According to
the Court of Federal Claims,
a contractor was subject to
False Claims Act liability,
despite prevailing in part
on its claims for payment of
unpaid invoices, because the
government's knowledge the
contractor's proposal was
pretextual did not displace
the contractor's knowledge
the proposal was false. The
contractor sought payment
for services provided under
a modification that extended
the term of an indefinite
quality/indefinite delivery
contract to provide sealift
logistic services awarded
under the Small Business
Administration's 8(a)
program. The government
contended the contractor
committed fraud by
submitting a proposal that
misrepresented the cost for
the services to be provided,
which rendered the
modification void ab
initio. According to the
government, the contractor
submitted a $2,999,949
proposal for five option
years with full knowledge
its annual billing for the
same scope of work had been
approximately $3.5 million
per year. The 8(a) program
required contract
opportunities to be awarded "on
the basis of
competition" if,
among other things, the
anticipated award price of
the contract would exceed $3
million, including options (15
USC 637(a)(1)(D)(i)).
Mountain
of Evidence
A "mountain
of record evidence"
made it inconceivable the
government justifiably
relied on the contractor's
proposal. Government
documents showed contracting
officials were "fully
aware of the need to befog
the [SBA] in order to obtain
its approval"
and to avoid competition
requirements by limiting the
award price to $3 million.
For example, although the
government was aware of the
discrepancy between annual
billings and the proposal
amount from the outset of
discussions, a senior
official encouraged any
steps necessary to award the
extension to the contractor,
and the contractor's
proposed phase-out of
services was dismissed as
necessary to remain within
the $3 million threshold. In
addition, a government
employee prepared a cost
estimate to support a
request to add funding,
which led to an
approximately $30 million
increase in the cost
estimate for the
modification's requirements.
The government failed to
demonstrate justifiable
reliance on the contractor's
misrepresentation of the
cost of proposed services,
and the contract was not
void at its inception. The
contractor was entitled to
payment to the extent
funding was available for
the work orders pursuant to
which invoiced services were
performed, and its total
recovery was $1,068,636.
Maximum
FCA Penalty
Despite
holding the contractor's
recovery in quantum
meruit negated
forfeiture under 28
USC 2514, the court
concluded the government'
institutional knowledge of
the contractor's performance
history and knowledge the
proposal was pretextual did
not neutralize the
contractor's FCA liability.
Government officials did not
engage in developing the
proposal or direct it be
presented as a scenario of
services that could be
obtained for $3 million. In
addition, although the
government failed to share
its knowledge of the
proposal's falsity with the
SBA, which was the
contracting agency, the
SBA's lack of knowledge of
the falsity did not absolve
the contractor of FCA
liability. Because the
proposal leading to award of
the modification was
fraudulent, all invoices
submitted under the
modification were tainted by
fraud. As a result, the
contractor was assessed the
maximum penalty for each
invoice for a total penalty
of $1,397,000. The evidence
also showed the contractor
knew three invoices
submitted after it was
ordered to stop work
contained false statements,
and the government's
knowledge of the alleged
falsity inherent in the
proposal did not provide a
basis for charging the
government with knowledge of
the alleged falsities in
these invoices. For
unsupported amounts in the 3
invoices, the government
also was entitled to recover
$568,802 in damages under
the Contract Disputes
Act’s fraud provision. ( Veridyne
Corp. v. U.S., FedCl, 56
CCF ¶79,845)
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