Click Fraud Protection How Billions of Dollars in Federal Funding Are Lost to Government Contractor Fraud
TZ Legal – Fraud Fighters Logo
HomeNewsHow Billions of Dollars in Federal Funding Are Lost to Government Contractor Fraud

How Billions of Dollars in Federal Funding Are Lost to Government Contractor Fraud

Date Published
Oct 26, 2022

According to recent IRS data, the average American pays around $15,322 in income taxes per year. However, a large percentage of that money is stolen every year. With government contractor fraud, large portions of taxpayer funds are siphoned off regularly by corporations or other companies that have agreed to provide services to the government and then renege on their commitments. Alternatively, some government contractor fraud is committed by companies that provide subpar services, cut corners on jobs they have agreed to perform, or allow private data to be stolen or ransomed by hackers or other bad actors in cyberspace.

Government contractor fraud is a very real problem, taking its toll on public funds and the number of services that the government can provide. While it may seem like a victimless crime, the toll is taken on every person who pays their taxes and expects fair results in exchange. If you have information about government contractor fraud, do not wait to come forward. You may be able to protect and recover taxpayer money, help improve public services, and prevent unscrupulous individuals from cashing in. You may also be able to recoup significant financial awards in exchange for your information.

For more information, contact the law firm of Tycko & Zavareei LLP today. Our expert attorneys are here to answer any questions you may have about the law and how to report government contractor fraud.

Government Funding and Private Company Contracting

Approximately 15% of government spending goes directly into the pockets of private companies through contracting. Both federal and state governments employ workers and perform services in-house, but often times many public services are provided by private corporations.

In 2020, the federal government spent more than $665 billion on contracts. This represents an increase of over $70 billion spent on contracts from previous years. The COVID-19 crisis has led to a sudden and ongoing spike in government contracting. Private companies, often healthcare centers and manufacturing firms, have been receiving higher levels of public funds on an expedited basis, due to the drastic nature of the public health crisis.

How Much Government Money is Lost to Contractor Fraud in an Average Year?

According to conservative estimates, around 5% of government contracting funds can be expected to be lost to fraud annually. This projection is based on an analysis of Department of Justice enforcement data, and records of fraud reported in the past. However, it is impossible to accurately predict how much government money is actually lost due to fraud every year, because of both the wily nature of scammers and ongoing discoveries.

In the fiscal year 2020, the Department of Justice reported recovering $2.2 billion using the False Claims Act. Of this, an estimated $1.8 billion was reclaimed from health care fraud alone.

Most Common Kinds of Government Contractor Fraud

Healthcare is one field that commonly reports enormous amounts of fraud and waste, but attempts to illegally draw down government funds can happen anytime a contract is signed. Other fields that commonly involve contractor fraud are:

According to the Department of Transportation Office of the Inspector General, the following are some of the most prevalent ways government contractors may attempt to defraud public funds:

  • Bid rigging/collusion: Contractors may appear to be competing with each other for government funds, but in actuality, they have agreed to a fixed price floor or other conditions in order to artificially inflate their profits.
  • Conflict of interests: Contractors may have inside connections or other conflicts of interests that allow them to sign favorable deals without disclosing the truth.
  • Disadvantaged business fraud: This kind of fraud takes advantage of efforts to even the playing field. In disadvantaged business fraud, a company misrepresents who performed work in order to draw down funds earmarked for minority or women-owned businesses and other equal rights initiatives.
  • Over-reporting or over-billing: A contractor may over-report services rendered, or over-bill for more than they actually accomplished. For instance, in 2021 United Airlines paid a settlement of $49 million to resolve civil and criminal charges that they failed to deliver international mail in a contract with the United States Postal Service. In an example of misreporting, the airline allegedly gave falsified parcel delivery information over a span of years, while claiming millions of dollars of payments as a government contractor.
  • Kickbacks: Agreements with contractors, negotiators, or bidders to secure contracts can lead to inflated estimates and misappropriated government funds.
  • Overcharging or product substitution: A common manufacturing scam with government contractors is to overcharge for the cost of materials or cut corners on the actual materials used in order to save money and increase total profit. This can lead to unsafe results in important public services such as maintaining a reliable electric grid, ensuring the safety of active-duty military personnel, or providing and using materials that meet environmental regulations.
  • Quality control misrepresentation: Oftentimes government contractors are required to report on their results, or to perform certain quality control tests. Contractors may misreport the results of these tests in order to keep a contract or oversell their rate of success in order to continue to draw down funds.
  • Bribery: Similar to exchanging or receiving kickbacks, with government contractor fraud bribery, a government official may be paid in order to award certain contracts or funds.

New Trends in Government Contractor Fraud: Cyber Fraud

With the 2021 announcement of the Civil Cyber-Fraud Initiative, the Department of Justice ushered in a new era of whistleblowing and enforcement in government contractor fraud. According to the Civil Cyber-Fraud Initiative, contractors that fail to maintain certain cybersecurity standards, or fail to report breaches in their data security to the government can be held liable via the False Claims Act. This new development allows whistleblowers to speak up about hacks or stolen data and claim financial awards. Even companies that do not adhere to minimum cybersecurity practices, or misreport compliance, may now be penalized under anti-fraud law.

Report Government Contractor Fraud

If you have information about government contractor fraud, come forward today. Every American citizen is harmed by government contractor fraud. Becoming a whistleblower is the right thing to do. You may be able to save taxpayer funds, ensure safe and effective public services, and claim anywhere from 15 to 30% of recovered funds in the event of a successful case. If you have previously undisclosed information, reach out to the experienced law firm of Tycko & Zavareei LLP for a confidential and complimentary consultation.

How can we help you?

Confidential Case Evaluation

Our experienced qui tam attorneys are available for a confidential, no-cost, no-commitment, initial evaluation of your case. Call us now at (202) 973-0900, or begin the process by completing our Confidential Case Evaluation Form.
Start The Process