The United States spends well over $600 billion each year on military defense, a significant portion of which is spent on goods and services provided by defense contractors. Although outsourcing these defense projects may enable the Department of Defense (DOD) to enhance its fighting forces, defense contractor fraud costs U.S. taxpayers billions of dollars each year. Defense contractors that provide substandard weapons and military equipment to the government not only commit fraud but also jeopardize the lives of our brave servicemembers. If you have knowledge of defense contractor fraud, you may be entitled to a whistleblower reward.
Jeffrey Newman Law, located in Massachusetts, provides powerful representation to defense contractor whistleblowers throughout the nation. We represent defense contractor employees in qui tam claims brought under the False Claims Act. Well-versed in whistleblower provisions of the National Defense Authorization Act of 2013 (NDAA), our defense contractor whistleblower attorneys will help you obtain the reward you have earned.
What is defense contractor fraud?
Defense contractor fraud is not a recent development. In fact, the False Claims Act (FCA) was enacted in 1863 to combat rampant fraud by government contractors during the Civil War. Today, defense contractors manufacture weapons, aircraft, ships, and vehicles, while providing critical services such as logistics, intelligence gathering, technical training, security management, and specialized military services. Defense contractor fraud occurs when false claims about the products they manufacture or the services they provide are submitted to the government.
Some common forms of defense contractor fraud include:
- Cross-charging — Generally, there are two types of defense contracts — fixed-price contracts and cost-plus contracts. Under a fixed-price contract, the defense contractor is paid a fixed amount for the goods or services, regardless of the production costs incurred. In a cost-plus arrangement, the contractor is paid a set price for the goods or services, plus a percentage of the contractor’s production costs. Cross-charging fraud occurs when defense contractors shift costs from a fixed-price contract to a cost-plus contract to boost its profits.
- Improper product substitution — Defense contracts typically require contractors to use a particular grade, type or quality of products or parts. Additionally, the parts must be new (as opposed to used or refurbished) and made in the U.S. Defense contractors that substitute cheaper or substandard parts to save costs or maximize profits do so in violation of the False Claims Act.
- Improper Cost Allocation — At times, defense contractors who provide products and services to the DOD also sell those products to governments and private businesses around the world. To secure lucrative contracts from private businesses or governments outside the U.S., defense contractors often improperly allocate or shift costs from those contracts onto the “cost-plus” contracts they have with the United States government, which means that taxpayers end up paying for these improperly allocated costs.
- Substandard Products or Services — Given the volume and complexity of the weapons systems, equipment, products, and services the government purchases, performing quality control on each item is not feasible. Therefore, the DOD typically relies on defense contractors to provide weapons systems, equipment, and products that perform as promised in their contracts. While cases of bona fide mistakes occur, a defense contractor may know or should have known, that the products they provided would not perform as promised. Delivering such worthless or substandard products can be devastating for servicemembers and may also violate the False Claims Act.
- Inflation of Costs and Charges — One common way defense contractors defraud the government by improperly inflating their costs and charges to increase the revenue the company earns through cost-plus contracts by inflating time records, inflating equipment and materials costs or inflating purchase orders.
- Truth In Negotiations Act — Because many of the weapons systems and equipment used by the military are highly specialized and complex, there may only be one defense contractor capable of producing that weapons system or equipment. This means the government often must rely on a single-source supplier. Nonetheless, the federal Truth in Negotiations Act requires defense contractors that enter into single-source no-bid contracts to honestly disclose all relevant information about its costs. Despite this requirement, a single-source defense contractor can inflate its costs and expenses because there are no competitive bids, which makes detecting this type of fraud difficult.
How Defense Contractor Whistleblowers Can Help
If you are a citizen or employed by a defense contractor and have information about fraudulent activity, you may be entitled to a whistleblower reward. Whether you have knowledge of violations of law, rules, and regulations or evidence of large-scale waste or misappropriation of funds, you can file a qui tam lawsuit under the False Claims Act.
This federal law not only allows you to recover a whistleblower reward, but it also protects you from employment retaliation. An employer cannot fire, demote, harass, or discriminate against you for reporting defense contractor fraud. Additionally, the National Defense Authorization Act of 2013 (NDAA), contains specific whistleblower protections for defense contractor employees.
Contact Our Defense Contractor Whistleblower Attorneys
If you have knowledge of defense contractor fraud, you need the informed representation Jeffrey Newman Law can provide. We will carefully review your information and help you file the required disclosure statement. If the government decides to take up the matter, you may receive a significant whistleblower award. You may still have a valid defense contractor whistleblower claim even if the government doesn’t intervene, however. In any case, the best way to help combat defense contractor fraud and receive the whistleblower award you have earned is to work with our legal team. Please contact our office today for a free evaluation of your case.