And when it comes to claiming costs as IR&D, under ATK Thiokol, such claims “are not ‘false’ simply because informally requested or benefitted from the work underlying the claims.” Instead, scienter under the FCA “depends on whether actually knew that the work underlying its IR&D claims to the Government was ‘specifically required by’, or recklessly disregarded the fact that bills to the Government were generated by work ‘specifically required by’. As the court recognized in Steuert, showing a defendant “knew” that false claims were submitted to the government for purposes of scienter requires a plaintiff to establish the defendant knew the claims at issue were false. This often is referred to as the FCA’s “scienter” requirement. Instead, the FCA requires knowledge of a claim’s falsity, either through actual knowledge or by acting in deliberate ignorance or reckless disregard of the truth. But one cannot defraud the government by honest accident, and not every cost accounting noncompliance is a false claim. įraud against the United States is a serious allegation. Because the qui tam relator-plaintiff in Steuert failed to “identify anyone at 元 who knew both that 元 was billing the Government for work and that billing the Government for work was improper,” the court dismissed his claims. District of New Jersey held that, to survive dismissal, a plaintiff alleging fraudulent mischarging of IR&D costs in violation of the FCA must plead sufficient facts, with sufficient particularity, to show the contractor knew or recklessly disregarded both (1) costs were being charged to IR&D and (2) those costs were for efforts specifically required by a contract. In an opinion published last week, United States ex rel. ![]() 2010), in which the court held that such costs are properly charged as IR&D unless they are “specifically required” by a contract, rather than merely necessary for successful performance.įor the first time, a federal court has applied this standard in the context of the False Claims Act (FCA). ![]() This makes good sense, and is reflected in the Federal Acquisition Regulation (FAR) cost principles at 31.205-18, which provides that costs of performing basic or applied research, development, and systems and other concept formulation studies are generally allowable as IR&D so long as they are not “sponsored by a grant or required in the performance of a contract.” This regulatory guidance is vague, though, and years of debating what it really means for R&D efforts to be “required in the performance of a contract” ultimately led to the Federal Circuit’s landmark decision in ATK Thiokol, Inc. When those R&D efforts are “independent” of any particular contract-hence “IR&D” or “IRAD”-the associated costs are properly allocated to the contractor’s indirect cost pools, rather than charged directly to any one customer. Many government contractors, like other private enterprises, invest heavily in research and development (R&D) to improve the products and services they offer, in hopes of better meeting their customers’ needs.
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