Government Contract Whistleblower Attorneys

Fraud in Government Contracts

The federal government commits hundreds of billions of dollars annually to contracts with private enterprises. These agreements may involve civilian agencies or the department of defense, and they can relate to a variety of goods and services, including aircraft, food services, biologicals, or computer software.

When a company enters into an agreement with the government, or when a subcontractor enters into a contract with a prime government contractor, it makes promises about the services and/or products supplied.

Contractor fraud takes many forms, including lying about:

• What the contractor can deliver or provide
• How much it costs
• How the goods or services will be provided
• Compliance with identified laws or terms, or
• The contractor’s qualifications to enter into the contract

Important Laws That Impact Government Contracts for Goods and services

Contracts for goods or services often incorporate legal responsibilities that specify how such goods or services must be provided to the government.

Three such laws commonly incorporated in government contracts are:

• Buy American Act
• Trade Agreements Act
• McNamara-O’Hara Service Contract Act

Buy American Act

The Buy American Act requires contractors to supply domestic end products to the federal government. The BAA generally applies to supply and construction contracts with an estimated value greater than the micro-purchase threshold and less than the dollar threshold established for applicability of the Trade Agreements Act of 1979. A qualifying contractor may violate the BAA’s domestic-preference requirements by supplying products that are not made in America while falsely certifying that they do. If the contractor does so knowingly, they may be committing fraud against the government under the False Claims Act.

Trade Agreements Act

The Trade Agreements Act is similar to the Buy American Act. It requires that companies supply procuring-government agencies with products and services originating from countries that have trade agreements with the United States, which are referred to as designated countries.

A product originates in a designated country if it is either:

• Wholly grown, produced, or manufactured in the US or a Designated Country.
• Substantially transformed into new and different articles of commerce in the U.S. or a Designated Country.

A company violates the TAA when it provides the government with products originating from non-designated countries. Examples of non-designated countries include China, Malaysia, India, Thailand, and Vietnam. The TAA applies to contract acquisitions over a specified dollar threshold, the amount of which is subject to periodic revision.

Many federal contracts require TAA compliance. Contractors must file certificates of compliance with the procuring government agency. It is the contractor’s responsibility to ensure they are compliant with the TAA. When a contractor knowingly violates the TAA, they may be committing fraud against the government.

McNamara-O’Hara Service Contract Act

The Service Contract Act applies to contracts provided by the federal government in an amount exceeding $2,500, when the principal purpose of the contract is to furnish services to the federal government service employees.

Service employees are employees, including independent contractors, who perform services within the United States and its outlying areas under a service contract. Employees and independent contractors who are exempt from the Fair Labor Standards Act and who perform services in a bona fide executive, administrative, or professional capacity are not service employees under the SCA.

Service contracts subject to the SCA require federal prime contractors and subcontractors to comply with certain requirements with respect to wage and fringe benefits. Government contracts must pay minimum wages and benefits based on the prevailing rates of the local market or in accordance with a controlling collective bargaining agreement. These rates are communicated by the Department of Labor’s wage determinations. Failure to provide the required wages or benefits may violate the Service Contract Act, and doing so knowingly, could amount to a falsity in violation of the False Claims Act.

Government Contract Fraud Within For-profit Education

For-profit schools, typically colleges, are privately run legal entities, but they often still receive government funds in the form of student loans. There are many modern examples of for-profit colleges that lie and cheat to do whatever it takes to increase profits with these loans. The Higher Education Act oversees the federal loan program. It provides loans to eligible students attending an eligible institution.

To become eligible, education institutions must enter into a program participation agreement with the Department of Education, and it must agree to continuously comply with program requirements.

Schools breach their contracts and violate the Higher Education Act, and potentially the False Claims Act, when they knowingly break the promises made under their PPAs. Liability may arise for things like:

• Maintain inflated job placement and graduation rates
• Mislead students about accreditation status
• Illegally incentivize admissions counselors to increase enrollment

Government Contract Fraud and Bid Rigging

Bid rigging is a form of collusion, where competitors essentially agree in advance about who will win the contract bid. When the federal government is the victim of bid rigging, a contractor may violate the False Claims Act.

Bids and be manipulated in a variety of ways, including:

• Bid Suppression: Bids are suppressed when one or more competitors agree to not bid or to withdraw a previously submitted bid so that the government agency will accept the designated winner’s bid.
• Complementary bidding: Complementary bidding exists when some competitors intentionally submit bids that either are too high to be accepted or purposefully contain unacceptable terms. The goal of this scheme is to give the appearance of a competitive bidding process and hide inflated prices.
• Bid rotation: Bid rotation occurs when all conspirators submit bids, but they take turns being the lowest bidder.
• Subcontracting: In this scenario, competitors refrain from bidding or submit a non-competitive bid in exchange for receiving subcontracts or supply contracts from the winning bidder.
• Market Division: Sometimes competitors collude to divide markets among themselves. For example, competitors may allocate specific customers, products, or specific locations amongst themselves.

A Nichols Kaster qui tam attorney can help you assess whether a bidding arrangement may violate the False Claims Act.

If you need guidance on navigating the complexities of any of these False Claims Act issues, reach out to schedule a free, confidential consultation with one of our team members specializing in the False Claims Act.