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'Price Reduction Clauses' Raise False Claims Act Perils

Jaclyn Jaeger | October 18, 2011

A record $200 million False Claims Act settlement that the General Services Administration reached this month with Oracle is putting a spotlight on price- reduction clauses that can cause compliance troubles for government contractors.

Oracle's settlement, announced by the Justice Department on Oct. 6, is the latest in a handful of recent cases alleging defective pricing by contractors. The Oracle settlement resolves allegations that the software giant knowingly provided inaccurate and incomplete information to GSA contracting officers, resulting in defective pricing of Oracle's software licenses and technical support to government entities.

Every contract with the GSA must include a price-reduction clause, which requires companies to give the government their best customer price. The government saves money, and the benefit to companies is a streamlined process of selling to hundreds of separate government purchasers under one central contract.

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