April 16, 2024

Qui Tam and Government Contracts

A qui tam lawsuit is a specific type of lawsuit that occurs when a whistleblower, or ‘relator,’ courageously steps forward to reveal fraudulent acts against the federal government. “Qui tam pro domino rege quam pro se ipso in hac parte sequitur” translates to “who sues on behalf of the King as well as for himself”. A qui tam lawsuit arises when there’s fraudulent activity committed against the government and can certainly occur within a government contract.

Qui Tam The False Claims Act, set up in 1863, paved the way on holding any person that commits fraud against the government accountable for their false claim. Those found liable are required to pay triple the damages incurred by the government, plus a fine. Under this act, qui tam cases empower whistleblowers by granting them a share of any funds recovered. Its intent was not only to discourage fraudulent actions but also guarantee that perpetrators atone for their false claims. This whistleblower reward system promotes the brave act, safeguards governmental interests, and ensures wrongdoers are held responsible. Throughout its history, the False Claims Act has reclaimed substantial sums of money, exposing the unscrupulous practices of businesses, causing public support to plummet.

The federal government often outsources tasks to external companies when it faces urgent needs but lacks the necessary resources or expertise. These partnerships are built on mutual trust: companies agree to deliver quality work, and the government promises fair compensation in return. The integrity of these agreements is crucial, making sure projects are completed efficiently and taxpayer money is spent judiciously. It is all about maintaining trust and that both parties honor their commitments. In this blog, we will explore the role of qui tam actions in combating fraud in government contracting.

Common Types of Fraud in Government Contracts

Over-billing: This occurs when a contractor charges the government for more hours worked or materials used than actually was.

Charging for Unprovided Services or Goods: Some contractors bill for products or services that they never actually deliver.

Substituting Products: This involves providing lower-quality materials or products than what the contract specifies.

False Certifications: Contractors may falsely claim that their products or services meet certain required standards or certifications.

Cost Misallocation: In cases where a company has both government and private contracts, they might improperly charge the government contract for costs that should be allocated to private contracts.

Kickbacks and Bribery: This involves offering or accepting money or other benefits in exchange for favorable treatment on government contracts.

Collusion and Bid-Rigging: Contractors might conspire among themselves to inflate prices or rig bids, manipulating the system so one of them wins the contract at a higher price.

The Brave Whistleblower

A qui tam case would occur if the whistleblower saw any of these types of fraud as a part of the contracting and reported it. Explore our detailed piece on defense contractors; here’s a preview— “[This] category of false claim actions brought against defense contractors involves the falsification of pricing information for equipment or labor. For example, a qui tam whistleblower claimed that the defendant company fraudulently overcharged the government on contracts with the Department of Defense and National Aeronautics and Space Administration. The qui tam whistleblower was the director of financial control for the company’s space unit and reported directly to its general manager. The qui tam whistleblower accused the company of shifting expenses from commercial jobs to government contracts, and falsely classifying other expenses in an effort to avoid reimbursement caps placed on research and development costs of government contracts. The company settled the lawsuit for $111.2 million.”

qui tam Although it may seem like a whistleblower should not feel fear in working to report fraud, challenges can be daunting, including retaliation, wrongful termination, or even the complexity of legal processes. It is imperative the qui tam relator feels support, confidence, and protection throughout the process. At Berg & Androphy, we ensure our clients feel just that. An overseas whistleblower wrote to B&A, “Throughout this entire ordeal, not one single time have I ever felt that I was alone in this fight to bring those responsible for fraud to justice. Anytime I sense some retaliation, you are always available (even on weekends while playing golf) to advise and contact the Department of Defense investigators to intercede. Being halfway around the world and still in the middle of the viper pit, you and your team have put my mind at ease, kept me in the loop and reassured me on almost a weekly basis that you have my back, and you are in this for the long haul the same as I am.” While challenging legitimate businesses might appear burdensome, pursuing a qui tam action is profoundly worthwhile. This courageous step not only holds corrupt individuals accountable but also recovers funds for a better future and supports the whistleblower in their journey.

Negative Impacts of Government Fraud

Defense Contractors

National Security Threats: Fraudulent activities can lead to compromised defense projects, endangering national security.
Wasted Resources: Over-billing and misallocation of funds can inflate defense budgets unnecessarily, diverting resources from critical needs.
Quality and Safety Compromises: Supplying substandard equipment or services jeopardizes the safety and effectiveness of military operations.

Construction Companies

Infrastructure Failure: Fraud, such as using inferior materials or skimping on safety protocols, risks the integrity of infrastructure projects, leading to potential disasters.
Cost Overruns and Delays: Fraudulent practices often result in projects going over budget and timelines extending, causing financial strain and inconvenience.
Economic Impact: The ripple effects of fraud in construction can affect local economies, from job losses to increased public spending to address issues.

Technology and IT Services Providers

Data Security Risks: Fraud involving IT contracts can expose government agencies to cybersecurity threats, risking sensitive data.
Inefficiency and Downtime: Delivering outdated or inefficient technology solutions can hinder government operations, leading to inefficiencies and potential system downtimes.
Financial Waste: Over-billing for technology services or products not delivered as promised leads to significant financial losses.

Healthcare and Medical Malpractice

Patient Care Risks: Supplying substandard medical equipment or pharmaceuticals compromises patient care in government-run healthcare facilities. This opens the door for further medical malpractice, resulting in further harm done to the patient.
Increased Healthcare Costs: Fraudulent billing practices inflate healthcare costs, affecting the budget set aside for public health services.
Trust Erosion: Healthcare fraud undermines trust in public healthcare systems, possibly deterring individuals from seeking necessary medical care.

Across all these sectors, fraud in government contracts not only results in financial losses but also erodes public trust, compromises safety and quality, and can have dire consequences on national security and public welfare. If you’re stepping into the crucial role of a whistleblower, feeling uncertain and overwhelmed about where to begin, we encourage you to reach out to us. Let us navigate you through this whole process, confirming and empowering you at every turn. Your bravery is admirable, and Berg & Androphy is here to stand by you every step of the way.