The Armed Services Board of Contract Appeals has issued its annual report for FY 2023, shedding light on how often contractor appeals reach a successful result, and what agencies are most frequently involved in contract litigation.
Continue Reading ASBCA Issues Annual Report, Providing Data on How Often Contractors Prevail
In Honeywell International, Inc., the ASBCA declined to dismiss a roughly $151 million claim by DCMA alleging a violation of CAS 410, holding that the government’s allegations were sufficient to state a claim for improper treatment of G&A expenses. The Board’s decision provides guidance on how to interpret CAS 410 — a topic that is often addressed by auditors, but has rarely been the subject of written opinions by the courts or boards of contract appeals.
Continue Reading ASBCA: Government Can Pursue $151 Million Claim Under CAS 410
The Coalition for Government Procurement and the National Defense Industrial Association filed an amicus brief in the consolidated Supreme Court cases United States ex rel. Schutte v. SuperValu, Inc. and United States ex rel. Proctor v. Safeway, Inc. The brief urges the Court to hold, consistent with the decisions of multiple federal courts of appeals, that a defendant cannot be liable under the False Claims Act (“FCA”) for “knowingly” submitting a “false” claim if (1) it acted in accordance with an objectively reasonable reading of an ambiguous statute, regulation, or contract provision and (2) there was no authoritative guidance warning it away from that interpretation. The Amici are represented by Covington & Burling LLP.
In SuperValu and Safeway, the Court is asked to resolve questions over the role that subjective intent plays in evaluating whether a defendant satisfies the FCA’s “knowledge” requirement. Petitioners argue that a contractor can be liable under the FCA for submitting a claim that is premised on an objectively reasonable interpretation of an ambiguous legal provision if the contractor recognized that the provision could be interpreted a different way. However, as the amicus brief explains, such a claim cannot be false for alleged noncompliance with the ambiguous legal provision that has not otherwise been clarified by authoritative guidance. Nor can such a contractor knowingly submit a false claim just because it was aware that the legal obligation may be interpreted differently.
Contractors often assume that government auditors have special authority to interpret the Cost Accounting Standards. That assumption is easy to understand — auditors frequently take the position that there is just one “right” way for a company to do its contract cost accounting, based on how other companies do things. But contractors should know that CAS is flexible and generally gives them options about how to comply, based on the circumstances of their business. In short, a contractor’s business judgment matters, and contractors can use it to push back on auditors who take an overly rigid view of CAS.
On February 1, 2022, the Department of Justice (“DOJ”) released its annual report summarizing False Claims Act (“FCA”) enforcement activity in FY 2021. The report confirmed what many practitioners already suspected: FY 2021 was another banner year in FCA enforcement. DOJ’s annual judgments and settlements exceeded $5.6 billion, making FY 2021 the second largest annual recovery ever (and the largest since 2014). But beyond this top line number, a closer analysis of the figures in DOJ’s report offers additional insight on strategies for preventing and mitigating costly FCA exposure.
Continue Reading DOJ Records Historic False Claims Act Recoveries in FY 2021
If a contractor is working on a fixed-price contract, can it charge the government for attorney’s fees to defend a False Claim Act (“FCA”) case related to the contract?
In The Tolliver Group, Inc. v. United States (Fed. Cl. Jan. 22, 2020), the Court of Federal Claims (“COFC”) said the answer was “yes,” if the government was liable for an equitable adjustment under the circumstances. The decision was welcomed by contractors facing meritless FCA suits, which are often costly to defend even when the relator plainly does not have a case.
But the Federal Circuit has thrown cold water on Tolliver — at least for now. In a decision last week, the court of appeals vacated Tolliver on jurisdictional grounds, concluding that the legal theory of the COFC’s decision was never presented to the contracting officer for a final decision under the Contract Disputes Act of 1978 (“CDA”), and that the COFC therefore lacked jurisdiction over the contractor’s claim. The Tolliver Group, Inc. v. United States (Fed. Cir. Dec. 13, 2021).
In a December 2020 speech, Deputy Assistant Attorney General Michael Granston warned that cybersecurity fraud could see enhanced enforcement under the False Claims Act (“FCA”). On October 6, 2021, Deputy Attorney General Lisa Monaco announced that the Department of Justice (“DOJ”) would be following through on that warning with the launch of the DOJ’s Civil Cyber-Fraud Initiative. The key component of the initiative is the use of the FCA against Government contractors and subcontractors that fail to comply with cybersecurity requirements, including information security standards and cyber incident reporting obligations, imposed by contract, statute, or regulation.
Under the FCA, the Government can recover treble damages and penalties from federal contractors and subcontractors that knowingly submit false claims for payment. Notably, the FCA incentivizes private citizens (relators), including contractor employees, to file qui tam suits on behalf of the Government by guaranteeing them between 15 and 30 percent of the recovery. DOJ stated that it intended to work with federal agencies, subject matter experts, and law enforcement partners on the Civil Cyber-Fraud Initiative. Recently, Assistant Attorney General Brian Boynton confirmed that this initiative was also intended to incentivize relators and the aggressive relators’ bar to focus their attention on potential cybersecurity noncompliance as the basis for qui tam actions.
Continue Reading DOJ Announces New Civil Cyber-Fraud Initiative
Many of our clients have been calling to ask whether failure to comply with the Administration’s Executive Order imposing vaccine mandates on federal contractors could lead to False Claims Act liability, and what steps they can take to minimize the risk of liability. Much remains unknown, especially what specific obligations will be included in the FAR clause to be released on October 8. However, we have highlighted a few key considerations that should be front of mind for all contractors and subcontractors.
Continue Reading COVID-19 Vaccine Mandate for Federal Contractors Could Pose False Claims Act Risk
On February 17, 2021, Senator Chuck Grassley (R-IA) and Brian Boynton, Acting Attorney General for the Department of Justice’s Civil Division, provided opening remarks at the Federal Bar Association’s annual Qui Tam Conference. Both emphasized the key role of the FCA in combating fraud against the Government, and noted an anticipated increase in FCA enforcement actions in the coming years, particularly related to the Government’s pandemic response. In addition, Senator Grassley offered a preview of potential legislative changes to the False Claims Act, and Boynton outlined DOJ’s enforcement priorities for the coming year.
Continue Reading Senator Grassley and Senior DOJ Official Discuss Potential False Claims Act Changes and Enforcement Priorities
As the recent SolarWinds Orion attack makes clear, cybersecurity will be a focus in the coming years for both governmental and non-governmental entities alike. In the federal contracting community, it has long been predicted that the government’s increased cybersecurity requirements will eventually lead to a corresponding increase in False Claims Act (FCA) litigation involving cybersecurity compliance. This prediction may soon be proven true, as a December 2020 speech from Deputy Assistant Attorney General Michael Granston specifically identified “cybersecurity related fraud” as an “area where we could see enhanced False Claims Act activity.” This post discusses recent efforts to use the FCA to enforce cybersecurity compliance — and, based on those efforts, what government contractors may expect to see in the future.
Continue Reading Cybersecurity and Government Contracting: False Claims Act Considerations