176 F.3d 776 (4th Cir. 1999), 98-1037, Harrison v. Westinghouse Savannah River Co.
|Citation:||176 F.3d 776|
|Party Name:||Edwin P. HARRISON, Plaintiff-Appellant, and United States of America, Party in Interest, v. WESTINGHOUSE SAVANNAH RIVER COMPANY, Defendant-Appellee.|
|Case Date:||May 17, 1999|
|Court:||United States Courts of Appeals, Court of Appeals for the Fourth Circuit|
Argued Oct. 28, 1998.
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ARGUED: Richard E. Miley, North Augusta, South Carolina, for Appellant. Lawrence Graeme Bell, III, Crowell & Moring, L.L.P., Washington, D.C., for Appellee. ON BRIEF: Christopher M. Farris, Crowell & Moring, L.L.P., Washington, D.C., for Appellee.
Before MURNAGHAN and WILLIAMS, Circuit Judges, and BLAKE, United States District Judge for the District of Maryland, sitting by designation.
Affirmed in part, reversed in part, and remanded for proceedings consistent with this disposition by published opinion. Judge MURNAGHAN wrote the opinion, in which Judge WILLIAMS and Judge BLAKE joined.
MURNAGHAN, Circuit Judge:
Relator Harrison ("Harrison" or "Appellant") brought a claim under the False Claims Act, 31 U.S.C.A. §§ 3729-3733 (West Supp.1998), against Westinghouse Savannah River Corp. ("WSRC") alleging that WSRC made false and fraudulent statements to the government in connection with claims for payment to a subcontractor hired by WSRC for a Department of Energy ("DOE") contract. Harrison alleged, inter alia, that WSRC misrepresented the cost and duration of the proposed subcontract in order to get DOE approval for the subcontract, and that WSRC falsely certified that there was no conflict of interest with the subcontractor. The district court granted WSRC's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), finding that no false claim had been made, either because Harrison's complaint amounted only to allegations of inefficiency, or because the allegedly false statements were not made in connection with a "claim" under the False Claims Act. We affirm in part and reverse in part.
Since 1989, WSRC has been the management and operations contractor for the United States Department of Energy at the Savannah River Site ("SRS"), a nuclear facility near Aiken, South Carolina. WSRC's contract with the government provides that WSRC is entitled to receive the allowable costs it incurs on the project in addition to an award fee.
As a part of its contractual responsibilities, and pursuant to policy and regulations, when WSRC decides to subcontract certain tasks necessary for the operation and management of the SRS, WSRC provides the technical requirements to the DOE for review before releasing a solicitation or request for proposals ("RFP") for that subcontracting action. See Department of Energy Acquisition Regula-tion ("DEAR") § 970.7108, 48 C.F.R. § 970.7108 (1988). 1 Once the technical review is complete, WSRC releases an RFP for the work and selects the subcontractor in a manner consistent with the provisions of the RFP. WSRC then sends a "Procurement Under Review" or "PUR" package to the DOE, which includes a copy of the technical requirements, the solicitation, the Justification for Award, the subcontractor-awardee's proposal, and the proposed subcontract. The DOE reviews the information in the package and decides whether it will approve the request to subcontract the work out. If the DOE approves, WSRC enters into a subcontract with the selected subcontractor.
Count 1: 2 False-Statements About Need for Subcontractor and Price of Subcontract
In July 1992, WSRC identified a need for training related to in-tank precipitation process operations, known as "ITP Training" (hereinafter "ITP Training Project"). As part of its standard practice, WSRC included in the technical package that was sent to the DOE for review a "Make or
Buy Analysis" ("MBA"), which analyzed the cost-effectiveness of buying the ITP Training services as opposed to providing those services in-house. (Amended Complaint at p 24.) The MBA stated that while WSRC had the capacity to provide the service, WSRC did not have personnel available. The MBA stated further that since the service was of a one-time variety and of a short-term nature (1.5 years), it was not practical for WSRC to hire full-time staff to meet the need.
WSRC's MBA also represented to the government that in the aggregate, WSRC estimated that the cost for WSRC to provide the ITP Training would be $1,579,500, while the cost for a subcontractor to perform the work would be substantially more--$2,750,000. The DOE reviewed and signed off on the technical package, including the MBA. After receiving the DOE's approval, WSRC released a request for proposals for the ITP Training Project and ultimately subcontracted the project to General Physics Corporation (hereinafter "GPC subcontract").
Harrison alleges that WSRC made the following misrepresentations to the government as part of its "plan and scheme" to obtain DOE approval for WSRC's use of a subcontractor rather than use of WSRC's own personnel to develop and implement the ITP Training Project:
That the project was "short term" such that subcontract personnel would be needed for no more than 1.5 years; WSRC knew that developing and implementing the ITP Training Project would take at least several years, (Amended Complaint p 24(a));
That providing the ITP Training was not "a continuing need" but rather was a "one time variety" project; WSRC knew that the ITP Training Project would be a continuous on-going need for many years, (Amended Complaint p 24(b));
That there was no need to hire permanent staff to fulfill the ITP Training requirement; WSRC knew that the ITP Training Project would require qualified trainers for a decade or more, (Amended Complaint p 24(c));
That "Other Costs" for such things as computers, etc., would be zero; WSRC knew that the subcontractor would need to purchase computers to perform the subcontract work, (Amended Complaint p 24(e)); (See also Amended Complaint p 33); and
That the ITP Training services could be obtained on a firm-fixed price basis at a "total cost" of $2,750,000; WSRC intended to subcontract the ITP Training Project on a cost-plus-fixed-fee basis and knew that the training would cost substantially more than $2,750,000, (Amended Complaint pp 24(d), 22(a)).
Count 2: False Certification of No Conflict of Interest
General Physics Corporation ("GPC"), a subcontractor company doing business with WSRC at SRS, employed Relator Harrison as one of its vice-presidents. He worked for GPC in Aiken, directing some of GPC's subcontract work with WSRC at SRS. On August 12, 1992, GPC received from WSRC a RFP for the ITP Training Project.
During the next several weeks, Harrison alleges that he became aware that GPC personnel developing GPC's proposal were requesting and improperly receiving insider information from WSRC's Subcontract Technical Representative ("STR"). Harrison allegedly found that WSRC's STR, who would later participate in the technical evaluation of the bids on the ITP Training Project, was supplying insider information not available to other bidders. He also alleges that he learned that WSRC's STR had permitted GPC employees to participate in preparation of portions of the RFP. 3 (Amended Complaintp 28.) WSRC awarded the ITP Training subcontract to GPC.
(a) In its proposal, GPC represented that it had no conflicts of interest related to the ITP Training subcontract. This certification was submitted to the DOE by WSRC as part of the "Justification for Award"in the PUR package. Harrison alleges that (1) the contacts between WSRC and GPC violated DEAR conflict of interest regulations, (2) WSRC was obliged to comply with these regulations and to certify such compliance, and (3) WSRC falsely certified to the DOE that it had complied with these regulations. Harrison asserts that this false certification caused all claims for DOE reimbursement on the GPC subcontract to be "false claims." 4
(b) Harrison also alleges that WSRC had an affirmative obligation to report undisclosed conflicts of interest with its subcontractors when a subcontract was significantly increased. WSRC's failure to alert the DOE to these conflicts, even after Harrison had given notice to WSRC about the conflicts, allegedly makes all claims submitted under several expansions of the GPC subcontract fraudulent. (Amended Complaint pp 27 (first sentence), 36.)
Count 3: Misrepresentation of Subcontract Terms
(a) Harrison alleges that after the GPC subcontract was approved, WSRC misrepresented the scope of work for the ITP Training Project. According to Harrison, the subcontract did not set forth any requirement for subcontractor personnel to perform procedure development. Less than three months into the ITP Training subcontract, however, WSRC knowingly misrepresented to the DOE that the existing ITP Training subcontract in fact provided for procedure revision and upgrade not to exceed 5% of the total scope of work. Based upon WSRC's misrepresentation, the DOE approved WSRC's request for adding work to the subcontract on a "sole-source" basis at a cost of $880,000. (Exhibit C to Amended Complaint; Amended Complaintp 22(b) and (c).)
(b) Separately, Harrison alleges that before this $880,000 procedure development cost was approved, WSRC had directed GPC to perform procedure development activities. Since at that time, these activities were allegedly not approved costs under the contract, Harrison alleges that WSRC's payment requests incorporating these activities were fraudulent. (Amended Complaint p 34.)
Count 4: False Signature
Harrison alleges that a purchase requisition form submitted to the DOE contained "fraudulent and/or unauthorized signatures" and WSRC knew that at least one of these was...
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