In 2008, the U.S. government enacted the Close the Contractor Fraud Loophole Act to cut down on taxpayer dollars lost to federal contractors who committed fraud, overbilled government agencies and/or made false claims. But according to a recent report from Bloomberg, Offices of the Inspector General at nearly all of the 11 highest-spending government agencies, including the Department of Defense, are unsure of how many disclosures they’ve received or how much they’ve recovered from those disclosures. This is despite contractors having disclosed more than 2,200 reports of possible fraud, overbilling or False Claims Act violations.
Bloomberg’s Sam Skolnik reports that the regulation’s lack of definition around some keywords and phrases has led to confusion for contractors and that federal officials have not cracked down on cases involving overbilling, fraud and false claims as the act intended.
The 2008 law was the result of tens of billions of federal government dollars reportedly being lost to contractor fraud and waste during the Iraq and Afghanistan wars, and it instructs contractors to immediately and routinely disclose instances of fraud and overbilling. Contractors who knowingly fail to disclose fraud or report overpayments are at risk for suspension or debarment.
Government Contracts & Disputes partner Todd Canni tells Bloomberg that since the regulation was enacted, many contractors have taken the route of disclosing all possible violations, including small overbilling instances, to be safe.
But some companies opt for “soft disclosures,” where they might inform the contracting officer from the government of a fraud or overbilling issue and hope it doesn’t come to the attention of officials at the agency who have the power to enact punishment. And Canni says still others choose not to report at all out of fear about repercussions from the government.
“I do know that’s a regular thought process for client,” he said. “It’s a fear of the unknown, a ghost-in-the-graveyard uncertainty.”