Unpacking the Expanded Reach of the Program Fraud Civil Remedies Act in the 2025 NDAA

The National Defense Authorization Act, or NDAA, has been a cornerstone of U.S. defense legislation since its inception in 1961. While its primary purpose is to authorize defense spending and policy, the annual NDAA often serves as a vehicle for passing additional federal initiatives and regulations. 

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Hidden in the NDAA: The Expanded Reach of the Program Fraud Civil Remedies Act

About the authors
Richard J.R. Raleigh, Jr.
Michael E. Clark

Transcript

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The National Defense Authorization Act, or NDAA, has been a cornerstone of U.S. defense legislation since its inception in 1961. While its primary purpose is to authorize defense spending and policy, the annual NDAA often serves as a vehicle for passing additional federal initiatives and regulations.  

One such regulatory tool is the Program Fraud Civil Remedies Act, which, until recently, operated under relatively modest parameters. Historically, this Act was used by federal agencies to address small-scale fraud claims involving amounts under $150,000. It functioned as an administrative remedy for fraudulent claims or statements made to the government. Penalties included fines of up to $5,000 per claim, plus an additional assessment of up to twice the fraudulent amount.  

However, the relatively low cap on claims often discouraged agencies from using the Program Fraud Civil Remedies Act in favor of more impactful federal statutes like the False Claims Act. That has now changed with the introduction of the Administrative False Claims Act.  

One of the most notable changes is the increase in the maximum claim amount for administrative fraud cases, which has risen from $150,000 to $1 million. This higher cap enables agencies to pursue larger fraud cases administratively, cases that previously required other judicial remedies.

Additionally, the Administrative False Claims Act grants federal agencies expanded authority, allowing them to serve as investigator, prosecutor, and judge in administrative fraud proceedings. This consolidation of power provides agencies with greater leverage when handling claims, streamlining the process and strengthening their ability to act.

Another impactful update is the ability for agencies to recover costs associated with investigating and prosecuting fraud cases. This new provision offers a financial incentive for agencies to utilize their expanded enforcement powers, potentially increasing the number of cases pursued.

Lastly, the Administrative False Claims Act introduces heightened penalties. Agencies now have the authority to impose severe consequences, such as suspension, debarment, and other punitive measures, which raises the stakes for entities accused of fraud.

Together, these changes mark a significant shift in how the federal government approaches civil fraud cases, delivering more scrutiny and harsher penalties for contractors and other entities under investigation. The Administrative False Claims Act represents a stronger, more aggressive stance on administrative fraud enforcement.

The False Claims Act has long been the most significant weapon in the federal government’s arsenal for combating fraud. But how does it compare to the revitalized Program Fraud Civil Remedies Act under the Administrative False Claims Act?  

The False Claims Act is known for its treble damages, statutory penalties, and whistleblower provisions. It allows private individuals (known as “relators”) to file qui tam lawsuits on behalf of the government, incentivized by bounties ranging from 10% to 30% of recoveries. False Claims Act cases are litigated in federal courts, providing a range of procedural safeguards like jury trials and strict federal evidence rules.  

The Program Fraud Civil Remedies Act lacks many of the False Claims Act's litigation safeguards. Hearings are conducted by Administrative Law Judges and agencies hold considerable influence over the process. Evidence rules are more relaxed, and if a defendant loses in an administrative hearing, the appeals process heavily favors the agency’s findings.

While the False Claims Act remains the go-to tool for major fraud cases, the updated Program Fraud Civil Remedies Act (via the Administrative False Claims Act) enables agencies to pursue smaller yet impactful claims without the need to escalate to federal court.  

For companies and individuals working with the federal government, the expanded scope of the Program Fraud Civil Remedies Act introduces several significant risks. One major concern is the limited legal protections it offers. Unlike False Claims Act litigation, Program Fraud Civil Remedies Act administrative hearings do not include jury trials and operate under less stringent evidence rules, leaving defendants with limited options for recourse, often restricted to a deferential appellate review. 

Another risk is reputational damage. Even accusations or contested findings of fraud can trigger public and private backlash, potentially harming relationships with clients, lenders, vendors, and shareholders. 

Finally, the financial consequences can be severe. Beyond monetary penalties, agencies have the authority to impose suspensions or debarments from federal programs, amplifying both financial and reputational harm for those impacted.

The expanded authority granted to agencies under the Administrative False Claims Act raises constitutional questions, particularly surrounding the right to a jury trial. The 2024 Supreme Court ruling in SEC v. Jarkesy highlighted how administrative penalties could violate the Seventh Amendment when punitive in nature.  

If agencies pursue punitive penalties under the Administrative False Claims Act, businesses may find new legal avenues to challenge administrative rulings. However, navigating these challenges will likely add time, costs, and complexity to any response strategy.  

For contractors navigating the evolving regulatory landscape, preparation is essential. One key step is to strengthen compliance programs by investing in robust internal controls and providing regular training. This helps minimize the risk of missteps that could lead to administrative fraud claims. Additionally, it’s crucial to monitor regulatory developments closely, staying informed about new agency rules stemming from the Administrative False Claims Act's expanded authority to ensure compliance with updated requirements.

When facing potential legal challenges, businesses should carefully evaluate the risks before pursuing litigation. Weighing the costs and benefits of challenging Administrative False Claims Act actions in court versus resolving them administratively is important, with considerations such as public relations, employee morale, and shareholder interests playing a role in the decision-making process. Finally, given the complexities of Administrative False Claims Act enforcement, consulting legal experts is invaluable. Professional guidance can provide clarity and support in navigating compliance issues, resolving disputes, and addressing challenges effectively.

The revitalization of the Program Fraud Civil Remedies Act through the Administrative False Claims Act marks a significant expansion of administrative fraud enforcement, with long-term implications for contractors and other federal entities. While these changes grant agencies powerful tools, they also raise constitutional questions that could reshape the enforcement landscape in the years ahead.  

For federal contractors, staying informed and agile is crucial. By taking proactive steps to reduce vulnerabilities and working closely with legal counsel, businesses can better manage the risks associated with these changes. And for those looking to ensure robust compliance programs, now is the time to act.  

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