Horizons Materials & Management: Inflated Costs on USPS Facilities Contracts

Inflated costs on USPS facilities contracts let the owner of Horizons Materials & Management LLC steal over $1.2 million from over $5 million in repair contracts, according to the Justice Department’s announcement of his guilty plea. He overstated subcontractor payments, employee payments and materials costs. Someone inside the repair business could know what those jobs actually cost. The paperwork reaching the Postal Service told a more expensive story.

The Rochester Hills contractor’s company received the contracts from U.S. Postal Service engineers between 2015 and 2018. The work covered repairs to postal buildings in Michigan and New York. The Postal Service’s Office of Inspector General investigated the owner’s criminal case. Its Contract Fraud Investigations Division joined the Justice Department in announcing the plea.

Small Repair Awards, Concentrated Buying Power

A Postal Service facilities engineer who separately pleaded guilty to taking gratuities from the contractor could award contracts worth less than $10,000 without bids. The Justice Department’s account of the engineer’s guilty plea describes that authority. Other engineers also awarded work to the company.

An engineer could choose a contractor for a small repair without a bidding process, and the contractor could return for more work. The award decisions and the costs submitted afterward tell different parts of the story: who approved the job, what repair it covered, and what the contractor said he had spent performing it.

A 2022 CEUR Workshop Proceedings paper, Public Procurement Fraud Detection and Artificial Intelligence Techniques: A Literature Review, identifies a way to examine relationships that a single invoice would miss: combining contract registers and business registers to find connections between suppliers and contracting authorities. It also describes European research that examined close buyer-supplier connections through repeated interactions and geographical dispersion.

Applied here, that means looking at the continuing award relationship alongside the individual repair files. An insider who sees both can explain how the work kept arriving and how the figures attached to it were produced.

What Are the Indicators of Government Procurement Fraud?

In this scheme, the indicators were differences between the costs reported to the Postal Service and the subcontractor payments, employee payments and materials costs behind them. The contractor’s guilty-plea announcement identifies each category. That makes the underlying billing evidence more revealing than a general suspicion that repairs seemed expensive.

Subcontractor Payments Overstated

The Justice Department said the owner often dramatically overstated what he paid subcontractors to complete repairs. A subcontractor’s own invoice and payment history give us a way to test the amount the prime contractor reported to the Postal Service for that same job.

For a subcontractor who knows the repair and the payment, the knowledge can be very specific: the scope completed, the amount invoiced and the money received. The prime contractor’s submission may tell a different story about that same work.

Construction payment paperwork can carry an express statement about money already paid downstream. Where a contract uses the federal construction progress-payment clause, the request identifies work and subcontractor amounts, and the contractor certifies that subcontractors and suppliers received amounts due from earlier government payments. That is why the contract’s payment terms matter alongside the invoice and the payment history.

Employee Payments Inflated

The owner’s guilty-plea announcement also says he falsely inflated what he paid his own employees. That puts payroll alongside subcontractor payments in the case. The people preparing payroll or assigning crews may know the labor costs that belong to a repair, while the person preparing the government submission controls the figure the Postal Service sees.

We compare the claimed employee cost with the payroll and job records behind it, together with the contract’s payment terms. The point is the particular representation: what the contractor said employees had been paid for the postal work, and what the records show they received.

Materials Costs Raised on Paper

Materials were another part of the owner’s admitted scheme. The Justice Department said he falsely inflated their cost on postal jobs. Purchasing records, supplier invoices and job assignments give the person who knows the materials a way to explain the expense behind the submitted figure.

For us, the connection runs through the repair itself: which materials belonged to that work, what they cost, and what amount appeared in the documentation sent to the Postal Service. A person familiar with purchasing can explain a discrepancy that the government’s copy of a cost submission would leave hidden.

The work could be a repair to a postal building while the lie sat in its cost paperwork. We see public repair money turned into extra income for the contractor, simply by changing the account of what he spent.

Private Benefits Around Public Repair Work

In his separate guilty plea, the facilities engineer admitted accepting illegal gratuities from the contractor because the contractor wanted to keep receiving postal work from him.

Morcon Shows Why Subcontractor Records Matter

Morcon Construction Company agreed to a $5.9 million False Claims Act settlement over a different set of Postal Service repair allegations. The government alleged that Morcon concealed subcontractors, certified subcontracted repairs as work it performed itself and falsified subcontractor invoices.

The Horizons owner’s criminal case concerned inflated payments and costs. The Morcon civil allegations also concerned who performed the repairs and what the subcontractor invoices said. The businesses doing the work can have a view of the transaction that the prime contractor’s submission obscures.

That is why we take a subcontractor’s account seriously. Knowing who arrived at the building, what work they performed and what they billed can explain the underlying transaction. A repair crew and a bookkeeper may each know something the submitted paperwork conceals.

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. A procurement whistleblower reward comes from the recovery in that civil case.

You Know What the Repair Actually Cost

If you saw subcontractor payments, payroll or materials costs grow on their way into a postal submission, speak to one of our whistleblower experts. We build your strongest postal contracting whistleblower case around that difference, bring in government procurement whistleblower lawyers who understand construction billing, and stay beside you throughout the case.