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Procurement Fraud and Qui Tam Cases


Procurement fraud refers to deception for personal profit within the process of government contracting for goods and/or services. In contracts paid by federal funds, almost any instance of bad faith that leads to profit can constitute procurement fraud.

Who can be found guilty of procurement fraud?

Guilty parties can include the individuals hired to procure on behalf of the government, the contractors (or bidders for a contract), and anyone else who may have influenced the contracting.

How does procurement fraud occur?

Fraud can occur at several points during the procurement process.

It can take place before solicitation of potential contractors begins. At this point in the process, the fraudulent party is usually a government agent. Examples of fraud that occurs before solicitation include insufficient justification of the necessity for a given product or service; inadequate research on the best source for the necessary service or product; and cultivation of an uncompetitive contracting process.

Procurement fraud can also take place during solicitation of contractors. Within the government, this may include selecting bidders based upon biased information, or disclosing information to one bidder but not to the public. It may also include collusion between bidders. And obviously the distribution or acceptance of bribes or kickbacks in relation to contracting is considered fraud.

The formation of a contract may be considered fraudulent. An example is a Walsh-Healy violation. Walsh-Healy is a law that states that private companies cannot purchase products and contract to sell them to the government at a profit without adding something to the product.
Finally, fraud can take place during the execution of a contract; for instance, if a contract stipulates that a product be tested, but the provider fails to do so, this can be considered fraud.

What is defense contractor fraud?

Defense contractor fraud is a type of procurement fraud in which a defense contractor or subcontractor fails to provide the government with the product or service that has been purchased.

Many defense contracts involve a primary contractor who agrees to provide a product and one or more subcontractors that the primary contractor hires to contribute to the product. They may provide parts, test one or more components, or provide other services. Each of these contractors is required to provide faithful service; any breach of a contract or subcontract that contributes to an inferior product for the government may constitute defense contractor fraud.

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