Contractor Pays $10 Million to Settle False Claims Act Allegations

Another day, another press release from the Department of Justice announcing yet another Government contractor has paid a bucket load of dollars to settle False Claims Act Allegations. There was no admissions of guilt, mind you, nor a determination of liability - only some money changing hands to settle some allegations. In this case, the contractor settled for $10 million.

It looks to us as if the charges began as defective pricing. Justice referred to "misrepresentations during contract negotiations" and "false statements to inflate the price of goods or services sold to the government". Those statements sound like the contractor did not furnish current, complete, and accurate cost or pricing data as required by the Truth in Negotiations Act.

At one time, the Government had a robust program for reviewing contracts for compliance with the Truth in Negotiations Act (TINA). Those reviews (audits) have all but disappeared. In fact, DCAA has programmed only 35 staff years out of a workforce of 4,668 to perform TINA reviews. That's less than one percent. We don't know why the significant drop-off except perhaps the feeling by Agency management that there was not sufficient payback on those kinds of audits.

The Government approaches TINA violations (i.e. failure to furnish current, complete, and accurate cost or pricing data during negotiations) as potential referrals for violations of the False Claims Act. In fact, every "positive" defective pricing audit report had to be either referred for investigation or a written justification as to why the auditor did not believe a referral was warranted had to be prepared.  It is, of course, easier to refer a defective pricing finding for investigation than it is to write up justification as to why it should not be referred and have that judgment questioned by supervision and management up the line.

The DoJ press release did not state the manner in which this alleged False Claims Act violation came to their attention. It could have been a contract auditor, a contracting officer, or perhaps a whistle-blower. Whatever manner, contractors should be aware that there is a panoply of Government oversight activities just doing their jobs and internal whistle-blowers looking to strike it rich.