Investigations under the False Claims Act (FCA) represent one of the most significant financial threats facing government contractors today. Recent reports from the Department of Justice indicate that defense contractors in particular are targeted by FCA claims more than almost any other industry.

Last year, DOJ reported more than $890 million in payments by government contractors. The agency has continued to aggressively pursue settlements in 2014 – reporting settlements for amounts ranging from $2.7 million to $6.5 million. These figures reflect only a small percentage of the contractors actively engaged in responding to FCA claims, and they do not take into account those companies’ tremendous productivity and legal costs.

What is the FCA, and how can defense contractors mitigate its risks? The act imposes civil liability for using false information to seek payment from the government. This means that government agencies can file lawsuits and seek monetary damages from private parties who violate the act.

However, FCA liability is not limited to government actions. The FCA also empowers private parties to file complaints on the government’s behalf. It rewards whistleblowers up to 30 percent of damages the government recovers, if the whistleblower files a complaint alleging violations not previously made public.