As the U.S. government bolsters its arsenal with the addition of the Administrative False Claims Act (AFCA) alongside the longstanding False Claims Act (FCA), government contractors and recipients of federal funds should prepare for enhanced oversight and enforcement activities by federal agencies. The passage of the AFCA, which is encapsulated in the 2023 National Defense Authorization Act, marks a significant shift in how agencies are empowered to investigate fraud claims.
This new legislation, effective since late December, aims to broaden federal agency capabilities to investigate and address fraudulent activities. Historically, the FCA, introduced in 1863, served as the primary instrument for combating contractor fraud tied to U.S. government funds, with enforcement largely driven by the Department of Justice and whistleblowers.
However, the AFCA provides agencies with independent authority to investigate lower-dollar fraud claims, thus diversifying the landscape of enforcement. Notably, the AFCA replaces the Program Fraud Civil Remedies Act (PFCRA) of 1986, streamlining enforcement by removing previous constraints and bolstering agency powers. Among the significant changes are:
- Increasing the recovery cap from $150,000 to $1 million per false claim, with automatic adjustments for inflation.
- Allowing agencies to recover costs related to investigating false claims.
- Extending the statute of limitations from six years to ten years for certain violations.
The enhanced authority and financial incentives for agencies to pursue independent investigations not only elevates the risk for companies engaged in contractual relationships with the federal government but also increases agency leverage during settlement negotiations. The AFCA’s self-funding mechanism for investigations further encourages agencies to tackle smaller fraud claims that were previously unaddressed due to limited resources.
Furthermore, contractors can be held liable under the AFCA even in the absence of direct claims for government funds, which expands the scope of liability beyond the FCA’s purview. Despite the absence of qui tam provisions under the AFCA, whistleblower incentives under the FCA remain unaffected.
For organizations working in the realm of federal contracts, it is crucial to heed the evolving regulatory environment and proactively mitigate risks associated with false claims. Legal professionals should guide their clients in navigating these changes to prevent potential exposure and ensure compliance with the new, stringent requirements.
For further reading on the subject, a comprehensive analysis by Cooley attorneys can be accessed here.