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FCA Liability for Later Contract Years Affirmed

A judgment imposing False Claims Act liability on a contractor was affirmed by the Court of Appeals for the Sixth Circuit because invoices submitted in connection with a contract premised on false statements constituted false claims. A federal district court found the contractor liable for 709 FCA violations, which corresponded to the number of invoices the contractor submitted in the last three years of a six-year contract to manufacture military aircraft engines. Earlier contract years were outside the FCA's 10-year statute of limitations. On appeal, the parties did not dispute the contractor's final offer contained three false statements that were material to the government's decision to enter into the contract, but the contractor contended the invoices were not false claims. The contractor noted the invoices contained no false statements and were connected to separate one-year contracts after the original contract was modified through a calls for improvements process.

False Claim

The Sixth Circuit noted, however, that "an invoice, which itself does not contain a falsity, may supply the premise for a false claim if submitted in connection with a fraudulently obtained contract." Moreover, the court found "it [was] not that easy" to separate the original contract from the modifications. The original contract set price windows and obligated the government to purchase a minimum number of engines for six years. All documentation referred to the original contract, and the context and nature of the revisions indicated the government regarded new terms as contract modifications, not new freestanding contracts. Finally, it was irrelevant whether the government may have based contract prices on adequate price competition rather than the contractor's final offer because FCA liability did not depend on whether the government in fact relied on the false statements to pay the claims. (U.S. v. United Technologies Corp., CA-6, 55 CCF 79,479)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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