Just last week, the Department of Justice announced another large False Claims Act settlement with a GSA Schedule contractor – for $60.9 million. A review of the underlying qui tam complaint, filed by a former vice president of the contractor, reveals multiple alleged failures by Tremco Inc. and RPM International to comply with the basic – yet often very challenging – requirements of the contract: disclosure of commercial pricing and compliance with the Price Reduction Clause. Among a number of allegations, the complaint alleges that the roofing supplies and services contractor failed to disclose to GSA that it offered better pricing to its commercial customers than identified on its published price list. As a result, the complaint states that the government was disadvantaged by negotiating higher pricing than it would have, had it known about the contractor’s actual commercial pricing practices. The complaint also alleges that, during the course of performing the GSA Schedule contract, the contractor failed to provide price reductions to government customers when it provided discounted pricing to its commercial customers. This complaint and settlement serve as a reminder to Schedule contractors of the importance of educating company personnel about the legal requirements of Schedule contracts and having in place internal systems and controls that will allow the company to comply with the contractual obligations. For example, when applying for a new GSA Schedule contract or renewing an existing contract, companies are required to disclose their commercial pricing on the Commercial Sales Practices form. Too often, companies do not fully understand the breadth of the required disclosures and do not dedicate sufficient resources to ensure the disclosed pricing is current, accurate and complete. Similarly, many Schedule contractors misunderstand the purpose and application of the Price Reduction Clause or simply forget its existence entirely, resulting in their failure to reduce the pricing to the government when required by the clause. To minimize the risk of a False Claims Act lawsuit, Schedule contractors would be well advised to assess the robustness of their current compliance program, including whether it addresses the risks unique to GSA Schedule contracting. They should also review internal systems and controls – for both commercial and government sales – to identify gaps and risk areas, and then implement fixes to reduce or eliminate any identified risks. For example, does the commercial sales force understand how changes to commercial pricing can affect the pricing Schedule contract sales? Are Schedule contract administrators tracking the company’s commercial pricing practices and granting price reductions to the government when required? Is the company disclosing both standard and nonstandard commercial discounting to GSA? Successful contractors adopt and enforce workable internal procedures and controls that allow the company to comply with the Schedule contract’s requirements without compromising commercial business pursuits. Does your company have the systems it needs to ensure compliance with Schedule requirements?
