Defense contractors are individuals or companies that provide services and goods to the United States military. If those individuals or companies deceive the government to obtain undeserved payments, they may be committing defense contractor fraud, which is a violation of the False Claims Act. Each year, national security is weakened and billions of taxpayer dollars are lost due to the fraudulent schemes of defense contractors. It is important, therefore, that persons made aware of defense contractor fraud come forward with their claims. By law, any person who blows the whistle on defense contractor fraud is entitled to a portion of the government’s recovery, as well as job security and protection from retaliation.

Common Forms of Defense Contractor Fraud

Defense contractor fraud typically involves misleading the government about the cost and quality of the products being supplied. For example, companies might tell the government that the vehicles they are purchasing are bulletproof and worth two hundred dollars each, when actually the vehicles are worth fifty dollars each and do not offer any protection.

While there are countless ways a defense contractor might seek to procure illegitimate government funds, the three most common defense contractor fraud schemes include:

Cross-Charging: Cross-charging occurs when a defense contractor enters into simultaneous contracts with two different payment stipulations, “fixed price” and “cost-plus.” In a fixed price contract, the company receives a fixed price for goods and services no matter the cost of production. In a “cost-plus” contract, the government pays the company for the cost of the goods, plus a percentage of its costs as a profit. If the company charges time it spends working on the fixed price contract to the cost-plus contract, it is essentially charging multiple times for the same service. This type of fraud is known as cross-charging.

Improper Cost Allocation: Improper cost allocation occurs when a company has entered into a government contract and a commercial contract at the same time. If the company charges the government for time spent working on the commercial contract, it may be guilty of improper cost allocation and in violation of the False Claims Act. 

Product Substitution:  In cases of product substitution, a company provides a substitute, and typically inferior, goods rather than the ones contractually agreed upon. If a company substitutes goods without the permission of a government contracting officer, it may be guilty of product substitution and in violation of the False Claims Act.

How Our Whistleblower Attorneys May be Able to Help

In addition to costing the country billions of dollars every year, defense contractor fraud also weakens our national security and unnecessarily endangers our servicemen and women abroad. For those reasons, it is especially important for persons with knowledge of defense contractor fraud to blow the whistle. At Morgan and Morgan, our False Claims Act attorneys can assist you in filing a claim safely and securely, while also working to protect you from retaliation and harassment. In addition, we can help ensure that you are properly compensated for coming forward and helping to recover lost government funds.

To learn more about defense contractor fraud and the False Claims Act, simply fill out our free, no risk case review form today.


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