SAP Public Services: GSA Fees, Discounts and Staffing Qualifications

SAP Public Services agreed to pay more than $2.2 million to resolve False Claims Act allegations involving GSA fees, discounts and staffing qualifications. For someone who worked on those contracts, the story runs through familiar records: the sales reported to GSA, the discounts on government bills, and the qualifications of the people assigned to the work.

The Justice Department announced the settlement on March 1, 2021. SAP Public Services sold software engineering and support to government customers. The department identified it as a subsidiary of SAP SE and SAP America.

What the Multiple Award Schedule Contracts Required

The General Services Administration awarded SAP Public Services Multiple Award Schedule contracts in 1998 and 2009. The program gives federal, state and local government buyers a way to purchase commercial goods and services at discounted prices. SAP canceled these contracts in 2014.

The contracts carried obligations beyond supplying software engineering and support. SAP Public Services had to pay GSA an Industrial Funding Fee, provide certain discounts, and meet educational or experiential requirements when assigning staff to projects. The government alleged failures in all three: fees the company had not accounted for, contractual discounts it had not always provided, and staffing that did not always meet the requirements.

We see a basic contradiction in those allegations: a program built to secure discounts, but a seller accused of leaving them off the bill.

What Are the Indicators of Government Procurement Fraud?

In a case involving these obligations, the indicators are sales that do not reach the fee accounting, bills that leave out promised discounts, and assigned workers whose qualifications fall short of the contract. Each connects a different business record to a different government promise. Our review follows those connections through the contract, the work and the money.

GSA Industrial Funding Fees Follow the Sales

The General Services Administration’s Industrial Funding Fee pays for administration of its contracting and purchasing programs. The allegation against SAP Public Services was that it failed to account for fees owed on several contracts.

Under the general Schedule fee arrangement, the fee is included in the sale price. The government customer bears it, and the contractor remits it to GSA. The general arrangement calls for quarterly fee remittance. That puts the sales accounting and the payment to GSA at different points in the transaction. A customer invoice, a reported Schedule sale and a fee remittance each answer a different question.

For an insider in accounting or contract administration, the connection may be visible in the transaction reports and remittance records used in everyday work. The important comparison is between the sales that entered the fee calculation and what the contractor actually sent to the General Services Administration.

Contractual Discounts Have to Reach the Bill

The government alleged that SAP Public Services did not always provide the contractual discounts it owed. The price promise and the charge to the government are the center of that allegation.

A discount has to survive the move from the agreement to the invoice. The question is concrete: did the government receive the discount promised for that purchase?

Commercial sales matter where the contract uses them as a pricing reference. The General Services Administration’s traditional commercial sales disclosure requirements asked about actual discounts and concessions, including departures from written policies. A published price list could leave out concessions that customers received in real transactions.

That distinction matters to someone in sales or pricing who knows the deals behind the list. Their knowledge can connect a stated discount policy to the prices the business actually offered. The contract and its modifications determine which promise governed that purchase.

Staffing Qualifications Are Part of What the Government Buys

SAP Public Services had to meet educational or experiential qualifications in its staffing assignments. The government alleged that it did not always provide appropriate staffing. Those requirements concern the people doing the work, not simply the description of a service on a bill.

In hourly service contracting, qualifications affect payment directly. The federal payment clause for time-and-materials and labor-hour contracts ties payment for specified work to the employee meeting the contract’s qualifications, unless the contracting officer specifically authorizes otherwise.

A staffing manager may know who was assigned and what qualifications that person had. A billing employee may know the category and hours charged. Personnel records and timekeeping connect the person who did the work to the category on the invoice. That is how an education or experience requirement becomes a question about what the government paid for.

Cognosante’s settlement shows the same overlap between pricing and staffing. The government alleged false commercial-discount disclosures and overcharges under two Multiple Award Schedule contracts, together with labor that lacked the qualifications required by one contract. A pricing review and a staffing review can concern the same government purchase while drawing on different records inside the contractor.

What Another Customer’s Price Can Reveal

A contractor’s commercial customer can hold information that helps evaluate a government price. That is a useful insight from the working paper Whistleblowing Threat and Corporate Disclosure. The paper explains how prices charged to nongovernment customers can help reveal government overcharges.

Studying the adoption of general state False Claims Acts, the paper found an associated 9.3% decrease in disclosure of customer identities. The researchers interpreted their findings as consistent with companies withholding information that could help whistleblowers.

For a pricing inquiry that turns on commercial comparisons, the practical point is the transaction on the other side of the business. A government invoice shows what the agency was charged. A commercial customer’s price can supply the comparison. Someone who knows those transactions may understand a discount discrepancy that the government bill leaves unexplained.

The Investigation Behind the SAP Settlement

The U.S. Attorney’s Office for the Eastern District of Pennsylvania and the General Services Administration’s Office of Inspector General coordinated the investigation and settlement. The government conducted its investigation alongside an internal investigation by SAP Public Services, and the Justice Department credited the company’s cooperation and intensive investigative efforts.

Fee accounting, contractual discounts and staffing assignments sit in different parts of a contractor’s operations. We bring those parts together around the particular obligation and the transaction affected. An insider’s value may be knowing how a sales report, a billing decision or a staffing assignment came to look the way it did.

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.

You Know Where the Promise Broke Down

If you worked with the sales reports, government bills or staffing assignments, speak to our whistleblower experts about where the promises broke down. We bring in government procurement whistleblower lawyers who know Schedule pricing and staffing disputes, and stay beside you to build your strongest government contract whistleblower case.