DoJ files False Claims Act lawsuit against CA Technologies

Thursday - 5/29/2014, 5:38pm EDT

The Justice Department is accusing CA Technologies of violating the False Claims Act since 2002 in how it conducted business under its General Services Administration schedules contract.

DoJ filed a complaint alleging CA, which sells a wide variety of software and hardware products, failed to properly apply the price reduction clause since 2002. Justice also alleges since at least 2006, CA "knowingly overcharged the government for software licenses and maintenance in various ways."

Justice stated CA seemingly failed to monitor discounts to certain commercial customers, compare these discounts to the discounts given to the government and, if the commercial discounts were higher, pass on those higher discounts to the government. The government alleges that CA failed to make those comparisons or, when it did make such comparisons, failed to do so correctly, resulting in the government overpaying for CA's information technology.

"Too many federal contractors think they can get away with overcharging the government," said U.S. Attorney for the District of Columbia Ronald C. Machen Jr. in a release. "Our complaint alleges that CA broke its promise to give the government the same prices it was giving commercial customers. We look forward to vigorously pressing these claims in court and recovering every dollar that is owed to the American taxpayer."

Additionally, DoJ not only filed its own case, but it joined a whistleblower lawsuit brought by a former employee, Dani Shemesh, under the qui tam provision alleging similar violations of the rules governing the schedules program.

According to GSA's schedules sales query tool, CA Technologies won more than $118 million off of schedule buys in fiscal 2013. DoJ stated agencies that purchase under CA's schedules contract include the department of Defense, Energy, Health and Human Services and Labor.

CA spokeswoman Jennifer Hallahan said the company believes DoJ's case is "unfounded" and will "vigorously contest" the allegations.

"We've had numerous discussions with the government and continue to believe that dialogue in good faith will lead to a satisfactory outcome for both parties," she said in a statement. "We look forward to working through this matter as quickly as possible."

These types of allegations are becoming all too common place in the procurement community, said Larry Allen, president of Allen Federal Business Partners.

Federal contractors such as Oracle, SAIC, EMC Corp. and Gallup, paid multiple million dollar fines over the last few years.

Allen said the complexity with complying with schedule rules relative to the pace of change in the commercial market and the money to be made by whistleblowers and plaintiff's attorneys as well as the GSA IG's aggressive enforcement are the main reasons for the rise in these cases.

"What is certain is that contractors have to spend at least seven figures defending themselves from such cases, regardless of whether they end up paying a fine," he said. "That should get the attention of more companies. For pennies on each defense dollar they could get much better compliance systems that would reduce the incidence and potential severity of any legal action. Why more do not is a mystery to me."

In 2013, Justice said it recovered more than $3.8 billion under the False Claims Act and more than $17 billion since 2009.

Roger Waldron, president of the Coalition for Government Procurement, wrote in a blog from March that vendors struggle to comply with the price reduction clause and other commercial sales practice rules.

"That the GSA IG has consistently found that the vast majority (four out of five) of multiple award schedule contractors have issues with the currency, accuracy and completeness of the commercial sales practices (CSP) pricing disclosures is a powerful statement regarding the impracticality/incomprehensibility of the disclosure requirements. Moreover, the new statutory and regulatory requirements for competition at the task and delivery order level drive pricing and value for customer agency requirements; not a pricing compliance scheme that increases costs to companies, limits their ability to compete in the private sector, and creates barriers to new, innovative solutions."

Waldron wrote this is another example of why the rules for the schedules program need to be reformed. He said the "reform should reflect the current state of the commercial market place and the statutory and regulatory mandates for competition at the order level-competition for agency specific requirements should and does drive pricing in the MAS program."

In this latest case, Justice claims CA "provided incomplete and inaccurate information to GSA contracting officers during negotiation of contract extensions. At the time CA negotiated these extensions, applicable regulations and contract provisions required CA to fully and accurately disclose how it conducted business in the commercial marketplace, so GSA could use that information to negotiate a fair price for government customers. The government also alleges that CA failed to truthfully update its discounting practices during the life of the GSA contract. CA repeatedly certified to GSA that its discounting policies and practices had not changed, when in fact its discounts to commercial customers had increased."

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The Civil False Claims Act