The U.S. District Court for the District of Columbia, in U.S. ex rel. Bid Solve, Inc. v. CWS Marketing Group, Inc., et al., recently issued a decision in a False Claims Act (FCA) case that has potentially far-reaching implications for small-business government contractors and how they calculate and report their average annual “receipts” for size purposes. The key facts, holdings, and takeaways from this noteworthy case are discussed below.
The defendants, a federal contractor and its owners, submitted a bid for, and were awarded, a small business, set-aside contract with the Internal Revenue Service (IRS). To qualify for this procurement, contractors were required to have averaged under $7.5 million in annual “receipts” over the past three years.
The plaintiff, a disappointed bidder, filed a size protest with the U.S. Small Business Administration (SBA) and lost.
Subsequently, the plaintiff filed a qui tam whistleblower lawsuit under the FCA, alleging that the defendants had falsely certified that their average annual receipts were under $7.5 million. After discovery, the parties cross-moved for summary judgment on various issues, including whether the defendants’ certifications regarding their average annual “receipts” were, in fact, false. On this issue, the court ruled in favor of the plaintiff, finding that the defendants had wrongly deducted “flowthrough income” — i.e., “reimbursement for expenses incurred on behalf of and for the benefit of customers” —...
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