Small Businesses with Government Contracts: Why Play by the Rules?


Running a small business can be rewarding, especially if you’re able to land lucrative government contracts. Many government contracts allow small businesses to not only expand and grow, but also to gain a name for themselves within the business community. Unfortunately, some small businesses jeopardize these benefits when they don’t play by the rules, and the consequences for such actions can be dire.

Breaking the Rules and the Law

Many small business owners understand the unspoken rules regarding ethics in business and morality when doing business with a government agency, but too few understand that breaking these unspoken rules can actually lead to criminal and civil prosecution. Under the False Claims Act, business owners who have contractual business obligations to the government may face a variety of penalties upon being caught breaking the rules, and this can land such business owners in court and behind bars.

What is the False Claims Act?

The False Claims Act is a law that essentially allows individuals to prosecute contractors in court if the contractors are found to be defrauding the government. Referred to as “whistleblowers,” they generally stand to earn a handsome reward for their efforts in the form of monetary gain if a False Claims Act case is successful. Basically, a whistleblower acting on behalf of the government will be due a portion of the award handed down by a judge once a such a case succeeds, and this amount can reach into the millions of dollars or more depending upon the severity of the infractions and the contract’s terms.

Can Business Owners Benefit?

Aside from the potentially negative consequences of the False Claims Act for small business owners, there actually is a bright side. If you are able to prove that your competition is defrauding the government, you can contact a False Claims Act attorney and take it upon yourself to bring the fraud to light. By doing this, you’re not only helping the government and tax payers save money, but you’re also doing the right thing – of course, potentially putting your competition out of business and receiving a financial reward doesn’t hurt either.

Be in the Know

If you’re unsure as to whether or not your business is acting within compliance of your government contract, you might want to consider partnering with a False Claims Act attorney to discuss the issue. They will be able to review your contract and your practices, allowing you to find potential trouble spots that need to be addressed or corrected. Doing this will also help you to remain protected in the event that someone does blow the whistle on your business as a Whistleblower’s attorney will be able to represent and protect your interests in court.

Finally, as a small business owner who has a contract with the government, it’s up to you to ensure that all of your employees understand the severity of breaking the rules and the law. Even if an employee goes off on his or her own and commits fraud, you and your company may still get the blame. As a result, most experts recommend regular training sessions for all employees regarding the correct ways to conduct contractual business with the government.

Ann Bailey has formerly reported on business fraud for TV news and shares this report for employers who might be in contract positions. The attorneys at Goldberg Kohn aggressively represent clients involved in court-suits due to the False Claims Act or any business to government fraud situation.

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Ann Bailey is an artist and former TV journalist, and currently contributes articles in the arts, business and legal fields.

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