Fraud in Federal Government Contract Claims
All too often you hear stories about contractors accused of defrauding the federal government either in obtaining or performing government contracts. From procurement fraud, to receiving kickbacks, to making fraudulent claims against the government, fraud is an issue of concern in government contracting. As more and more contractors decide to work with the federal government, it is important to avoid fraud or even the appearance of fraud.
One area where contractors need to exercise caution is in presenting claims to the federal government. Just as in the private sector, a contractor working with the government can present claims to the government related to its performance on the project. Conversely, if the government believes any portion of that claim is fraudulent, it can bring a counterclaim for fraud against the contractor. The federal government has several options in bringing such a counterclaim. Four common types are discussed below as well as guidelines to avoid these counterclaims when bringing claims against the federal government.
The False Claims Act (FCA) generally creates liability for any person who defrauds the government by presenting a false claim. The penalty for violating the FCA is a civil fine not less than $5,000 but not more than $10,000, plus treble damages. Due to the fact that the penalties for filing false claims can be steep, the burden is relatively high. The FCA requires the government to prove that a contractor knowingly presented a false claim, meaning it must be more than merely a mistake by the contractor.
The Contract Disputes Act (CDA) fraud provision is another avenue for the government to recover for false claims brought by a contractor. Under the CDA, a contractor is required to certify all claims over $100,000 by asserting that the claims are made in good faith and that the claims are accurate and complete to the best of its knowledge. Under the CDA, a contractor is required to provide support for all of its claims. If it is found that even a portion of a claim is unsupported, a contractor is liable for damages equal to the amount of the unsupported claim plus all costs to the federal government related to reviewing that unsupported portion of the claim. The CDA is unique in that only the fraudulent portion of the claim is removed and any non-fraudulent portions of the claim can still be brought.
The Forfeiture or Fraudulent Claims Act (FFCA) allows for exactly what its name implies: forfeiture of any claim that is found to be fraudulent. Under the FFCA, also known as a Special Plea in Fraud, the government is required to prove by clear and convincing evidence that a claim is fraudulent. If the government meets this high standard to prove that any portion of a claim is fraudulent, then a contractor forfeits its entire claim. The FFCA, unlike the CDA, only requires a portion of a claim to be fraudulent in order for the entire claim to be forfeited.
Common law fraud is another counterclaim that the government can bring against a contractor for fraudulent claims. In order to prevail under this counterclaim, the government must prove that a contractor misrepresented a material fact with the intent to deceive the government, that the government relied on the misrepresentation or deception, and that the government was injured.
To avoid these types of counterclaims, a contractor doing business with the government must ensure that everything is in order before submitting a claim to the government. That requires the formulation of accurate claims and the keeping of meticulous documents to support every aspect of a claim. If the documents in a contractor’s project file support the entitlement to damages sought in a claim, then it will be more difficult for the government to prove that the contractor had knowledge of a misrepresentation, or intended to deceive the government. Every prime contractor should ensure that each of its employees and subcontractors also follows these guidelines.
Keeping and providing accurate records to verify your claim can be the difference between the government bringing a counterclaim like the ones asserted above and obtaining payment for your claim filed against the government. A contractor that follows these guidelines can combat a fraud allegation. The lawyers in the Federal Contracting Practice Group at Cohen Seglias are able to further discuss how you can best avoid counterclaims of fraud asserted by the government against your company.
