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Contractor Beware: Noncompliance Could Result in False Claims Acts Liability

Authored by attorney Shalanda N. Franklin

A contractor could face false claims act liability for presenting a claim for payment when it fails to comply with material terms of a government contract, according to the Fourth Circuit Court of Appeals. In January, 2015, the Fourth Circuit held that the Government could pursue a false claims act claim against a contractor under those very circumstances. 

The contractor was awarded a contract to provide security services to an airbase in Iraq. The contact required the contractor to ensure that its guards were qualified to carry and use a weapon. It was alleged that the contractor knew that the guards it employed did not have the requisite qualifications, falsified records regarding the guards’ qualifications, and submitted monthly invoices for payment under the contract. Although the contractor never expressly certified that its services conformed to the contract, the Fourth Circuit held that the certification of compliance could be implied under the circumstances. The contractor’s alleged submission of the payment requests with knowledge it failed to provide skilled marksmen, which was a material contract requirement, presents a valid claim under the False Claims Act.

The Fourth Circuit noted that its ruling should not be interpreted to create a False Claims Act case against every contractor that fails to comply with all contract requirements. Instead, the Court’s decision highlights the purpose of the False Claim Act, which is to “protect the treasury against the claims of unscrupulous contractors.”  The general disputes regarding the contractors performance or minor violations should not trigger liability under the False Claims Act.  

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