Deliberate underbidding on federal government contracts–known in industry parlance as “buying in”–is not a terribly unusual practice. Contractors may buy in for several reasons, such as an effort to gain a toehold in the federal marketplace or the belief that modifications to the contract will result in a higher actual price.
However, contractors thinking of underbidding, for whatever reason, should proceed with caution in light of a new federal court case. In United States ex rel. Hooper v. Lockheed Martin Corp., No. 11-55278 (9th. Cir. 2012), the U.S. Court of Appeals for the Ninth Circuit held that underbidding and/or giving false estimates, at least in the context of a cost reimbursement contract, may be violations of the False Claims Act.