The Department of Justice (DOJ) released its Fiscal Year (FY) 2025 False Claims Act (FCA) results, and the message for government contractors is clear: FCA enforcement is accelerating, and procurement fraud, cybersecurity non-compliance, pandemic program fraud, and tariff/custom duty evasion remain key priorities. DOJ reported total FCA settlements and judgments of more than $6.8 Billion for FY2025, the largest annual recovery in FCA history. Below are key takeaways from DOJ’s annual fraud statistics report, our outlook for FY2026, and important compliance considerations for government contractors. For more information on this topic, visit this link to register for our webinar, “PilieroMazza Annual Review: FCA Enforcement and Compliance Updates for Government Contractors—What to Watch in 2026.”
A. Record-Setting FY2025 Numbers
The total amount of FY2025 FCA settlements and judgments was $6,888,096,266, the highest annual amount since DOJ began tracking FCA statistics. In addition, a record number of new matters were initiated (1,698), continuing the trend of significant increases each year (1,218 new matters in FY2023; 1,405 new matters in FY2024). This was fueled by whistleblowers filing 1,297 new qui tam lawsuits, the most yet by far in a single year. Government-initiated investigations dipped slightly from 423 in FY2024 to 401 in FY2025. Recoveries from qui tam matters also dwarfed non-qui tam recoveries, $5.3 Billion compared to $1.5 Billion, respectively. Relators’ shares of recoveries totaled $330,358,218.
Recoveries stemming from health care fraud allegations once again drove most of the total dollars ($5.7 Billion). Outside of health care fraud, DOJ reports FY2025 Department of Defense (DOD) recoveries of $633,927,500 (with $533,728,446 arising from qui tam matters) and $532,632,235 in recoveries tied to other (non-HHS and non-DOD) agencies.
These statistics underscore why contractors should expect increasing enforcement: qui tam matters accounted for the majority of recoveries, and the volume of new filings continues to climb. From a risk management standpoint, that combination increases the likelihood of investigations triggered by employee complaints, competitors, government auditors, and OIG referrals.
B. Six Enforcement Themes We Expect DOJ to Emphasize in 2026
- Procurement Integrity: Defective Pricing and Substandard Performance
DOJ’s FY2025 fact sheet highlights multiple procurement matters centered on alleged false or inflated cost and pricing data, as well as billing for substandard performance. For instance, Raytheon agreed to pay $428 Million to resolve allegations that it knowingly provided false cost and pricing data when negotiating with DOD for numerous government contracts and double billed on a weapons maintenance contract, leading to Raytheon receiving profits in excess of negotiated rates. As another example, DynCorp International LLC agreed to pay $21 Million to resolve ongoing litigation in which the government alleged that one of DynCorp’s subcontractors charged excessive, uncompetitive, and unsubstantiated rates for hotel lodging and guard, translator, driver, and supervisor services and that DynCorp knowingly passed on those charges to the State Department for reimbursement. And, DRI Relays Inc. agreed to pay $15.7 Million to resolve allegations that it failed to conduct certain required tests on relays and sockets but invoiced for military grade electrical relays and sockets when it knew those parts had not met testing requirements to be deemed military grade.
These matters reinforce that pricing controls, subcontractor cost management, and representations regarding contract compliance remain core FCA risk areas.
- Cybersecurity: FCA Liability for Inaccurate Certifications and Control Failures
Cybersecurity FCA enforcement continued to mature in FY2025. DOJ reported more than $52 Million recovered in nine cybersecurity fraud settlements and noted that cyber settlements have more than tripled in each of the past two years. The fact sheet’s examples—including an $11.2 Million resolution with HNFS/Centene and a $4.6 Million settlement with MORSECORP—underscore a consistent theory that DOJ will continue to expand: FCA exposure exists when contractors certify compliance (or report security scores) that do not match implemented controls, system security plans, remediation timelines, or documented risk reports. In FY2026, expect DOJ also to focus on data privacy and security on government contracts, key topics DOJ representatives recently highlighted in public speeches.
- Pandemic-Era Funds: PPP, Payroll Support, and Documentation Gaps
DOJ reported more than 200 FCA settlements and judgments totaling over $230 Million in FY2025 related to pandemic fraud, and over $820 Million collected to date tied to alleged fraud or improper payments in pandemic relief programs. Even where the underlying programs are closed, eligibility certifications and use-of-funds requirements remain enforceable in some instances and can generate FCA exposure years later, especially when documentation is incomplete or inconsistent with certifications. Pushed by an OIG report calling into question its program oversight, the U.S. Small Business Administration (SBA) launched claw-back efforts in FY2025 aimed at the Shuttered Venue Operators Grant (SVOG) and Restaurant Revitalization Fund (RRF) grant programs as well as other pandemic relief programs. Expect SBA’s heightened scrutiny of those programs to result in at least some FCA investigations in FY2026.
- Trade, Tariffs, and Customs: An Expanding FCA Frontier
Trade compliance continues to move into the FCA mainstream. DOJ highlighted duty-evasion matters involving misclassification, country-of-origin misrepresentations, and disguising goods to evade duties. This included a $54.4 Million customs settlement described as the largest customs fraud resolution ever under the FCA, which involved allegations that Ceratizit USA LLC, a distributor of tungsten carbide products, knowingly and improperly failed to pay duties owed on such products imported from China.
Contractors with supply-chain and import exposure should recognize that their customs representations and duty calculations can expose them to FCA liability, particularly where they intersect with federal sourcing requirements and contract representations. In fact, these contractors face heightened scrutiny of classification, valuation, and origin representations from DOJ’s Trade Fraud Task Force, a cross-agency endeavor with the Department of Homeland Security launched in August 2025. The Task Force is operational and has already been involved in enforcement efforts, and it has explicitly called out the FCA as a key enforcement mechanism to pursue the evasion of tariffs and other duties and the importation of prohibited goods.
- Small Business Fraud: SBA and DOJ Ramp Up Inquiries
DOJ’s annual report does not publish specific facts or statistics regarding DOJ’s efforts to curb small business fraud. Nevertheless, DOJ announced several settlements or criminal indictments in small business fraud cases that should catch government contractors’ attention. In June 2025, for instance, DOJ announced that a USAID official and three corporate executives pled guilty to a decade-long bribery scheme that resulted in $550 Million in 8(a) Business Development (BD) Program awards to companies controlled by the executives. Other settlements or investigation announcements identified alleged abuses of the Service-Disabled Veteran-Owned Small Business (SDVOSB) and Women-Owned Small Business (WOSB) programs. Then, on December 5, 2025, SBA announced a full-program audit of the 8(a) BD Program to identify and weed out fraud, waste, and abuse. In January 2026, SBA suspended approximately 1,100 firms from the 8(a) BD Program for failure to fully respond to the audit. SBA has indicated further investigations will be forthcoming based on information uncovered during the audit, and public statements by Administrator Kelly Loeffler and Senator Joni Ernst indicate a vocal minority of public officials believe the 8(a) BD Program is rife with fraud, placing 8(a) contractors directly in the crosshairs.
- Diversity, Equity, and Inclusion: A New FCA Frontier
On May 19, 2025, DOJ issued a memorandum launching the Civil Rights Fraud Initiative, intended to target diversity, equity, and inclusion (DEI) policies and alleged antisemitism among corporations and institutions of higher education. Although many in the industry question the viability of the initiative (given courts’ historical skepticism that the FCA can be used to address discrimination allegations), that has not dissuaded DOJ to date. On December 28, 2025, several media outlets reported that DOJ had issued civil investigative demands to several large private sector companies to investigate their DEI practices. Recent public speeches by DOJ officials have echoed that pursuing FCA liability based on companies’ and institutions’ DEI policies, purported antisemitism, and policies regarding gender-affirming care will be a top priority for DOJ in FY2026.
C. Practical Compliance Steps for Government Contractors
- Inventory all contract and grant certifications (pricing, cybersecurity, sourcing, performance) and maintain evidence to support each certification.
- Audit pricing workflows to ensure accuracy and adequate controls over TINA/pricing disclosures and subcontractor data integrity.
- Ensure cybersecurity capabilities are audit-ready with documented SSPs, accurate scoring/reporting, evidence of control implementation, and tracked remediation.
- Maintain robust internal reporting channels and non-retaliation practices; assume whistleblower risk persists, given the record level of qui tam activity.
- For importers and supply-chain heavy contractors, validate customs classifications, origin documentation, and duty calculations, and retain documentary evidence.
- Examine small business regulatory obligations to ensure compliance with contractual and program requirements.
- Review policies involving DEI and non-discrimination to ensure compliance with the Trump Administration directives.
D. Bottom Line
FY2025’s record recoveries and unprecedented filing volume demonstrate the FCA’s continued role as DOJ’s primary civil fraud tool. For government contractors, proactive compliance reviews remain the most effective way to reduce FCA exposure going into 2026 and beyond.
If you have questions about the FCA or are the subject of an FCA investigation or lawsuit, please contact Jackie Unger, Todd Reinecker, Matt Feinberg, or another member of PilieroMazza’s False Claims Act or Audits & Investigations practice groups.
