Monday, July 9, 2018

Be Certain to Deliver What the Government is Paying For

The Justice Department just announced a settlement in what has become an all-to-common situation - one where a contractor is not giving the Government what it is paying for. We're talking about T&M (Time and Materials) contracts where fixed hourly rates are based on particular skills, experience, and other qualifications. When contractor then bills those rates using individuals that do not meet the qualifications (i.e. those with lesser skills and experience), the contractor is securing windfall profit and the Government is getting less than it bargained for. Think of it as paying for a Maserati but driving away in a Ford.

Contract auditors are attuned to these situations. In fact, incurred cost audit procedures specifically identify this as a high risk audit area and auditors are required to develop procedures to specifically look into whether this is occurring. Some of you have probably already fielded auditor requests to review personnel files.

In the latest case to be publicized, CACI Technologies (CACI) agreed to pay the Government $1.5 million to settle an allegation that it billed and accepted payment from the Government for work performed by certain CACI employees who did not meet the required qualifications. The contract referenced attached labor categories that prescribed the type of experience and educational qualifications needed for classes of personnel billed under the particular labor category.

This scheme went on for at least three and a half years before coming to light. The Justice Department press release on the matter did not disclose how the alleged fraud was uncovered. It could well have been the result of an incurred cost audit. It could also have been the result of company whistleblower.

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