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Posted on Tuesday, August 21, 2012

False Bidding Estimates = Fraud

Extreme competition among government contractors for ever-increasing federal dollars has sparked a wave of “how low can you go” bidding wars among contractors.  Although a bidder may want to submit low bid prices to win a cost-reimbursement contract, the bids must be the actual prices and must have the facts to support  them.

A recent federal court case involving a large government contractor confirms that purposefully bidding prices lower than the actual charge can constitute fraudulent bidding under the False Claims Act.  In the case, the contractor’s initial bid prices came in too high so they lowered the bids without considering the actual cost.  The contractor won the contract but a whistleblower successfully claimed that the contractor’s bidding process violated the FCA.  Although bids are only estimates and opinions, they must have some facts justifying them.  This decision shows that courts will continue to broadly interpret the False Claims Act.

The decision highlights a solid government contracts principle:  always make sure that your bid prices are backed up with solid pricing and market research data to avoid costly bid protests, FCA treble damages, and findings of non-responsibility based on ethical and legal violations.

Katie Lipp is an Associate Attorney with Berenzweig Leonard, LLP, a business law firm in the DC region.  She can be reached at klipp@BerenzweigLaw.com.  Terry O’Connor is the Director of Government Contracts for Berenzweig Leonard, LLP and can be reached at toconnor@BerenzweigLaw.com.