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Late last week, the D.C. Circuit affirmed the district court’s dismissal on summary judgment of a relator’s FCA claims in U.S. ex rel. Folliard v. Government Acquisitions, Inc. & Govplace. Although the court provided an extensive discussion of several evidentiary rulings that led to the dismissal of much of the case, its ruling with respect to the Trade Agreements Act (TAA) certifications received from suppliers is significant to contractors. The court held that, in providing country of origin information to the Government under the TAA, the contractor reasonably based its representations on certifications it received from a supplier. Accordingly, the district court had properly granted summary judgment with respect to an FCA claim based on purportedly defective certifications. To the extent a Government contractor is reselling products in reliance on a supplier’s TAA certification—and there is a reasonable basis to accept the certification—the Govplace decision should prove helpful to contractors.

Federal contractors selling commercial products to the Government on the GSA Schedules (or other procurement vehicles) are facing increasing FCA claims based on purported TAA non-compliance and certification issues. Tracking the origin of each and every component in a product (particularly an electronics product) in the age of globalization can be difficult for a manufacturer selling its own products to the Government. The problems are more substantial for resellers, which cannot know the origin of every component of products they don’t manufacture—and must rely on information obtained from entities within a supply chain.

The contractor Govplace isn’t a manufacturer of the products it sells to the Government. As relevant to the lawsuit, Govplace sold Hewlett Packard (HP) products it acquired from a large technology products distributor, Ingram Micro, under the distributor’s “GSA Pass Through Program.” That program “helps resellers maintain their GSA contracts by regularly passing through manufacturer-certified information,” and for HP, Govplace received certifications that the “[p]roducts offered by the manufacturer are compliant with the Trade Agreements Act.”

The contractor wasn’t the only entity that believed reliance on its distributor’s certifications was sufficient for compliance with the TAA. GSA conducted numerous “Contractor Administrative Visits” during the years preceding the FCA lawsuit, and after Govplace’s reliance on the country of origin certifications was explained, GSA repeatedly issued “Report Cards” finding “that Govplace demonstrated compliance with the TAA.” Those findings made perfect sense; Govplace is a downstream reseller and presumably had no realistic way to make additional demands on HP.

To succeed with an FCA claim, a relator (or DOJ) must show that a contractor “knowingly” submitted false claims, and because “actual knowledge” was not alleged in this case, the relator had to provide evidence of Govplace’s “deliberate ignorance” or “reckless disregard” of the allegedly false certifications. But it was clear that Govplace obtained its HP products from Ingram Micro, which the court described as the “largest technology products distributor,” and that Ingram Micro “expressly certifies to resellers . . . that [country of origin] information is accurate, and more generally that the products it distributes comply with the TAA.” The court’s opinion also relied on GSA’s repeated acceptance of the Ingram Micro certifications during its contractor visits. In sum, the court explained that “a contractor like Govplace is ordinarily entitled to rely on a supplier’s certification that the product meets TAA requirements.” Barring significant red flags with respect to the certifications’ validity—which the Govplace relator was unable to find in the discovery that it was allowed—that is surely the correct conclusion.

Making TAA certifications is increasingly serious business for contractors selling electronics (and other types of) products to the Government. The Govplace decision is helpful in providing some clarity for contractors regarding FCA claims they may face based on sales made under the GSA Schedule program.