage laws, and competitive bidding laws. Under some circumstances, these laws can be enforced through the False Claims Act, despite the absence of a “private right to sue,” because government contracts contain many clauses beyond the technical requirements or descriptions of the products or services being procured. The contractual provisions themselves are derived from language in the Federal Acquisition Regulation (“FAR”) or from similar government acquisition regulations. Often, a contract will only cite the applicable FAR provisions and, thereby, incorporate the regulation by reference. All government contracts have broad-reaching public policy provisions, although some variations exist from one contract to the next.

If you are aware of an instance where a government contractor is committing, or has committed, fraud on the government and are thinking of blowing the whistle, please contact Michael S. Bigin or Laurence J. Hasson.