The U.S. Department of Justice and Fluor Federal Services are at odds on whether a federal court should throw out a lawsuit that alleges Fluor and Savannah River Nuclear Solutions (SRNS) overcharged the federal government more than $5 million for home office expenses and other “unallowable costs” in operation of the Savannah River Site, according to court documents filed in June and July.
The federal government sued SRNS, the management and operations contractor for the Department of Energy facility in South Carolina, and Fluor, one of the contractor’s parent companies, on March 18 in the Aiken division of the U.S. District Court for South Carolina. The lawsuit charges that the companies knowingly overcharged the U.S. to pay for home office expenses and bid and proposal costs – a direct violation of the M&O contract and of the cost transfer agreement that says the allocation of home office costs is unallowable under the contract.
SRNS on May 20 requested that the lawsuit be dismissed, stating that the DOJ did not “explain how any particular costs would be unallowable in the context of both the language of the Contract and the regulations that govern its interpretation.”
The two sides are at it again in two more recent court filings. On June 17, the Justice Department responded to the contractor’s attempt to dismiss the lawsuit. While SRNS and Fluor maintain the federal government did not properly plead its case, DOJ said in the court filing that it properly pled that the expense claims were objectively false under the contract. DOJ wrote that the lawsuit states “the who, what, when, where, and how of alleged fraud.”
The federal government calculated 573 claims that violated the contract, spanning from Oct. 8, 2008, to Dec. 31, 2015. “Fluor Federal and SRNS made clear their understanding of this explicit contractual provision when they issued the December 2008 cost transfer agreement that unequivocally recognized the very costs at issue in this litigation were unallowable and could not be charged under the M&O Contract,” the federal government stated in the June 17 filing.
SRNS and Fluor defended their motion to dismiss in a response on July 1. The lawsuit says home office costs are unallowable, but SRNS and Fluor argued that the federal government “ignores that the Contract does not disallow all home office expenses.” The contractor group also took issue with the DOJ assertion that the alleged overcharges were part of a scheme to defraud the government.
“DOJ relies on conclusory statements combined with factual allegations that it argues are consistent with fraud. But, even assuming they are consistent with fraud, these allegations do not themselves show any scheme to defraud with particularity,” the contractor group wrote in the July 1 response.
The federal government’s lawsuit includes several examples of SRNS allegedly committing fraud. In the first listed incident, workers from SRNS and Fluor submitted an incurred cost report for nearly $338 million for their 2008 services. But, according to the complaint, the report included $1.19 million in home office costs and nearly $90,000 in bid and proposal costs for a total of more than $1.2 million in unallowable costs.
Subsequent unallowable costs alleged by the federal government include $942,000 in 2009, $906,000 in 2010, $362,000 in 2011, $666,000 in 2012, $254,000 in 2013 and $481,000 in 2014. “Fluor Federal and SRNS received payment from DOE for these improper, unallowable, inflated, and fraudulent claims,” the complaint alleges. The federal goverment could receive three times the amount of the total violation, or 15.6 million, and between $5,500 and $11,000 per violation.
There have been no other filings in the case since July 1, and there have been no reported rulings or court dates scheduled.
