This common scheme to cheat the Government can occur in the manufacturing setting or in a contract involving personal services provided to the Government. In a typical False Claims Act case, the Government pays for employee labor hours that were either not actually worked or which were worked, but not on the contract for which the Government was billed. Sometimes the original time records are accurate, but are then changed to falsely reflect work being performed on another contract. Alternatively, the original time records may falsely inflate the number of hours actually worked, as where non-billable administrative time (as in time spent giving blood, making deposits at the company credit union, training on new machines, or handling union grievance matters) is instead charged as if the time was actually spent working to make a product for the Government.

Quite often, other company records will exist to show that the labor hours are false. For example, if a critical machine was required to perform the Government work, but that machine was off-site to be repaired during the weeks for which time was charged, it can be shown that the labor hours were false. Alternatively, if an entire department's time is charged to a particular Government job, but instead that department produced 2,000 products that week for a non-government job, the charges to the Government can be shown to be false.

Sometimes schemes to charge time to the wrong contract are called “cross-charging” because charges on one contract are charged to another and charges on a third contract are charged to still another contract. In many mischarging cases, companies that do a lot of business with the Government may have dozens of contracts and many subcontracts, with a variety of governmental agencies, foreign entities, and private companies. There may be all sorts of internal company pressure to reduce time spent on one contract that is “over-budget,” while charging time to another contract that is “under-budget.” However, many times the “under-budget” contract may be a “cost-plus” or other type of contract where the Government pays for virtually each hour charged to the contract. The “overbudget” contract may be a “fixed price” contract, often a private sector contract, where the company gets paid the same price for the products produced, regardless of the amount of time spent on the work.

A labor hours mischarging case is frequently discovered or reported by clerical workers and production workers, or their immediate supervisors, who are required by higher-level company officials to falsely record time or to falsify accurate time records of co-workers. The actual architects of the scheme could be anyone from low-level supervisors upwards to those in the executive offices in far-away company headquarters.

To make matters worse, the Government allows contractors to use the historical or “experiential” data from prior Government work to help set the proper number of hours, overhead, “indirect costs,”and allowable profit for future Government contracts. Where a lot of mischarging has occurred, this data, used for cost and pricing determinations by the Government, is also false.

Whatever the details of the scheme, the result is the same since the Government simply should not be charged for work not done on a specific contract and should not be charged for work done for private parties.

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