Government Expands Administrative False Claims Powers, Creating New Risks for Contractors

Federal agencies have gained expanded authority to pursue contractors for allegedly false statements through recent changes to the Administrative False Claims Act (AFCA), according to a new announcement from the Civilian Board of Contract Appeals (CBCA).

The AFCA, previously known as the Program Fraud Civil Remedies Act of 1986, was enacted in December 2024 and has been steadily implemented by various agencies including the U.S. Nuclear Regulatory Commission, the U.S. Postal Service, the Federal Labor Relations Authority, and the Railroad Retirement Board.

Most recently, the CBCA announced procedural changes driven by the FY2025 National Defense Authorization Act (NDAA), which significantly broadened the board’s jurisdiction over AFCA cases. This expansion creates substantial new risk exposure for government contractors, as agencies can now administratively pursue not only false claims but any false written statements made to the government.

The revised AFCA represents a major shift in enforcement capability, increasing the maximum claim amount from $150,000 to $1 million for cases where the Department of Justice declines to pursue judicial action. This sevenfold increase dramatically expands the range of potential cases that can be handled through administrative proceedings rather than federal courts.

The law’s liability framework largely mirrors the federal False Claims Act (FCA), though with double damages rather than the FCA’s treble damages provision. Unlike the FCA, the AFCA does not include qui tam provisions that allow whistleblowers to initiate lawsuits. Instead, it relies on administrative adjudication and grants agencies subpoena power to support their investigations.

Industry analysts note a particularly concerning aspect of the AFCA’s funding mechanism: any recovery is first applied to reimburse the investigating agency for its costs in pursuing the case. This cost-recovery structure creates a direct financial incentive for agencies to initiate more enforcement actions, as it reduces their budget impact while potentially generating additional funds.

The AFCA’s scope extends beyond payment claims to cover any false written statements submitted to federal agencies, even without an associated monetary claim. This means routine contractor submissions such as change order requests, progress reports, and other administrative documents could trigger enforcement actions if deemed false or misleading. The law also covers “reverse false claims,” where contractors make statements that conceal or attempt to reduce obligations owed to the government.

Under the newly announced CBCA rules, the AFCA process begins when an agency reviewing authority receives permission from the Attorney General to pursue a civil fraud claim. The agency must then notify the contractor of the allegations and amounts at issue. The contractor has 30 days to elect a hearing, after which the matter may be referred to the CBCA.

The CBCA’s procedural rules for AFCA cases generally parallel those used for Contract Disputes Act (CDA) proceedings. A single Board member will preside over the case, setting schedules, overseeing discovery, conducting proceedings, and deciding the merits. Parties must submit electronic evidence files similar to the Rule 4 file under the CDA, with the important addition that exculpatory information must be included.

Notably, party representatives in these proceedings need not be attorneys, and while the Board’s merit rulings will be posted on its website, they are binding on the parties but not considered precedential for future cases.

Government procurement experts warn that these changes represent a significant shift in the contractor-agency relationship. The AFCA gives agencies a streamlined pathway to pursue potential fraud without initiating a full FCA action or involving the Department of Justice in litigation. Critically, an AFCA case can proceed even without an underlying certified claim from the contractor.

This development comes amid the current administration’s intensified focus on fraud enforcement across federal programs. For contractors, the message is clear: increased scrutiny of all statements made to the government is now essential, as even routine communications could potentially trigger costly administrative proceedings under the expanded AFCA framework.