|
|
Claim Used as "Negotiating Ploy" Was Fraudulent
The amount of a Contract Disputes Act fraud penalty assessed on a contractor
by the Court of Federal Claims was upheld by the Court of Appeals for the
Federal Circuit because the assessment applied to the fraudulent portion of the
contractor's claim. The contractor, engaged to construct a road on a tropical
island, found it difficult to compact soil. It blamed the government's contract
requirements, claiming $64 million in damages. At trial, the government
counterclaimed, alleging the contractor's claim violated the CDA. Under the
antifraud provision of the CDA (41 USC 604), "[i]f a contractor is unable
to support any part of his claim and it is determined that such inability is
attributable to misrepresentation of fact or fraud on the part of the
contractor, he shall be liable to the [g]overnment for an amount equal to such
unsupported part of the claim." The CFC found the contractor underbid the
contract with the intent to recoup any shortfall through equitable adjustments
and consequently submitted the claim as a "negotiating ploy" (50
CCF ¶78,635). The contractor, therefore, violated the CDA by submitting a
false claim with intent to deceive the government. The CFC determined the
portion of the contractor's complaint that claimed future costs was fraudulent
and assessed the CDA penalty accordingly, but it did not assess a penalty for
the amount claimed as breach of contract damages.
Good Faith Submission
On appeal, the contractor did not offer a strong challenge to the CFC's
findings, but instead argued the CFC's decision should be set aside because the
court found only $50.6 million of the $64 million claim was fraudulent. However,
the CFC's decision to assess the lesser amount as a penalty did not undermine
its factual findings. Though the breach of contract claims could also have been
fraudulent, they could be supported by different methodologies, which even if
incorrect were not fraudulent. The contractor further argued a claim can be
fraudulent only if it rests on false facts rather than on a baseless
calculation. This argument lacked merit, as the CDA at 41 USC 605(c)(1) requires
the submission of a claim "in good faith" and with "supporting
data [that] are accurate and complete." By certifying to $64 million, the
contractor represented the entire claim was submitted in good faith. Congress
enacted the antifraud provision of the CDA specifically to address such baseless
claims. The contractor's argument the penalty was unconstitutional under the
Eighth and Fifth Amendments also lacked merit. The penalty was not
disproportionate to the possible harm to the government. (Daewoo Engineering
and Construction Co. v. U.S., CA-FC, 53
CCF ¶79,065)
(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. )
|
|
|
|