On Friday, the Department of Justice joined a False Claims Act lawsuit against Lance Armstrong.
Among his many troubles, Lance Armstrong now has a big government contracts problem on his hands–and Lance’s problem can provide an important lesson about “representations and certifications” for the less-famous government contractors among us.
A proposal submitted on behalf of an 8(a) company claimed that the company had performed a $3 million NASA contract even though no such contract existed, according to a recent report issued by the SBA Office of Inspector General. As alleged in the SBA OIG report, the same honesty-challenged 8(a) company claimed to have 33 employees, even though it never had more than two.
Perhaps it is little wonder that the company in question is alleged to have passed through nearly 100% of its work on several 8(a) set-asides to its non-8(a) subcontractor.
In the latest indication that the Government is on the lookout for false and improper contractor certifications, the Department of Justice has intervened in a False Claims Act lawsuit against a Texas-based contractor involving the FAR lobbying restrictions.
According to a False Claims Act complaint filed by a whistleblower, Fluor Hanford Inc. and its parent company, Fluor Corporation, used federal funds for lobbying purposes, in violation of a FAR provision requiring Fluor to certify that it would not engage in lobbying with federal funds.
More than once, a small government contractor has complained to me that there is “just no way” a particular AbilityOne contract recipient is performing at least 75% of direct labor hours with people who are blind or have other significant disabilities, as is required for a non-profit agency to participate in the AbilityOne Program.
Now those same contractors might be saying “I told you so.” The U.S. Department of Justice announced yesterday that a Texas company has agreed to pay $5 million to resolve False Claims Act allegations that the company failed to comply with the 75% direct hour requirement over a period of six years, but misreported its compliance to the government.
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.
A soon-to-graduate 8(a) contractor submitted a fraudulent proposal designed to evade the 8(a) Program’s sole source limits, with the full knowledge of the procuring agency in question, according to a decision issued by the U.S. Court of Federal Claims.
As described in Veridyne Corporation v. United States, No. 06-150C (Fed.Cl. 2012),Veridyne Corporation greatly underestimated the cost of a contract in order to slip it under the 8(a) Program’s sole source threshold, but the scheme eventually collapsed, leaving Veridyne liable for false claims and procurement fraud–and leaving the procuring agency in question with egg on its face and a lot of explaining to do.
An Ohio-based construction company has paid $500,000 to settle federal False Claims Act allegations related to the Department of Transportation’s Disadvantaged Business Enterprise program, according to a statement published by the U.S. Department of Justice.
This case is particularly interesting because the allegations made by the government sound an awful lot like circumstances that, I have heard, may occur on many government projects requiring small business subcontracting plans. Some in the industry have complained that sometimes, a small and/or socioeconomically disadvantaged business is named as a subcontractor under a large prime’s subcontracting plan, but the small business is expected to pass all or most of the work through to a large, second-tier sub.
It’s not that different from what happened in Ohio, and now the prime contractor in question is half a million dollars poorer. The settlement begs the question: will the government use the False Claims Act to root out this type of subcontracting plan abuse in the near future?