To combat fraud, the federal government has available an arsenal of criminal and civil statutes that carry severe penalties for contractor wrongdoing. Among its arsenal is the civil False Claims Act (FCA)—one of the government’s more effective weapons to combat fraud and deter false claims. Any person who knowingly submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government may be liable under the FCA and can be severely punished. Under the FCA, a party submitting a false claim to the government is
liable for a civil penalty of between $5,500 and $11,000 and three times the damages that the government sustains.
Central to contracting with the government is the requirement that contractors and subcontractors deal honestly with the government. This central theme is reflected in the requirement for various contractor certifications, including certification of applications for progress payments. Federal Acquisition Regulation (FAR) §52.232–5, for example, addresses payments under fixed-price construction contracts and contains a requirement for certification of payment applications. FAR §52.232–5 requires that along with each request for a progress payment the contractor certify that, to the best of the contractor’s knowledge and belief, (1) the amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract; (2) all payments due to subcontractors and suppliers from previous payments received under the
contract have been made, and timely payments will be made from the proceeds of the payment covered by the certification, in accordance with subcontract agreements and the requirements of the Prompt Payment Act; and (3) the request for progress payments does not include any amounts which the prime contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of the subcontract.
It is easy to imagine several circumstances under which the required certification would be considered false, thus exposing the contractor to liability under the FCA. For example, what if the quantity of work installed is
overstated? What if the installed work does not comply with the contract specifications? What if the quality of the installed work is deficient? What if tests and inspections required by the specifications were inadequately performed or not performed at all? What if the contractor substituted products without approval? What if the contractor failed to comply with the Buy American Act? What if the contractor failed to comply with the Davis-Bacon Act? What if the contractor failed to pay its subcontractors and suppliers in accordance with the Prompt Payment Act? What if the contractor failed to pay its subcontractors and suppliers from previous payments received from the government? What if the contractor intends to withhold or retain funds from its subcontractors or suppliers? Each of these instances could be deemed a false certification and give rise to an allegation of false claims under the FCA and thereby subject the contractor to very serious penalties.
Certifications alert the contractor signing the certification to the significance of its signature and should not be taken lightly. When a certification is false, it simplifies the government’s proof in establishing a violation of an underlying statute and also may create the basis for an action based solely on the false nature of the certification. While not an exhaustive list, following are some other types of certifications that contractors and subcontractors should keep in mind when doing work for the government.
- When submitting claims in excess of $100,000, the Contract Disputes Act requires the contractor to certify that (a) the claim is made in good faith; (b) the supporting data are accurate and complete to the best of the contractor’s knowledge and belief; (c) the amount requested accurately reflects the contract adjustment for which the contractor believes the federal government is liable; and (d) the certifier is authorized to certify the claim on behalf of the contractor.
- A Certificate of Current Cost or Pricing Data is required by FAR § 15.406-2 when a contractor submits cost or pricing data for pricing of certain contract proposals and contract modifications of more than $700,000.
- A Certification of Affirmative Action Compliance is required by FAR § 52.222-25.
- A Certification of Payrolls and Basic Records is required by FAR § 52.222-8, certifying that Davis-Bacon wages have been fully paid and data on the payroll records form is accurate and complete.
Government construction contract forms, policies and procedures are devised from multiple statutes and a comprehensive regulatory system, which includes numerous requirements for contractor certifications. Contractor certifications are a key element of the government’s effort to combat fraud and deter false claims and often provide the initial foundation of the government’s assertion of wrongdoing by a contractor. Consequently, such certifications should be taken very seriously; should always be truthful and accurate; and should never be considered mere formalities.
This article originally appeared in Construction Connection Newsletter. www.constructionconnection.com