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Government Contractors

Rule Updated on Whistleblower-Related Legal Costs

In June 2013, Cherry Bekaert notified you of coming changes to whistleblower protection laws for government contractors. Subcontractors were being given protection under whistleblower laws, and the Federal Acquisition Regulation (FAR) was amended at that time to generally not allow legal fees or other expenses related to whistleblower protection claims.

This past July, multiple government agencies, the Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”), finalized a rule to update FAR cost principle 31.205-47, related to the allowability of legal costs. The change implements a section of the National Defense Authorization Act 2013 regarding the allowability of legal costs pertaining to whistleblower proceedings filed under 41 U.S.C. 4712 or 10 U.S.C. 2409. Under the final rule, costs for settled whistleblower complaints are to be treated consistently with those incurred in the settlement of proceedings brought by a third party under the False Claims Act.

FAR 31.205-47(c)(2)(ii) now reads:

In the event of disposition by consent or compromise of a proceeding brought by a whistleblower for alleged reprisal in accordance with 41 U.S.C 4712 or 10 U.S.C. 2409, reasonable costs incurred by a contractor or subcontractor in connection with such a proceeding that are not otherwise unallowable by regulation or by agreement with the United States may be allowed if the contracting officer, in consultation with his or her legal advisor, determined that there was very little likelihood that the claimant would have been successful on the merits.

The importance of this change is that it gives the contracting officer some wiggle room in regards to the allowability of settlement costs arising from whistleblower proceedings. While many were hoping for a more drastic change, this does open the door to recovering more costs and should be considered a small win.

For more information on this rule, contact a member of Cherry Bekaert’s Government Contractors team.

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