Tuesday, August 9, 2016

DOE Trying to Limit Costs Related to Whistleblower Activities

The Department of Energy (DOE) is known for their gigantic cost-type contracts where all of the financial risks are ascribed to the Agency and ultimately American taxpayers. DOE spends billions of dollars every year cleaning up nuclear production sites across the land. It is dangerous work where safety is paramount. DOE contractors seem to generate more than their fair share of whistleblowers. Most of these whistleblowing events relate to safety issues though more than a few relate to financial improprieties (e.g. timecard mischarging or overtime pay for hours not worked).

Whistleblowing has become a huge industry (try "Googling" "whistleblower lawyers" and you will be amazed). One can attend seminars on how to blow the whistle with emphasis on how to increase the odds of getting the employer to ignore your concerns, thus opening the door to filing a "Qui Tam" action. Whistleblowing has costs (becoming a pariah in the organization or losing one's job) and rewards (the potential of a big payday).

Contractors, of course, must defend against whistleblower suits and the cost, in terms of legal expense alone, can be significant. For DOE cost-type contractors, these costs are often billed directly to the contract and reimbursed by the Government. Sometimes the parties will try to reach a settlement - you know, pay the whistleblower some money and he'll drop the case. Contractors justify this on the basis that a payoff is cheaper than the legal fees to properly defend the company. Or, they cite "litigative risk". Again, payoffs, like legal fees, are charged to the Government contract and reimbursed.

The Department of Energy recently issued new guidance concerning costs related to whistleblower activities. Essentially it removes the decision making process over what is allowable from local contracting officer authority to its General Counsel's office. Tomorrow we will unpack that guidance and see what it means for contractors.

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