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Other > Qui Tam Government Fraud > Federal Government Contractor Fraud

Procurement Fraud (Where the Government buys goods or services from contractors)

Traditional False Claims Act procurement cases include delivering goods of inferior quality or in violation of inspection, testing, or other technical requirements. Procurement violations frequently involve defense contracts, such as B-1 bombers, computers, tanks, and other traditional subjects of Government contracting. The Government, however, buys a wide array of goods. Supplying reconstituted powdered milk, not the fresh milk that the contract requires, is a False Claims Act violation. When Army mess halls were delivered inferior quality meat, the False Claims Act was violated. Charging the Government higher labor rates than those agreed to in the contract is another scheme utilized to defraud the Government. False billing cases can also involve misrepresenting indirect and overhead labor charges as direct labor. Collusive bidding schemes where bidders conspire to rig prices can also trigger False Claims Act liability.

The most frequently cited procurement case arising under the False Claims Act is United States v. Bornstein, 423 U.S. 303 (1976). In Bornstein, the prime contractor was to provide radio kits to the Government that met certain quality standards. The subcontractor supplying the electronic tubes instead delivered substandard parts. The parts were mislabeled in an attempt to disguise the inferior nature of the goods. Both the "innocent" prime contractor and the "guilty" subcontractor were liable.

Contract Compliance Violations

A false certification of regulatory and statutory compliance, necessary to obtain a contract, can render false all claims for payment under that contract. Likewise, a contractor's failure to meet contract performance requirements and failure to provide goods and services in conformance with federal statutes and regulations, as set forth in what might otherwise be termed "boilerplate" sections of contracts, may be sufficient to violate the False Claims Act.  (See "Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations" below.)

Presentation of a claim for payment, when the failure to abide by contract requirements has not been affirmatively disclosed to the Government, is deemed equivalent to false certification of compliance with such laws, rules, and regulations.  Thus, submission of claims for payment when the contract requirements have not been fulfilled in all respects, if federal funding is conditioned on compliance, gives rise to a viable False Claims Act case. Claims may be false, even though goods or services otherwise fulfill contract specifications. 

Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations

The False Claims Act is an enforcement device for contract terms requiring compliance with other federal statutory schemes. Government contractors must abide by certain public policies like environmental protection laws, equal employment opportunity, small business procurements, federal wage laws, and competitive bidding laws. Under some circumstances, these laws can be enforced through the False Claims Act, despite the absence of a "private right to sue," because Government contracts contain many clauses beyond the technical requirements or descriptions of the products or services being procured. The contractual provisions themselves are derived from language in the Federal Acquisition Regulation (FAR) or from similar Government acquisition regulations. Often, a contract will only cite the applicable FAR provisions and, thereby, incorporate the regulation by reference.

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