August 24, 2023
Booz Allen Hamilton Holding Corp. (Booz Allen), headquartered in McLean, Virginia, has agreed to pay $377 million in a landmark procurement fraud settlement. The settlement resolves allegations that Booz Allen violated the False Claims Act by charging costs for unrelated contracts to government contracts. It is one of the largest procurement fraud settlements in history.
The False Claims Act (FCA) is designed to safeguard taxpayer funds and ensure the integrity of government-contractor relationships. Government contracting rules require contractors to establish a clear connection between costs billed to a government contract and the contract’s objective. A contractor may submit claims for contract costs directly related to that contract and indirect costs that benefit multiple contracts. A contractor, however, may not submit costs to a government contract that have no relationship to that contract. This safeguard prevents the misuse of public funds to subsidize unrelated business activities.
In 2016, a former Booz Allen employee filed a whistleblower case under the FCA qui tam statute. Her lawsuit claimed that Booz Allen committed procurement fraud. Specifically, she alleged that between 2011 to 2021, the company improperly allocated indirect costs to government contracts that supported Booz Allen’s commercial and/or international businesses. According to the settlement agreement, Booz Allen created and maintained “indirect cost pools” that commingled costs for commercial and international contracts together with government contracts. The government claimed that this comingling violated the Cost Accounting Standards and the Federal Acquisition Regulations (FARS), both of which set out the rules for determining costs on negotiated procurements.
Through its cost allocation methods, Booz Allen disproportionately allocated indirect costs to government contracts. As a result, the company received reimbursement for costs that provided no benefit to the United States. In short, it subsidized its work for commercial and international contracts with taxpayer dollars.
The whistleblower also highlighted instances where Booz Allen shifted employees and work associated with its commercial and international operations between Responsibility Centers. These practices violated established regulations as well.
For bringing these improper practices to light, the whistleblower will receive nearly $70 million as an award under the FCA.
The Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients nationwide in bringing actions under the federal and state False Claims Acts and other whistleblower programs. The firm’s many successes include a recent settlement with Zoll Medical for violations of the Trade Agreements Act (TAA). TAA violations are just one type of government procurement or defense contractor fraud. Our firm also represented whistleblowers in successful cases involving the enormous “Big Dig” reconstruction project in downtown Boston. If you have knowledge of government program fraud, contact us for a confidential consultation.