A whistleblower was awarded $3 million for exposing a bid rigging scheme among entities that held themselves out to be competing small business but in fact were controlled by one entity. The settlement with defendant ADS resolved a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed in federal district court in the District of Columbia by Ameliorate Partners LLP. As part of the settlement, the whistleblower will receive approximately $2.9 million.
From the Department of Justice press release:
Virginia Beach, Virginia-based contractor ADS Inc. and its subsidiaries have agreed to pay the United States $16 million to settle allegations that they violated the False Claims Act by knowingly conspiring with and causing purported small businesses to submit false claims for payment in connection with fraudulently obtained small business contracts, the Department of Justice announced today. The settlement further resolves allegations that ADS engaged in improper bid rigging relating to certain of the fraudulently obtained contracts. The settlement with ADS ranks as one of the largest recoveries involving alleged fraud in connection with small business contracting eligibility.
There are a number of ways unethical contractors try to “game” programs setting aside contracts for small businesses, veteran owned businesses, women or other minority owned businesses. One scam is for a non-eligible large business to use a small business (either an existing small business or a sham company they set up) as a “front” for the larger business. The eligible small business bids, but in reality, the large business is going to do the bulk, if not all of the work.
Collusion among bidders is often a part of schemes to scam the small business set aside. Typically, if the government only gets one bid, it will not award the contract, or will demand the sole bidder justify its pricing. Therefore, even if Company A is designated to win the bid, Companies B and C will put in complementary (high bids) to make it appear that there is competition. The aim of bid rigging/collusion schemes is to create the appearance of competition, when in fact, due to a secret scheme among the bidders, there is none.
The government is serious about fighting bid rigging fraud in small business set aside programs. From the press release:
“This case involved fraud perpetrated in the Service-Disabled Veteran-Owned Small Business Contracting Program and the 8(a) Program for disadvantaged individuals. Identifying and aggressively pursuing instances of civil fraud by participants in these procurement programs and other set aside contracting programs, is one of SBA’s top priorities.”
A whistleblower can be an individual, a group of individuals or a company. In this case it was a company—probably a legitimately legible company that was one that was cheated out getting a contract under the set-aside program. If you have information about collusion on government contracts (federal and/or state) and want to discuss the situation, please feel free to contact me to discuss. Thanks for reading.