Law requires IG, contracting officer involvement

New mandatory disclosure rules for federal contractors are likely to increase the involvement of federal inspectors general in investigating fraud allegations in federal contracting, according to a government contracts expert.

The new disclosure requirements in the Federal Acquisition Regulation took effect Dec. 12, 2008. Contractors must report in a timely fashion to the appropriate inspector general or inspectors general if the contractor has credible evidence of procurement fraud. If they fail to make those reports, the contractors face suspension or debarment from federal contracting.

“Anything having to do with fraud has to go to the inspector general, in writing, with a copy to the contracting officer,” said Robert Burton, a partner at Venable LLP, who spoke at a conference on the new requirements today. “Consequently there will be a lot more communication between the inspector generals and the contracting officers.”

In the past, such disclosures were voluntary, with some reports made to IGs, and others to contracting officers. The Defense Department had a voluntary fraud disclosure program that generated dozens of reports annually in the 1980s, but the number or reports dwindled to four in 2006 and only two in 2007, Burton said.

Under the new requirements, contractors also must make timely reports of significant overpayments to contracting officers. Burton said he suspects contracting officers will be sharing that information with IGs if there is any chance fraud is involved.

“With overpayments, the contracting officers will be inclined to coordinate with IGs because there may be civil False Claims Act ramifications,” Burton said. The false claims law allows whistle-blowers to file lawsuits if they discover federal procurement fraud.

Burton said contractors should anticipate that whistle-blowers will not only continue to report instances of alleged fraud, but also under the new rule, they will make allegations that contractors failed to make timely disclosures when confronted with credible evidence of fraud.

“It is inevitable that at some point in time companies will be confronted with whistle-blowers alleging misconduct and failure to make mandatory disclosure,” Burton said. “It makes it a little more problematic for the contractors.”

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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Reader comments

Fri, Feb 13, 2009 oracle2world

"Contractors must report in a timely fashion to the appropriate inspector general or inspectors general if the contractor has credible evidence of procurement fraud." Am I living in the Twilight Zone? A contractor (or any entity for that matter) is going to rat itself out on fraud because of a regulation? They committed fraud IN THE FIRST PLACE because they don't respect regulations. Oh, oh ... I get it now. They can confess and make it up to the gov't, and put in for work at the US Treasury. It was okay for the Secretary of the Treasury, and that is the example folks there all look to. No matter how little I do for the gov't, when I read stories like this, any guilt I might have had disappears.

Fri, Feb 13, 2009 Hal Blanthorn NY

While I do not believe that there are large numbers of IT Contractors receiving overpayments for overcharges, I am sure that it does happen. However, I have seen disgruntled employees making "whistle blowing' - completely unfounded - charges also, as a means of harassing their employer (the IT Contracting Co.). It is a good thing that the IG investigate all charges fairly. There is also a serious issue of 'alleged overcharges' that are strictly the fault of the various government agencies contracting IT work. I have seens this situation personally, on numerous projects on which I have worked. The amount of 'scope creep' on virtually every Federal, Municipal, and State Contract I have been involved in has been extensive. In addition, Requirements are often ridiculous - (such as requirements which are solely related to Operating Systems, which are what they are, because the OS cannot be re-written by the project, and testing the various OS's for requirements compliance is a waste of money. I have seen charges for these activities branded as "frivilous overcharges'). Similarly, I have seen literally dozens of "Authorizations to Proceed" on work that has no clear amounts defined, where the Contractor is trying to help expedite work, only to be confronted (later) with refusal (by the Agency) to pay for work, and complaints (by the Agency) of overcharges. For examole, I recently did an analysis on a particular requested 'Work Order" changing a large part of the Contract design and implementation. There was never an agreed-upon price, as it was too much of the scope-of-effort was unknown. Although I do not know what the ultimate resolution of the issue was (or if it is still unresolved) - there was the Agency position that it was a $50,000 level of effort, and the Contractor claiming an over $5 million level-of-effort. Meanwhile, the work was performed, and after the fact, there were many comments regarding overcharges, allegations of wrongdoing, and other innuendoes made against the Contractor. This was a scenario I have seen countless times. I am not defending the Contractor, nor the Agency. I am simply pointing out how the whole issue of overcharges (and thus overpayments in many cases) is a very complex issue, with root causes on both sides of the issue. I sincerely hope the IG's Office will be fair and 'just' in their oversight, and that their efforts will not increase the costs of Projects - which are always paid by the Taxpayer. Perhaps the Federal Government might consider simplifying FISMA requirements, as I have seen projects with over 2,000 FISMA (and of course NIST) requirements, not counting the actual System (and associated) Requirements. This adds staggering costs, to align, and prove compliance, as well as requesting variance or exemptions from various requirements.HJB

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