GSA Fraud

What is General Services Administration Fraud?

Fraud against the General Services Administration (or “GSA”) can occur when a company that is selling commercial items to the Government under a Multiple Award Schedule (“MAS”) contract with GSA knowingly fails to disclose accurate pricing or discounting information regarding sales to other commercial customers, either when negotiating the MAS contract (i.e., defective pricing) or afterwards (i.e., violating the Price Reduction Clause).

Qui tam actions may arise from knowing violations of Multiple Award Schedule (MAS) contracts. The General Services Administration (GSA) and the Veterans Administration (VA) often enter into contracts with multiple vendors to provide certain designated commercially-available items to the Government at prices that are supposed to take into account the Government’s vast purchasing power. These contracts are known as MAS contracts.

Defective Pricing

When a Government agency or office wishes to purchase a commercial item that is included in a MAS contract, the agency or office may choose to purchase the item from any of the vendors with whom GSA or the VA has a contract, at the price that was previously negotiated between the vendor and GSA or VA. The negotiated prices are listed on a publicly available Federal Supply Schedule.

MAS contracts include requirements designed to ensure that the Government has the opportunity to negotiate a price similar to the lowest price available to commercial customers making comparable purchases. As part of the process of negotiating a MAS contract, the vendor must provide the Government with a catalog that lists the vendor’s established prices for commercial items. Importantly, the vendor must also disclose to the government the discounts it provides to commercial customers off of its catalogue prices. This information is designed to enable the Government to negotiate prices that are the same as or better than the prices offered by the vendor to its most favorable commercial customers. A vendor may be liable under the False Claims Act for defective pricing when it misrepresents or fails to disclose the discounts it provides to comparable commercial customers.

Price Reduction Clause

MAS contracts also include a price reduction clause. This provision requires the contractor to inform the Government of any previously undisclosed price reductions that the vendor has given or intends to give to other comparably-situated commercial customers during the period covered by the contract, and to reduce prices to the Government, prospectively and/or retroactively, so that the Government can also have the benefit of these price reductions.

When vendors fail to disclose the best prices they have given to other commercial customers, either when negotiating MAS contracts or during the term of such contracts, they may run afoul of the False Claims Act. For example, in October 2011, Oracle Corporation and its subsidiary agreed to pay $199.5 million, plus interest, to settle allegations in a qui tam lawsuit that Oracle failed to disclose its best commercial prices to GSA.

Compliance with U.S. Trade Agreements

Vendors entering into MAS contracts also must agree to comply with the U.S. Trade Agreements Act. Under the terms of this Act, vendors who sell foreign-made products to the Government may only sell such products that are made, or “substantially transformed,” in countries with reciprocal trade agreements with the United States. Whistleblowers and the United States have brought successful qui tam False Claims Act lawsuits against several well-known suppliers of office products for selling goods that were manufactured in violation of U. S. Trade Agreements. These suppliers include Staples ($7.4 million settlement), Office Depot ($4.75 million settlement), and Office Max ($9.8 million settlement).

VSG Qui Tam Lawyers Are Experienced in Handling Multiple Award Schedule Fraud Cases

VSG qui tam lawyers are pioneers in the prosecution of MAS fraud cases under the False Claims Act. In a case handled by Ms. Slade, Motorola, Inc., in what was at the time the largest civil recovery ever by the GSA, paid $15 million to resolve a False Claims Act lawsuit charging MAS violations. In a False Claims Act lawsuit brought by VSG partner Rob Vogel, Beckton Dickinson & Co., a medical device manufacturer, paid $3.3 million to settle allegations that the contractor overcharged the Department of Veteran Affairs for in vitro diagnostic devices after failing to disclose more favorable prices provided to commercial customers.