What is Government Contracting Fraud?

Over the past several years the federal government has increased efforts to curb abuses in contracting activity. A main goal of this heightened oversight is to identify and prevent fraud. Contracting fraud is more than just the multi-million dollar schemes we read about in the news involving large corporations. Small companies that perform basic functions such as paper shredding or janitorial services can also engage in fraudulent conduct. Even though fraud schemes range in complexity, the underlying goal is often the same: to obtain an unfair or dishonest advantage at the government’s expense.

Here are some common types of government contracting fraud:

  • Bid Rigging: Contractors misrepresent that they are competing against each other when in fact they agree to cooperate on a winning bid to increase job profit.
  • Conflict of Interest: A government contracting official or someone else with oversight authority has an undisclosed financial interest in a contractor or vendor, resulting in an improper contract award or inflated costs.
  • Kickbacks: A contractor misrepresents the cost of performing work by secretly paying a fee for being awarded the contract.
  • Materials & Time Overcharging: A contractor misrepresents the amount of materials or employee labor used on a job in order to be paid for more material than was actually used or to artificially charge for more work hours.
  • Bribery: A contractor compensates a government official in exchange for obtaining contracts or permitting overcharges.

To uncover these schemes, governmental agencies frequently conduct audits and investigations. Governmental organizations also encourage their employees to be on the lookout for warning signs that may be indicators of fraud. If that wasn’t enough, federal law compensates people who come forward with information about possible fraud being perpetrated by their own employer. However, the discovery of “red flags” does not always mean a contractor is lying, stealing, or cheating. Sometimes there are alternative explanations for alleged unlawful conduct. For instance, misinterpretation of a contract or a change in a particular industry standard can cause an unwarranted accusation. A fraud conviction can have criminal, civil, and administrative ramifications. Criminal penalties alone can result in up to 10 years’ imprisonment and a $1 million fine.

To avoid unnecessary exposure to criminal fraud statutes, it is important to work with the right criminal defense attorney. Berry Law has extensive experience developing aggressive strategies to safeguard clients from government investigations and prosecutions. Please contact us if you or your business has been accused of contracting fraud.

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