It’s Time to Re-Think the False Claims Act

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The federal False Claims Act (FCA) is one of the government’s primary weapons in combating fraud by federal contractors, federal grantees and recipients of federal benefits. Since 1986, when the FCA was restructured into its current configuration, total recoveries under the Act amount to almost $39 billion. Recoveries during the last three fiscal years alone total almost $12 billion. Approximately two-thirds of all recoveries since 1986 have resulted from suits initiated by whistleblowers pursuant to the unique qui tam provisions of the FCA which enable private citizens to file suit on behalf of the government and reward them with 15-30% of any resulting recovery. The number of such whistleblower suits been rising and, during the last three fiscal years a record number of suits was filed each year: 635 cases in 2011, 652 cases in 2012, and 753 cases in 2013. Significantly, however, almost all of the recoveries from whistleblower-initiated cases were obtained in the small minority of those cases in which the government intervened to take over the action.

It is difficult to identify and measure all the relevant costs and benefits arising from FCA enforcement. As a result, there has been a tendency to focus on metrics that are easy to quantify — the number of FCA cases brought and the amount of money recovered as a result of those cases. Fundamental policy decisions concerning the FCA and its enforcement have tended to be based on assumptions, ideology, or political appeal. Clearly, the FCA creates some notable benefits for the government and the public. The FCA has been used to recover substantial amounts of money and to deter fraud; without a strongly enforced FCA, contractors, grantees and program participants likely would engage in more fraud than now occurs. The question, however, is not whether the existing FCA yields some significant benefits, but whether it is optimal in light of alternatives.

Originally Published in the Federal Contracts Report by Bloomberg BNA - July 22, 2014.

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