Failure to Comply With Government Contract Requirements: “Best Pricing” Requirements

Generally, contractors must give the U.S. government the “best price” that the contractor would give to any one of its other customers.  A contractor must certify that it has offered a price to the government that is either less than or equivalent to the price it gives its other customers.  A company’s failure to give the government the best price can constitute fraud under the False Claims Act.

Recently, Network Appliance (“NetApp”), a California computer storage and data management vendor, agreed to pay the U.S. government $128 million to settle contract fraud charges brought by a whistleblower on behalf of the GSA. The settlement relates to contracts by NetApp to sell hardware, software and storage management services to government agencies through the GSA’s Multiple Award Schedule (“MAS”) program. In the lawsuit, NetApp was accused of knowingly overcharging the government by failing to give government agencies the same discounts NetApp gave to commercial customers. NetApp was also accused of making false statements to the GSA about its sales practices and discounts.

Price Reduction Requirements

GSA contractors must notify the government if the price used as a basis for GSA contract negotiations has been reduced for commercial customers. In that instance, the GSA contractor must give the federal government the same discount as was provided to the commercial customer.  Failure to do so may result in False Claims Act liability.

If you have, or think you have, witnessed a best price or a price reduction violation of a contract with the GSA, contact Michael S. Bigin or Laurence J. Hasson to discuss the possibility of bringing a lawsuit on behalf of the government to recover damages for the contractor’s improper conduct.