(Editor’s Note.  The following case demonstrates quite a good disincentive against fraudulent claims.)

The contractor submitted a price adjustment claim that was later litigated and proven to be fraudulent.  The contractor was found liable not only for the amount of the fraudulent claim ($223,000) and civil penalty ($10,000) but also $619,900 of “review” costs by the contracting officer, DCAA and the Department of Justice.  As is quite common, a CO has no authority to address cases of suspected fraud so they turn it over to the Department of Justice who, in turn, asks for support from DCAA to audit the claim.  The Court claimed these “review” costs were not litigation costs and hence the Contractor was liable for them (UMC Electronics Inc., vs United States, Fed. C; (No 93-7096).

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