The False Claims Act – Contractor Fraud

Because the federal government relies heavily on contractors to supply it with goods and services, fraud by contractors costs the government and taxpayers billions of dollars annually. Whistleblowers play a critical role in combating government contractor fraud.

3M Company paid $9.1 million in 2018 to settle claims that it allegedly sold the military defective hearing protection devices.

Inchcape Shipping Services paid $20 million in 2018 to resolve charges of overbilling the U.S.

Some of the most common forms of government contractor fraud are set forth below. Regardless of the manner in which the fraud is procured, all forms of government contractor fraud violate the False Claims Act (the “FCA”).

Purchase and Procurement Fraud:  When the government needs a good or service it “procures” it by way of purchasing. 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.

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 FCA. 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 FCA.  Submitting 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.

Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations:  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 FCA because government contracts contain many clauses beyond the technical requirements or descriptions of the products or services being procured.

If you think a contractor has committed fraud on the government and are thinking of blowing the whistle, the whistleblower lawyers at Bernstein Liebhard can help. Contact Michael S. Bigin or Laurence J. Hasson for a free, confidential consultation.