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MOAR
Government Procurement Fraud and the False Claims Act
Federal Acquisition Regulation
As of December 12, 2008, Federal Acquisition Regulation (“FAR”) amendments require a government contractor to self-disclose its own or its employees’ violations of criminal conduct, relating to fraud, conflict of interest, bribery or gratuities, or the FCA. The offenses must have occurred “in connection with the award, performance, or closeout” of the contract or subcontract.7 False statements are the most commonly charged offense in procurement fraud cases, and are used to penalize common forms of fraudulent procurement activity.8
FAR requires a contractor to timely disclose when it has credible evidence to believe a triggering violation has occurred.9 The disclosure typically should occur before a complete and thorough investigation is completed. Disclosure should be made within thirty days in order to take advantage of the provision in the FCA that rewards timely self-disclosures with a limit of doublerather than treble damages.10
The disclosure should specifically state that is being made in accordance with the mandatory disclosure provisions of FAR Section 52.203-13, and that the contractor has credible evidence that an offense has occurred subject to the mandatory disclosure provisions.11 This includes when a contractor learns that the government “has overpaid on a contract financing or invoice payment.”12 The disclosure should describe and identify the offense and provide general, preliminary factual information and a description of the damages.13
The FAR does not require a waiver of attorney client or work product privileges, but waiver may occur when information is disclosed to a third party.14 A 2008 amendment to the Federal Rules of Evidence limits subject matter waivers of privileged information following certain intentional disclosures to the federal government.15 This waiver, however, extends only to the information disclosed to the government, and does not extend to third parties absent a court order.16
Although contractors must comply with FAR mandatory disclosure requirements, they still retain the right to defend an investigation and not become deputies of the government, and the right to assert and preserve attorney-client privilege and work product Protection.17
These new regulations essentially shift the focus from management to law enforcement. In addition, it is feared that the requirements under the new regulations regarding “potential” civil FCA violations “will have a chilling effect on the discretionary decision making” of those involved because the new regulations effectively shift de facto management of the federal acquisition system to the Department of Justice.18 Increasingly, contract performance will be determined to be successful based on a contractor’s effective compliance programs.19
https://www.bafirm.com/publication/government-procurement-fraud-and-the-false-claims-act/