In Daewoo Engineering & Constr. Co, Ltd. v. United States, the United States Court of Federal Claims concluded that the contractor was liable to the government for $50 million for the contractor’s violation of the fraud provision of the CDA in connection with the contractor’s submission of a claim for additional compensation. The dispute arose under a contract between the U.S. Corps of Engineers (“Corps”) and Daewoo for the construction by Daewoo of a highway project on the island nation of Palau. During construction, Daewoo experienced extended weather delays and adverse sub-surface site conditions that Daewoo alleged affected its construction activities. Daewoo submitted a certified claim in the amount of $64 million, which included $13.4 million in incurred damages and projected additional costs of $50 million. The Corps issued a final decision denying the claim, which Daewoo appealed by filing suit in the Court of Federal Claims.
The Court of Federal Claims affirmed the Corps’ final decision denying Daewoo’s claim, and further concluded that Daewoo was liable to the government for $50 million for filing a fraudulent claim under the CDA. In making its ruling, the court relied on section 604 of the CDA, which states: “If a contractor is unable to support any part of his claim and it is determined that such inability is attributable to misrepresentations of fact or fraud on the part of the contractor, he shall be liable to the Government for an amount equal to such unsupported part of the claim in addition to all costs to the Government attributable to the cost of reviewing said part of his claim.” The court found that Daewoo “made the claim for purposes other than good faith belief that the Government owed Daewoo that amount,” because Daewoo’s project manager testified that Daewoo filed at least $50 million of the claim as a “negotiation ploy” and “to get the Government to ‘pay attention’ so it would agree to a cheaper method of constructing embankments.” As such, the court entered judgment against Daewoo in the amount of $50 million based upon the portion of the claim found to be fraudulent. The decision, while subject to reversal, sets a challenging precedent for claimants required to certify a claim containing elements of damage that have not yet been suffered. No. 02-1914C, 2006 WL 2982098 (Fed. Cl. Oct. 13, 2006).