COMMON TYPES OF FRAUD: DEFENSE CONTRACTOR FRAUD

The United States spends approximately $500 billion per year in national defense. A large percentage of that massive annual spending goes to the procurement of new weapons systems, facilities, equipment, supplies, logistical and technical services to be used in defense of the United States. In addition, the government spends billions of dollars to upgrade and repair current weapons systems, equipment and facilities. The overwhelming majority of this defense procurement is done through contracts with private businesses in the United States and around the world.
Defense contractor fraud remains one of the most active areas of false claims litigation under the Federal False Claims Act. Billions of dollars have already been recovered from defense contractors, largely as a result of qui tam whistleblowers acting under the Federal False Claims Act. Below is a description of some of the more common ways in which defense contractors have tried to defraud the federal government:
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Improper Cost Allocation: In many forms of business, including defense contracting, the key to getting a lucrative private or government contract is often the ability to deliver the product or service at a price less than the competition. Defense contractors that provide products and services to the United States military also sell those products, in some form or another, to government and private businesses around the world. One way that some defense contractors have attempted to secure lucrative contracts from private businesses or governments outside the United States is to improperly allocate or shift costs from those contracts onto the “cost-plus” contracts they have with the United States government. As a result of this scheme, the United States ends up paying for the costs that should be paid by these private businesses or foreign governments.