Imputation of False Claims Act Liability to Prime Contractors.

Subcontractor FCA Liability The FCA imposes liability on any entity--whether aprime contractor or a subcontractor--whose unlawfulconduct induces the government to pay a false claim. This is because prime contractors are responsiblefor supervising their subcontractors' compliance withapplicable contractual and legal requirements.34 Wherea prime contractor acts with "reckless disregard" or "deliberateignorance" with respect to the truth of a subcontractor'srepresentations or performance, the governmentmay be able to impute the subcontractor'smisconduct to the prime. Require Subcontractor Certifications for Deliverables The U.S. Court of Appeals for the D.C. Circuit's decisionin Folliard provided prime contractors with an effectivesafeguard against subcontractor misconduct: supplier certificationsof conformance with contract requirements. Reserve Audit/Investigation Rights in Subcontracts Prime contractors should include a clause in subcontractsgranting the prime contractor audit or investigationrights in the event the subcontractor finds credibleevidence of an FCA violation. [Extracted from the article]