Mitigating False Claims Act Risk While Combatting Coronavirus

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In the midst of this coronavirus crisis, many of our friends and colleagues are bravely working in support of the nationwide mobilization now under way. Just over the last few days, the President issued a national disaster declaration to pave the way for FEMA to begin coronavirus-related work under the Public Assistance Program and the Stafford Act and invoked the Defense Production Act to direct U.S. industry to manufacture needed medical supplies and equipment. These measures and others put the U.S. on a "war footing" with an ever-increasing number of companies serving as government contractors in this monumental effort.

And yet, this much-needed work presents significant legal and compliance risk, not the least of which under the False Claims Act (FCA). As our Qui Notes readers know, the FCA penalizes companies for falsely billing the government, but what constitutes a "false claim" is an often vague and malleable concept and can stem from purported contractual or regulatory non-compliance with underlying program requirements. During this coronavirus conflict, contractors are and will be required to make decisions with lightning speed, often without time for extensive deliberation or documentation.

In the heat of this battle, doing what is necessary to satisfy the mission is doubtless the paramount concern. We also know from past experience defending contractors in contingency environments, such as disaster relief and wartime, that when this battle is won, the second-guessing will begin. Efforts that appear entirely reasonable today, may well appear hasty, ill-advised, or wasteful viewed in hindsight months or years later. Failures to dot each "i" and cross every "t" may well be considered, particularly by self-interested relators, as serious non-compliance with mandatory procedures. It is not a question of whether but only of when qui tam cases will be brought. At least one relator-side law firm has publicly called on the DOJ to step up FCA enforcement efforts related to this crisis—see Lydia Wheeler, "Coronavirus False Claims Task Force Urged at Justice Department," Bloomberg Law (Mar. 17, 2020)—showing the interest is already there. Virtually every other major national and international disaster and war effort in recent history appears to have been followed by extensive FCA litigation, including the wars in Iraq and Afghanistan, 9-11 related reconstruction, relief efforts under Hurricane Katrina and other declared disasters in the U.S., and USAID efforts following international events. There have been FCA suits relating to vaccine development and delivery as well as alleged non-compliance with FDA requirements for various treatments and medical devices. The massive financial package currently being hammered out will mean billions of dollars of spending through a myriad of programs, each with their own complicated regulatory requirements. The risk of confusion and inconsistent application of rules and regulations by government contracting officers has already been noted. See Jacqueline Feldscher, Daniel Lippman, Connor O'Brien, "DoD Coronavirus Plan Causing Confusion Among Contractors," Politico (Mar. 17, 2020). There is every reason to believe that when the COVID-19 crisis subsides, a wave of FCA cases will come in its wake.

Of course, this risk does not mean contractors can afford to slow their essential work to combat the virus, but it does suggest some prudent steps based on our past experience:

• Review procedures—most "rulebooks" are written for the rule, not the exception, and assume a non-contingency process for contracting. For example, procurement procedures written for everyday decision-making likely do not contemplate the types of efforts currently underway. Consider adapting such procedures or writing in reasonable, documented exceptions for this environment so that decisions made today are not compared against an unrealistic yardstick later on.
• Document deviations—document wherever possible deviations from existing policies and the reasons for the deviation. Try to avoid boilerplate and write a line or two as to the particular exigencies that required, for example, a shortening of the timeline usually used to conduct a procurement, relief from usual bidder qualifications, or a review of a more limited number of bids than usual.
• Government direction—where the government gives an order or direction, ensure it is committed to writing, preferably by the government official giving the direction, but if necessary in your own documentation. Consider sending a confirming email to the government official memorializing the conversation in which the direction was given or as a last resort a contemporaneous "memo to file" documenting what was said. It is too often our experience that government-issued instructions given in the heat of the moment are forgotten after-the-fact, leaving the contractor at great risk of being held responsible for what appears to have been unsanctioned conduct.
• Follow the FAR—this may seem self-evident to most, but FAR compliance very often takes a back seat in contingency operations. However prudent it may be to adopt, there is still no separate "wartime or disaster" FAR—instead the same rulebook is written for all contracting, whether crisis or no. If deviation is required, please see the advice above, document the deviation and notify the contracting officer or other responsible government official as promptly as possible.

These simple steps are no cure but may help inoculate those on the front lines from facing FCA liability for their work combatting the coronavirus. As issues develop, please of course reach out to us, or our practice leads in national security/government contracting, life sciences, and health care. Above all, please do everything possible to stay safe and healthy in these trying times.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.