Public Works Fraud

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Federal and state governments undertake a wide variety of expensive public works projects and enter into contracts with private companies to carry out this work. These projects involve huge sums of money and are frequent targets for fraud. Whistleblowers have helped the government recover billions of taxpayer dollars by bringing qui tam actions under the False Claims Act (FCA) to expose fraud by unscrupulous contractors.

Common Public Works Fraud Schemes

Fraudulent practices by public works 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 in performing the contract.
  • fraudulent testing or false quality assurance representations.
  • inflated bills for materials or labor.
  • false progress reports or other required documents under the contract.
  • false statements of compliance with requirements such as the Buy American Act and U.S. trade agreements.

Successful Public Works Fraud Cases and Awards

Whistleblowers have played a significant role in exposing fraud in this area. Examples of successful FCA cases in the public works sector include:

  • Falsified testing: Universal Concrete Products Corp. and its president and co-owner agreed to pay $1 million to settle FCA allegations that Universal falsified test records for concrete panels for the extension of the Silver Line, also known as Phase II of the Dulles Corridor Metrorail Project. Universal was working as one of the subcontractors supplying precast concrete to the project, which is partially funded by loans from the U.S. Department of Transportation and the Commonwealth of Virginia.
  • Substandard materialsAggregate Industries Inc., the largest asphalt and concrete supplier in New England, paid $50 million in cash and agreed to provide up to $75 million in insurance coverage for its role in supplying adulterated concrete to the “Big Dig” project, a massive reconstruction of downtown Boston’s roadways, tunnels, and bridges.
  • Substandard materials and testingBechtel/Parsons Brinkerhoff, a joint venture responsible for managing the “Big Dig” project in Boston, agreed to pay over $407 million to resolve civil and criminal liabilities to the government. Bechtel/Parsons failed to institute concrete testing protocols at the construction site as well as in the materials lab to ensure that all concrete delivered to the Big Dig by Aggregate Industries, Inc. met specifications and was placed pursuant to procedures. By failing properly to oversee the construction and submitting bills for of out-of-specification or non-conforming concrete, Bechtel/Parsons violated federal and state FCAs.
  • Substandard materials, testing, and services: Bechtel National Inc. and its primary subcontractor agreed to pay $125 million to resolve allegations that they charged the Department of Energy (DOE) for materials and services that did not meet the exacting standards required for work at the contaminated Hanford nuclear site in Richland, Washington. The DOE paid the defendants billions of dollars to design and build a Waste Treatment Plant to convert up to 56 million gallons of radioactive waste into a stable glass form for disposal. Among other things, the defendants were alleged to have bought and used deficient materials and services and to have used materials that had not been tested in accordance with quality control requirements. Defendants were further accused of illegally using taxpayer dollars to lobby Congress for money for Bechtel’s work at the Hanford site.
  • 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 had 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.
  • False statements and knowing non-performance: Lighthouse Disaster Relief and its partners, Gary Heldreth and Kerry Farmer, paid $5.3 million to settle FCA claims alleging that that they failed to build and staff a basecamp sufficient to house and feed the number of first responders to Hurricane Katrina specified in their contract with the Department of Homeland Security and that they lied to employees of the Federal Emergency Management Agency in order to be paid before they had fulfilled the contract.

How to Report Public Works Fraud

These are just a few examples of the sorts of cases that can be brought under the False Claims Act. A wide variety of misconduct can constitute fraud in the public works arena. If you believe you have information regarding fraud, please contact us for a free, confidential consultation.