HD Supply Waterworks: The Supplier Negotiated, the DBE Sent the Bill

HD Supply Waterworks agreed to pay $4,945,000 to resolve False Claims Act allegations over DBE invoice pass-throughs on federally funded projects. For buyers in assisted water projects, the allegation is recognizable: contractors claimed disadvantaged-business credit for a company that copied Waterworks’ bills, added a markup and sent them onward.

Waterworks supplied water, sewer, fire-protection and storm-drain products. In its August 12, 2015 settlement announcement, the Justice Department described the intermediary as American Indian Builders & Suppliers, Inc., known as AIB. AIB held Disadvantaged Business Enterprise certification in New York and other states.

How the DBE Invoice Pass-Through Worked

The government alleged that prime contractors negotiated prices and other terms directly with Waterworks, then represented that AIB had performed that commercial function. The bargain and the credited participation pointed to different companies.

According to the announcement, Waterworks acknowledged the invoice sequence in its settlement agreement. AIB collected invoices from Waterworks and transferred their information to invoices bearing AIB’s own name. AIB added a markup and passed those invoices to the prime contractors.

The government alleged that Waterworks enabled the primes to certify falsely that AIB supplied materials, even though Waterworks, AIB and the prime contractors knew it had not. Those certifications, the government alleged, resulted in false claims for payment from federal funds. That is the supplier’s connection to the government’s bill.

Commercially Useful Function Means Doing the Credited Work

A contractor could claim DBE participation credit only when the disadvantaged business served a commercially useful function, the Justice Department explained in this case. An extra participant inserted to pass funds through and create the appearance of participation did not qualify.

Price negotiation, ordering, payment and responsibility for the materials describe the supplier’s work.

AIB’s certification answered whether it held DBE status. The transaction answered what it did on a particular project.

For someone working in purchasing or sales, that is a recognizable split. You may know which company settled the price, handled the order or accepted responsibility for the goods. Those details explain a supplier relationship that a participation total alone cannot show.

What the Markup Bought

According to the Justice Department’s account of the broader AIB investigation, the business actually performing the work or supplying the materials received much of the financial benefit. AIB collected a small percentage of the subcontract amount for the use of its name and DBE status. Investigators found that several primes had listed AIB as a subcontractor that worked on or supplied materials for projects when it did neither.

We call that paying for a name. A program intended to give disadvantaged businesses a chance to compete becomes a way to pay for their names while the commercial work goes elsewhere. Participation by invoice.

The National Contract Management Association’s 2025 article The Big Power of Small Business explains why genuine participation matters beyond a single payment. Small businesses supply agencies and large primes, and successful performance builds experience that can help them win later work. The article describes the wider damage from abuse:

That is the opportunity a pass-through empties out. The project can record participation while a genuine supplier loses the chance to negotiate, perform and build a customer relationship. The Justice Department described the Waterworks allegations as defeating fair competition for legitimate disadvantaged businesses and law-abiding contractors.

Federal Assistance Reached the Supplier Through the Project

The Waterworks matter concerned subcontracts on projects supported by the Department of Transportation and the Environmental Protection Agency. The agencies’ programs used federal funding to state and local governments, with goals for disadvantaged-business participation in the funded projects.

That structure explains the grant fraud allegation. The supplier dealt with prime contractors. The primes’ alleged false certifications connected the materials transaction to claims for federal money. For a water-products supplier, the customer across the negotiating table could be a contractor while the public funding came through another tier.

The investigation and settlement were a joint effort by the U.S. Attorney’s Office for the Northern District of New York, the Transportation and Environmental Protection Agency inspectors general, and the Federal Bureau of Investigation.

The Same Participation Problem in Painting Work

False DBE participation credit can turn on who manages the work as well as who supplies materials. In a separate Ahern Painting Contractors settlement announced in 2019, Ahern admitted recklessly disregarding facts showing that Spectrum Painting managed and supervised Tower Maintenance’s DBE work on the Brooklyn Bridge and Queens Plaza projects.

An invoice can name one supplier while the negotiations identify another. Personnel paperwork can name one business while day-to-day supervision identifies another. The people working on the transaction or project can explain that difference in a way a participation form cannot.

What Are the Indicators of Government Procurement Fraud?

In a DBE supplier transaction, an important indicator is a conflict between the supplier role claimed and the business that actually negotiated, ordered or supplied the materials.

We work with you to connect the billing evidence to the actual supplier relationship. The invoices show how the charge traveled; negotiations and delivery records help explain who did the work behind it.

The employee who negotiated the price may know something different from the employee who processed the marked-up bill. A project administrator may see the participation certification without seeing the supplier correspondence behind it. Connecting those views is the practical value of an insider’s account.

Someone who knows why a DBE name was inserted can also explain the decisions behind the claimed credit. We work with you on what that knowledge means for your case.

A whistleblower case under the False Claims Act can pay a whistleblower reward of 15% to 30% of what the government recovers.

You Know Who Made the Sale

If you handled the price negotiations, supplier invoices or DBE participation records, we work beside you to build your strongest case around the actual supplier relationship. We bring in government procurement fraud whistleblower lawyers who understand DBE pass-throughs and federally assisted projects, and stay with you through the case. Talk with our whistleblower experts about whose work received the credit.