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Relator Sufficiently Alleged Contractor Violated FCA

A qui tam False Claims Act complaint stated a cause of action, according to the District Court for the Eastern District of Pennsylvania, because the relator alleged the contractor made false disclosures to the government regarding discounts it gave to other customers, the contractor knew it was required to disclose the discounts, and the false disclosures were material to the government's decision to enter into equipment contracts. According to the relator, the contractor fraudulently induced the government to pay more than it should have to purchase capital medical equipment by misrepresenting the extent of pricing discounts the contractor gave to commercial customers. The alleged false statements were made on Discount and Pricing Information forms, which require offerors to provide the government with information on discounts given to other customers that result in lower net prices than those offered to the government. The contractor moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing the relator failed to state a "false statement" cause of action under 31 USC 3729(a)(2) or any other theory of liability under the FCA. To state a claim under the FCA, a relator must allege the contractor knew it made or submitted a materially false statement or claim to the government.

"Best Discount"

The contractor argued it made no false statements because there was no omission of required information. According to the contractor, the Federal Acquisition Regulation did not require DPI forms to contain information regarding "transactional" discounts, only "contractual" discounts. However, a plain reading of the DPI indicated "transactional discounts are not excluded from the calculus," and an offeror must provide its "best discount," not just its best "contractual discount." Even if the contractor had no duty to provide transactional information, there was a basis for a cause of action, namely that the contractor provided the government with allegedly false information on the DPIs regarding the best discounts it gave other customers. The contractor further argued the relator failed to allege facts showing the government relied on the missing information, so the information could not have been material. Again, looking at the DPI, the request for best discounts was material because the information enables the government to use the information to negotiate a fair and reasonable price. The contractor then argued the relator did not allege facts from which to infer the contractor knew or believed that transactional documents needed to be disclosed. However, the relator did not limit his allegations to the failure to disclose transactional discounts. For example, the relator alleged the contractor devised a scheme to hide higher discounts given to private customers. Also, the contractor's managers admitted the contractor was frequently not giving the government the best discount. (U.S. ex rel. Thomas v. Siemens AG, et al., DC ED Penn, 54 CCF 79,318)




(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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