DoD Recovers More Than $7 Billion from Procurement Fraud in a Five Year Period

The 2018 NDAA (National Defense Authorization Act) required the Defense Department to submit a report on defense contracting fraud for the previous five fiscal years (2013 through 2017). That report has not been published and shows some surprising results. We are all aware that there is significant fraud occurring in Government contracting and in DoD contracts in particular. We report on some of those on these pages from time to time. What we did not know was the magnitude of the occurrences and recoveries, until now.

The report, entitled "Report to Congress, Section 889 of the FY 2018 NDAA, Report of Defense Contracting Fraud was issued last December and reported the following:

• During the five year reporting period, there were 1,059 cases resulting in a criminal conviction of 1,087 defendants. 678 of those were individuals while the remaining 409 were business entities. As a result of these convictions, a total of $369 million was recovered in fines and penalties, $370 million was recovered through restitution, and $53 million was recovered through forfeiture of property (total: $792 million).
• Those recoveries, while impressive, pale in relation to recoveries from civil judgments and settlements. Over the same five year period, a total of $5.8 billion was recovered in civil judgments and settlements. Comprising these cases were 546 defendants (or respondents) of which 111 were individual persons and 435 were business entities.

Another interesting statistic coming from the report indicates that a handful of contractors are responsible for the majority of the fraud.  The total number of individuals or entities indicted for, settled charges of, been fine by any Federal department or agency for, or have been convicted of procurement fraud, involved 168 contractors with 16 million contract actions valued at $334 billion. Ninety-four percent of the 16 million contract actions was from a single contractor and 76 percent of the $334 billion was from two contractors.

Procurement fraud includes such things as cost and labor mischarging, defective pricing, price fixing, bid rigging, and defective and/or counterfeit parts.