Construction Law

False Claims Act Does not Deal with Ordinary Contract Matters

By Ryan McCabe

Recently a resigned foreman filed a whistleblower action alleging that a contractor defrauded the government by billing for substandard or defective work on a new US Embassy in Baghdad. According to the foreman?s allegations, the contractor billed for inadequate concrete work and overstated the amount of work completed on payment invoices.

The circuit court determined that the False Claims Act (FCA) is only concerned with fraud, not ordinary contract matters. First, the court found that the concrete work was not substandard because the contract itself anticipated subsequent minor repairs. Further, government inspectors frequented the job site and approved the contractor?s work, contradicting the claim of fraud or falsity.

As to the foreman?s second claim, the court found that it is industry standard to estimate the completed percentage in progress payments. The contract once again shines light on the discrepancy by providing that progress payments would be made ?on estimates of work accomplished.? The foreman was unable to provide any evidence or first-hand knowledge that the estimates were falsified. 

Because the disgruntled foreman failed to show that the contractor knowingly engaged in fraudulent conduct that was material and cost the government money, his FCA claim failed. The court refused to align these contractual disagreements with false claims under the FCA.

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Full post as published by The South Carolina Construction Law Blog on September 21, 2010 (boomark / email).