Under scrutiny

Editor’s note: This article is for general educational purposes only and does not constitute legal advice.

Fderal construction projects offer roofing contractors significant opportunities but carry heightened compliance obligations. Whether you install a new roof system for a military facility, perform maintenance under a General Services Administration term contract or provide disaster recovery services through the Federal Emergency Management Agency, working in the federal space means every representation made to the government is subject to intense scrutiny.

False claims act

One of the most powerful enforcement tools available to the federal government (and one of the most dangerous for contractors) is the False Claims Act. Originally enacted during the Civil War to combat fraud against the Union Army, the FCA has evolved into a sweeping statute that imposes treble damages (a legal remedy allowing courts to award a plaintiff three times the actual damages suffered) and civil penalties for anyone who knowingly submits a false or fraudulent claim for payment to the U.S. government. For roofing contractors, false claims liability can arise not only from inflated invoices but also from misrepresentations about immigration compliance, Disadvantaged Business Enterprise participation and materials sourcing.

The modern FCA, codified at 31 U.S.C. §§ 3729–3733, prohibits knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval or knowingly making a false record or statement material to such a claim.

“Knowingly” includes actual knowledge, deliberate ignorance or reckless disregard for the truth. The statute allows the federal government and private whistleblowers, known as “relators,” to bring actions on behalf of the government. If liability is established, violators face treble damages, statutory penalties that can exceed $25,000 per claim and potential debarment from future federal work. The Department of Justice recovers billions of dollars annually through FCA settlements, and the construction sector has been a recurring target.

FCA and roofing

In the context of roofing and other specialty trades, the risk of FCA exposure has expanded beyond traditional billing fraud. Agencies and whistleblowers are increasingly using the statute to pursue misrepresentations tied to contractual and regulatory compliance. Three areas in particular (immigration compliance, Disadvantaged Business Enterprise participation and materials sourcing) have generated growing enforcement attention. Each involves certifications or statements made to the government that may later be challenged as false or misleading if the underlying facts are inaccurate.

The first area of concern involves immigration and employment eligibility compliance. Federal contracts routinely incorporate clauses requiring compliance with the Immigration Reform and Control Act and E-Verify regulations. Contractors and subcontractors must certify their workforces are authorized to work in the U.S.

If a roofing company knowingly employs unauthorized workers or fails to verify the status of its labor force while continuing to bill for work performed, those invoices can be deemed false claims. DOJ and the Department of Homeland Security have pursued enforcement actions against contractors who falsely certified compliance with E-Verify or submitted payroll records misrepresenting worker authorization. Even if a contractor did not intend to defraud the government, a pattern of willful blindness such as ignoring mismatched Social Security numbers or accepting suspect documentation can satisfy the “reckless disregard” standard under the FCA.

The second enforcement area relates to Disadvantaged Business Enterprise and small-business participation requirements. Many federal and federally funded roofing projects require a portion of the work be subcontracted to certified Disadvantaged Business Enterprises, which are minority-, women- or service-disabled veteran-owned firms. Contractors must submit utilization plans and periodic reports certifying compliance with these participation goals. False claims liability arises when contractors misrepresent the involvement of such entities, for example, by listing a certified Disadvantaged Business Enterprise as a subcontractor when, inreality, that firm serves only as a pass-through business with no meaningful performance or control.

In recent years, DOJ and the Department of Transportation have aggressively prosecuted “DBE fraud” schemes under the FCA, resulting in multimillion-dollar settlements and debarments. If you partner with certified firms, ensure those entities are performing commercially useful functions, controlling their own labor and receiving payment consistent with the scope of work. Paper compliance or token participation can lead to significant exposure even when the underlying project work was completed without issue.

The third and increasingly significant area of risk involves representations about materials sourcing and domestic preference requirements. Many federal roofing contracts incorporate “Buy American” or “Buy America” clauses, requiring construction materials and manufactured products be produced in the U.S. or in designated trade partner countries. When contractors certify compliance with these clauses but use foreign-made fasteners, insulation, membranes or other roof system components, those certifications can constitute false statements under the FCA.

In one notable case, a federal contractor paid millions of dollars in damages after falsely certifying that imported steel products met domestic origin requirements. For roofing contractors, verifying supply chains has become more complex as material distributors source components globally. Even unintentional errors, such as relying on supplier assurances without documentation, can trigger allegations of reckless disregard if you fail to exercise due diligence.

The FCA’s broad reach is amplified by its qui tam provisions, which allow private whistleblowers to file suits and share in any recovery. In the construction industry, whistleblowers are often former employees, competitors or subcontractors who allege falsification of compliance records. Once filed, these suits are investigated by DOJ and, if meritorious, either intervened in or allowed to proceed independently. Regardless of the outcome, the process can impose substantial legal costs and reputational harm. If you perform federal work, you must maintain robust internal compliance programs to mitigate whistleblower risk.

Compliance

Key elements of an effective compliance program include workforce verification procedures, written subcontractor oversight protocols and supply-chain documentation controls. Regarding immigration compliance, contractors should ensure I-9 forms are properly completed, E-Verify results are retained and periodic audits are performed by third parties. (For immigration compliance guidance, go to nrca.net/immigrantlabor.)

Relying on subcontractor certifications alone is insufficient; if you are a prime contractor on a project, you are responsible for ensuring downstream compliance when billing the government. Regarding Disadvantaged Business Enterprise participation, verify listed firms are properly certified, perform a commercially useful function and payments correspond to the work performed. For materials sourcing, maintain manufacturer certifications of origin, invoices and correspondence confirming compliance with domestic preference requirements. All such documentation should be organized and retained for audit and potential defense.

Training and communication also are critical. Project managers, estimators and procurement staff must understand compliance certifications are not mere paperwork; they are legal attestations made to the federal government. Train employees to recognize potential red flags, such as unexplained substitutions, subcontractors who lack personnel or equipment, or suppliers who cannot document product origin. Establishing a culture of compliance, supported by leadership from ownership and senior management, is the best safeguard against FCA exposure.

If compliance questions arise, seek legal guidance before making certifications or submitting invoices. Voluntary disclosure may be appropriate in limited situations when an error is discovered before the government is aware of it. DOJ has a voluntary self-disclosure policy that can mitigate penalties for contractors who promptly report, cooperate and remediate violations. However, once a false claim has been knowingly submitted, subsequent correction will not necessarily shield a contractor from liability. The key is prevention and ensuring accuracy before submission rather than attempting to repair the damage afterward.

It also is important to recognize FCA exposure extends beyond prime contractors. Subcontractors can be liable if they submit false invoices to a prime contractor with the knowledge those invoices will be passed through to the government. Likewise, prime contractors can face liability for subcontractor misconduct if they fail to exercise adequate oversight. Courts have held FCA applies to anyone who “causes” a false claim to be submitted not just the party who signs the invoice. This shared exposure reinforces the need for strong contract language requiring compliance certifications, indemnification for violations and audit rights throughout the project chain.

Recent enforcement trends suggest roofing and specialty contractors will face increased scrutiny under the FCA in the coming years. DOJ has expanded its use of data analytics to identify anomalies in billing and certification patterns while agencies such as the Department of Labor, Environmental Protection Agency and DHS share information that can trigger cross-agency investigations. Cases involving misrepresented Disadvantaged Business Enterprise participation and foreign material sourcing have been particularly active, reflecting the government’s focus on equity and domestic manufacturing policies. Expect contracting officers and inspectors general to request more detailed documentation and verify compliance in real time rather than solely during post-award audits.

The financial consequences of an FCA violation can be severe. In addition to treble damages and per-claim penalties, contractors risk suspension or debarment from federal work, loss of bonding capacity and reputational damage that can affect private-sector opportunities. Even settlements without admission of liability can be publicized, making reputational repair difficult. The best defense is a proactive compliance posture supported by documentation, training and a demonstrated commitment to ethical contracting practices.

You should view FCA compliance not as a bureaucratic obstacle but as a cost of doing business in the federal marketplace. The same diligence that protects against liability also enhances operational quality and accountability. Accurate recordkeeping, transparent subcontracting practices and verified sourcing build trust with public owners and reduce risk across the board. Moreover, maintaining compliance readiness positions contractors to compete more effectively for structured federal and state contracts, which increasingly require detailed representations about workforce, diversity and materials.

Little room for error

In the current enforcement environment, the FCA functions as a sword and shield for the government. For honest contractors, it rewards integrity and transparency; for careless or deceptive firms, it imposes substantial penalties. Roofing contractors engaged in federal projects must take the statute seriously and invest in systems that ensure truthfulness in every representation made to the government.

By integrating compliance into daily operations from bid submission to final payment, contractors can minimize risk, preserve eligibility for future federal opportunities and demonstrate the professionalism that defines the roofing industry at its best. Diligence, verification and transparency equal not only good compliance but also good business.

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