COVID-19 Funding Brings Enforcement Risks

In these unprecedented times, when the Government is handing out literally trillions of dollars of cash, a certain amount of unscrupulous behavior is almost certainly to follow. While the economic stimulus plan will provide desperately needed help to plenty of worthy small businesses, it will also surely be rife with fraud – and the Government will be on the lookout for deceitful contractors.

The Government is acting quickly to hand out payments to those in need but ambiguities related to Agency memorandums or temporary guidance abound. For example, agencies continue to issue copious memorandums related to COVID-19 guidance and payments to contractors, but the guidance can be confusing (the Department of the Defense has issued at least seventeen various pieces of guidance alone) and the law is being interpreted differently between agencies as well as between contracting officers.

As this funding amounts to the largest-ever federal stimulus program, Contractors receiving COVID-19 payments should be aware that enforcement actions are likely to follow. With the sheer amount of money involved, it would likely be impossible for Inspectors General, oversight boards, or agency auditors, among others, to completely police these payments. The Government will likely turn to whistleblowers and other compliance programs to ensure that the guidelines are properly being met by contractors, particularly contractors supplying services or goods to the federal government for the first time. Indeed, the Department of Justice has already set up a hotline for the American public to generally report fraud related to COVID-19 and the DOJ has likewise already filed its first enforcement action. While these items do not relate specifically to contractors, contractors should be wary of the attention that COVID-19 fraud schemes have already garnered and be sure that they have compliance programs in place.

Contractors certainly will not want to be confronted with a False Claims Act violation so contractors should be diligent in documenting all costs expended related to COVID-19 (and documenting those costs separately to the extent possible), as well as any document associated delays in performance or performance related issues. In this regard, contractors should likewise comply with all record-keeping requirements and be sure to retain those records for the applicable amount of time even after performance is complete. Companies should also invest in compliance programs, particularly for newer contractors that might be unfamiliar with the sometimes mysterious government contracting rules and regulations.

Attorney General Barr noted the importance of enforcement in a memo to U.S. Attorneys, “The pandemic is dangerous enough without wrongdoers seeking to profit from public panic and this sort of conduct cannot be tolerated.” Thus, enforcement actions are sure to follow so contractors should make sure to have everything documented now to protect yourself against a potential audit, investigation, or claim in your future.