Thursday, March 24, 2016
Government Files False Claim Action Against DOE Contractor
The U.S. Government has filed a civil action against the contractor in charge of its Savannah River cleanup operations (Savannah River Nuclear Solutions, LLC or SRNS) and its parent company Fluor Federal Services, Inc. (FFS) for making false and fraudulent claims and statements to the Government and for knowingly including unallowable costs in inflated claims to the Department of Energy.
The contractor operates under a DOE (Department of Energy) M&O contract (Maintenance and Operations). These M&O contracts are designed to operated by stand-alone entities and therefore any cost allocations from a home office are not allowable under the contract. Any costs that may be allocable to the M&O contract from a home office are covered by the fee that the contractor earns.
The M&O contractor often "borrows" personnel from the parent company. These loaned employees are now commonly referred to as "corporate reachback" employees because employees are loaned from the M&O contractor's owners to conduct work directly for the M&O contractor. The M&O contract makes it clear that while the reachback program is fine, the costs allocated to the M&O contractor for reachback labor cannot include any home office allocations.
The problem from the Government's point of view was that the cost of reachback labor transferred from the SRNS's owner did include home office allocations. The Government's filing goes to great lengths in chronicling the contractor's duplicity in telling the Government one thing but doing quite another. In fact, the filing describes a "secret" modification to the cost transfer agreement between SRNS and FFS that deleted the phrase "For the term of this Agreement and any extensions thereof, allocations of home office expenses to FFS loaned employee costs are unallowable in accordance with the provisions of the SRNS Contract ..." to "For the term of this Agreement and extensions thereof, allocations of home office expenses to the SRNS segment costs are unallowable in accordance with the provisions of the SRNS Contract ..." That change is no small matter. Between 2008 and 2015, the amount of home office allocations on reachback labor ultimately billed to DOE totaled $5.2 million.
We are not Government contract attorneys but on the surface, it seems like the Government has made a very compelling case against the actions of SRNS. You can read the Government's complaint here.