AGC Efforts Defeat State False Claims Act

By Tymon Berger

Portions of the following article first appeared in the Seattle Daily Journal of Commerce on February 19 2010.

Thanks to the efforts of AGC of Washington for the second consecutive year the Washington legislature has decided against a state-based false claims statute.

The state false claims law could have spelled disaster for Washington’s public works program. Applied to construction false claims statutes raise the stakes for contractors when predicting the impact of delays and changes to their work or even when performing routine tasks like estimating the percentage of work completed or certifying that the work was completed according to contract.

Under the proposed law contractors on public works projects would have risked costly civil liability for performing aspects of construction that are unavoidably more art than science. Further the state false claims act would have exacerbated a statewide public works climate infamous for its strict enforcement of administrative notice requirements.

Renewing last year’s efforts to defeat the same bill the AGC of Washington once again this year convinced lawmakers that any benefits of a state false claims act were outweighed by the heavy toll the law would take on Washington’s ability to build.

Federal False Claims Act Liability

AGC’s efforts to defeat the state false claims act should be greeted as welcome news by AGC members. But state and local public works typically involve some ingredient of federal money. And recent broadening of the federal False Claims Act means that even without a state false claims statute Washington public works contractors still face the potential for false claims liability.

Last May Congress revised the federal False Claims Act making the federal law equally applicable to fraud at the state and local levels regardless of whether the false claim was submitted to the federal government or whether the false claim sought payment directly from federal funds.

Now when federal funds are used at the state or local level Washington contractors are liable under federal law for simply presenting a false claim for payment or for making a false statement that would otherwise influence the decision to pay the false claim. Gone from the federal law is the requirement that the false claim be presented to a federal officer or employee; and gone is the requirement that a false statement be made with the intent to directly defraud the federal government.

Public Works in Washington

Unmistakable in its wide application wherever federal money is used the federal False Claims Act now extends to Washington public works contractors subcontractors and material and equipment suppliers alike. The federal law applies regardless of whether the false claim originated with a lower-tier subcontractor or only went so far as a local government official or state agency. As Washington looks forward to an era of unprecedented infrastructure projects—from the expansion of the 520 bridge to the Alaskan Way Viaduct replacement to continued expansion of light rail and mass transit—the presence of federal funding will mean the presence of the federal False Claims Act.

AGC members must be mindful of this extended reach of federal law into state and local projects. And there is always the potential for local government bodies to enact false claims acts of their own—like those enacted by New York City Chicago and Miami. But thanks to the AGC’s presence in Olympia AGC members will not suffer the double threat of state and federal false claims liability.

Tymon Berger is a lawyer in the Construction Law Group at Stanislaw Ashbaugh. He can be reached at tberger@lawasresults.com.