Government Contracts Monitor
A Quote Is Not a Claim, but Be Ready for More Government Counterclaims
May 10, 2013
When faced with a $95,115 Contract Disputes Act certified claim for improper cancellation of a purchase order for printed circuit cards, the United States Government didn’t just defend the claim – it went on the offensive by filing a False Claims Act (FCA) claim against the contractor. In Ulysses, Inc. v. United States, No. 06-436C (Fed. Cl. April 30, 2013), the Court of Federal Claims found the government’s counterclaims to have no merit, after a lengthy trial on liability.
The government based its FCA counterclaims on two separate theories. First, it alleged that the contractor knowingly submitted a false quotation in response to a Request for Quotations. Second, the government claimed that the contractor falsely asserted that it was an approved manufacturer of the part at issue. The Court made easy work of the first claim under the FCA. It bluntly held that the contractor “did not violate the FCA when it submitted its electronic quotation in response to the First RFQ because the submission of a quotation is not a claim – the quotation is not a request or demand for money or property” as required by 31 U.S.C. § 3729(c). Simply stated, “[b]y submitting a quote to supply a product at a given price, [the contractor] was not asking the Government for money.” Only later, after the Government accepts the quote and contractor delivers a product could there be a claim for money. Because the contractor never supplied any parts under the Purchase Order covered by the First RFQ, there was no false claim by the contractor simply by virtue of a quotation alone.
As to the second claim under the FCA, the Court applied the Government Knowledge Defense to deny the counterclaim. Under the Government Knowledge Defense, “prior Government knowledge of an allegedly false claim may negate the FCA’s scienter requirement.” The Government Knowledge Defense has previously been recognized and applied in other federal appellate courts, but never before in a decision of the Federal Circuit (or the Court of Federal Claims). The Court found that the contractor “candidly advised the Government of its [legal] position that it believed it was an approved source, capable of manufacturing the part itself and did not attempt to deceive or mislead the Government in representing its status. The Government knew that Ulysses had not gone through the Source Approval Request process because Ulysses told it so. Further, Ulysses persisted in arguing that it should not have had to undergo this process because it had already manufactured the 112 Part for the Government as a component of a larger part. . . Ulysses told the Government the truth about its status, making this a classic case for application of the Government knowledge defense.”
After finding for the contractor on some of its claims and denying all of the Government’s counterclaims, the case now heads to the damages trial phase. Perhaps this case will serve as a cautionary tale for the Government to prevent it from overreaching and overreacting to valid Contract Disputes Act claims with unwinnable FCA counterclaims? One can hope.
Michael J. Schrier is the attorney responsible for the content of this article.