Tangible Software: DISA Overbilling and a New Owner’s Disclosure

In the Tangible Software settlement, the company agreed to pay at least $500,000 over allegations that it knowingly sought reimbursement for information technology services above what it actually paid. The government’s account puts the reimbursement request beside the contractor’s own spending, a comparison familiar to billing and accounting employees. New ownership disclosed alleged misconduct under the previous owners, helping the investigation into the government’s bills.

The Justice Department announced the civil settlement on February 25, 2015. It resolved a whistleblower’s False Claims Act lawsuit over alleged false claims during the prior ownership’s tenure, from 2008 through 2011.

What Tangible Asked the Government to Reimburse

The government alleged that Tangible Software sought reimbursement for costs on information technology support and services contracts with the General Services Administration and the Defense Information Systems Agency. According to the Justice Department, Tangible knew the amounts requested exceeded what it had actually paid for those services.

We see a simple breach of trust in that allegation: calling a charge reimbursement tells taxpayers it covers an expense the contractor bore. The government alleged that Tangible knew better.

Defense contractor labor fraud can come into view when the people who know the work compare it with the government’s bill. Tangible’s alleged misrepresentation concerned the amount paid for services. That focuses our attention on the reimbursement request, the corresponding expense and the people who knew how the figures had been prepared.

New Ownership Disclosed the Earlier Conduct

Energy Management and Security Solutions had owned and operated Tangible Software since 2011. The Justice Department credited the new ownership’s disclosure of alleged misconduct by the prior ownership with aiding the investigation.

The company also initiated a shareholder lawsuit against its former management, which had overseen the period at issue. That suit mattered to the government settlement because its outcome was one of the conditions governing additional payments.

The investigation involved the U.S. Attorney’s Office for the District of Maryland, the Defense Criminal Investigative Service, and the inspector general offices of the Defense Information Systems Agency and the General Services Administration. The Defense Contract Audit Agency assisted.

For an insider involved in a company’s fraud disclosure, Tangible raises a concrete question about the records: what information about earlier bills reached the new decision makers? We would connect that information to the charges it concerned and the company’s response. Someone who reviewed the old bills may know what the new owners learned and how they responded.

Additional Payments Depended on What Happened Next

The announced settlement could reach $1.05 million. Payments above the minimum depended on Tangible’s financial performance over the next five years and the outcome of its shareholder lawsuit against prior management.

The ownership changed, but the company still faced the earlier billing claims. Its future business results would help determine the settlement payments for allegations about its past.

The Records Behind the Reimbursement Request

For an insider who knows the bills, evidence of defense contractor fraud starts with the connection between the government’s claim and the underlying service cost. We would examine the contract’s payment terms, the request for reimbursement and the records supporting what the company spent. The same service and billing period have to stay in view throughout that comparison.

An IT contract can use different payment arrangements for different line items. That makes the particular line item and any contract changes important when we examine a disputed charge. The payment request, the terms that governed it and the service records need to tell the same story. A person who worked on that part of the contract can help us connect them.

That comparison depends on the contract because defense contract payment terms determine what a charge represents. Cost reimbursement pays allowable incurred costs within the contract’s authorization and ceilings. Time-and-materials work uses fixed labor-category rates that include wages, overhead and profit, so the billed rate and a worker’s pay answer different questions. We read the actual payment terms before deciding which cost, rate or service record answers the question raised by a bill.

Federal procurement rules require contractors to support claimed costs with records showing that the costs were incurred and belonged to the contract. The company’s books show the spending behind its reimbursement request. The supporting records also need to connect that spending to the government contract being charged.

Where a bill includes shared expenses, the accounting trail has another part: how the contractor divided the cost among the work that benefited. Procurement rules call for allocating those costs according to that benefit or another equitable relationship. We would look at the original invoice, the cost assignments and the allocation basis alongside the reimbursement request. An accountant who knows those assignments can explain how an expense reached a particular government bill.

A billing employee may know how the reimbursement request was assembled, while an accounting employee may know the payment recorded against the service. Someone involved in reviewing earlier charges after an acquisition may know how a discrepancy reached management. We work with that knowledge to identify the particular request, the corresponding cost and the decisions connecting them.

Another IT Billing Case Turned on the People Behind the Rate

In a separate Army IT case, Computer Sciences Corporation agreed to pay $1.1 million over allegations that falsified résumés qualified personnel for higher-paid labor categories. That case puts personnel qualifications beside the billed labor category. Tangible’s allegations put requested reimbursement beside actual service payments. Both comparisons connect a government bill to information inside the contractor’s business, and show why someone who knows how the charge was built can add more than the invoice alone reveals.

The Whistleblower’s Share of a Recovery

The Tangible announcement provided for a payment to the whistleblower from the settlement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know the Cost Behind the Bill

If you saw government reimbursement requests rise above the service payments behind them, tell our whistleblower experts where the figures diverged. We bring the contract, the accounting and the decisions inside the business into one case, match you with defense contractor whistleblower lawyers, and stay beside you as it moves forward. Bring us what you know about the gap between the government’s bill and the company’s books, and let’s build your strongest defense contractor whistleblower case.