U.S. ex rel American Systems Consulting Inc. v. ManTech Advanced Systems International, No. 14-3269 (6th Cir.)

The Sixth Circuit recently affirmed the dismissal of a False Claims Act (FCA) suit against ManTech Advanced Systems International (ManTech). At issue was whether a change in ManTech’s key personnel in a contract was a material false statement. By way of background, ManTech and American Systems Consulting Inc. (ASCI) were in competition for a Defense Information Technology Contracting Organization contract for inventory management support. Each offeror was required to submit a specific individual as the prospective Program Manager and address his skills and qualifications. Both ManTech and ASCI identified a prospective Program Manager but ASCI failed to address his specific skills and qualifications. ManTech received a higher score based on the experience of their proposed Program Manager and was ultimately awarded the contract. However, after initial proposals were submitted, the specific individual ManTech proposed resigned and ManTech did not advise the government nor did they modify their proposal. Subsequently, ASCI filed an FCA action against ManTech, alleging ManTech fraudulently induced the government into awarding it the contract by misrepresenting the person who would act as Program Manager.

The Sixth Circuit upheld the lower court’s ruling that the personnel change was not a material false statement because the alleged misrepresentation did not have “an objective, natural tendency to affect the government’s decision.” Government contracting officials testified ManTech would have received the contract even if they had known of the proposed Program Manager’s resignation. Their testimony explained they only used the resume of the specific individual “as a general indicator of the human capital ManTech could provide” and they were well aware that “personnel are free to leave their employers at any time, so a given Program Manager might change.” Moreover, the government continued to work with ManTech even after it learned of the alleged misrepresentation.

ASCI also challenged the lower court’s emphasis on what the actual government decision-makers said and did which demonstrated a subjective rather than objective test of materiality was applied. The Sixth Circuit disagreed, indicating “statements by the actual decision-makers may be (and often are) the best available evidence of whether alleged misrepresentations had an objective, natural tendency to affect a reasonable government decision-maker, especially if they are consistent with a rational decision-making process and a common sense reading of the record as a whole.” Thus the court concluded that “nothing in the record about the actual decision-makers (or their decision-making process) suggests a gap between their subjective views and the hypothetical views of a reasonably objective government decision-maker.”

The Court of Appeals did reject the trial court’s finding that the government’s decision to continue with ManTech after it learned of the resignation necessarily precluded a finding of materiality. The court stated, “when the government discovers misrepresentations made during contract formation, a subsequent decision not to terminate may weigh against a finding of materiality, but it is not always dispositive. Circumstances can change between a decision to enter into a contract and a subsequent decision not to terminate it, and the extent of any such changes would bear on the inquiry.”