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Fraud Allegations and Government Contracting
Author(s) -
HEESE JONAS,
PÉREZCAVAZOS GERARDO
Publication year - 2019
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12258
Subject(s) - government procurement , liberian dollar , government (linguistics) , business , reputation , settlement (finance) , procurement , incomplete contracts , commit , service (business) , finance , economics , law , marketing , microeconomics , incentive , payment , political science , linguistics , philosophy , database , computer science
This paper examines whether fraud allegations affect firms’ contracting with the government. Using a data set of whistleblower allegations brought under the False Claims Act against firms accused of defrauding the government, we find that federal agencies do not reduce the total dollar volume of contracts with accused firms; however, they substitute approximately 14% of the harder‐to‐monitor cost‐plus contracts for fixed‐price contracts. This effect is concentrated in the procurement of services and explained by contract and service substitution. Finally, we find that after the conclusion of the investigation, the government reduces the contract dollar volume by approximately 15% for cases that resulted in a settlement. Our findings indicate that contract‐design changes are used to mitigate uncertainty in suppliers’ reputation.