Cost Estimates -- Too Low ??
Can a cost estimate be too low?
Yes, according to the U.S Court of Appeals for the Ninth Circuit, which held that a contractor can be held liable under the FCA if it makes false estimates and engages in underbidding to win a contract.
In U.S. ex rel. Hooper v. Lockheed Martin Corp., 688 F.3d 1037 (9th Cir. 2012); 54 GC ¶ 257, the Ninth Circuit found that a relator presented a genuine issue of material fact as to whether Lockheed’s proposals on a cost-reimbursement contract included cost esti¬mates which it knew were lower than the costs it ex¬pected to incur. The relator alleged that Lockheed em¬ployees were instructed to lower their cost estimates without regard to actual cost. The court found that the relator presented evidence that one Lockheed em¬ployee “was simply asked [by management] to change the cost” even though the change was not based on engineering judgment. He called the inputs used to create the bid “bad, bad guesses.” When the same em¬ployee allegedly objected to a similar cost reduction on another contract, his supervisors dismissed him from the contract bid meeting altogether, and then cut the company’s proposed cost by nearly half.
