The Wall Street Journal reported on 3-3-09 that "Federal prosecutors accused EMC Corp. of paying illegal kickbacks and overcharging U.S. government agencies, as part of a broad investigation of federal technology contracting. Separately, NetApp Inc, indicated it expected to pay $128 million to resolve a government inquiry also related to alleged illegal overbilling on government contracts."
Both companies sell computer storage systems. EMC, of Hopkinton, Mass., denied the government's allegations. Net- App, of Sunnyvale, Calif., declined to discuss its filing.
While kickbacks in the federal space are unusual, more important to me is that the complaint against EMC also alleges the company illegally overcharged the
government on a contract for "hundreds of millions of dollars in sales by EMC to
the Government," by billing the government more than comparable private-sector
customers, which would be a violation of the False Claims Act (see www.taf.org/federalfca.htm).
A Justice Department spokesman declined to estimate the damages the government
would be seeking. In 2007, International Business Machines Corp. and
PricewaterhouseCoopers LLP agreed to pay a combined $5.3 million to settle
related cases against them. Sun and Oracle have also paid fines in the past.
With each GSA contract is awarded, a class or classes of customers are selected/negotiated in which the awardee is required to maintain the initial GSA benefit (in terms of markup or discount) than their class(es) of customers for price reduction monitoring, when and only when they offer a lower price to said customers (price reduction monitoring clause) AND only when a GSA ordering activity has placed an order for the same goods/services during the period of performance of the non-federal customers order(s).
The crux of the problem is that very rarely does GSA or the contract awardee actually define who the said customers are, as they are widely classified as commercial end-users, national accounts or corporate accounts and commercial firms just aren't in a habit of classifying their customers as such.
My suggestion to my GSA clients is that if their basis of award and price monitoring reduction is so widely broad as "commercial end-users", they need to document on file at the time of award which of their current customers are classified as such and have that list linked to their order management entry system and to update the list quarterly.
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