Government Contract Fraud Defense: Federal Procurement Fraud Explained

By Elizabeth Franklin-Best, Esq., and Christopher Zoukis, JD, MBA

Federal procurement fraud cases reach contractors, subcontractors, suppliers, and the individuals who run them — and they can put a company’s survival and an executive’s liberty at stake at the same time. When federal scrutiny lands on a government contract, retaining a government contract fraud lawyer early matters more than in almost any other white-collar matter, because three forms of jeopardy arrive together: criminal exposure, civil False Claims Act liability, and the threat of suspension and debarment. At Elizabeth Franklin-Best, P.C., we defend contractors and individuals against federal procurement fraud allegations nationwide.

Government contract fraud is prosecuted under a powerful cluster of statutes — the Major Fraud Act, the false claims statute, false statements, conspiracy, and others — and it is investigated by agency Inspectors General, the Defense Criminal Investigative Service, and the FBI. The Department of Justice frequently runs a criminal case and a civil False Claims Act case in parallel, while the contracting agency considers excluding the contractor from future federal work.

Our firm brings a federal-court defense practice grounded in detailed statutory analysis and controlling case law. Principal attorney Elizabeth Franklin-Best has appeared in more than 330 federal proceedings and over 100 federal appeals, is admitted to the United States Supreme Court and all twelve federal circuits, and carries a Chambers USA 2026 ranking for Litigation: White-Collar Crime & Government Investigations and is recognized as a 2026 “Best Lawyer” in Appellate Practice by Best Lawyers in America. Every procurement fraud engagement starts with the same discipline: isolate the statutes actually charged, line their elements up against the contract file, and probe whether the government can carry its burden on intent and materiality. A paid, one-hour initial consultation is where we begin that work for you.

Government Contract Fraud: Quick Answer

Question	Answer
What is government contract fraud?	Fraud committed in the award or performance of a federal contract — including false claims for payment, false certifications, product substitution, and defective pricing.
What must the government prove?	For major fraud, that the defendant knowingly executed a scheme to defraud the United States in a procurement worth $1,000,000 or more; for false claims, the knowing presentation of a false, fictitious, or fraudulent claim.
What penalties can apply?	Major fraud under 18 U.S.C. § 1031 carries up to 10 years per count; false claims under 18 U.S.C. § 287 carry up to 5 years per count — plus civil False Claims Act liability and possible debarment.
Is intent required?	Yes. These are intent crimes. An honest billing error or a good-faith contract dispute is not procurement fraud.
Where does the defense start?	With a paid, one-hour initial consultation in which we map the criminal, civil, and debarment exposure against the contract file and set a coordinated strategy.

Key Takeaways

• Government contract fraud is charged under several statutes — most often the Major Fraud Act (18 U.S.C. § 1031), the false claims statute (18 U.S.C. § 287), and false statements (18 U.S.C. § 1001).
• The Major Fraud Act applies to procurements worth $1,000,000 or more and carries up to 10 years per count.
• The statute reaches subcontractors and suppliers, not just prime contractors — privity with the government is not required.
• Criminal charges frequently run parallel to a civil False Claims Act case, which can impose treble damages and per-claim penalties.
• Suspension and debarment from future federal contracting can be as damaging to a company as the criminal case itself.
• Materiality and intent are required; an honest billing error or a good-faith contract interpretation dispute is not fraud.
• Common theories include false certifications, product substitution, defective pricing, and small-business set-aside fraud.
• Early, coordinated defense work across the criminal, civil, and administrative tracks is critical.

What Is Government Contract Fraud?

Government contract fraud — often called procurement fraud — is a species of federal fraud committed in connection with the award or performance of a federal contract. The federal government buys enormous quantities of goods and services, and it relies on contractors’ representations at every stage: in bids and proposals, in cost and pricing data, in certifications of compliance, and in invoices submitted for payment. Procurement fraud is the knowing corruption of any of those representations.

The conduct takes many forms. It includes submitting invoices for work that was not performed or goods that were not delivered, substituting cheaper or noncompliant products for what the contract specified, providing false or incomplete cost data during negotiations, falsely certifying compliance with contract terms or regulatory requirements, cross-charging costs between contracts, and fraudulently obtaining contracts set aside for small or disadvantaged businesses.

It is equally important to understand what procurement fraud is not. Federal contracts are complex, and contractors and agencies routinely disagree in good faith about scope, specifications, allowable costs, and performance. A genuine contract dispute is a matter for the contracting officer and the boards or courts that resolve such disputes — not a crime. Procurement fraud requires proof of a knowing intent to deceive, and that line between a dispute and a fraud is central to the defense.

How Procurement Fraud Is Charged

A federal procurement fraud case is typically built from several statutes:

• Major fraud against the United States, 18 U.S.C. § 1031. Enacted as the Major Fraud Act of 1988, this statute criminalizes knowingly executing or attempting a scheme to defraud the United States, or to obtain money or property by false pretenses, in any procurement of property or services where the contract value is $1,000,000 or more. It carries up to 10 years per count and substantial fines.
• False, fictitious, or fraudulent claims, 18 U.S.C. § 287. This statute criminalizes making or presenting a claim against the United States knowing it to be false, fictitious, or fraudulent. It carries up to 5 years per count, and each false invoice can be a separate count.
• False statements, 18 U.S.C. § 1001. Knowingly making a materially false statement in a matter within federal jurisdiction — frequently charged for false certifications and false representations to contracting officers.
• Conspiracy, 18 U.S.C. § 371. An agreement to commit any of these offenses, or to defraud the United States.
• The civil False Claims Act, 31 U.S.C. § 3729. Not a criminal statute, but the government’s primary civil tool — imposing treble damages and per-claim penalties, and frequently litigated in parallel with the criminal case.

A critical feature of the Major Fraud Act is its reach. In United States v. Brooks, 111 F.3d 365 (4th Cir. 1997), the Fourth Circuit held that any contractor or supplier involved with a prime contract with the United States who commits fraud with the requisite intent can be guilty, regardless of whether that party had direct privity with the government — so long as the prime contract, a subcontract, or any constituent part of the contract is valued at $1,000,000 or more. The court also explained that the “value of the contract” means the amount the government agreed to pay, not the contractor’s profit. Subcontractors and suppliers whose own subcontracts fall below the threshold are still squarely within the statute’s scope when the prime contract qualifies.

Applied Insight: The $1,000,000 threshold of the Major Fraud Act is a real, litigable element. The value is measured against the contract, subcontract, or constituent part at issue — and where the government’s charge does not actually reach the threshold, that is a defense, not a footnote. The precise statutory framing of a procurement fraud count rewards close reading.

What the Government Must Prove

Under the Major Fraud Act, the government must prove that the defendant knowingly executed, or attempted to execute, a scheme or artifice with the intent to defraud the United States — or to obtain money or property by false or fraudulent pretenses — in a covered procurement meeting the $1,000,000 threshold. The knowing, intentional execution of a fraudulent scheme is the core of the offense.

Under the false claims statute, the government must prove that the defendant made or presented a claim against the United States knowing it to be false, fictitious, or fraudulent. The text of § 287 does not use the word “material,” and the circuits have split over whether to read materiality in. Some, including the Fourth Circuit, have long treated materiality as an element, while others — the Third Circuit in United States v. Saybolt, 577 F.3d 195 (3d Cir. 2009), among them — have held that a § 287 conviction does not require it, even while requiring materiality for a false-statement-based conspiracy to defraud under 18 U.S.C. § 286. Which side of that split governs your district shapes both the jury instructions and the motions practice, and it is one of the first questions we resolve in a false-claims defense.

Across these statutes, two elements do the most work for the defense: intent and materiality. The government must show the defendant acted with knowledge of falsity and a purpose to deceive — not that the defendant made a mistake, held a defensible interpretation of an ambiguous requirement, or disagreed with the agency about performance. Evidence of good faith, of disclosure, and of reasonable reliance on others all goes directly to the absence of criminal intent.

What Kousisis and Recent Decisions Mean for Procurement Cases (2023–2026)

The Supreme Court’s most consequential recent fraud decision arose from government contracting itself. In Kousisis v. United States, 605 U.S. 114 (2025), contractors obtained federally funded painting contracts by misrepresenting compliance with disadvantaged-business participation requirements, then performed the work. The Court upheld the convictions, holding that fraudulent inducement is a valid wire fraud theory even when the government suffers no net pecuniary loss — getting the bridge painted does not erase the fraud that won the contract. The decision’s limiting principle is materiality: only a misrepresentation that goes to a requirement the government genuinely cares about, in its payment and award decisions, can support a conviction.

That materiality fight has a well-developed playbook on the civil side. In Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016), the Supreme Court described the civil False Claims Act’s materiality standard as “demanding” — a requirement is not material merely because the government labeled it a condition of payment, and evidence that the government kept paying despite knowing of noncompliance is strong evidence the requirement was not material. After Kousisis, defense counsel can press the same themes on the criminal side: certification-based theories must be tested against what actually drove the agency’s decisions, not against the boilerplate. And Ciminelli v. United States, 598 U.S. 306 (2023), adds a structural limit — a federal fraud scheme must aim at traditional property, not at intangible interests like the right to control how a contract is awarded.

Applied Insight: Read together, Kousisis, Escobar, and Ciminelli make materiality the central battlefield of a modern procurement fraud case. The government no longer has to prove it lost money — but it does have to prove the misrepresentation mattered. Discovery into how the agency actually treated the requirement at issue, including whether it paid other contractors despite known noncompliance, can carry a defense.

Common Procurement Fraud Theories

Federal procurement fraud prosecutions tend to follow recurring patterns. Recognizing how the government frames a fact pattern helps shape the defense:

• False claims for payment. Invoicing for work not performed, goods not delivered, hours not worked, or costs not incurred.
• Product substitution. Delivering goods that do not meet the contract’s specifications — different parts, lower grades, or noncompliant country of origin — while representing that they conform.
• Defective pricing. Providing inaccurate, incomplete, or non-current cost or pricing data during contract negotiations, in violation of truthful-cost-data requirements.
• False certifications. Falsely certifying compliance with contract terms, quality or testing requirements, labor standards, cybersecurity requirements, or domestic-sourcing rules.
• Cross-charging. Shifting costs from a fixed-price contract to a cost-reimbursement contract, or between contracts, to inflate recoverable costs.
• Small-business and set-aside fraud. Fraudulently obtaining contracts reserved for small, women-owned, veteran-owned, or disadvantaged businesses through pass-through or front arrangements.
• Bid rigging and collusion. Coordinating with competitors to manipulate the competitive bidding process.

In every pattern, the government must prove knowing fraud rather than error or dispute. The defense scrutinizes the contract terms, the certifications actually made, the documents and communications, and what each individual defendant actually knew and decided.

Applied Insight: Procurement fraud cases often turn on the meaning of a contract requirement. Where a specification or a certification is genuinely ambiguous, a contractor’s reasonable interpretation — even if the agency later disagrees with it — is powerful evidence against fraudulent intent. The defense frequently begins by reading the contract as carefully as the indictment.

Parallel Proceedings and Debarment

Procurement fraud rarely travels on a single track. A contractor under investigation often faces three at once: a criminal case from the Department of Justice, a civil False Claims Act case — frequently begun by a whistleblower’s sealed lawsuit — and an administrative suspension or debarment proceeding by the contracting agency.

Each track carries distinct stakes. The criminal case threatens liberty and criminal fines. The civil False Claims Act case threatens treble damages and per-claim penalties that can dwarf the actual loss. And suspension or debarment can cut off a company’s access to federal contracts entirely — an existential threat for a business that depends on government work. Decisions in one track ripple into the others: a statement made to defend the civil case can become criminal evidence, and an admission made to preserve eligibility can undermine the criminal defense. These matters must be defended in a coordinated way, not in isolation.

Procurement Fraud Enforcement in 2025–2026

Contractors should understand the current enforcement climate: it is the most active on record. The Department of Justice announced more than $6.8 billion in False Claims Act settlements and judgments for fiscal year 2025 — the highest single-year total in the statute’s history — alongside a record 1,297 new whistleblower (qui tam) lawsuits and 401 newly opened government investigations. Procurement, loan, and grant fraud sit among the Department’s stated priorities, together with contractor cybersecurity compliance and a new cross-agency Trade Fraud Task Force focused on tariff and customs evasion.

The enforcement machinery is also increasingly coordinated across agencies. DOJ works procurement matters hand in hand with contracting agencies and their Inspectors General — in 2025, for example, DOJ announced a $14.75 million False Claims Act settlement with a Maryland IT company over alleged noncompliance on a General Services Administration contract, a matter developed with GSA and its oversight components. For a contractor, the practical meaning is that an audit finding, an OIG referral, or a whistleblower complaint at any agency can move quickly into a coordinated DOJ matter spanning civil, criminal, and administrative remedies — which is why we map all three tracks at the outset rather than waiting for each to surface on its own.

Penalties for Government Contract Fraud

The criminal exposure is serious. Major fraud under 18 U.S.C. § 1031 carries up to 10 years per count and substantial fines. False claims under 18 U.S.C. § 287 carry up to 5 years per count, and because each false invoice can be charged separately, the count total can be high. False statements under § 1001 add up to 5 years per count. Conspiracy adds its own exposure.

Beyond prison, the consequences include restitution to the government, forfeiture of proceeds, and — through the parallel civil case — treble damages and per-claim civil penalties under the False Claims Act. For a company, suspension and debarment can be the most damaging outcome of all.

In federal court, the advisory United States Sentencing Guidelines drive the actual sentence — see our guide to how federal sentencing works — and in procurement fraud cases the loss amount is usually the dominant factor, along with the number of victims, the use of sophisticated means, and the defendant’s role. Loss in these cases is genuinely contestable — it involves the value the government actually received, the distinction between intended and actual loss, and questions of causation. A disciplined loss analysis is often the most consequential part of a sentencing defense.

Defenses to Government Contract Fraud Charges

No two procurement fraud cases are alike, and no lawyer can promise a result. But several defense themes recur, and matching them to the evidence is the core of building a strategy:

• Lack of intent to defraud. The conduct reflected an error, a misunderstanding, or a defensible reading of the contract — not a knowing scheme to deceive the government.
• Good-faith contract interpretation. A reasonable interpretation of an ambiguous specification or certification requirement is not fraud, even if the agency later disagrees.
• Contract dispute, not crime. The matter is a genuine performance or cost dispute properly resolved through the contract disputes process.
• No materiality. The statement or claim was not capable of influencing the government’s payment or contracting decision.
• The government received what it paid for. Evidence that the government got the value it bargained for can rebut a fraud theory and limit loss.
• Below the threshold. For Major Fraud Act counts, the procurement at issue did not meet the $1,000,000 statutory threshold.
• Reliance on others. Good-faith reliance on compliance staff, accountants, or counsel can negate intent.
• Sentencing and loss challenges. Even where conviction is likely, contesting loss and enhancements can sharply reduce exposure.

The right combination depends entirely on the contract, the documents, and the facts. Our role is to test the government’s proof element by element, develop the favorable record, and press every legitimate defense across all three tracks — during the investigation, in pretrial motions, at trial, and on appeal.

How Procurement Fraud Investigations Begin

Procurement fraud investigations surface in recognizable ways. A subpoena from an agency Inspector General or the Defense Criminal Investigative Service, a Civil Investigative Demand, an unsealed whistleblower lawsuit, an audit finding from the Defense Contract Audit Agency, an agent’s interview of an employee, or a show-cause notice from a suspension and debarment official can each be the first visible sign that a federal investigation is underway.

The early steps matter. Preserve all contract files, cost records, certifications, and communications; impose a litigation hold; avoid informal explanations to investigators; and route communications through counsel. Procurement fraud turns on intent, and an off-the-cuff account of “how the contract was performed” can be recast as evidence of knowledge. Understanding whether a company or an individual is a witness, a subject, or a target — and whether parallel civil and administrative matters exist — should guide every decision.

Why Work With Elizabeth Franklin-Best, P.C.

Government contract fraud cases are document-intensive, intent-driven, and fought on three fronts at once — criminal, civil, and administrative. They reward defense lawyers who read the contract and the statutes closely, who understand how procurement actually works, and who coordinate strategy across every track.

Elizabeth Franklin-Best, who leads the firm, argued and briefed criminal appeals before writing Reversing Your Criminal Conviction, and her admissions span the United States Supreme Court and every federal circuit court of appeals — credentials reflected in her 2026 Best Lawyers in America and Chambers USA recognitions. That appellate background matters in document-driven procurement cases, where the record made during the investigation and at trial often decides the appeal: across more than 330 federal proceedings and over 100 appeals, she has litigated the kind of intent, materiality, and loss questions that determine these outcomes. Christopher Zoukis, the firm’s Managing Director, brings a deep focus on federal sentencing and corrections to the back end of every case. Together with pro hac vice admission where needed, that lets us defend contractors, executives, and employees in procurement fraud matters in any district in the country.

Outcomes in procurement fraud cases cannot honestly be guaranteed by anyone, and we never do. Our commitment is to the craft: reading the contract as carefully as the indictment, telling you candidly where the government’s proof is strong, and building a coordinated strategy across the criminal, civil, and debarment tracks. Engagements begin with a paid, one-hour initial consultation.

Talk With a Government Contract Fraud Defense Lawyer

Liberty, the company, and its place in the federal marketplace can all be on the line in a single procurement fraud matter — and the record being built today will shape all three. Engaging defense counsel while the investigation is still forming preserves choices that disappear once charges or a civil complaint land. Book a paid, one-hour initial consultation to review your contract file and exposure with us in confidence.