The Fiscal Year 2025 National Defense Authorization Act overhauled the AFCA, increasing maximum liability to $1 million per claim and tapping the Boards of Contract Appeals to provide presiding officers for any agency that does not employ its own administrative law judges, potentially significantly expanding the reach and prevalence of the AFCA.
The Administrative False Claims Act is not new. Codified under 31 U.S.C.§ §§ 3801 – 3812, it provides agencies an administrative, rather than judicial, mechanism to seek civil penalties for fraudulent claims. Penalties of up to $5000 as well as double the value of the value of the fraudulent claim are available for each claim. What is new is the greatly expanded liability per claim, increasing from a $150,000 maximum per claim to the new limit of $1,000,000. Also new is the ability for judges at the Boards of Contract Appeals to act as the presiding officer for AFCA hearings initiated by agencies that do not employ their own administrative law judges. This change has the potential to expose government contractors to a new vector of liability for matters the government considers false or fraudulent, since more agencies will have a venue for such administrative claims and can pursue more substantial claims administratively.
What Agencies will benefit most from referring AFCA claims to the Boards? Surprisingly, military departments.
The new Board jurisdiction only applies to agencies that do not have their own administrative law judges. Many civilian agencies already have one or more administrative law judges. While the information is somewhat dated, according to the Office of Personnel Management in 2017 there were 1,931 administrative law judges across 27 civilian agencies (which includes the Coast Guard under DHA). Agencies that have administrative law judges must rely upon their own. The biggest agencies that do not have administrative law judges are the military departments under the Department of Defense. These departments are also big spenders, with large contracting footprints. Previously, lacking administrative law judges made AFCA claims procedurally impractical for an agency. Now, no agency lacks access to a presiding officer to adjudicate a hearing under the AFCA. No longer being wholly beholden to the Department of Justice under the False Claims Act and the heightened per claim ceiling makes the AFCA a potentially appealing option for an agency that feels it has been defrauded.
The CBCA has already amended its rules in anticipation of AFCA cases.
While the military departments serviced by the ASBCA seem the most likely to take advantage of the new jurisdictional rules, the CBCA has led the way in amending its rules to cover AFCA cases. The amendments were issued in final form on January 28, 2026, and codified at 48 C.F.R. Part 6107. They went into effect of February 27, 2026. The new rules for AFCA cases largely track the CBCA’s rules for contract appeals. In fact, the new regulations contain only a few substantive changes, a few more changes to nomenclature, and the omission of several inapplicable rules. The procedure should be largely familiar to anyone who has practiced before the CBCA. To date the ASBCA has not issued new rules to account for its new AFCA jurisdiction. Notably, the ASBCA can refuse to hear an AFCA case, in which case that matter could go to the CBCA.
How much new AFCA litigation are we likely to see? Unclear.
As mentioned, the AFCA is not new and was an option available to any agency with administrative law judges (or any agency that wished to create them for that AFCA purposes). Despite this, AFCA claims against contractors have been relatively rare. This means that, at minimum, agencies are going to overcome some bureaucratic inertia in adopting new procedures to bring AFCA claims. Further, to proceed on an AFCA claim the agency must obtain approval from the Attorney General or a designated Assistant Attorney General. While this approval is supposed to occur within 90 days, there is no real recourse for an agency if this deadline is not met and the approval is mandatory. There is some potential that agencies will again regard the AFCA as too much trouble for too little benefit.
However, it is important to remember that the Trump Administration has signaled that it intends to use the False Claims Act in its efforts to eradicate “racially discriminatory DEI activities” and every contractor must now certify compliance with Radical FAR Overhaul 52.222-90, with false certifications being primed for FCA claims. There is no reason why the AFCA might not be utilized for enforcement when the claim amount is less than $1,000,000 (particularly in the face of a Department of Justice pinched for attorneys). Note as well that a “claim” is any request for money—an invoice submitted under a false certification for example. Hence, if a contractor’s invoices are under $1,000,000 (regardless of total contract value), the Government could daisy chain many claims into a hefty sum. A motivated, aggressive agency has the potential to use the AFCA to significant effect. Whether they will remains to be seen.
Takeaways
With every federal agency now having access to presiding officers and the ability to adjudicate administrative claims up to $1,000,000 under the AFCA, federal contractors large and small must be extremely diligent to ensure that submissions to the government are accurate and made in good faith. While the changes to the AFCA are still new, the potential for significant liability is very real. Agencies are no longer totally reliant on the Department of Justice to bring fraud allegations with teeth in addition to traditional contract claims.
Sources: 31 U.S.C.§ §§ 3801 – 3812, Civilian Board of Contract Appeals Rules of Procedure, Rules 701-703.