The Justice Department recently intervened in civil actions filed in the
U. S. District Court in Arkansas against a number of major information technology companies that includes Accenture, Hewlett-Packard, Sun Microsystems and others. An important note is the suits were not initiated by the government. They were originally filed in September 2004 by several whistle-blowers, or as identified in legal terms in the complaints as relators. The Justice Department decided to intervene with the full weight and might of the government. Please contact me at jcorini@cmai.com if you would like a copy of the complaints.
The complaints allege that the three companies were in violation of the False Claims and Anti-Kickback Acts with their GSA Multiple Award Schedule (MAS) contracts. The period of time covered in the suits date back to 1998. There has been dramatic growth in sales volumes and the numbers of GSA contractors in recent years. Has this growth resulted in more abuses by industry? Are we now entering an era of increased scrutiny by Inspector General Offices and the Justice Department? Have the GSA contractors been lax in the management of their contracts?
All of us in the contracting community have always dreaded and been in fear of an audit or a suit by the government. We have accepted this as an inherent consequence of doing business with the government. We generally knew in the past that if an audit or suit was triggered, the source was most-likely from within the government. Now we may be seeing more of another source as the initiator – the whistle-blower. Examples of recent cases in the office supply and IT community where whistle-blowers have prevailed in civil suits include the settlements with Office Max, $9.8M, May 2005; Office Depot, $4.75M, Sept. 2005: Oracle (PeopleSoft), $98.5M, Oct. 2006. The potential incentives are huge for whistle-blowers - they can be entitled to a bounty of up to 30% of the government’s recovery, plus attorneys’ fees, costs and expenses.
The issue is what can be done to guard against the whistle-blower. They are usually unknown, not necessarily from within your company and can file a suit at any time. Any private person is provided this right under the False Claims Act. I offer no suggestions on how to identify and stop whistle-blowers. However, there are measures and steps that should be instituted to potentially prevent or mitigate the effects of an audit or lawsuit from any source.
Listed below are six steps that, as a minimum, represent a sound policy for proper management and protection of your GSA Multiple Award Schedule Contracts.
1. Corporate governance. It is vitally important that senior management is aware of the responsibilities and consequences that are associated with the rewards of a GSA Schedule contract. There are over 5,500 companies that now hold GSA IT Schedule contracts. Most of the management personnel at the established firms are well versed on their contract responsibilities. However, many from the other companies are not.
2. Understand the rules. GSA schedule contracts are governed by numerous statutes and regulations. Many of these statutes and regulations are complicated and difficult to understand. For example, what represents a violation of the False Claims Act, Anti-Kick Back Act or the Price Reduction Clause that are included in all GSA Schedule contracts is not well understood by many companies. It is extremely important for management and all parties that have responsibility for government contracts to understand the rules.
3. Establish contract data security procedures. The corporate data that your company is required to submit to GSA, and for that matter any government agency, includes sensitive data that must be protected against any unauthorized disclosures - both within and outside your company. A “Need-To-Know” process should be established within your company as to who is authorized access.
4. Implement a process to track commercial business practices. GSA schedule contracts are awarded predicated on your company’s commercial business practices and discounts. As such, it is imperative that you monitor your commercial practices to determine whether any changes will affect your GSA Schedule contract. Violations can trigger the Price Reduction Clause and result in fines and penalties pursuant to the False Claims Act. Many companies have been lax in this most important area. In many cases it is primarily due to a lack of understanding and lack of a process to track the commercial practices.
5. Make current, accurate and complete disclosures to GSA. Dave Nadler, a Partner and an authority on GSA Schedule contracts at the law firm of Dickstein Shapiro states that this is another area of vulnerability. The difficulty is that the personnel who have responsibility for GSA Schedule contracts are not always aware of what should or should not be disclosed. The larger firms have a different set of problems - as many times there is a “disconnect” between the federal, channel and commercial sales organizations.
6. Establish oversight. Build within your organization oversight of your GSA Schedule contract. Many of the established firms have given oversight responsibility to a senior executive outside the contracts department. Implementing a sound check and balance system can be an effective deterrent to protect your company’s interests and mitigate the effects of audits and suits.
The government has reduced their oversight of the government contracting community in recent years. As such, many companies have dropped their “guard” and have become lax about the management of their government contracts. We are entering an era where we can expect more oversight and most likely more audits and suits by the government. If you add the threat of the whistle-blower, it is important that all government contractors raise their “guard.”
Joe Corini is President of CMA, a government marketing, business development and contract services firm. This article represents Mr. Corini’s views as the result of working with hundreds of government GSA Schedule contractors since 1989. He can be reached at jcorini@cmai.com. Comments are welcomed. |
