Government contractors must always be vigilant of prosecution under the False Claims Act (FCA). Charges and settlements are brought and announced in the news daily against government contractors for violations of this Act. On October 30, we published a client alert, Government Contractors Beware: Increased FCA Enforcement in Government Contracts, discussing recent cases and settlements. Just recently, another contractor, North Florida Shipyards, settled for a fine of $1M for violations of the FCA. The president of North Florida Shipyards was caught in a scheme to qualify for ship repair contracts set aside under the Service-Disabled Veteran-Owned Small Business (SDVOSB) program. In this scheme, another company, Ind-Mar Services Inc., was created as a front company to qualify for the SDVOSB set-asides while North Florida, who did not qualify under the SDVOSB regulations, did all of the actual work and took all the profits. Fraudulently obtaining access to these special contracting opportunities was deemed a violation of the False Claims Act. If the government had known of the front company, Ind-Mar’s, falsified status, the Coast Guard would not have awarded the contracts to them. Please see our recent article published in BNA Federal Contracts report titled, Big Risks for Small Businesses: Increased Enforcement Activity Against Size and Status Misrepresentations, for a further discussion of the intersection of the FCA and small business programs and representations.
