December 22, 2022

False Claims Act Settlement: Government Contractor Failed to Disclose Cost or Pricing Data

On November 29, 2022, the Department of Justice announced that North Carolina government contractor, PowerSecure Inc., has agreed to pay $8.4 million to resolve claims that it violated the False Claims Act. The settlement resolves allegations that PowerSecure’s failed to provide certified cost or pricing data to the U.S. Army Corps of Engineers when negotiating rates in connection with a sole source contract for the repair and restoration of Puerto Rico’s power grid following the aftermath of Hurricane Maria in September 2017.

In sole source contracts, there is no price competition. In order to help level the playing field between the government and government contractors, the Truth in Negotiations Act (TINA) was enacted in 1962 to make sure that government negotiators have access to the cost or pricing data that the contractor uses when making its offer. Thus, this act requires that when government contractors seek the award of a sole source contract, they are obligated to be completely transparent with the government regarding the basis for their proposed pricing.

In this case, the United States alleged that PowerSecure knowingly withheld cost or price data as required by the Truth in Negotiations Act, regarding the rates that it used for “basecamp services” on a restoration project in Florida and Georgia following Hurricane Irma, in violation of the False Claims Act. Furthermore, the United States alleged that PowerSecure withheld cost or price data regarding labor and equipment costs in violation of TINA. The settlement agreement acknowledges that PowerSecure’s failure to divulge this critical information led the U.S. Army Corps of Engineers to agree to inflated rates for basecamp services, labor, and equipment.

Following the settlement, U.S. Attorney Stephen Muldrow for the District of Puerto Rico stated that “with the recent passage and destruction of Hurricane Fiona serving as a backdrop, this settlement demonstrates our resolve to ensure that individuals and companies fully comply will all laws and regulations relating to the provision of disaster relief.” He went on to add that the settlement emphasizes the tools available at the Department of Justice’s disposal of “not only criminal and administrative penalties, “but also civil enforcement actions” as well. This case illustrates the Department of Justice’s commitment to holding those accountable who violate the False Claims Act and the Truth in Negotiations Act.

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