Booz Allen Hamilton: Commercial Costs Charged to Government Contracts

Booz Allen Hamilton agreed to pay $377,453,150 to resolve allegations of commercial costs charged to government contracts. From that settlement, the Justice Department announced that a former employee who brought the qui tam case would receive approximately $69.8 million. The government alleged that taxpayers covered expenses belonging to the company’s commercial and international business, including activities that gave the United States no benefit.

The company provides management, consulting and engineering services to government, commercial and international customers. The Department of Justice announced the settlement on July 21, 2023, calling it one of the largest government procurement fraud settlements in history. For an accountant who knows which business an expense supported, the allocation behind the government’s bill may be the part of the story nobody outside the company can explain.

This form of government contractor cost mischarging turns on who should bear an expense. We see the unfairness in the government’s allegation plainly: taxpayers were asked to support commercial activities that did nothing for them. The customer getting the work and the customer carrying its costs had allegedly parted company.

What the Government Alleged About Commercial Costs

The government alleged that, from approximately 2011 through 2021, Booz Allen charged government contracts and subcontracts costs that belonged to its commercial and international contracts. The alleged mechanism was indirect-cost allocation: deciding how expenses supporting the business would be divided among contracts.

The Justice Department described costs that had no relationship to the government contracts charged, as well as costs allocated to those contracts in disproportionate amounts. A cost accountant can recognize the distinction: what went into the pool matters, and so does the basis used to divide it.

The government also alleged that Booz Allen failed to disclose how it accounted for costs supporting its commercial and international businesses. The alleged result was reimbursement for commercial activities that provided no benefit to the United States. An accounting allocation with a taxpayer on the other end.

Why the Cost Pool Matters

A shared expense still needs a connection to the government contract bearing it. The government’s explanation of the Booz Allen case makes that connection central: indirect costs can benefit multiple contracts, but the government alleged that commercial costs reached contracts they did not benefit, or reached them in disproportionate amounts.

For an insider, the useful comparison runs through the pool to the activities it supports. Which expenses entered it, how they were spread and which contracts absorbed them can explain a total that looks unremarkable on a bill. A person familiar with the commercial projects may understand why an expense belongs there even if someone reviewing a government voucher sees only the allocated amount.

The commercial work and the accounting method offer different views of the same charge. A project employee knows what the work was for. A rate preparer sees how its cost moves across contracts. Neither perspective has to begin with the final invoice. Each can explain a part of the allocation that the invoice total leaves hidden.

In cost-reimbursement work, interim billing rates are reconciled to final indirect rates under the allowable cost and payment clause. An accountant preparing the final rate proposal can see the expenses behind earlier vouchers, making that proposal another place to recognize a commercial cost assigned to government work.

DynCorp’s Costs Came Through Subcontractor Rates

The separate DynCorp case shows another way costs can reach a government bill. In its State Department settlement announcement, the Justice Department described allegations that DynCorp knowingly passed through excessive, uncompetitive and unsupported subcontractor lodging and labor rates on a civilian-police training contract in Iraq.

There, the disputed charges came through subcontractor rates. Booz Allen’s case concerned allocation of commercial and international business costs. The contrast matters to someone inside a contractor: an unsupported subcontractor rate and a commercial expense assigned through an indirect pool leave different records behind the government’s charge. The question in both is what the government was being asked to pay for.

What Proof Do You Need as a Whistleblower?

For a case about commercial costs charged to government contracts, the useful proof connects the expense’s business purpose, its allocation and the government’s bill. We work through those connections with you, starting with the part you know from your work.

The contract and the records behind the bill connect the work purchased, the cost assigned to it, the method described to the government and the amount requested or paid. The allegation about undisclosed accounting methods adds another comparison: what the government was told beside the method actually used. That is the difference an insider can explain.

An expense description alone may say little about the customer who benefited. Your knowledge of the commercial project gives that entry context. Likewise, knowing how the allocation was calculated can explain why a charge reached a government contract even when the activity behind it served another business. Those are concrete connections between the work and the money, the kind this case’s allegations put at issue.

The Settlement and the Whistleblower Reward

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The whistleblower reward announced in the Booz Allen case came from a case brought by a former employee. The Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Columbia coordinated the resolution with the Defense Contract Management Agency and the Defense Contract Audit Agency, which provided expert financial assistance.

You Know Which Business the Cost Belonged To

If you saw commercial work become a government expense, talk with our whistleblower experts about the accounting behind that charge. We build the case with you around the costs, the customer and the decisions that connected them, and bring in government contract fraud whistleblower lawyers who understand indirect-cost disputes. You have us beside you from the first conversation through the pursuit of the case.