Berg Companies, Inc. To Pay $3.3M To Settle False Claims Act Claims For Alleged Bid Rigging On Government Contracts
The government continues its efforts to enforce the False Claims Act when it comes to claims of bid rigging and government contracting fraud. Earlier this month, defense contractor Berg Companies, Inc. agreed to pay $3.3 million to resolve allegations it violated the False Claims Act by engaging in a bid rigging conspiracy that caused the submission of non-competitive bids and caused Department of Defense (DoD) customers to be overcharged for items Berg manufactured.[1] This case serves as another example of how alleged anticompetitive conduct in government contracting or procurement can form the predicate for a False Claims Act case and lead to an awards for whistleblowers.
Primer on Bid Rigging
The goal of a competitive bidding process is to achieve the highest quality and/or greatest quantity of products or services at the lowest price. The competitive bidding process is subverted, however, when individuals or entities engage in bid rigging. Bid rigging comes in many forms, but in general it involves competitors agreeing on terms of bids or the outcome of the bidding process.
The following list from a DOJ publication describes four common fact patterns for bid-rigging schemes:
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- Bid Suppression: … [O]ne or more competitors agree not to bid, or withdraw a previously submitted bid, so that a designated bidder will win. In return, the non-bidder may receive a subcontract or payoff.
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- Complementary Bidding: … [C]oconspirators submit token bids which are intentionally high or which intentionally fail to meet all of the bid requirements in order to lose a contract. “Comp bids” are designed to give the appearance of competition.
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- Bid Rotation: … [A]ll coconspirators submit bids, but by agreement, take turns being the low bidder on a series of contracts.
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- Customer or Market Allocation: …[C]oconspirators agree to divide up customers or geographic areas. The result is that the coconspirators will not bid or will submit only complementary bids when a solicitation for bids is made by a customer or in an area not assigned to them. This scheme is most commonly found in the service sector and may involve quoted prices for services as opposed to bids.[2]
A common thread among these schemes is competitors in a bidding process agreeing on the terms or outcome, which undermines the competitive bidding process. Among other causes of action, allegations of bid rigging can form the predicate for an antitrust claim or, as in the Berg case, the predicate for a False Claims Act claim.
The FCA Allegations Against Berg and the Settlement
On July 14, the government announced that Washington-based Berg, which was acquired by Hunter Defense Technologies in 2019, agreed to pay $3.3 million to settle allegations it violated the False Claims Act by “engaging in a bid rigging conspiracy with a government prime vendor and two sub-vendors – including Albuquerque-based Improve Group, Inc. – that caused fraudulent, non-competitive bids to be submitted to the Defense Logistics Agency (DLA)” and “[a]s a result, Department of Defense (DoD) customers were overcharged for rigid wall shelters manufactured by Berg.”[3]
According to the DOJ’s allegations, “Berg conspired with the prime vendor and two sub-vendors to rig bids” on the DLA’s Maintenance, Report, and Operations (MRO) contracts for the European Command.[4] To obtain the best prices available, the MRO contracts require prime vendors to engage in competitive bidding and solicit bids from at least two or three independently competing vendors, depending on the amount of the transaction.[5]
In this case, the DOJ claimed that Berg “coordinated with the prime vendor and sub-vendors and submitted inflated quotes for Berg-made rigid wall shelters so that the sub-vendors would win the awards at inflated prices.”[6] The DOJ claims Berg admitted to two primary schemes: (i) Berg “coordinated and submitted inflated quotes on two solicitations for the sale of 10 Berg-made rigid wall shelters that were awarded to … sub-vendor Improve Group”; and (ii) Berg “coordinated and submitted inflated quotes on 26 solicitations for the purchase of 29 Berg-made rigid wall shelters that were awarded to a sub-vendor . . . .”[7] The DOJ claims that as a result of these bid-rigging schemes, the prime vendor did not engage in the requisite competitive bidding process and caused the prime vendor, sub-vendors, and Berg to overcharge military customers.[8]
United States Attorney Leah B. Foley remarked: “As evidenced in this settlement agreement, these contractors manipulated and undermined the fair and open bidding process designed to save our military and taxpayers money. … [N]ot only will my Office continue to use the False Claims Act to help root out fraud, waste and abuse involving taxpayer funds, but it will reward those that accept responsibility and cooperate with the government.”[9] Notably, Berg received cooperation credit with the DOJ.[10]
The Whistleblowers Who Initiated the Case
These claims were initially brought by two whistleblowers under the qui tam provisions of the False Claims Act.[11] The False Claims Act was enacted during the Civil War to go after war profiteers trying to defraud the Union Army. Under the statute, successful whistleblowers can receive up to 30 percent of the government recovery. Under the settlement in this case, the two whistleblowers will receive over $560,000 as their share of the recovery.[12]
Our Firm Helps Whistleblowers, Including Those Who Have Information On Bid Rigging Violations
This is not the first time that the government has gone after allegations of bid rigging in government contracts. For example, 91pornrepresented a whistleblower who brought a False Claims Act lawsuit against several South Korean oil companies for allegedly bid rigging fuel contracts for U.S. military bases in South Korea.
In the South Korea case, five different entities ended up paying a total of $363 million to settle the matter. It was the largest False Claims Act antitrust recovery as well as the largest False Claims Act settlement involving bid rigging to date. The whistleblower received an award of nearly $37 million, representing 23% of the False Claims Act payments. Read more about that case hereԻhere.
91pornattorney Daniel Vitelli commented: “Our antitrust laws protect consumers. Bid rigging, like other forms of anticompetitive conduct, distorts markets and can lead to higher prices, reduced quantity, or reduced quality. Consumers and competitors can bring civil antitrust actions to remedy such misconduct. When anticompetitive conduct leads to inflated payments by the government, in addition to potential antitrust liability, defendants can also be exposed to liability under the False Claims Act. This will continue to be an important area of enforcement to watch.”
Bid rigging, like other anticompetitive arrangements, are often secretive agreements. Whistleblowers can play a key role in uncovering the misconduct. If you have any information of potential antitrust violations that directly impact government purchases, military contracting, or Medicare/Medicaid and would like to speak to an experienced member of the 91pornwhistleblower lawyer team, please do not hesitate to reach out and contact us for a free and confidential consultation.
Speak Confidentially With Our Whistleblower Attorneys
Sources:
[1] .
[2] .
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
Tagged in: Defense Contract Fraud, False Claims Act, qui tam,