The U.S. is one of the largest consumers of goods and services in the world. Federal and state governments spend billions of dollars each year purchasing items for government workers and programs. From office supplies to consulting services, from New York to Iraq, fraud can occur anywhere. Procurement fraud can harm any agency that contracts with private companies, including the General Services Administration, the Environmental Protection Agency, the Department of State, and many others. By bringing qui tam actions under the False Claims Act (FCA), whistleblowers have helped to expose fraud by unscrupulous contractors and recover taxpayer dollars.
Common Procurement Fraud Schemes
Fraudulent practices by government contractors include:
- illegal conduct in securing government contracts (see Bribes, Kickbacks, & Bid-Rigging).
- false statements in obtaining government contracts, such as misrepresenting minority contractor or small business status.
- substandard materials or workmanship.
- fraudulent testing or false quality assurance representations.
- failure to comply with contract specifications.
- inflated bills for goods or services.
- false statements of compliance with requirements such as the Buy American Act and U.S. trade agreements.
- misrepresentations of cost or pricing data required by the Truth in Negotiations Act.
- false statements to the General Services Administration about pricing data.
Successful Procurement Fraud Cases and Awards
Whistleblowers have played a significant role in exposing procurement fraud in a wide variety of settings. Examples of successful FCA cases include:
- Inflated invoices: Para-Plus Translations Inc. contracted with federal and state agencies for interpretation, transcription, and translation services. It and its owners agreed to pay the United States, Delaware, and New Jersey a total of $1.5 million to settle FCA allegations that Para-Plus submitted invoices that intentionally overstated the travel time and mileage incurred by its interpreters to federal and state government clients.
- False pricing information: CA Inc. agreed to pay $45 million to resolve allegations that it made false statements and claims in the negotiation and administration of a General Services Administration (GSA) contract for software licenses and maintenance services. The settlement resolved allegations that CA (1) provided false information to the GSA during contract negotiations about the discounts it gave to commercial customers for its software licenses and maintenance services and (2) failed to provide government customers with additional discounts when commercial discounts improved.
- Noncompliance with contract terms: Former professional cyclist Lance Armstrong agreed to pay $5 million to resolve allegations that his admitted use of performance-enhancing drugs (PEDs) had resulted in the submission of millions of dollars of false claims for sponsorship payments to the U.S. Postal Service.
- False statements about small business status: Big-D Construction Corp. and Creative Times Dayschool Inc. agreed to pay $1,062,900 and $150,000 respectively to settle allegations that, between 2009 and 2013, they misrepresented their eligibility to participate in a Small Business Administration (SBA) program for small and disadvantaged businesses. Big-D personnel performed virtually all of the work on certain federal agency construction projects, contrary to the SBA’s requirement that the small business perform at least 50% of the work itself.
How to Report Procurement Fraud
These are just a few examples of the sorts of cases that can be brought under the False Claims Act. Procurement fraud can occur in a wide range of contexts. If you believe you have information regarding fraud, please contact us for a free, confidential consultation.