Public Contract Law Journal, Vol. 41, No. 1, 2011
57 Pages Posted: 10 Feb 2011 Last revised: 17 Dec 2011
Date Written: February 9, 2011
The False Claims Act prohibits fraud by government contractors, including a contractor's false certification of compliance with the contract, statutes or regulations. In the early 1990s, some courts began holding that the mere act of requesting payment from the government implicitly represents such compliance, exposing breaching contractors to the FCA’s penalty regime. Circuits are today split on the implied certification doctrine. This Article provides a theory of the FCA in general, and implied certification in particular, that explains the value of extracompensatory remedies in this area of contract law. There good reasons for the implied certification rule. It is an information-forcing majoritarian default. It tracks the special ethical obligations of government contractors. And it addresses agency lassitude in drafting and monitoring. But implied certification also has its costs. Most importantly, it lowers the bar to frivolous qui tam actions and threatens to impose FCA liability for violations better addressed by more discretionary and nuanced regulatory tools. This Article recommends rule for implied certification that both addresses these considerations and rationalizes case outcomes. It also argues that, by paying attention to the FCA when drafting contracts, agencies can approximate first-best results by requiring express certification of compliance with those duties for which FCA liability makes sense, and contracting-out of implied certification for those duties that are better enforced in other ways. In addition to these practical suggestions, the Article draws some general lessons about contractual duties to cooperate, interpretive defaults in contract and tort, and the special ethical obligations of government contractors.
Keywords: contract, fraud, False Claims Act, government contracts, interpretation
JEL Classification: K00, K10, K12
Suggested Citation: Suggested Citation
Klass, Gregory and Holt, Michael, Implied Certification Under the False Claims Act (February 9, 2011). Public Contract Law Journal, Vol. 41, No. 1, 2011; Georgetown Law and Economics Research Paper No. 11-03. Available at SSRN: https://ssrn.com/abstract=1758884