Resources - Morgan Verkamp

General False Claims Act Information

Understanding the False Claims Act

The False Claims Act is strongly supported by Taxpayers Against Fraud and the Taxpayers Against Fraud Education Fund (collectively, “TAF”). Several years ago, TAF produced a video on incentivizing integrity. We think the video is one of the best ways to explain why the False Claims Act is so effective.

TAF’s website provides additional resources about the False Claims Act and the economic fraud reporting programs at the IRS, SEC and CFTC. Click here to check out the TAF website or contact any of Morgan Verkamp’s attorneys for information about the benefits of supporting the TAF organization.

Common False Claims Act words and phrases

False Claims Act cases involve some unique terminology. Here is a quick-reference guide to some of those words and phrases:

Materiality and the Supreme Court’s Escobar decision

One of the primary elements of False Claims Act liability is the “materiality” of a false record or statement made to get a claim paid by the United States. In layman’s terms, “materiality” traditionally meant, “does this kind of conduct matter to the government?” The False Claims Act was amended in 2009 to add specific materiality language to the statute, and this language largely codified the definition the courts had been using, namely, does the conduct have a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property from the government?

Where courts have sometimes parted ways is on the line to draw if the conduct did not violate an express statement or certification of the contractor in order to get paid, but instead violated an underlying condition of a contract or a statute. Where does the court look to determine whether the violation at issue was significant enough to cause a false or fraudulent claim for payment? Plainly, restricting False Claims Act liability to cases of facially false descriptions of goods or services on a claim or affirmative false certifications of compliance creates giant loopholes for false or fraudulent conduct which are concealed from the government. The need to carve room to impose liability under the False Claims Act for this kind of fraud led to the use of a label, called implied certification. This theory of liability is simply the expression of the basic principle that if the government defines its bargain in a manner that requires adherence to a statute or regulation, then compliance with that statute or regulation is implied by virtue of the contractor’s request for payment.

Over the years, courts have addressed the implied certification theory of liability in different ways, with some recognizing that rigid use of labels can get in the way of evaluating whether defendants have submitted or caused the submission of false or fraudulent claims. Indeed, in 2011, this issue was addressed by the First Circuit Court of Appeals in one of Morgan Verkamp’s cases, United States ex rel. Hutcheson v. Blackstone Medical. In that case, the First Circuit recognized, along with several other circuit courts of appeal that, whether called implied certification or anything else, the knowing submission of claims in violation of material conditions of the claimant’s eligibility for payment is patently within the False Claims Act.

Then, in 2015, the United States Supreme Court announced it would hear a case on appeal from the First Circuit Court of Appeals, Universal Health Services, Inc v. U.S. ex rel. Escobar. The two questions accepted by the Supreme Court had to do with the application of the implied certification theory of liability. Taxpayers Against Fraud Education Fund (TAFEF), an organization dedicated to protecting the False Claims Act and preserving anti-fraud legislation, filed a brief in support of the relators in the case, Julio Escobar and Carmen Correa. Morgan Verkamp was honored to be asked by TAFEF to represent the organization’s interests as counsel of record for the Escobar brief. Morgan Verkamp partners Jennifer Verkamp and Chandra Napora took the laboring oar on the TAFEF amicus curiae brief, which was filed March 3, 2016. In encouraging the Court to affirm the First Circuit’s opinion on behalf of TAFEF, Morgan Verkamp wrote:

Congress’ intent has been loud and clear each time it has chosen to “modernize’ the FCA: The FCA was never intended to allow corner-cutting contractors to hide under its skirt with robotic and narrow language. Rather, Congress intended to entrench the FCA as “the protector of all Government funds or property.” (Citation omitted.) Moreover, while “[t]his Court has never required that every permissible application of a statute be expressly referred to in its legislative history,”Moskal v. United States, 498 U.S. 103, 111 (1990), Congress has specifically and repeatedly recognized that claims premised on violations of underlying statutes and regulations are within the scope of the FCA.

The TAFEF brief – which can be found in its entirety here – discussed the courts that have supported an implied certification theory and how that theory is consistent with the purpose of the False Claims Act. It also advocated for the Supreme Court to adopt a materiality-driven analysis of which violations should give rise to a False Claims Act action, rather than adhere strictly to the characterization of a statute or regulation as a “condition of payment.” The TAFEF brief concluded,

Far from supporting extra-statutory limitations of the application of the False Claims Act, the rising level of fraud reinforces that liability should be construed consistent with “the ultimate touchstone,” the FCA’s purpose. The FCA was designed to protect the public fisc. Petitioner is not a 14 year old teenager mowing the grass in a manner that flagrantly violates the requests of his mother. Petitioner is a government healthcare contractor, who should be held to the material terms of its agreement with the United States, consistent with the statute, its history, and the seminal decisions of this Court.

In June 2016, the Supreme Court issued an 8-0 opinion in Escobar that held that implied certification can be a theory for FCA liability if the contractor fails to disclose its failure to comply with material statutory, regulatory or contractual requirements. Finding the theory to be valid, the Court went on to clarify that FCA liability does not turn on the language used in a statute or regulation, but whether the defendant knowingly violated a requirement that the defendant knew was material to the government’s payment decision. 136 S.Ct. 1989 (2016).

The Court then undertook a lengthy evaluation of how the materiality requirements should be imposed. Although the Court surely intended its opinion to bring clarification to the materiality process so as to encourage uniform application around the country, this has not been the result. Almost immediately after Escobar, courts began issuing opinions evaluating materiality in varying degrees of rigidity. The result is that, once again, some parts of the country have more flexible interpretations of the materiality standard, such that relators in certain jurisdictions are likely to fair better than others – at least until the Court addresses the issue again or Congress amends the False Claims Act to make a statutory correction.

Materiality is a rapidly and constantly changing issue that will assuredly be at the forefront of False Claims Act jurisprudence for the near future. Morgan Verkamp’s attorneys continue to refine their expertise on these issues, including by continuing to closely study, lecture, write and litigate about materiality issues. If you are considering bringing a False Claims Act case and want to discuss whether the defendant’s conduct was material to the government, or if you are a lawyer seeking co-counsel to litigate a case that includes an anticipated materiality challenge, click here to contact any of Morgan Verkamp’s experienced attorneys.

Healthcare Resources

The Anti-Kickback Statute

The federal healthcare Anti-Kickback Statute (“AKS”) arose out of a Congressional concern that payoffs to those who influence healthcare decisions will result in goods and services being provided that are medically unnecessary, of poor quality, or even harmful to a vulnerable patient population. To protect the integrity of federal health care programs from these difficult-to-detect harms, Congress enacted a prohibition against the payments of kickbacks in any form.

The AKS, which is codified at 42 U.S.C. § 1320a-7b and can be found in full here, prohibits any person or entity from offering, providing, requesting, or accepting “remuneration” to induce or reward any person for referring, recommending or arranging for the purchase of any item for which payment may be made under a federally-funded health care program. Certain arrangements are excluded from falling under the AKS and others are protected from AKS liability by “safe harbors.”

Violations of the AKS can subject the perpetrator to criminal and civil penalties, as well as exclusion from participation in federally-funded healthcare programs.

The Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”) often issues guidance related to the AKS. HHS-OIG’s Special Fraud Alerts and other notifications can be found here: HHS-OIG Federal Register Reports and Publications

The Stark Law

The Stark Law prohibits a physician from making referrals for certain “designated health services” payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless an exception applies. The statute also prohibits the entity from billing Medicare or Medicaid for those referred services.

A “financial relationship” under the Stark Law includes arrangements involving any remuneration between a physician (or an immediate family member) and an entity. A “referral” includes, among other things, “a request by a physician that includes the provision of any designated health service for which payment may be made under Medicare….” A “referring physician” is defined as “a physician who makes a referral … or who directs another person or entity to make a referral or who controls referrals made to another person or entity.”

Claims submitted in violation of the Stark Law are ineligible for payment and violate a material condition of payment for federal healthcare programs.

A claim for payment that is based on a violation of the Stark Law constitutes a false claim under the False Claims Act.

Comparing the Stark Law and the Anti-Kickback Statute

The Stark Law and Anti-Kickback Statute are both designed to protect the federal healthcare program by prohibiting financial relationships that could influence medical decisions. While virtually all violations of the Stark Law are also violations of the Anti-Kickback Statute, not all violations of the Anti-Kickback Statute also violate the Stark Law. The statutes typically do not overlap when the fraudulent conduct involves referrals made by someone other than a physician or when the referred services are not a “designated health service” as defined by the Stark Law.

The Office of Inspector General for the U.S. Department of Health and Human Services provides various resources related to the Stark Law, the Anti-Kickback Statute, and how to address the anti-fraud laws in a compliance program. One of the HHS-OIG documents is a helpful side-by-side comparison chart of the two anti-fraud statutes:

Comparison of the Anti-Kickback Statute and Stark Law*
	The Anti-Kickback Statute (42 USC § 1320a-7b(b))	The Stark Law (42 USC § 1395nn)
Prohibition	Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business	Prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies Prohibits the designated health servicesentity from submitting claims to Medicare for those services resulting from a prohibited referral
Referrals	Referrals from anyone	Referrals from a physician
Items/Services	Any items or services	Designated health services
Intent	Intent must be proven (knowing and willful)	No intent standard for overpayment (strict liability) Intent required for civil monetary penalties for knowing violations
Penalties	Criminal: Fines up to $25,000per violation Up to a 5 year prison term per violation Civil/Administrative: False Claims Act liability Civil monetary penalties and program exclusion Potential $50,000 CMP per violation Civil assessment of up to threetimes amount of kickback	Civil: Overpayment/refund obligation False Claims Act liability Civil monetary penalties and program exclusionfor knowing violations Potential $15,000 CMP for each service Civil assessment of up to three times the amount claimed
Exceptions	Voluntary safe harbors	Mandatory exceptions
Federal Health Care Programs	All	Medicare/Medicaid

*This chart is for illustrative purposes only and is not a substitute for consulting the statutes and their regulations.

Additional information comparing the statutes provided as part of the Health Care Fraud Prevention and Enforcement Action Team (“HEAT”) Provider Compliance Training Initiative can be found here.

What are the Stark Law exceptions and Anti-Kickback Statute safe harbors?

Both the Stark Law and the Anti-Kickback Statute allow for specific financial arrangements that might otherwise violate the statute but have been carved out as permissible relationships.

Under the broad language of the Stark Law, any relationship between a physician and an entity to which the physician refers violates the statute unless the relationship meets one of the statutory exceptions. The exceptions identify types of arrangements which are not considered financial relationships for purposes of Stark liability. The Stark exceptions are found in the Code of Federal Regulations at 42 C.F.R. § 411.355-357.

Unlike Stark, however, a provider may refer to an entity with which it has a relationship and not necessarily run afoul of the Anti-Kickback Statute. To give providers a measure of protection, the AKS sets forth a series of safe harbors that identify relationships that will not give rise to AKS liability if the parameters are complied with fully. The AKS safe harbors are voluntary instead of mandatory, but compliance with at least one safe harbor is a best practice in the healthcare industry. The AKS safe harbors are also found in the Code of Federal Regulations at 42 C.F.R. § 1001.952.

The following is a chart of the types of financial relationships which are the subject of a Stark exception, an AKS safe harbor, or both. Click the links to go to the full statutory language for the applicable exception or safe harbor.*

Comparison of the Stark Exceptions and Anti-Kickback Safe Harbors
Nature of Relationship	Subject of Stark Exception	Subject of AKS Safe Harbor
Academic Medical Centers	Yes	No
Ambulance Replenishing	No	Yes
Ambulatory Surgery Centers	No	Yes
Assistance to Compensate a Nonphysician Practitioner	Yes	No
Certain Arrangements with Hospitals (Unrelated to DHS)	Yes	No
Charitable Donations by Physician	Yes	No
Community-Wide Health Information Systems	Yes	No
Cooperative Hospital Service Organizations	No	Yes
Compliance Training	Yes	No
Discounts	No	Yes
Electronic Health Records Items and Services	Yes	Yes
Electronic Prescribing Items and Services	Yes	Yes
Employment Relationships	Yes	Yes
EPO and Other Dialysis-Related Drugs	Yes	No
Eyeglasses & Contacts Following Cataract Surgery	Yes	No
Fair Market Value Compensation	Yes	No
Federally Qualified Health Centers	No	Yes, here and here
Group Practice Arrangements with a Hospital	Yes	No
Group Purchasing Organizations	No	Yes
Implants Furnished by an ASC	Yes
Increased Coverage, Reduced Cost-Sharing Amounts, or Reduced Premium Amounts Offered by Health Plans	No	Yes
Indirect Compensation Arrangements	Yes	No
In-Office Ancillary Services	Yes	No
Intra-Family Rural Referrals	Yes	No
Investment Interests: Publicly-Traded Securities / Large Investment Interests	Yes, here and here	Yes
Investment Interests: Held by Either Active or Passive Investors	No	Yes
Investment Interests: Joint Ventures in Rural or Underserved Areas	Yes	Yes
Investment Interests: Group Practices	No	Yes
Investment Interests: Hospital Investment or Ownership	Yes	No
Isolated Transactions	Yes	No
Local Transportation	No	Yes
Medical Staff Incidental Benefits	Yes	No
Medicare Coverage Gap Discount Program	No	Yes
Non-Monetary Compensation	Yes	No
Obstetrical Malpractice Insurance Subsidies	Yes	Yes
Payment by a Physician	Yes	No
Personal Service Arrangements	Yes	Yes
Physician Services	Yes	No
Physician/Practitioner Recruitment	Yes	Yes
Preventative Screening Tests, Immunizations, and Vaccines	Yes	No
Price Reductions Offered by Contractors with Substantial Financial Risk to Managed Care Organizations	No	Yes
Price Reductions Offered to Eligible Managed Care Organizations	No	Yes
Price Reductions Offered to Health Plans	No	Yes
Professional Courtesy	Yes	No
Referral Agreements for Specialty Services	No	Yes
Referral Services	Yes	Yes
Rental of Office Space and Equipment	Yes (equipment only)	Here for space rental; Here for equipment rental
Retention Payments in Underserved Areas	Yes	No
Risk Sharing Agreements	Yes	No
Sale of Practice	No	Yes
Services Furnished by an Organization to Enrollees in a Prepaid Health Plan	Yes	No
Timeshare Arrangements	Yes	No
Waiver of Beneficiary Coinsurance and Deductible Amount	No	Yes
Warranties	No	Yes

*Last updated July 24, 2019.

Where can I find Medicare provider claims data?

In May 2013, the United States implemented an “open data policy” with the goal of enhancing intra-agency government cooperation and accountability. One of the consequences of the new policy was the release of thousands of government datasets, including many in the healthcare field. To compile all the healthcare information in one place, the United States created a website – www.HealthData.gov – aimed at making the data more accessible to consumers, researchers and policymakers alike.

Most significant for False Claims Act practitioners, the government released a dataset formally titled “Medicare Provider Utilization and Payment Data: Physician and Other Suppliers” in April 2014. It is a compilation of Medicare Part B fee-for-service payments made to doctors and other providers beginning January 1, 2012. Payment information is consolidated and typically added to the site annually, though the most current data in 2020 is from FY 2017. Although the data is far from perfect, it represents unprecedented access to payment data which can be used to show billing trends, make provider comparisons, and identify outlier providers. The data can be accessed directly on the Center for Medicare and Medicaid Services website here.

Although anyone can access the data, it is very cumbersome to search and analyze. If you are looking to support an allegation of fraud, you should speak with an experienced attorney or investigator about the data. Contact a member of the Morgan Verkamp team to discuss your claims and the supporting data.

How can I find out if my doctor accepted money from pharmaceutical companies?

One of the main reasons for the Anti-Kickback Statute is to ensure that a doctor’s prescriptions or referrals are based purely on medical judgment rather than being swayed by financial incentives. Despite the proscriptions of the AKS, pharmaceutical and medical device companies have made an entire industry of finding ways to persuade physicians to prescribe one brand of drug or device over another. As a result, pharmaceutical and device companies still spend hundreds of millions of dollars each year to buy physician and hospital loyalty.

Just like the Medicare provider data, the United States publishes data showing the amount of money specific providers have received for things like research grants, meals, travel, gifts and speaker fees. The data is compiled on a website accessible at www.OpenPaymentsData.CMS.gov. Data is available beginning from August 2013 and subsequent years are added annually.

If you believe a physician or hospital is taking kickbacks from a pharmaceutical or medical device company in exchange for referrals of Medicare and/or Medicaid patients, please contact a member of the Morgan Verkamp team to discuss your potential False Claims Act case.

Procurement Resources

Overview of government procurement

Government contracts to purchase goods or services can be complicated arrangements which vary significantly depending on factors like the nature and value of the items or services being purchased, the agency making the acquisition, and the size and capabilities of the contractors fulfilling the request. But the underlying process utilized to arrive at those contracts is itself relatively simple. The Congressional Research Service (a legislative branch within the Library of Congress that provides nonpartisan policy and legal analysis) issued a 2012 CRS Report to Congress called “Overview of the Federal Procurement Process and Resources” which offers a simplified summary of the way the federal government’s purchases goods and services:

Summary of the Acquisition Process

Essentially, the federal acquisition process begins when an agency determines its requirements and how to purchase them. If the agency’s contracting officer determines that the appropriate method for procuring the goods or services is a contract, and the contract amount is greater than $25,000, then the agency posts a solicitation on the Federal Business Opportunities (FedBizOpps) website, available at https://www.fbo.gov. At a minimum, a solicitation identifies what an agency wants to buy, provides instructions to would-be offerors, identifies the source selection method that will be used to evaluate offers, and includes a deadline for the submissions of bids or proposals. Agencies also may post solicitations on their own websites and, in exceptional circumstances, may post solicitations on their websites instead of on FedBizOpps. (The Federal Emergency Management Agency (FEMA) did this in the aftermath of Hurricane Katrina in 2005).

Following the deadline for companies to submit their offers, agency personnel evaluate offerors’ submissions, using the source selection method and criteria described in the solicitation. Unless multiple suppliers or firms are needed, such as for a supply schedule, the agency awards a contract to one firm.

The CRS Report also contains additional resources for businesses considering becoming government contractors and is a valuable introductory primer for the procurement industry. The full report can be found here.

Regulations for government suppliers

The Federal Acquisition Regulations (“FAR”) are a set of rules which govern the acquisition process in the United States for all executive agencies, although there are some exceptions (such as the Federal Aviation Administration and the U.S. Mint). The FAR does not apply to legislative or judicial branch agencies, although agencies in those branches of the government may adopt the FAR as a matter of policy. The FAR set forth how the processes work for three phases: (1) need recognition and acquisition planning, (2) contract formation, and (3) contract administration. The FAR System codifies and publishes the FAR, as well as agency regulations that implement or support the FAR. The complete FAR and supplemental regulations can be found at www.Acquisition.Gov, a website created and powered by the General Services Administration.

Closely related to the FAR is the Defense Federal Acquisition Regulation Supplement (“DFARS”), a supplement to the FAR that provides Department of Defense (“DoD”)-specific acquisition regulations that DoD government acquisition officials – and those contractors doing business with DoD – must follow in the procurement process for goods and services. The DFARS and related procedures, guidance, and information can be found here on the Defense Procurement and Acquisition Policy website, a site maintained by the DoD.

Although all FAR clauses may be involved in any given contract, certain sections are most commonly related to contracts in False Claims Act cases:

Part 6 – Competition Requirements – describes the policies and procedures to promote full and fair competition in the acquisition process, as well as the circumstances where certain sources may be excluded or where there is a justification for an acquisition without full and open competition
Part 9 – Contractor Qualifications – describes who can enter into government contracts and the consequences of a contractor who has been debarred, suspended or declared ineligible
Part 12 – Acquisition of Commercial Items – describing the policies and procedures related to commercial items, a process intended to closely resemble acquisitions in the commercial marketplace
Part 13 – Simplified Acquisition Procedures – described the policies and procedures for supplies and services which do not exceed a threshold amount (typically $150,000)
Part 15 – Contacting by Negotiation – describes the policies and procedures governing competitive and noncompetitive negotiated contracts, which is any contract that is awarded other than one which used a sealed bidding procedure
Part 16 – Types of Contracts – describing the different types of contacts which can be awarded by executive agencies
Part 19 – Small Business Programs – describing various types of small business related clauses, including those often seen in False Claims Act cases such as small business set-asides, Service-Disabled Veteran-Owned Small Business Procurement Program, Women-Owned Small Businesses
Part 52 – Solicitation Provisions and Contract Clauses – sets forth a series of provisions and contract clauses, many of which are often incorporated by reference by their FAR Part 52 subsection

Where can I find information about awarded government contracts?

There are three main websites where the public can access assembled information about awarded federal contracts: the Federal Procurement Data System – Next Generation, USA Spending, and FedBizOpps.

The primary website is the Federal Procurement Data System – Next Generation, a government-wide centralized system operated by the General Services Administration. The FPDS-NG is a real-time database which contains information on all contracts over $3,000 from FY2004 through the present. The information includes the requesting agency, the awarded contractor, the contract amount, the duration of the contract, and additional terms and statistics. It’s important to note that the contract amount is the amount “obligated” for a particular award and it may not be the actual amount paid to a contractor. Although FPDS-NG is available for public access with a simple email registration, the website primarily serves as a resource for the procurement community. Access to FPDS-NG requires user registration.

To make the information more accessible, the data from the FPDS-NG is compiled on a site called www.USASpending.gov. The data on USA Spending is more static (and therefore easier to review) because it is updated every thirty days instead of in real-time like FPDS-NG. The USA Spending platform can be searched by the federal agency, award recipient, location, or contract amount, among other options. Although the site has been criticized in the past for not always returning complete results, it is typically the best starting spot for searching for award recipients. No user registration is required.

FedBizOpps (“FBO”) is a government web-based portal which allows vendors to review federal procurement opportunities valued at more than $25,000. These opportunities include request for industry day participation, Request for Proposals (“RFP”), Request for Information (“RFI”), synopses, source sought notice, special notice, and award notices. Dependent on the procurement, there may be documents available to include solicitation notices, modifications, and justification/approval (for sole source type procurements). Access to FedBizOpps requires user registration.

None of those websites, however, provide access to the actual contracts. Some agencies provide access to commonly-requested contracts on their individual agency websites, but there is no uniform requirement for contract availability or central database of executed contracts. Some contracts can also be obtained through Freedom of Information Act requests, but there can be significant repercussions to submitting such a request in advance of a False Claims Act case, so it is very important to speak to an experienced False Claims Act attorney before making any such request.

Morgan Verkamp’s attorneys and investigator have extensive experience locating and evaluating government contracts. Contact a member of the Morgan Verkamp team if you are looking for information about a government contract to support False Claims Act allegations.

What are the different types of government contracts?

An agency seeking to procure goods or services from a contractor may offer one of several types of contracts. The type of contract will determine the nature of the relationship between the parties, as well as when, how and for what the contractor bills the government. The most common types of contracts are fixed-price contracts and cost-plus contracts. Fixed-price contracts are the lowest risk for the government but higher risk for contractors, while cost-plus contracts are higher risk for the government and lower risk for contractors. For a False Claims Act case, it is extremely important to determine what kind of contract underlies a fraud claim because conduct that is appropriate under one contract may be prohibited under another. The following are some of the more common types of government contracts:

Fixed-Price Contracts

Fixed-price contracts are used when the government knows the specific requirements for what it’s trying to purchase. Despite the name, some fixed-price contracts actually include adjustable prices within a fixed range or subject to a ceiling. There are variations on fixed-price contracts that can be used depending on the goods or services being acquired. These include:

Firm-fixed-price contract (“FFP”) – An FFP is a standard flat-rate contract with a fixed price for the purchased goods. FFPs are commonly used for commercial supplies and services.
Fixed-price contract with economic price adjustment (“FFP-EPA”) – FFP-EPAs are often used to purchase goods that historically have had significant price fluctuations. FFP-EPAs can only be used if there are significant doubts about the stability of the market or labor conditions as a way to protect the contractor and the government by a contracted adjustment if the price fluctuates again.
Fixed-price incentive firm contract (“FPIF”) – An FPIF resembles a standard FFP contract, but also includes a profit adjustment formula as an incentive to the contractor to use cost-effective measures to manage the contract.
Fixed-price award-fee contract (“FPAF”) – An FPAF provides for a traditional fixed price payment plus an incentive payment that can be earned in additional to the fixed price for a satisfactory contract performance.
Fixed-price prospective redetermination (“FPRP”) – An FPRP is a standard FFP for an initial contract period with set times to reevaluate the contracted rate for subsequent periods. The contracts typically require the contractor to provide a significant amount of data related to the contract performance in order to complete the pricing redetermination.

Cost-Plus Contracts

Essentially opposite of a fixed-price contract, a cost-plus contract is used when the government’s needs are speculative and uncertain. The speculation may relate to the amount of labor hours, the labor mix, and/or materials requirements. Because the needs are uncertain, the government takes on risks that do not exist in fixed-price contracts. The government will pay allowable costs incurred in the completion of the project so long as the contractor puts forth its best effort in completing the contract in a timely and efficient manner. Like with fixed-price contracts, there are variations on cost-plus contracts which can be used in a variety of circumstances:

Cost or cost-sharing contract (“CR” or “CS”) – CR or CS contracts are simply reimbursement for the incurred costs, so the contractor does not receive any fee for performing the contract. In a cost contract, the government pays the entire amount of costs incurred, while in a cost-sharing contract, the parties share in the costs.
Cost-plus fixed-fee contract (“CPFF”) – A CPFF is the best deal possible for a contractor. The government agrees to pay the costs incurred in the performance of a contract (typically without any ceiling) and the contractor also receives a negotiated fee.
Cost-plus incentive-fee contract (“CPIF”) – A CPIF, like an FPIF, is used to provide an incentive to manage the contract effectively by agreeing to a fee adjustment formula. The CPIF must set a range with a minimum and maximum amount of potential incentive payment.
Cost-plus award-fee contract (“CPAF”) – A CPAF is another type of incentive contract which provides a fixed award unrelated to the contract performance as well as an award related to the quality of the contract performance.

Other Contract Types

There are also other types of contracts which do not fit squarely under the fixed-price or cost-plus umbrellas, but are nonetheless used when they are appropriate in the circumstances. In particular, time and materials (“T&M”) contracts often arise the False Claims Act cases. T&M contracts pay for labor at a fixed hourly rate and purchase materials at cost, often subject to a ceiling that can only be adjusted by a contract modification. A T&M contract is particularly risky for the government, so it is used only as a last-resort contract.

General False Claims Act Information

Healthcare Resources

Comparison of the Anti-Kickback Statute and Stark Law*

Comparison of the Stark Exceptions and Anti-Kickback Safe Harbors

Procurement Resources

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