Contractors Repay $75 Million for Overcharging the Government

Here's something for contractors with GSA Multiple Award Contracts to consider. Every company that has ever received a GSA contract knows full-well that the prices offered the Government must be the best prices offered any commercial contractor. That requirement is well entrenched into the process. If you want to sell to the Government, fine, just don't try to gouge the Government because it has deep pockets, because you can get away with it, because the oversight is lax, or just because you can.

Under the Multiple Award Schedule (MAS) Program, prospective vendors agree to disclose commercial pricing policies and practices to the GSA in exchange for the opportunity to gain access to the broad federal marketplace and the ease of administration that comes from selling to any government purchaser under one central contract.  GSA regulations require that, during contract negotiations with GSA, prospective vendors seeking an MAS contract make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers.  The GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.  Additionally, after the MAS contract is awarded, regulations require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.

The Department of Justice recently announced a settlement with two MAS contractors who agreed to pay back a staggering $75 million to resolve allegations that they violated the (Civil) False Claims Act by misrepresenting their commercial pricing practices thereby overcharging the Government (it would be interesting to see how the companies footnote these events in their audited financial statements).

The settlement resolves allegations that the two companies made false statements to the government in connection with the sale of their products and services under MAS contracts.  These false statements allegedly concealed the companies’ commercial pricing practices and enabled the companies to overcharge the government from 2007 through 2013. 

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  Looks like a very good payday for the whistleblower (a former president of one of the companies). Although the Justice's press release did not disclose how much of the $75 million will go to the whistleblower, it will be sizable.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

You can read the full press release here.