Oliver E. Jury Archives - Government Contracts Navigator

More Cases and Expanded Data Analytics: A Closer Look at DOJ’s FY 2023 False Claims Act Statistics

Dominique L. Casimir, Luke W. Meier, and Oliver E. Jury ●

The United States Department of Justice (“DOJ”) recently announced its statistics for False Claims Act (“FCA”) FY 2023 settlements and judgments. DOJ recovered $2.68 billion in FY 2023; as usual, the majority of these recoveries (nearly 70 percent, or $1.8B) came from the healthcare industry. DOJ continues to make use of data analytics to inform its enforcement activity.

Background

Comparing year-to-year variance in the volume of DOJ’s FCA recoveries provides only marginal utility. More telling is the rapid expansion of the non-qui tam matters opened during the past two years. In FY 2022, DOJ opened 305 non-qui tam matters, representing approximately 186 percent of its prior ten-year average (164). In FY 2023, this increase continued, with DOJ opening 500 non-qui tam matters—305 percent of the ten-year average over FY 12–21.

The FAR Council Proposes Standardizing Cybersecurity Requirements

Michael Joseph Montalbano and Oliver E. Jury ●

On October 3, 2023, the FAR Council proposed two potentially significant cybersecurity rules. We discussed FAR Case No. 2021-017, which would impose a range of new cyber incident reporting requirements on nearly all government contractors, earlier this week. This post discusses FAR Case No. 2021-019, which seeks to standardize cybersecurity contractual requirements across federal agencies.

Who Will the Standardization of Cybersecurity Contractual Requirements Affect?

Under the proposed rule, the FAR Council would promulgate two new FAR clauses, FAR 52.239-YY (Federal Information Systems Using Non-Cloud Computing Systems) and FAR 52.239-XX (Federal Information Systems Using Cloud Computing Services). As drafted, the rule would affect contracts that involve the development and maintenance of federal information systems (“FIS”).

What is an FIS? The proposed rule defines FIS as “an information system used or operated by an executive agency, by a contractor of an executive agency, or by another organization, on behalf of a government agency.”

FAR 52.239-YY would be required in contracts acquiring FIS services that include (or are anticipated to use) non-cloud computing services during contract performance. The proposed clause would require flowdown to subcontractors at all tiers (provided those subcontractors may use non-cloud computing services). There would be no exception for acquisitions below the simplified acquisition threshold or acquisitions for commercial products, including commercially available off-the-shelf (“COTS”) items and commercial services, “because Government data and systems require protection regardless of dollar value.”

The FAR 52.239-XX requirements would largely mirror those in FAR 52.239-YY, albeit for contractors using cloud-based computing services during performance. Contractors would need to comply with both proposed clauses if they use both non-cloud and cloud-based computing services in support of contract performance.

The FAR Council Proposes New Cyber Incident Reporting Requirements

Michael Joseph Montalbano and Oliver E. Jury ●

On October 3, 2023, the FAR Council issued two proposed cybersecurity rules that could have significant implications for both Government prime and subcontractors. This post discusses the first rule, FAR Case No. 2021-017, which, if implemented, will impose an array of new cyber incident reporting requirements on nearly all government contractors. The second rule, FAR Case No. 2021-019, seeks to standardize cybersecurity contractual requirements across Federal agencies. We discuss the first rule in further detail here.

Who Would Have to Comply with the New Cyber Incident Reporting Rule?

Under the proposed cyber incident rule, the FAR Council intends to promulgate a new FAR clause, FAR 52.239-ZZ. In its current form, FAR 52.239-ZZ would apply to all contracts where “information and communications technology” (“ICT”) is used or provided in the performance of the contract.

What is ICT? ICT is just about anything computer related. ICT includes computers and their peripheral equipment, telecommunications equipment, computer software, and electronic documents. In other words, if a contractor uses a computer or related device in the performance of a government contract, then FAR 52.239-ZZ would likely apply.

3 Tips to Reduce False Claims Act Exposure in the Wake of United States ex rel. Schutte v. SuperValu, Inc.

Justin A. Chiarodo, Jennifer A. Short, Stephanie M. Harden, Samarth Barot, and Oliver E. Jury ●

2023 is shaping up to be a major year in False Claims Act (“FCA”) practice, with the Supreme Court weighing in on both FCA scienter (in SuperValu) and the reach of the government’s dismissal authority (in Polansky), and the government focusing its enforcement efforts around antitrust, cyber, and national security. We focus today on the United States ex rel. Schutte v. SuperValu, Inc. decision, in which the Supreme Court held that a contractor’s subjective belief about its compliance at the time it submitted claims for payment is relevant to whether it had the requisite scienter for FCA liability. Much has been written on this case, with most articles exploring esoteric concepts like “scienter,” “falsity,” and the “objectively reasonable person.” But assuming—as we do—that the decision will reduce the prospect of successful early dispositive motions, what practical steps can contractors take to reduce their False Claims Act exposure and avoid litigation in the first place? We offer three suggestions.

We begin with a basic refresher on the issue presented in SuperValu. A defendant is not liable under the False Claims Act unless it “knowingly” (including acting with “reckless disregard”) submits a false claim to the government. The “knowing” scienter element—particularly around reckless disregard—can be difficult to prove in the world of complex and often ambiguous laws and regulations that govern contractors’ compliance. The federal circuits had split on the issue of whether a defendant’s subjective interpretation at the time it submitted claims for payment to the government was relevant to determining FCA “knowledge” if the defendant could later show that the underlying rule was ambiguous and its conduct (regardless of its contemporaneous understanding or belief) was consistent with an objective, reasonable interpretation of the unsettled requirement. SuperValu resolved the debate by holding that whether a defendant knowingly violated the FCA—and satisfied the scienter element—must consider the defendant’s real-time “knowledge and subjective beliefs.” United States ex rel. Schutte v. SuperValu, Inc., 143 S. Ct. 1391 (2023).

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