Bringing Qui Tam Cases Against Government Contractors for Mischarging Labor Categories

Qui tam whistleblowers have been instrumental in helping the government combat fraud by government contractors.  One common type of procurement fraud that has been the subject of qui tam lawsuits is labor mischarging, which occurs when a contractor inflates labor costs by charging incorrect pay rates.

In this situation, the contractor charges the hourly pay rates that apply to certain labor categories, despite knowing that the personnel performing the services did not satisfy the contractual requirements to be included in those labor categories.

For example, a contract with one of the military services might call for the contractor to provide engineering services, and it might define certain levels of “engineers” and specify different levels of pay for those engineers, depending on their level of education or experience.  The contract might contemplate that some services will be performed by relatively junior engineers at a rate of $75/hour, while other services will be performed by more senior engineers at a rate of $125/hour.  The contract might define a “junior engineer” as someone who has at least a bachelor’s degree in science or engineering and two years of relevant work experience, while defining a “senior engineer” as someone who has at least a master’s degree in science or engineering and five years of relevant work experience.

In this example, if the contractor submits claims for payment under the contract, knowingly using the billing rate for a “senior engineer” for work that was done by someone who only met the qualifications of a “junior engineer,” or knowingly using the billing rate for a “junior engineer” for work by someone who failed to meet those qualifications, the company is labor mischarging and may be defrauding the Government.

In this kind of situation, the contractor could be liable to the Government for treble damages and civil penalties under the False Claims Act.  Moreover, a whistleblower who initiates the lawsuit under the Act’s qui tam provisions could be eligible to receive 15% to 30% of the Government’s recovery. VSG’s lawyers have pursued several labor mischarging cases on behalf of whistleblowers and the United States.  If you are aware of labor mischarging fraud, please feel free to contact us to discuss the situation.