New Administrative Process for False Claims Cases Takes Effect Next Year

The U.S. Civilian Board of Contract Appeals (CBCA) has issued final rules governing how it will handle claims under the Administrative False Claims Act of 2023 (AFCA). The rules, published on January 28, 2026, establish the administrative framework for deciding claims referred to the Board under the AFCA, as amended by the National Defense Authorization Act for Fiscal Year 2025.

The AFCA represents a significant shift in how the federal government pursues smaller fraud cases. Previously known as the Program Fraud Civil Remedies Act of 1986, the law enables administrative investigations and prosecution of false claims and statements made by contractors to the government in cases where the U.S. Department of Justice declines to pursue action.

Notably, the CBCA’s jurisdiction has been expanded under the recent amendments to hear fraud claims referred to the Board under the AFCA. This change creates a streamlined administrative pathway for addressing contractor fraud that falls below the threshold typically pursued through judicial channels.

The revised AFCA establishes a ceiling of $1 million for enforcement actions, an amount that will be periodically adjusted for inflation. This administrative process targets smaller dollar cases that might otherwise escape scrutiny, creating a more comprehensive anti-fraud framework across federal agencies.

Unlike its more well-known counterpart, the False Claims Act, the AFCA provides for administrative resolution rather than judicial proceedings and does not contain a qui tam enforcement mechanism allowing whistleblowers to file lawsuits on behalf of the government.

The scope of liability under the AFCA is notably broad. Contractors may be found liable for written false statements even without making a false claim for payment. The law also includes “reverse false claims” liability when contractors attempt to avoid, conceal, or decrease obligations to pay or transmit money, property, or services to the government.

Penalties under the AFCA include $5,000 for each false claim or written false statement, plus damages of twice the amount of any false claim in cases where the government has already made payment. Recovered funds will first reimburse agencies for investigation and prosecution costs, with remaining amounts deposited into the Treasury.

The CBCA’s new rules for AFCA hearings largely mirror its procedures for Contract Disputes Act claims, with some notable differences. When an agency initiates a fraud claim, it must provide the contractor with notice. The contractor then has 30 days to elect a hearing, at which point the agency will refer the matter to the Board.

A single Board judge will typically preside over each referral, unless the Board’s chair rejects or refuses to accept the case. This presiding judge will set the hearing schedule, oversee discovery, conduct proceedings, and ultimately decide the merits of the case. Interestingly, party representatives need not be attorneys, potentially making the process more accessible.

The Board will utilize the Federal Rules of Evidence to resolve any objections to evidence admission. While rulings issued by the presiding Board judge are binding on the parties, they are not considered precedential.

These new rules, taking effect on February 27, 2026, come at a time of heightened focus on government fraud prevention. The 2025 fiscal year saw record-breaking False Claims Act recoveries totaling $6.8 billion. Simultaneously, the Small Business Administration has recently taken aggressive action, terminating 154 small business concerns from its 8(a) program for allegedly failing to meet “economic disadvantage” requirements.

The implementation of the AFCA and the CBCA’s new rules reflect the federal government’s intensifying efforts to combat waste, fraud, and abuse, even in relatively low-value claims that can be addressed at the agency level. As scrutiny increases, government contractors should strengthen their internal controls and compliance programs to meet the rigorous administrative audits that have become increasingly common in the federal contracting landscape.