Government Construction Projects & Prevailing Wage Fraud

Each year, the federal government and state governments spend billions of dollars on numerous construction projects. These projects range from highways and bridges to government office buildings and federally subsidized housing. It should come as no surprise that these government construction programs have been a frequent target for fraud. The federal government’s False Claims Act is a law that provides financial rewards to individuals who file false claim suits on behalf of the government against individuals and entities which defraud the federal government. There are currently 31 states that have their own false claims acts, which also allows private citizens to bring suit against individuals and entities which defraud the state. On May 20, 2009, President Obama signed the Fraud Enforcement and Recovery Act of 2009 (“FERA”). FERA amended the federal False Claims Act by significantly expanding the circumstances in which contractors and subcontractors may be liable for false claims. Under FERA, liability under the federal False Claims Act is extended to claims under any contract or grant that is funded or partially funded by the federal government. Prevailing wage fraud is sometimes a mechanism by which the government is defrauded.

In many government contracts, “prevailing wage” rules apply. Prevailing wage laws require that contractors and subcontractors who have been awarded certain government construction contracts pay their employees a certain minimum amount. This minimum amount is referred to as the “prevailing wage.” The purpose of prevailing wage laws is to prevent contractors and subcontractors from placing low bids for government work by paying employees less than what they would earn under non-government contracts. In 2016, there were more than 36,000 federal government construction contracts where prevailing wages applied. Contracts with prevailing wage provisions accounted for $9 billion in spending in 2016. Congress has authorized prevailing wage provisions in a number of statutes under which federal agencies provide financial assistance for construction projects. These statutes, such as the Federal-Aid Highway Act, the Housing and Community Development Act, Federal Water Pollution Control Act, to name a few, cover construction projects which include transportation, housing, and the environment. Fraud occurs when a government contractor fails to pay its employees the prevailing wage (when required to do so) but nevertheless, charges the government the full amount as if the prevailing wage was paid to the employees.

The other common types of fraud involving government construction projects include, but are not limited to, the following:

  • Bid-Rigging
  • Falsification of Disadvantaged Business Enterprise status/Minority Contractor Status
  • Payment of bribes & receipt of illegal kickbacks
  • Overcharging the government for materials
  • Use of substandard materials
  • Failure to follow contract specifications
  • Falsification of documentation and construction reports
  • Overcharging for labor hours

The False Claims Act is an excellent tool for reward private citizens for reporting fraud committed against the government. However, it typically only provides a reward to the first person with knowledge who files a claim. If you believe you have knowledge fraud committed against the government, contact us as soon as possible at (856) 746-6332

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