Defense Contractor Berg Co. Agrees to Pay $3.3 Million to Resolve False Claims Act Allegations for Bid Rigging on Defense Contracts

ALBUQUERQUE - Berg Companies, Inc., of Spokane, Washington, has agreed to pay $3,300,000 to resolve allegations that it violated the False Claims Act (FCA) by engaging in a bid rigging conspiracy with a government prime vendor and two sub-vendors - including Albuquerque-based Improve Group, Inc. - that caused fraudulent, non-competitive bids to be submitted to the Defense Logistics Agency (DLA). As a result, Department of Defense (DoD) customers were overcharged for rigid wall shelters manufactured by Berg.

Berg manufactures rigid wall shelters and sells them directly and indirectly to the federal government, including through various prime vendor programs. In September 2019, Berg was acquired by Hunter Defense Technologies, Inc. (HDT), which is a defense contractor based in Solon, Ohio. HDT manufactures integrated expeditionary products and solutions.

The DLA oversees several prime vendor contracts that it makes available to military customers to acquire a variety of products and services. At issue here are DLA's Maintenance, Repair, and Operations (MRO) prime vendor contracts for the European Command. These contracts were operated by a prime vendor based in Boston, Massachusetts. Through these contracts, military customers in Europe could purchase supplies and equipment such as chemicals, electrical supplies, hardware, HVAC/refrigeration, prefabricated structures, and a variety of small tools. The goals of the MRO program are to achieve favorable product pricing through leveraged buying, infrastructure savings, and inventory cost reductions. To obtain the best price, the MRO contracts require the prime vendor, which is paid per transaction, to engage in a competitive bidding process, soliciting bids from at least two independently competing vendors for transactions below $25,000 and from at least three independently competing vendors for transactions at or above $25,000.

The United States alleged that from 2019 to 2021, Berg conspired with the prime vendor and two sub-vendors to rig bids on the MRO contracts for the European Command for the sale of its rigid wall shelters. More specifically, Berg admitted that it coordinated with the prime vendor and sub-vendors and submitted inflated quotes for Berg-made rigid wall shelters so that the sub-vendors would win the awards at inflated prices.

In the first scheme, Berg admitted that it coordinated and submitted inflated quotes on two solicitations for the sale of 10 Berg-made rigid wall shelters that were awarded to Albuquerque-based sub-vendor Improve Group.

In the second scheme, Berg admitted that it coordinated and submitted inflated quotes on 26 solicitations for the purchase of 29 Berg-made rigid wall shelters that were awarded to a sub-vendor that operated out of Palm Beach Gardens, Florida. As a result of these bid rigging schemes, the United States contends that the prime vendor did not engage in a competitive bidding process, that bids were not submitted by independently competing vendors, and that the collusion caused the prime vendor, sub-vendors, and Berg to overcharge the military customers.

Berg received cooperation credit under the Department of Justice's guidelines for taking disclosure, cooperation, and remediation into account in FCA cases. Berg cooperated with the government in this matter, conducted internal investigation, and voluntarily self-disclosed one issue that was not known to the government before.

"Collusion in government contracting erodes public trust, distorts fair competition, and drives up costs for taxpayers and service members," said U.S. Attorney Ryan Ellison for the District of New Mexico. "Such conduct undermines the integrity of the procurement process and betrays the public's expectation that government funds will be used responsibly. This resolution demonstrates our unwavering commitment to protecting taxpayer dollars, ensuring a level playing field for all businesses, and holding accountable those who seek to profit by manipulating federal contracting. We will continue to work closely with our law enforcement partners to defend the integrity of government procurement and safeguard the interests of the American people."

"Bid rigging of this type inhibits competition on the products and on prices, thereby creating the risk that the government is purchasing inferior products at exorbitant prices," said Assistant Attorney General Brett Shumate of the Justice Department's Civil Division. "This settlement reinforces the Department's commitment in using the FCA to pursue anti-competitive fraud."

"As evidenced in this settlement agreement, these contractors manipulated and undermined the fair and open bidding process designed to save our military and taxpayers money," said United States Attorney Leah B. Foley. "We commend Berg for cooperating with the government to resolve this matter and taking responsibility for this conduct. As this settlement demonstrates, not only will my Office continue to use the False Claims Act to help root out fraud, waste and abuse involving taxpayer funds, but it will reward those that accept responsibility and cooperate with the government."

"Today's settlement announcement demonstrates the commitment of the Defense Criminal Investigative Service (DCIS), along with our law enforcement partners, to aggressively pursue those who undermine the integrity of the DoD contracting process," said Chad Gosch, Acting Special Agent in Charge of the Department of Defense Office of Inspector General, DCIS Southwest Field Office. "DCIS will use all available resources to hold accountable those who betray the trust of the American taxpayer by corrupting the DoD procurement system for personal gain."

"GSA OIG will continue to work with its investigative partners to hold government contractors accountable for concealing relevant information that may affect the award or performance of government contracts," said Special Agent in Charge Joseph Dattoria of the U.S. General Services

This settlement resolves claims brought against Berg under the qui tam or whistleblower provisions of the FCA, which permit private parties to sue on behalf of the government when they believe that a defendant has submitted false claims for government funds and to receive a share of the recovery. The settlement in this case provides for the whistleblowers, Mark G. Davis and Andrew G. Gunn, to receive a $561,000 share of the recovery. Davis is a U.S. Army veteran and former salesperson for one of the sub-vendors involved in the conspiracy allegation. Gunn is the managing director of a United Kingdom company that manufacturers storage equipment for United States military customers and sold its equipment through this prime vendor's MRO contracts. The remainder of the matter remains under seal.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney's Offices for the District of New Mexico and District of Massachusetts, with assistance from the Defense Criminal Investigative Services, the Army Criminal Investigation Division, the Air Force Office of Special Investigations, and the General Services Administration Office of Inspector General.

The matter was handled by Trial Attorney Samson Asiyanbi of the Justice Department's Civil Division, Assistant U.S. Attorney Sean Cunniff and Auditor Phillip Stella of the District of New Mexico, Assistant U.S. Attorneys Lindsey Ross and Brian LaMacchia of the District of Massachusetts, and criminal investigators from the Air Force Office of Special Investigations.

The claims resolved by the settlement are allegations only and there has been no determination of liability.