Government Contracting Fraud
Learn about the different types of government contracting fraud.
Table of Contents
The federal government buys all sorts of goods ranging from weapons systems to computer software to uniforms, under a variety of procurement and government contracting rules and systems.
The vendors who sell those goods and services commit fraud across various industries, employing numerous schemes and structures to deceive the government.
Whistleblowers who report government contracting fraud may be eligible to receive a share of the government’s recovery as a financial reward.
Here are some of the most common types of government contracting fraud:
Non-conforming goods
This type of fraud occurs when contractors deliver goods or services that do not meet the specific requirements outlined in their government contracts. Whether it involves substituting lower-quality materials or failing to provide the proper services, these actions violate contract terms and can result in significant waste of taxpayer money. Such fraudulent practices undermine the integrity of government procurement and can lead to serious legal repercussions under the False Claims Act.
Products that Failed Testing or Quality Assurance or Haven’t Been Tested
Contractors are often required to conduct rigorous testing and quality assurance on the products they supply to the government. When they either skip these processes or deliver products that fail testing, they violate contract terms and may put government operations at risk. Providing defective or untested products can lead to dangerous situations, particularly in industries like defense or healthcare. Whistleblowers who expose these practices can help ensure that contractors are held accountable.
Misrepresenting Costs, Prices, and Discounts
Government contracts often contain provisions requiring contractors to offer the government their best prices, also known as “most favored customer” or “best pricing” clauses. Violations occur when contractors misrepresent costs, prices, or discounts, overcharging the government by not offering the same discounts provided to other customers. This can also include violations of the Truth in Negotiation Act (TINA), which requires accurate disclosure of cost and pricing data during contract negotiations.
Inflated Material Costs or Rates
This fraud involves inflating material costs, labor rates, or other expenses submitted to the government. Contractors may overstate the true costs of goods or services provided, or inflate the hours worked to increase the amount of money they receive under a contract. Submitting false claims for inflated costs is a violation of the False Claims Act, and whistleblowers who report such activities can help the government recover funds lost due to these deceptive practices.
Cross Charging or Misallocating Costs Between Contracts
Cross charging occurs when a contractor improperly shifts costs from one government contract to another, or misallocates costs between government and private contracts. This fraudulent practice allows contractors to charge the government for work that was not performed under a particular contract or inflate the cost of work done under multiple contracts. Misallocation of costs can result in overcharging and defrauding the government, and whistleblowers play a crucial role in exposing such misconduct.
Cybersecurity Vulnerabilities, Hacks, and Data Breaches
Government contractors are required to comply with specific cybersecurity standards to protect sensitive information. Concealing cybersecurity vulnerabilities, data breaches, or cyberattacks from the government violates contract terms and can expose national security or confidential data to risks. Failing to report these incidents or misrepresenting the state of a company’s cybersecurity readiness is a serious form of fraud, and whistleblowers can help ensure accountability by bringing these issues to light.
Compliance with Buy American Act or Trade Laws
Many government contracts require compliance with the Buy American Act, U.S. Trade Agreements, or other export control laws. Contractors who provide goods or services that do not meet these requirements are committing fraud by misrepresenting the origin or legal status of their products. This type of fraud can undermine U.S. manufacturing and trade policies, and whistleblowers are instrumental in revealing when contractors fail to meet these obligations.
Non-compliance with the Davis-Bacon Act or Prevailing Wage Requirements
The Davis-Bacon Act and other prevailing wage laws require contractors to pay workers a certain wage when performing work on government projects. Contractors who falsely certify compliance with these laws but actually pay their workers less than the mandated rate are engaging in wage theft and contract fraud. This type of fraud not only harms workers but also undermines fair competition in government contracting.
Falsely Claiming Disadvantaged Business Status or Using Sham Subcontractors
Government programs set aside contracts for small businesses, minority/women-owned businesses, or service-disabled veteran-owned businesses. Fraud occurs when companies falsely claim disadvantaged business status or use sham subcontractors to take advantage of these programs. By circumventing the intent of these programs, fraudulent businesses gain unfair advantages in contracting, and whistleblowers can help protect the integrity of these set-asides.
Bid-Rigging, Bribery, or Other Wrongful Means
Contractors who engage in bid-rigging, bribery, or other illegal tactics to win government contracts violate antitrust laws and procurement regulations. These practices distort the competitive bidding process, leading to inflated costs and substandard performance on government projects. Whistleblowers who expose such corruption play a vital role in ensuring fair and transparent contracting processes, protecting taxpayers from fraud and abuse.
