Frank Konkel | Nextgov | March 16, 2017 | 0 Comments

Inside CA Technologies' $45M False Claims Settlement

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A long-lasting legal dispute between IT contractor CA Technologies and the federal government reached a conclusion last week, as the Justice Department announced the company agreed to pay $45 million to settle allegations that it overcharged and provided false pricing information to the government.

The backstory of this conflict signifies a more aggressive stance taken by the government in dealing with contractors that mislead the government or bilk taxpayers. Public statements by both DOJ and the General Services Administration’s inspector general further suggest they are more willing than ever to prosecute contractors that play ball unfairly—even if it takes years to do so, as it did with CA.

DOJ contends New York-based CA submitted false pricing data in 2007 and again in 2009 regarding products it sold through the GSA's Schedule 70, a multiple-awards schedule and large acquisition vehicle federal agencies use to purchase various IT products and services.

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Under Schedule 70, GSA pre-negotiates prices and terms for products in an attempt to get federal agencies the best bang for their buck, requiring contractors to disclose their commercial marketplace dealings and agree to a price reduction clause, which mandates contractors reduce their government prices when commercial prices improve.

Issues between CA and the government date back to the early 2000s, but reached a boiling point sometime after 2009, when the government alleges it was "fraudulently induced to enter into the two contract extensions, which in turn resulted in CA submitting false claims for payment throughout the contract extension periods,” according to court filings.

The first instance covered products CA sold through Schedule 70 via Special Item Number 132-32 and 132-33.

“CA captured $54.5 million on Schedule 70 through the two SIN categories in question” between September 2007 and September 2009, according to Matt Hummer, director of analytics and professional services for Govini. The top customer agencies during that time period—and those most likely to have overpaid for products and services from CA—were the FBI, U.S. Army, the Education Department and DOJ itself.

Then, the government asserts, CA submitted inaccurate pricing data for SIN categories 132-32, 132-33 and 132-34 when the contract was extended in 2009.

From 2009 through 2015, CA captured $648.8 million via Schedule 70 through those three SINs, Hummer said. Top buyers included Customs and Border Protection, the Internal Revenue Service, U.S. Army, the FBI and the Social Security Administration, which made the single largest purchase from those SINs totaling $173.9 million for software maintenance and upgrades. Most of the purchases, Hummer said, appeared to be for “legacy software running on legacy mainframes.”

Though the DOJ issued its release on the matter only last week, the civil action was signed March 31, 2015.

Since then, CA’s revenue from those SINs has fallen dramatically, Hummer said.

From fiscal 2009 to fiscal 2015, capture rose 300 percent for CA across the three SINs to a peak of $109.6 million in fiscal 2015. After the civil action, obligations dropped nearly 38 percent in fiscal 2016 to $79.7 million, Hummer said.

“This settlement resolves allegations that CA did not fully and accurately disclose its discounting practices to GSA contracting officers,” DOJ said in a statement. For its part, CA said through a statement it is happy to move on.

“This litigation arose from a complicated contract the parties signed almost 15 years ago,” the company told Nextgov in a statement. “We are pleased to have reached a settlement with all parties. Government agencies remain valued customers of CA Technologies.”  

More to Come?

While rare, these sorts of settlements are not unheard of in federal IT contracting.

In 2015, VMware and Carahsoft settled a similar allegation—a violation of the False Claims Act and overcharging federal customers—for $75.5 million.

Prosecutions may become more frequent, however, because GSA—pushed by its inspector general and led by its acquisition wing—is working to significantly improve Schedule 70.

“We will continue to look into all allegations of false claims in GSA contracts,” said GSA Deputy Inspector General Robert C. Erickson, in a statement. “I appreciate the hard work of our auditors, our agents and the attorneys on this complex case that has resulted in a large amount of money being returned to the United States.”

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