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Alleged Mistakes Were Not False Claims Act Violations

In a qui tam False Claims Act action, the Court of Appeals for the Fourth Circuit affirmed summary judgment in favor of a contractor because the relator failed to establish alleged construction mistakes constituted FCA violations. The relator alleged his former employer falsely billed the government for deficient work in constructing the U.S. embassy in Baghdad. According to the relator, the contractor billed for substandard concrete work, used larger than specified rebar, did not build a perimeter wall to the required height, provided subpar security items, installed a substandard fire protection system, overstated the amount of work in its progress payment invoices, and requested final inspections knowing work was deficient.

Garden-Variety Issues

The court concluded the relator "largely failed" to show the contractor's claims and statements were "arguably false" and "failed entirely to show that [the contractor] either had actual knowledge or recklessly disregarded the possibility of its billing for work that was anything other than was claimed." Instead, the allegations concerned "garden-variety issues of contractual performance," consisting of "honest disagreements, routine adjustments and corrections, and sincere and comparatively minor oversights." The court noted it was not the FCA's purpose to "punish honest mistakes or incorrect claims submitted through mere negligence," and applying the FCA to a "run-of-the-mill breach of contract action" would "penalize good faith disagreements over matters of commercial judgment." The court also noted the relator's allegations of fraud had to "be viewed in the context of the close working relationship" between the contractor and the government. With a large stake in successful completion of the project, the government called in inspectors at every stage and maintained engineers on site. According to the court, "[t]his [was] not a case where a contractor was left to its own devices to complete a government project with only its commercial conscience as its guide." (U.S. ex rel. Owens v. First Kuwaiti General Trading & Contracting Co., CA-4, 54 CCF 79,375)




(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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