The U.S. Department of Justice (DOJ) has announced new national fraud enforcement priorities that may be particularly relevant to federal government contractors. In a memorandum, DOJ identified government procurement fraud as a critical enforcement priority and outlined an increased focus on fraud involving government contracts and taxpayer-funded programs. 

The Department's new National Fraud Detection Center brings together prosecutors, law enforcement agencies, data analysts, and subject-matter experts and uses advanced data analytics to identify potential fraud and develop investigative leads. 

The DOJ identified several areas for increased enforcement attention, including defective pricing, bid rigging, self-dealing, bribery, product substitution, and billing fraud. DOJ also plans to use increased data analytics and coordination among federal enforcement agencies to identify and investigate potential fraud. 

Existing Contractor Requirements Remain Important 

The DOJ announcement does not create a new general compliance requirement for all government contractors. Many of the applicable ethics and disclosure obligations have been part of the Federal Acquisition Regulation (FAR) for years. 

For example, FAR 52.203-13, Contractor Code of Business Ethics and Conduct, applies to certain covered federal contracts and requires contractors to maintain a written code of business ethics and conduct and establish appropriate measures to prevent and detect criminal conduct.  Under the current FAR, the clause is generally included in contracts expected to exceed $7.5 million with a performance period of 120 days or more.  

Covered contractors also have requirements related to internal reporting, training, internal controls, and disclosure of certain credible evidence of misconduct. The increased DOJ enforcement focus provides a good reason for government contractors to review whether their existing compliance processes are current and functioning as intended. 

How Issues May Be Identified 

Government contractors should be aware that potential compliance issues may be identified through employee or former-employee reports, government audits, agency Inspectors General, contracting officials, whistleblower lawsuits, or increasingly through data analytics that identify unusual patterns in government contracting and payment data. 

The government's own description is that it is trying to connect information that previously existed in separate systems and use analytics to generate investigative leads.   

If the government identifies potential misconduct, the contractor may face an investigation, audit, civil or criminal enforcement action, repayment or settlement obligations, and, in serious cases, suspension or debarment from federal contracting. A typical progression can look like this: 

1. Initial inquiry/investigation. DOJ, an agency Inspector General, or another government agency may request records, interview employees, or investigate the allegation. In False Claims Act matters, DOJ has authority to issue a Civil Investigative Demand (CID) seeking documents, written answers, and/or oral testimony.  

2. Internal investigation and cooperation. If FAR 52.203-13 applies, the contractor has obligations concerning cooperation with government audits/investigations. The clause also expressly preserves the contractor's ability to conduct its own internal investigation and defend a proceeding.  

3. Civil settlement or recovery. If the government concludes that the contractor improperly billed or made false claims, the matter can result in repayment, penalties, or a negotiated settlement. The dollar amounts can be substantially larger than the underlying improper payment.  

4. Criminal prosecution. If the evidence supports criminal conduct, DOJ can pursue criminal charges against the company and/or individuals.  

5. Contract consequences. Depending on the circumstances, the contractor can face contract remedies, including termination, withholding/recovery of payments, or other administrative action.  

6. Suspension or debarment. This is potentially the most significant contractor consequence. FAR permits suspension when there is adequate evidence of certain misconduct, including fraud or criminal conduct relating to a government contract. Suspension is temporary and generally remains in effect while an investigation or legal proceeding is pending.  

   
   

Recent Enforcement Examples 

Recent DOJ enforcement actions demonstrate the types of issues that can create significant exposure for government contractors: 

These cases illustrate that government-contract enforcement can involve timekeeping and labor charging, cybersecurity, conflicts of interest, small-business eligibility, procurement practices, billing, and employee reporting. They also demonstrate that issues can be identified through employees, former employees, agency inspectors general, and other government enforcement resources. 

What Government Contractors Should Review 

Contractors should consider the following: 

• Don’t just have policies on paper. Make sure employees know the rules, managers understand their responsibilities, time and billing records are accurate, and there is a functioning process for reporting and escalating concerns—including a confidential or anonymous reporting option. 

• Review applicable contracts. Determine whether FAR 52.203-13 or other agency-specific ethics and disclosure requirements apply to current contracts or subcontracts. 

• Review the code of conduct. Confirm that the company's business ethics and conduct policy is current and accessible to employees. 

• Confirm reporting procedures. Employees should know how to report suspected fraud, conflicts of interest, bribery, improper billing, or other potential misconduct. 

• Review training requirements. Confirm that employees and other covered individuals receive required ethics and compliance training. 

• Review internal controls. Pay particular attention to controls involving government billing, labor charging and timekeeping, pricing, procurement, subcontractors, cybersecurity, and contract deliverables. 

• Reinforce non-retaliation expectations. Employees should be able to raise concerns through established reporting channels without fear of retaliation. 

• Review escalation procedures. Managers should know where to direct concerns involving potential government-contract misconduct rather than attempting to resolve significant allegations independently. 

• Review disclosure procedures. Make sure the company has a process for promptly involving the appropriate compliance and legal resources when potential misconduct may trigger a contractual or legal disclosure obligation. 

• Document corrective action. Where concerns are substantiated, companies should document appropriate corrective and remedial measures consistent with their policies and contractual requirements. 

  
  

Government Resources 

• U.S. Department of Justice – Fraud Section: https://www.justice.gov/fraud 

• DOJ – Fraud Division Policies and Guidance: https://www.justice.gov/criminal/criminal-fraud/policy-materials 

• Acquisition.gov – FAR 52.203-13, Contractor Code of Business Ethics and Conduct:  https://www.acquisition.gov/far/52.203-13 

• Acquisition.gov – FAR Subpart 3.10, Contractor Code of Business Ethics and Conduct:  https://www.acquisition.gov/far/subpart-3.10 

• Acquisition.gov – FAR 3.1003, Requirements for Government Contractors:  https://www.acquisition.gov/far/3.1003