W.W. Grainger Inc. has agreed to pay the United States $70 million to resolve allegations that it submitted false claims under contracts with the General Services Administration (GSA) and the U.S. Postal Services (USPS), according to the Department of Justice (DOJ).
The DOJ said that Grainger entered into a contract to sell supplies to government customers through the GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly used commercial goods and services.
To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must agree to disclose their commercial pricing policies and practices to assist the government in negotiating the terms of the MAS contract.
In a press release, the DOJ said the settlement resolves issues discovered during a GSA post-award audit of Grainger’s MAS contract. The GSA Office of Inspector General learned that Grainger failed to meet its contractual obligations to provide the GSA with current, accurate and complete information about its commercial sales practices, including discounts afforded to other customers. As a result, government customers purchasing items under the Grainger MAS contract paid higher prices than they should have.
In addition, the settlement resolves allegations that Grainger failed to meet its contractual obligations to provide “most-favored customer” pricing under two USPS contracts for sanitation and maintenance supplies.
The USPS contracts required Grainger to treat USPS as Grainger’s “most-favored customer” by ensuring that USPS received the best overall discount that Grainger offered to any of its commercial customers. Agents and auditors from the USPS Office of Inspector General (OIG) investigated Grainger’s pricing practices and discovered that Grainger did not consistently adhere to this requirement, causing USPS to pay more than it should have for purchases made under the two contracts.
Grainger maintains it complied with the disclosure requirements and the contracts in all material respects, and the settlement does not contain any admission of wrongdoing by the company.
“The GSA and USPS remain long-standing and important Grainger customers. These contracts account for a portion of the company’s overall government business, which represented 17 percent of its total U.S. 2011 revenue,” the company said in a statement. Grainger said the agreement settles a long-standing dispute with the federal government which involved contracts implemented more than ten years ago.
Grainger recorded a $70 million pre-tax reserve for this settlement in October and established a separate pre-tax reserve to resolve tax, freight and miscellaneous billing issues with the two government customers.
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