Government Contracts Monitor

When You Agree to Put a Roof Over the Government’s Head, Give it the Right Price

October 14, 2013

The government recently settled a qui tam lawsuit against Tremco, Inc., a roofing restoration and supply company that is a subsidiary of RPM International, Inc., a multi-national holding company headquartered in Medina, Ohio. In United States, ex. rel. Gregory Rudolph v. Tremco Inc. and RPM International Inc., No. 10-CV-1192 (D.D.C. filed July 15, 2010) (complaint linked here), the relator alleged that for a period of over nine years, Tremco failed to provide the government with price discounts that it provided to non-federal customers, marketed expensive materials to government purchasers without disclosing the availability of lower cost options, and used a defective adhesive formula in its roofing systems that were installed on government buildings. The complaint alleged false claims in connection with two multiple award schedule contracts with the GSA for roofing supplies and services.

The relator alleged that Tremco gave the government a standard 13.3% discount for its purchases. However, the complaint also alleged that for private contracts, as well as contracts with individual states, Tremco gave discounts of 30% and could even seek company approval for discounts as high as 40%. The complaint alleged that because of this broad pricing discretion, Tremco was unable to assure that the government received the best prices as it had promised. The complaint alleged that Tremco’s Roofing Division President expressed concern over the discount issue, and said that if the government ever audited Tremco’s discounting practices, Tremco “would get killed.” The complaint also alleged that Tremco did not have sufficient policies and procedures in place regarding pricing.

Tremco settled with the government, and agreed to pay $60.9 million. The relator will receive $10.9 million for his share of the settlement. This case presents a costly reminder to companies with FSS Schedule contracts to make sure that policies and procedures regarding proper pricing are in place. Companies also need to be diligent with its sales force to make sure that the government is getting the appropriate price for its goods, especially for the roof over its head.

Brian Stolarz is the attorney responsible for the content of this article.