When working on a federal job, there’s a different set of rules. Literally! There are a slew of laws surrounding requirements on federal projects, not the least of which is the Miller Act. But this isn’t another Miller Act post (though we’re sure to publish another one soon).
No, this post takes a look at a circumstance of federal projects that’s less obvious – the fact that consequences for mistakes on federal jobs can be more grave than on state or private projects. We’re talking about the False Claims Act.
Take Extra Care When Billing Federal Jobs
Construction and risk go hand in hand. There’s risk in payment, risk in job security, and we don’t need to tell you about the safety risks involved. When working on federal projects, everyone should be aware that there’s an additional layer of risk, albeit an easily avoidable one. When working on a federal job, you’d better be sure to submit accurate applications for payment. If you overbill, you could run afoul of the False Claims Act.
The False Claims Act
The False Claims Act means business. Violators of the Act may face treble (triple!) damages, plus 5-figure fines on top of that. What’s more, the government actually incentivizes individuals to bring False Claims Act suits. Yup – people who bring False Claim Act suits on behalf of the government get a cool 15-30% of the total recovery. That may sound a little odd, but it makes sense. The government can’t police everything, so they have to make it worth someone’s while to bring a suit.
Slow Down. What is The False Claims Act?
The False Claims Act effectively wards off fraud against the government. It’s there to protect the government from overpaying for goods and services. You might be thinking, “The government budget is already bloated! The False Claims Act isn’t working!” But the truth is, things would likely be a lot worse without it.
Unrelated, But Important Reading: Don’t File Fraudulent Mechanics Liens
What in the world does this have to do with construction?
Basically, the False Claims Act comes into play when any person knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval from the federal government.
Unfortunately, it’s not all that uncommon for a little exaggeration to take place when it comes to billing. So, it’s pretty obvious how a contractor could get in trouble with the False Claims Act. Just because a sub or supplier doesn’t have a contract with the government doesn’t mean they’re in the clear, though.
Say a subcontractor submits a bill to their GC and “inflates” the amount of time or materials for that particular invoice. While that sub or supplier is not under a direct contract with the federal government, that is where the money will ultimately come from – federal coffers. Plus, as mentioned above, the False Claims Act will apply when any person presents a false or fraudulent claim for payment, or even if they merely cause that claim to be presented.
Do you see where we’re going here?
If a sub or supplier submits an application for payment that’s contains more than what’s actually owed, they might become liable under the False Claims Act since they caused that invalid claim for payment to be presented!
It is always best practice to operate your business transparently and honestly. For those performing work on a federal job, though, there’s extra incentive. The False Claims Act. So be sure to take extra care when billing federal jobs.