Under government contracting rules, a contractor may not charge costs to a government contract that has no connection to it. According to the allegations in the settlement agreement, from approximately April 2011 to March 2021, Booz Allen improperly allocated indirect costs associated with its commercial and/or international businesses to government contracts and subcontracts that “should have been allocated to commercial and/or international contracts or should have been treated as unallowable costs.”
The government further alleged Booz Allen created and maintained indirect cost pools that commingled costs associated with both commercial and/or international contracts and government contracts and subcontracts. Consequently, Booz Allen allegedly allocated indirect costs “disproportionately between commercial and/or international contracts and government contracts and subcontracts,” violating Cost Accounting Standards and the Federal Acquisition Regulation, according to the settlement agreement.
“Booz Allen used costs and cost rates that included indirect costs supporting Booz Allen’s commercial and/or international businesses to seek inflated payments and reimbursements under its government contracts and subcontracts,” the settlement agreement stated. It further “failed to disclose current, accurate, and complete cost or pricing data related to such costs resulting in inflated prices for government contracts and subcontracts.”
The settlement resolved a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file a lawsuit on behalf of the United States for false claims and share in a portion of the government’s recovery. The qui tam lawsuit was filed by Sarah Feinberg, a former Booz Allen employee, who will receive approximately $70 million of the government’s recovery.
In a Form 8-K filing, Booz Allen said it entered into the settlement agreement “to avoid the delay, uncertainty, and expense of protracted litigation,” and that the agreement “contains no admission of liability by the company.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.