Mar 10, 2015

Like any good life insurance policy, one hopes that government contract compliance policies will always be there to secure successful future for Government contractors. With the renewed Government focus on criminal prosecutions and administrative sanctions, and additional compliance requirements released in the Howard P. Buck McKeon National Defense Authorization Act for Fiscal Year 2015, it is important to know where the U.S. Government looks for contractor non-compliance.

Where does the U.S. Government expect to find non-compliance?

Generally speaking, the U.S. Government expects good faith compliance with federal and local laws when it comes to government procurement law, and prompt disclosures in cases of non-compliance. Presently, 5 general areas of where the U.S. Government enforcement agencies look for contractor non-compliance are:

(1) mischarging for time and resources,

(2) product substitution / defective products,

(3) corruption in contractor-Government matters,

(4) eligibility for or compliance with special Government contracting program requirements and

(5) defective pricing.

Having strong internal controls and policies in the above areas combined with annual training may eliminate potential legal issues distracting from successful contracting with the U.S. Government. Failure to enforce such internal policies may result in allegations of procurement fraud.

What is procurement fraud?

Generally, “procurement fraud” consists of any deceptive or corrupt conduct related to the procurement of goods or services by a U.S. Government agency. Examples of procurement fraud include bribery, embezzlement, corruption, false claims, product substitution, and defective pricing, among others. In at least one case, a conspiracy to undermine procurement integrity through bid-rigging, has been charged as a conspiracy to defraud the U.S. Government. See generally U.S. v. Gosselin World Wide Moving, N.V., 411 F.3d 502 (4th Cir 2005)

What are some of the consequences of non-compliance?

Over the past almost 150 years, the U.S. Government has developed a vast array of remedies to address contractor procurement fraud and non-compliance. Generally, they are categorized into criminal remedies, civil remedies, contract remedies, and administrative remedies.

The U.S. Department of Defense Instruction 7050.05 (2014), Coordination of Remedies for Fraud and Corruption Related to Procurement Activities lists Government remedies which lead to criminal convictions, asset forfeiture, contract terminations and suspension and debarments, among others. In U.S. v. Mackby, 339 F.3d 1013 (9th Cir. 2003), the court found that $730,000 in penalties for $55,000 in damages resulting from false claims against the U.S. Government did not violate the Eight Amendment to the U.S. Constitution.

What can I do now?

Review your Government compliance policies and certifications, and determine whether they need any changes, or updates, and whether your employees need compliance training. Government contract compliance boils down to an investment in present and future contracting opportunities. For example, one of the new changes to the FAR imposes new contractor responsibilities to report and combat trafficking in persons.

Centre Law and Consulting LLC (WOSB) offers a broad range of nationally accredited training opportunities and legal services for Government contractors and Federal agencies interested in developing and maintaining strong government contract compliance policies, and resolving legal issues. If you are looking for more information or are not sure whether you are in compliance, contact us here, or call at 703-288-7010.

DISCLAIMER: This is not legal advice. Portions of this article may constitute attorney advertising. For educational use only.

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