New mandatory disclosure rules for contractors will increase the involvement of inspectors general in policing contractor fraud, expert says.
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.”