As a business owner doing business with the federal or local and state government you follow three main steps in the life cycle of the contract: pre-award, performance of the contract post award, and payment for the work done.
Contract Fraud: In each step contractors seem to spend time thinking to find ways to fool the government. Pre - award contract fraud begins with the collusion. So, the contractors or want to be contractors will conspire with each other to create and present bids in such a manner that one of them would be awarded the contract. The price point in the contract becomes the genesis. Low price, or high price point, the contracting officer will see the offers presented and decide on the reasonableness of the price.
The outcome could lead to the contract being awarded to one offeror, member of folks conspiring to fix prices. What about the rest of the members you may ask? Don't you worry about them, they will either compete in the future, you see the conspiracy continues or they will become subcontractors in the contract that is about to be performed. Welcome to bid rigging.
Should the scheme be discovered, and usually it is, the company and the individuals involved will face criminal charges. I hate to break the news but no person wants to become members of club fed. What all this means for you? Should you be approached to be part of discussion steering toward collusion, be on alert, that's flag that will drag you down a rabbit whole out of which you won't get out without severe consequences.
But contract fraud doesn't end there. If only. When a contract is awarded it's performance time. Here too people seem to go at great lengths to want to cheat the government with getting more than what is owed. Government wants 20 widgets, how about delivering 10 and invoicing for 20? Or, what if the Statement of Work doesn't outline a service performed or a product offered yet the government is billed for it? And what about those certificates of compliance? The Buy American Act? Sure. Can it be that it's not an American product but one made in China sold do the government as American made? These are examples of contract fraud during the performance phase.
When these are discovered here are the steps a contractor will phase from the government: A government investigation, possible charges both civil and criminal. For instance violations of the Buy American Act will lead to both civil and criminal penalties. In addition, such a violations is grounds for a lawsuit under the False Claims Act. Why FCA? A false certification implicates the False Claims Act. The Act prohibits any one to make a false claim to defraud the U.S. government. As a contractor, you will oversee that that regulations are followed. Can you afford to pay treble damages?
Last, contract fraud happens during the payment phase of the contract. Most are familiar with progress payments. Here the government allows the contractor to submit invoices for costs incurred as they progress. People will get the idea to inflate the invoice, claiming having incurred greater costs performing the project. Troublesome is when contractors claim they cannot perform the contract albeit having been paid. Red flags anyone?
As a business owner you will make sure that each member of the organization involved in the management and oversight of a government contract not only is trained to follow your processes, but it is also trained to pay attention to these and other instances where fraud may occur. You also should have a system in place that allows employees to report anonymously any discrepancies or wrongdoing they observe.
What systems do you have in place to ensure compliance? Have any changes in your circumstances call for a review of your policies and procedures or compliance certificate?
If you have questions contact Attorney Dismondy at firstname.lastname@example.org or via Skype at aida.dismondy or directly at +1.734.674.5922