CA Inc.: Renewal Disclosures and GSA Price Reductions

CA Inc. agreed to pay $45 million to resolve False Claims Act allegations that it gave the General Services Administration false commercial-discount information and withheld required price reductions. The government alleged that CA misrepresented discounts on software licenses and maintenance when negotiating and extending its contract, then failed to give government customers the additional discounts they were entitled to receive.

A former employee of CA Software Israel LTD brought the allegations in a whistleblower case. The government joined part of it. The Department of Justice announced the settlement on March 10, 2017.

CA was an information technology management software and services company headquartered in New York. Its agreement let federal agencies buy software licenses and maintenance under terms negotiated in advance. The commercial discount information helped determine what those agencies would pay. In the government’s account, false information and missed reductions left federal agencies, and ultimately taxpayers, paying more than they should.

What Is GSA Fraud?

GSA fraud includes giving the General Services Administration false commercial-pricing information to obtain higher government prices, or withholding discounts the contract requires. CA’s settlement covered allegations of both.

Under a Multiple Award Schedule contract, the General Services Administration negotiates prices and contract terms that federal agencies use for later orders. At the time of CA’s contract, suppliers had to disclose fully and accurately how they did business in the commercial market. The agency used that information to negotiate a fair price for agencies buying the same company’s products and services.

CA’s contract included a Price Reductions Clause specifying when better commercial prices required lower government prices. The Justice Department alleged that CA failed to provide the additional government discounts required when its commercial discounts improved. We see the absurdity: a negotiated promise of lower prices is worth little if the seller keeps the better discounts to itself.

The Original Negotiation and Two Extensions

The alleged false disclosures reached the original contract negotiation in 2002 and extensions in 2007 and 2009. At each of those stages, the government said, CA supplied false information about the discounts it gave commercial customers for software licenses and maintenance services.

The renewal disclosures concerned extensions of the government contract. The allegation followed the agreement as the company sought to continue selling under it, giving the commercial-pricing account renewed importance at each extension.

The government also alleged a failure during contract administration: additional commercial discounts did not produce the required government discounts. That brings later sales and billing decisions into the same story. The negotiation documents explain the price the General Services Administration agreed to. The commercial transactions and government invoices explain whether subsequent prices followed the agreed relationship.

The Commercial Discounts Behind the Government Price

The traditional Commercial Sales Practices disclosure sought actual discounts and concessions, including departures from a company’s written policies. A standard discount schedule could leave out the deals that mattered. The historical disclosure format called for current, accurate and complete information, with changes disclosed before negotiations closed.

The customer used for comparison also mattered. Under the traditional schedule pricing framework, the government sought most-favored-customer pricing but could accept another fair and reasonable price. The negotiated basis-of-award customer supplied the reference for tracking later changes. That means the customer or customer category written into the agreement is part of the price comparison.

A person familiar with pricing exceptions may understand a discrepancy that is hard to see from the standard schedule alone. The commercial customer agreement shows the terms of a particular sale; the disclosure shows how the company described its practices to the General Services Administration. We examine those records together because the alleged overcharge depends on the relationship between them.

The same pattern appears in Oracle’s software-pricing settlement. The government alleged incomplete commercial-sales and discount disclosures, followed by missed price reductions when commercial discounts improved. Like CA’s case, it connected the account given at negotiation with the prices charged afterward. For a software sales insider, the exception to the published discount policy can be the part of the transaction the government never sees.

What Proof Do You Need as a Whistleblower?

For a pricing case like this, the useful proof connects the commercial transaction, the contract’s customer comparison, the disclosure sent to the General Services Administration and the government price billed. We work with insiders to understand how those records fit and what the people making the pricing decisions knew.

A commercial invoice may show a discount, while an extension submission describes the company’s discounting practices differently. The governing agreement explains why that difference mattered to the government price. Someone who understands both sets of records can explain the transaction in a way that a price list cannot.

The agency’s later move toward Transactional Data Reporting changed the basis-of-award tracking framework when the contract was modified. We assess older sales against the terms that governed them, including the commercial-pricing promises in force then.

CA’s Separate Maintenance-Renewal Case

CA also paid $8 million in a separate federal settlement announced in November 2013 that included allegations of overlapping software-maintenance periods. In that case, the government alleged double billing: CA allegedly started a renewal on the day it processed the order, while the customer’s existing maintenance coverage was still running. The government said the renewal should have begun after that coverage expired.

Those maintenance renewals concerned service time agencies had already paid for, while the later pricing case concerned commercial-discount disclosures and required government discounts. The distinction matters to someone who works with renewals: the order-processing date and the coverage dates reveal a different billing problem from the discount offered on a software sale.

How Much Money Can a Whistleblower Get From a Qui Tam Lawsuit?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In CA’s pricing case, the Justice Department announced a $10.195 million share of the settlement for the former employee who brought the allegations.

You Know the Deal Behind the Disclosure

If you worked with commercial discounts, GSA extension submissions or government billing and know where those accounts diverged, speak with our whistleblower experts about the discounts the government never saw. We build your strongest pricing whistleblower case with you and bring in government procurement fraud whistleblower lawyers who understand software sales and GSA discount obligations. We stay beside you as the case moves from the deals you know to the government’s claim for repayment.