New rules implementing the Administrative False Claims Act could expand how federal agencies pursue smaller fraud cases

Eric White Why don’t we start with what the CBCA’s job is as it comes to the Administrative False Claims Act, and then we can kind of get into the procedural rules that have been established here.

Dan Ramish So the CBCA has jurisdiction to adjudicate claims that are brought under the Administrative False Claims Act or AFCA by federal agencies that are trying to seek civil administrative penalties against individuals and companies for submitting, making, presenting false claims or statements to the government. And the CBCA has a role here that’s new under the Administrative false claims act. I might mention, AFCA itself is not new, but it’s an overhaul of an earlier authority, the Program Fraud and Civil Remedies Act of 1986. A number of reforms were made to that act as part of the NDAA for 2025. And one of those was to give authority to the boards of contract appeals, specifically the Civilian Board of Contract Appeals, the Postal Service Board of contract Appeals and other boards. Notably not the Armed Services Board. And the reason for this was the previous authority was limited to using administrative law judges and not every agency has administrative law judges. And so one of the reforms was to provide this alternate avenue for the CBCA to adjudicate these instead of an agency ALJ.

Eric White How does this differ from claims brought under the False Claims Act, which is a justice department driven entity that usually relies a lot on whistleblowers?

Dan Ramish The Administrative False Claims Act is distinct from the Civil False Claimed Act in that FCA, the most well-known authority for enforcing civil fraud in government contracts, involves actions that are brought by DOJ or qui tam or Laters. There is no cap on the amount of damages sought. What the AFCA, the role that it plays in enforcement in relation to government contracts and also conceivably grants and other assistance agreements is that it handles smaller dollar allegations of false claims act violations, so, false claims are statements. And the previous ceiling, [when] the Program Fraud and Civil Remedies Act was in place, was $150,000. And that was so low that that was one of the factors that led to agencies not really using the authority. And so one of the major reforms of the AFCA was to increase the ceiling for claim liability to $1 million, which is more significant, of course, and could be a lot of money, along with other costs of legal costs and fees associated with defending against one of these actions. And yes, I think it’s foreseeable that the administration may use this authority to enforce contract related representations. So a new tool and new scrutiny that contractors will need to be concerned about.

Eric White We’re talking with Dan Ramish. He’s counsel at Haynes Boone. And how are these claims actually brought if they are different and not enforced by the Justice Department? I imagine that the process for actually garnering them can be somewhat different.

Dan Ramish Yes, so there is no whistleblower provision, and they aren’t being brought by the Department of Justice, although, as I’ll mention, there is a role for the attorney general in the process. Now, these claims are starting with agencies, and the first step is for an agency investigating official, typically the agency inspector general or an agency can designate someone else if they don’t have an IG. And that investigating official must investigate allegations of a false claim and make a finding a potential liability. Then that goes to an agency reviewing official, a high ranking agency official designated by the agency head who has to make a determination that there’s sufficient evidence to believe the person’s liable. From the reviewing official, it then, there’s a requirement to notify the attorney general that the agency intends to pursue a claim. And this has been an inherent feature of the statute, even when it was the PFCRA, there’s a requirement that the attorney general approve the action moving forward. And once that approval happens, then it’s referred to a presiding official, and that would be either an administrative law judge or other agency officer or employee that meet certain qualifications, or, in the case we’re talking about, the Civilian Board of Contract Appeals.

Eric White So that’s interesting, you know, they’ve raised the ceiling now to make the penalties more significant. And that’s a lot of investigative bodies that are involved in this. And it’s coming from the agency itself. This, you know, it could potentially be seen as well, I guess I could infer that these sorts of claims may have a little bit more teeth than just your run of the mill false claims act. Do I have that reputation correct?

Dan Ramish I think this will definitely result in some additional actions being brought that would not have otherwise been brought. The Department of Justice has limited resources to pursue these types of claims and whistleblowers and DOJ alike really focus on high dollar magnitude claims. By having this new $1 million threshold, there’s really an easier mechanism and it’s more worthwhile for agencies to pursue small dollar claims. And actually, one of the other reforms that it was made in the AFCA was that it allows agencies to collect, to credit amounts that are collected under the Act and use them for their own purposes, basically reimbursing the costs of investigating and prosecuting the claim. So, there’s an additional incentive. It’s not actually drawing resources from limited enforcement funding. Rather, it can pay for itself, assuming that they’re successful in pursuing this model.

Eric White So it’s like yeah a run-of-the-mill lawsuit where you got to pay the other side’s court costs if you lose

Dan Ramish Right, it’s like a prevailing party provision for the government.

Eric White All right, so let’s say you’re on the other side and you’re a company that is found liable under this act. Do you have any recourse? If that is the case, what can you do?

Dan Ramish Eric, the first line of defense is going to be at the CBCA there actually isn’t a requirement for the people alleged having submitted a false claim or statement to be notified that there is this action until the action is referred to a presiding official like the CBCA. So the process of the CBCA involves responding to the complaints. There’s a process that is similar to the process for Contract Disputes Act claims. There are a number of exceptions. That’s kind of the way that the CBCA lays out the rules. And so an answer is filed. There may be evidentiary rulings. There’s a provision for electronic evidence files similar to a Rule 4 file in a Contract Disputes Act claim. And the agency is required to submit exculpatory information that the respondent or person alleged to have submitted a false claim or statement can use in their defense. And so they’ll go through this process, defend the allegations before a single board judge, is the way the CBCA sets it up. That’s different from a CDA claim where there’ll be a panel of three judges. And the judge will issue a decision that is binding, but is not considered to be precedential. And then that goes on a website. Now, if a respondent loses before the board, The statute provides that adverse decisions can be appealed to the local district court or to the district court for the District of Columbia.

Eric White Gotcha. All right. But before that, what can you tell the contracting community to perhaps avoid all that paperwork and sitting around and waiting?

Dan Ramish Well, of course, an ounce of prevention is worth a pound of cure. So the best lesson, I think, for government contractors with this new government tool to police the accuracy of representations in government contracts is to double down on ethics and compliance programs, implementing robust policies and procedures and training and internal controls to detect and self-prevent and self report misconduct and ensure compliance with contracting regulatory requirements, I think the additional measures would be helpful in preventing these kinds of problems, and there may be more small actions that might have been left with the higher thresholds typically involved in an FCA action.