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Comment by matthewmcg | Hacker News Reader

The DOJ statement has more detail on the fraud:

>Under government contracting rules, there must be a nexus between the costs charged to a government contract and the objective of the contract. Thus, a contractor may charge to a government contract costs directly related to that contract, as well as indirect costs that benefit multiple contracts including the government contract. A contractor may not charge costs to a government contract, however, that have no relationship to that contract. This prohibition prevents government contractors from using taxpayer funds to subsidize non-government related work.

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If I charge more from client A than client B, I’m not necessarily subsidizing B with A. My price for doing the same work for the government is higher than the same work for a private party. It literally costs more and has higher risk. This honestly feels like this lady went digging around looking for things that would be arguable under vague accounting standards.

The way that these contracts work is that they get paid for their costs, plus a percentage. They were just fraudulently reporting costs incurred from other contracts on this contract to inflate their profits.

Cost-plus accounting is a horrible way to do business, it's basically designed to facilitate this kind of fraud.

If I'm understanding what she reported, Booz was losing $XX on commercial contracts and billing $XX excess on government contracts. There was a direct link between the two, which is prohibited.

And her case was strong enough that the government decided to pursue it. That doesn't always happen - whistleblowers sometimes have to pursue these cases on their own (crazy as that sounds to me).

The government is just not "a client". There are special rules if you want to sell anything to them, because you're playing with taxpayers' money. This is one such rule.

I’m not an expert, but in the world of government contracting margins are often fixed. It’s common to contract on a “cost plus” basis where the contractor discloses its costs and is paid an agreed margin on top. For a diversified business like BAH (well not that diversified but I digress), they’d need to allocate sg&a in some way to those cost plus contracts. My guess is they were doing it in a way that was, shall we say, “advantageous.”

Perhaps it’s charging client A for work performed (i.e., time spent) on client B.

> I’m not necessarily subsidizing B with A

Ok, but in this case, they were.

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