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Fraud in GSA Contracts: How to Report it Under the False Claims Act for a Whistleblower Reward

Posted  May 13, 2019

Federal government offices purchase all the products and services any office does: office supplies, telecommunications equipment and services, computer hardware and software, consulting services, vehicles, travel services, and so on. The General Services Administration is the centralized procurement arm for the federal government, overseeing tens of billions of dollars in procurement annually, as well as handling other government property management.

With so much money at stake, GSA contracts have been a regular target of fraud.  Whistleblowers have played a crucial in exposing fraud in GSA contracts.  Without whistleblowers, such fraud might otherwise go undetected.

How GSA Contracts

Much of GSA’s procurement happens through Multiple Award Schedules (MAS), also called Federal Supply Schedules (FSS).  GSA schedules are long-term contracts for commercial products and services.  State and local governments may also be able to purchase under GSA schedules.

In addition to GSA Schedules, GSA also runs numerous other procurement and contracting programs, including professional services contracts, specialized information technology and telecommunications contracts, software blanket purchase agreements, building maintenance and janitorial services, fleet vehicle purchase and maintenance, and the disposition of surplus government property.

GSA procurement and contract negotiation is governed by the GSA Acquisition Manual (GSAM) and the GSA Acquisition Regulations (GSARs). GSA contracts typically incorporate specified provisions of the Federal Acquisition Regulations (FARs) and GSARs, established to create uniform policies for government acquisitions.  Because the FARs are incorporated into the contract, contractors must abide by the FARs.

Fraud in GSA Contracts

Defective Pricing Cases

Businesses who wish to have their products included in the GSA Schedules are required to fully and accurately disclose prices and discounts offered to commercial clients, so that the government can negotiate a fair price. Other GSA contracts have similar truth in negotiation and disclosure obligations.  Failure to disclose all the discounts and terms offered to comparable commercial customers may result in False Claims Act liability.  In 2015 two software companies paid $75.5 million to resolve pricing fraud allegations brought by whistleblowers under the False Claims Act.  And, today it was announced that software company Informatica has agreed to pay $21.6 million to resolve similar allegations in a whistleblower case.

Rubber stamp with "Best Price" imprintGSA contracts may contain a price reduction clause or a most favored commercial client clause, requiring that the government be given the best price available throughout the term of the contract. Deloitte Consulting paid $11.38 million in a case alleging it failed to comply with a price reduction clause in a technology services contract.

Violations of Set-Aside Programs

GSA contractors have been held liable for falsely representing that they qualified under programs designed to assist small and disadvantaged businesses. MCC Construction paid $1.8 million for conspiring to illegally obtain government contracts intended for small, disadvantaged businesses.

Violations of the Trade Agreements Act

GSA vendors are required to comply with the Trade Agreements Act and to certify that the products they supply are manufactured in the United States or in countries with which the U.S. has a trade agreement. Whistleblowers have successfully pursued cases alleging that companies violated the TAA and the False Claims Act by knowingly providing inaccurate information as to the country of origin of goods supplied under GSA contract, including the just-announced Informatica settlement and an earlier case involving Samsung Electronics.

Bid Rigging and Kickbacks

GSA procurement requires competitive bidding.  Contractors who enter into secret side deals to fix bid prices or pay kickbacks to others involved in the procurement face liability, including potential criminal liability.  In April, 2019, the principal of a Texas company pleaded guilty to rigging bids at online public auctions of surplus government equipment conducted by the GSA.

Blowing the Whistle on Fraud in GSA Contracts

Fraud in GSA contracts can be difficult to detect without inside information from whistleblowers.  Company insiders can provide critical information about the accuracy of a contractor’s price disclosures and discounts to commercial customers, or about arrangements with subcontractors and suppliers.

Volumes of FARs in softcoverIn addition to insiders, GSA fraud is an area in which competitors have brought whistleblower suits when they learned of a vendor’s violation.  For example, suits alleging TAA violations were successfully pursued against several office supply companies by a rival firm.

Because GSA contracts are regularly used for procurement by state and local governments, claims under applicable state or local False Claims Acts should also be considered. For example, in 2015, United Parcel Service resolved allegations that it had violated a GSA contract, paying $25 million to the federal government and $4 million to states and local entities.

Whether an insider or not, and whether the claim involves damages to the federal government only, or also to state and local entities, a whistleblower who reports GSA fraud by filing a qui tam case under the federal or a state False Claims Act may be eligible to receive a share of any recovery on behalf of the government – up to 30%. Monetary rewards for whistleblowers recognize that they have often put their careers on the line to expose wrongdoing, and should be compensated for their role in recovering funds for the government and taxpayers.

The whistleblower attorneys of Constantine Cannon have extensive experience representing whistleblowers under the qui tam provisions of federal and state False Claims Acts on claims involving government contract fraud. If you have evidence of GSA contract fraud, please contact us.  We can advise you on the merits of your potential claim, help you decide whether to blow the whistle, and work with you to plan your next steps.

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Tagged in: FCA Federal, FCA State, Government Procurement Fraud, Pricing Fraud, Set-Asides and Preferences, Trade Agreements,


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