Government Contracts, Bid Rigging, and Whistleblower Rewards

Earlier this month, the Department of Justice announced that it was intervening in a False Claims Act lawsuit filed against SAIC, Science Applications International Corp. The whistleblower suit alleges that SAIC and three government officials colluded to award a $3.2 billion contract to SAIC to form the National Center for Critical Information Processing and Storage. Former computer scientist David Magee filed the whistleblower suit on behalf of the United States and himself.

The United States only intervenes in one out of every 3.5 False Claims Actions filed. If the action succeeds, the US Treasury will recoup lost payments and treble damages. The whistleblower could win up to 25% of what the United States recovers.

The suit alleges that David Galloway, among others, worked with government officials to narrowly construct Requests for Proposals so that only SAIC could meet the bidding requirements. The narrow construction of the RFPs made it impossible for other organizations to compete for the lucrative defense contracts.

POGO, the Project on Government Oversight, follows SAIC activity and reports that the government conducted a five year investigation of SAIC for similar activity before. Though the 2006 report found that SAIC engaged in questionable activities designed to give SAIC an unfair advantage in supposedly competitive bidding processes, no action was taken against SAIC. POGO states that the only punishment meted out by SAIC was the administrative punishment of a program manager.

SAIC responded to a Washington Post inquiry on the allegations by saying that SAIC looked into the complaints and found them without merit. The corporation says it will defend itself vigorously in court.

The government elects against pursuit of defrauders for several reasons - inability to pay, little yield when compared against investigatory expense, politics, etc. Sometimes, an FCA suit can prod the government to prioritize a fraud investigation when it would otherwise allow the complaint to gather dust on a credenza somewhere. If nothing else, the SAIC situation seems to be on its way to some much needed scrutiny.