Construction & Defense Contract Fraud

Handled by Experienced Whistleblower Attorneys in Salt Lake City

State and federal governments spend tens of billions of dollars each year on construction projects such as roads, buildings, bridges, dams, waterways, and just about anything that can be built. Construction of infrastructure is one of the major responsibilities of our government; no single state, corporation, or private sector enterprise can undertake the collective action necessary to make our country function as a modern society. And within these tens of billions of dollars each year, opportunities exist for fraud to be committed on a massive scale.

In construction, many varieties of fraud and false claims activity can be committed. The most important person in preventing fraud in government construction is the whistleblower. Successful whistleblower cases in government construction fraud have been brought by lower-level supervisors and employees to top corporate executives. Fraud can exist in many ways, such as purchasing substandard or cheaper materials than the specifications require, omitting key components in a building project, shortcutting on services such as ground compaction and testing, and many others. In many construction projects, these defects may be “buried” within the project. Sometimes inspectors are bribed or are part of the scheme and the defect isn’t known until many years later when highways begin to fail, bridges start crumbling, or buildings show signs of premature deterioration.

Contact Eisenberg, Gilchrist & Cutt Attorneys at Law online or call us today at (801) 901-3470 to schedule a free and discreet consultation with one of our whistleblower lawyers in Salt Lake City.

Two of the most important obligations in every federal contract are the obligation of federal construction contractors to bid fairly and honestly so the government knows what it should pay at the outset and to pay their workers reasonable and fair wages rather than low-bidding the contract by taking it out of the pockets of the workers who will carry out the construction.

Wage Fraud & the Davis-Bacon Act

The Davis-Bacon Act is a federal law that requires contractors on federal construction projects to pay at least the prevailing wage and fringe benefits in the area for each classification of laborers and workers. While the Department of Labor is tasked with oversight of this law, violations result in false claims violations when the contractor certifies that it is in compliance with Davis-Bacon to get paid by the government. Every prime contractor must include Davis-Bacon provisions in all subcontracts, retain certified payrolls of subcontractors in each request for inspection with each request for payment, and maintain certified payroll reports. This law ensures that workers will receive fair payment for the area or locality where they are working when taking on labor in a government context. Contractors who violate Davis-Bacon can be required to repay the government for the amount of their contract, have the contracts themselves terminated, and be prevented from any future government contracting.

One way in which contractors violate the Davis-Bacon Act is by misclassifying employees. For example, a contractor may be paying an employee as a laborer or worker, but classifying that employee as a supervisor to receive more money from the government under the contract than it is actually paying to the worker. Conversely, a contractor may be classifying an employee correctly, but paying the employee minimum wage when the prevailing wage for that worker in the local area is substantially above that level. The employer then submits the prevailing wage request for reimbursement rather than the lower amount actually being paid. In fact, paying the employee under the prevailing wage is a Davis-Bacon violation itself. When multiplied by thousands of workers and tens of thousands of hours on a major federal contract, the amount of fraud committed against the government can be substantial.

The costs of labor usually amount to at least 50 percent of the total cost in any government contract.

If you are aware of any potential violation of the Davis-Bacon Act or suspect such a violation, contact the experienced attorneys at Eisenberg, Gilchrist and Cutt right away at (801) 901-3470

Defense Contract Fraud

The U.S. Department of Defense (DOD) accounts for two-thirds of all federal government contracting activity. It is estimated that, from 2001 to 2010, $1.1 trillion was paid to defense contractors that were later found to have defrauded the Federal Government. DOD contract management has been listed by the Government Accountability Office as “high risk” for waste fraud and abuse since 1992.

The federal government has recovered billions of dollars from defense contractors with the help of whistleblowers acting under the Federal False Claims Act.

Some of the common ways that defense contractors have tried to defraud the government are:

Cross charging: In order to boost profits, a defense contracting firm that holds multiple contracts with the DOD might shift expenses from a fixed-price contract to a cost-plus contract. Cost-plus contracts, unlike fixed-price contracts, allow the contractor to bill not just one fee for its service/product, but also a percentage of its production costs. Therefore, there is a strong financial incentive to fraudulently charge expenses to the cost-plus contract to maximize revenue.

Product substitution: Defense contracts may specify that the contractor use a particular type of product. When contractors utilize cheaper or lower quality parts without the permission of the government it may be a violation of the Federal False Claims Act.

The Office of the Inspector General has put together a list of “Fraud Red Flags and Indicators” that can be found here.

Call us today or feel free to contact us online to schedule a free case evaluation with one of our dependable whistleblower attorneys in Salt Lake City. We can help you today.

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