Contract Compliance

DOJ Settles False Claim Act Allegations for Overbilling on Service Contract

Federal contractors with service contracts must strictly adhere to the required contract qualifications for each labor category included in their contract staffing plan, total compensation plan or other contract requirement. Contractors typically define their labor categories and required qualifications in their proposal. Once the labor categories and qualifications are accepted and included in the contract, the contractor is bound to follow them. For instance, if a specific labor category requires a Bachelor’s degree an employee without the degree cannot be billed in that labor category, regardless of experience or other job qualifications.

Contractors that invoice for employees without the required qualifications are overbilling for the services, and face prosecution and penalties under the False Claims Act (FCA). The FCA statute of limitations is up to 10 years, so the fines can add up. Whistleblowers that report FCA violations can receive up to 30% of the money recovered.

The Department of Justice (DOJ) aggressively pursues FCA claims, recovering nearly $6 billion in FY 2014. The DOJ recently announced settlement of a case stretching back nearly 10 years that illustrates the importance of adhering to the qualification requirements contained in the contract. DRS, a Virginia-based contractor, designs and operates satellite communications systems. The DOJ alleged some DRS employees who worked on two separate contracts did not fully meet the requirements of their invoiced labor category, but DRS billed the government for a higher labor category as if the employee had all qualifications. The DOJ accused DRS of FCA violations for a nine-year period on one contract and a two-year period on the other. The total amount of overbilling was not specified, but DRS agreed to pay $13.7 million to settle the allegations.

Lessons Learned From Enforcement Actions

Recent enforcements, such as the DRS case, illustrate actions contractors may take to ensure compliance.

1. Where possible, propose requirements for labor categories to allow highly qualified, but unconventional, employees to qualify for the position. For instance, consider including experience, licenses or specific certifications to fulfill an education requirement. Use ranges for experience rather than a particular specific cut-off. You can also consider broad definitions to include highly qualified candidates such as: “other demonstrated directly relevant experience or other qualification may be considered to fulfill the requirements for this position.”
2. Categorize employees properly, and always adhere to required qualifications. If an employee does not meet minimum requirements classify them in a lower job category.
3. If experience or other non-traditional qualifications are used to justify classification in a higher category fully document the qualifications and how they satisfy the job requirements. Documentation should be complete and available upon government request.
4. Regularly audit company labor compliance as a part of a rigorous compliance policy.

Additional Information

If you have questions regarding proposing or charging on a service or other contract or other federal government contract compliance issue, contact the professionals at Williamson Law Group at 301 788-8198 for confidential and candid assistance and counsel, or e-mail Scott Williamson, managing attorney, at srw@williamsonlawgroup.com.

This Contract Compliance Update is intended to keep readers current on developments in federal government compliance matters and is not intended to be legal advice. If you have any questions, please contact Scott Williamson for legal advice regarding your particular case.