Construction companies working on projects that involve federal funds are typically aware that they can be at risk of False Claims Act (FCA) suits for inaccurate billing or false statements about construction quality. The Department of Justice (DOJ) has broadened its FCA focus beyond those areas by targeting the compliance certifications and regulatory statements companies make in connection with government contracts, grants, loans, and other federally funded programs. Whistleblowers filing FCA qui tam suits on behalf of the government are also increasingly identifying these areas of liability.
This shift has significant implications for construction firms, real estate developers, manufacturers, and any business that performs government work or accepts federal funding.
Regulators are examining not only what a company charges the government but also what it committed to do during performance of the contract. Claims about construction material sourcing, cybersecurity readiness, small business status, site security, immigration rules, and labor standards have all become potential triggers for FCA investigations and whistleblower litigation. The DOJ is also pursuing these cases on an accelerated timeline and coordinating more closely across civil, criminal, and administrative enforcement teams, resulting in a broader and more varied risk landscape for contractors.
FCA Risk from Noncompliant Materials and Testing
Falsified testing data is a distinct category of construction FCA risk. For example, earlier this year, DOJ announced a $17.5 million settlement with an asphalt products company, which began when two whistleblowers alleged the company had submitted asphalt testing data on federally funded highway projects that concealed the use of non-compliant asphalt. The same relators separately sued a second company in the same industry based on similar allegations. The second lawsuit resulted in a $12.5 million settlement, reportedly because that company received cooperation credit after it investigated the allegations internally, terminated the responsible employees, adopted new controls, and retrained its quality control staff.
In another case that has been litigated for over 13 years, a Superfund site remediation company settled FCA and related allegations for a total of $57 million. The case related to clean-up of radioactive materials in a former Navy shipyard located near San Francisco. The relator in that case was a former company employee, who alleged that, over the course of many years, company officials falsified data and manipulated radiation tests in ways that made certain areas of the site seem as if further expensive remediation efforts were not needed. DOJ’s press release reviewed allegations in the formal complaint, which included extensive analysis and testimony from employees that “clean” dirt stored in a trailer had been used for testing instead of soil samples collected from various remediation sites.
These cases illustrate that instances of non-compliance with applicable statutes, regulations, or contract specifications can taint every subsequent payment request, exposing a company to FCA liability even where the underlying work appears to be complete. Additionally, self-investigation and prompt remediation remain available to contractors as steps that can reduce risk exposure once allegations surface.
Increased Scrutiny of Set-Aside Eligibility
In June 2026, the DOJ’s $21.3 million settlement with two construction companies resolved allegations spanning more than eight years, during which the companies allegedly exercised primary control over contracts awarded to entities that appeared to qualify as service-disabled veteran-owned or other eligible small businesses. The companies allegedly directed the work, chose subcontractors, and controlled project finances, while the small businesses received only a limited, fixed share of contract revenue. Notably, the defendants admitted the arrangements continued even after at least one of the small business owners raised concerns about compliance with federal control and participation requirements, without meaningful changes being made.
Key considerations from this settlement: small business regulations require both ownership and control, meaning that eligibility must reflect operational reality, not only documentation; financial arrangements leaving the “eligible” business with only nominal compensation may themselves indicate noncompliance; and internal questions about control or affiliation should be treated as compliance issues requiring documented follow-up, rather than dismissed without investigation.
Certification-based risk extends beyond active federal contracts. The statute of limitations can run for as long as 10 years, meaning that FCA risk does not end when contract performance ends or when the last payment is made. For example, a group of luxury homebuilders, including companies, their owners and a related consulting firm, all agreed earlier this year to pay $2.65 million to resolve allegations they misrepresented payroll costs, overstated employee counts, and falsified the purpose of their Paycheck Protection Program loans, then submitted false information to obtain forgiveness. The case originated from a whistleblower suit filed by a Houston-area realtor in October 2021, illustrating both the extended timeline for resolving these matters and the fact that a whistleblower need not come from within an organization. For construction and real estate businesses that received pandemic relief funding, potential exposure from that period remains. The same applies to any other federal grant, award or contract.
The Role of Early Cooperation
Increased enforcement activity has not diminished the value of cooperation. When DOJ recently announced an FCA settlement with a laboratory company, it indicated the company was credited for self-reporting, cooperating with investigators, removing responsible employees, and taking remediation steps. DOJ’s policy regarding disclosures of misconduct and allowing leniency for cooperation is detailed in the Justice Manual at Section 4-4.112. In order for a contractor to receive credit for cooperation, the contractor must identify individuals substantially involved, disclose all relevant facts, preserve relevant evidence, identify individuals who know about the misconduct (even if not substantially involved), make witnesses available for interviews, disclose relevant facts learned through any internal investigations into the misconduct, provide facts about misconduct by any third-parties who were involved, accept responsibility, and assist in recovery of any losses suffered by the government. These requirements are extensive, but DOJ has indicated both in its policies and in its FCA resolutions that it will credit disclosure, cooperation and remediation with leniency.
Implications for Contractors
The FCA’s application has expanded beyond its traditional use in billing-fraud cases to encompass a range of compliance-related claims, including small-business eligibility claims, cybersecurity attestations, material quality certifications, so-called “illegal DEI” certifications, and pandemic-era loan representations. Knowing submission of inaccurate certifications can lead to FCA exposure in the same manner as submission of inflated invoices. Certification-based claims may be particularly relevant to the construction industry, which involves layered subcontracting, extensive supply chains, and substantial regulatory requirements, where a single inaccurate certification or falsified test result can create liability and affect otherwise accurate invoices.
To manage this risk effectively, contractors may wish to consider treating certifications, test data, and set-aside eligibility representations as binding legal statements supported by documented internal verification, rather than routine formalities, because an inaccurate representation, not only an incorrect invoice, is increasingly the basis for scrutiny under the False Claims Act.
If you have any questions about these developments, contact Cormac Connor, Todd Gee, or Kip Randall.