ORDER
For the reasons stated in an accompanying Memorandum, it is this 11th day of March, 1999, hereby
*30 ORDERED: that plaintiffirelator’s motion for leave to file an amended complaint [188] is GRANTED; and it is further
ORDERED: that defendant’s motion to strike plaintiff/relator’s motion for summary judgment [207] is DENIED; and it is further
ORDERED: that defendant’s motion to dismiss for lack of subject-matter jurisdiction [205] is GRANTED; and it is further
ORDERED: that defendant’s motion to dismiss on constitutional grounds [202] is DENIED AS MOOT; and it is further
ORDERED: that the parties’ cross-motions for summary judgment [203, 204] are DENIED AS MOOT.
MEMORANDUM
Mervyn Schwedt, former director of the Pension and Welfare Benefits Administration’s (“PWBA”) Office of Information Management, 1 filed this suit against Planning Research Corporation, Inc. (“PRC”) on August 24, 1992. In his complaint, Schwedt alleged that PRC violated the False Claims Act, 81 U.S.C. §§ 3729-3733, in its performance of a government contract. That contract, which became effective September 22, 1989, called for PRC to develop the software subsystem for a Field Office Information System (“FOIS”) for the PWBA. The contract stipulated that PRC would submit twenty specified deliv-erables during the course of the project, and that the government would remit a specified payment upon acceptance of each deliverable.
The government accepted and paid for sixteen of the specified deliverables. PRC submitted the other four deliverables together on both June 8,1990 and December 7, 1990; the government rejected the entire set on both occasions. A third submission of the four deliverables came on May 17, 1991, after which the government accepted and paid for one of the four items. PRC resubmitted the remaining three items on September 13, 1991, prompting the government to reject them and to issue a stop work order. PRC has performed no work on the contract since the order, but has requested two “equitable adjustments” totaling $2.1 million. Schwedt, who was responsible for managing the FOIS contract, filed this suit alleging that PRC “knowingly on no less than four occasions presented] ... non-functional and non-compliant software ... while wrongfully and knowingly misrepresenting [in progress reports] that said software was compliant and functional.” Compl. at ¶25. The United States Department of Justice conducted an investigation, but declined to intervene. 31 U.S.C. § 3730(b)(4)(B).
An Order of March 31, 1994 dismissed the complaint for failure to state certain claims with the requisite specificity, and for failure to state a claim that the United States suffered damages as a result of the allegedly false progress reports.
United States ex rel. Schwedt v. Planning Research Corp., Inc.,
I.
PRC first moves to dismiss on jurisdictional grounds, arguing that Schwedt’s suit fails to satisfy the False Claims Act’s so-called public disclosure provision. That provision, which was part of the 1986 amendments to the Act, establishes that courts lack subject-matter jurisdiction for qui tam suits that are
based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
31 U.S.C. § 3730(e)(4)(A). The statute defines “original source” as “an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.”
Id.
§ 3730(e)(4)(B). Pursuant to
United States ex rel. Findley v. FPC-Boron Employees’ Club,
A.
The public disclosure prong of § 3730(e) has two discrete criteria: there must be a “public disclosure of allegations or transactions;” and the qui tam suit must be “based upon” the public disclosure. 31 U.S.C. § 3730(e)(4)(A).
1.
PRC argues that a government audit report issued five months before Schwedt filed this suit constitutes a “public disclosure of allegations or transactions.” The report, prepared for and released by the Office of Inspector General (“OIG”) of the Department of Labor, assessed the project to develop a Field Office Information System. 2 In preparing the report, the outside accounting firm “reviewed the documentation provided PWBA by the contractor and reviewed portions of the acceptance testing process.” Report at 3. The report noted that “[ajfter two years of work, PWBA ... rejected the Field Office access system and Case Management Information System software.” Id. at 1. It concluded that PRC’s “unsatisfactory” performance in developing the software subsystem for the FOIS “was a significant factor in the system development failure.” Id. at 3.
The report documented the four software deliveries at issue in Schwedt’s complaint, as well as the government’s subsequent testing and rejection of them. According to the report, the first delivery was made on June 8, 1990, after the government “revised the delivery date to allow the contractor time to solve” problems that had arisen. Id. The initial delivery was reviewed, but the government was not able to test it, prompting its re *32 jection because it was “substantially incomplete.” Id. The report indicates that PRC made the second delivery on December 7, 1990, “knowing that all modules of telecommunications software were not included in the delivered product.” Id. (emphasis added). The flaws of the second delivery “prevented complete testing;” meanwhile, the government discovered other problems including “missing edit checks and faulty form approval processes,” prompting rejection of the second delivery. Id.
The third delivery was received on May 17, 1991, and underwent “extensive testing.” Id. According to the report, the PWBA concluded after testing that “the software did not meet contractual requirements.” Id. After PWBA reported 367 errors and omissions in the delivery, the General Services Administration issued, though later rescinded, a “show cause” letter to the contractor. Id. The final delivery was made on September 13, 1991, but likewise was rejected “because of the number of critical problems” — including 226 reported errors and omissions — “found during acceptance testing” Id. Rejection of the fourth delivery prompted a stop work order. The audit report documented that PWBA had “disbursed $803,811” to PRC under the contract, that PRC had filed a “Request for Equitable Adjustment” for $657,000, and that PRC “stated [that it would] file additional claims.” Id. at 18. Having determined that PRC “did not adequately test the software before delivery,” id. at 15, the report concluded that “[t]he contractor delivered the software late and ultimately failed to deliver a software system that meets contractual requirements.” Id. at 4.
The parties do not dispute that the OIG audit report was a “public disclosure,” or that its issuance pre-dated Schwedt’s
qui tarn
suit. Rather, they disagree about whether the audit report disclosed “allegations or transactions” as contemplated by 31 U.S.C. § 3730(e)(4)(A). In
United States ex rel. Springfield Terminal Railway Co. v. Quinn,
[w]hen the publicly disclosed transaction is sufficient to raise the inference of fraud (X + Y are in the public domain), there is “little need for qui tarn actions, which tend to be suits that the government presumably has chosen not to pursue or which might decrease the government’s recovery in suits it has chosen to pursue.”
United States ex rel. Findley v. FPC-Boron Employees’ Club,
Information in the OIG audit report satisfied this standard. The report did not conclude explicitly that PRC submitted false or fraudulent claims for payment — and therefore did not disclose the “Z” of the
Springfield Terminal Railway
equation.
3
However, the report revealed
*33
that on four separate occasions PRC submitted deliverables that ultimately were rejected by the government. Report at 3. The report further documented that the government considered one of the submissions “substantially incomplete,” that it found others to contain 367 and 226 errors, respectively, and that PRC submitted the remaining deliverable with knowledge that it was not complete.
Id.
As a matter of law, the report disclosed the “X” and “Y” of the alleged fraud: It detailed the “critical elements” of the allegedly fraudulent transactions,
Springfield Terminal Railway,
The nature of the disclosures also distinguish this case from
Springfield Terminal Railway.
The disclosure in that case consisted of telephone records and payment vouchers obtained through civil discovery. The court in
Springfield Terminal Railway
characterized the vouchers as “facially valid,” and described the phone records as not suggestive of “any misrepresentation on [the defendant’s] part.”
2.
PRC further contends that Schwedt’s suit is “based upon” the “allegations or transactions” in the OIG audit report. This position is fully supported by circuit precedent. In
Findley,
our court of appeals established that the statutory phrase “based upon” means “supported by,” not “derived from.”
Schwedt argues that because his central charge is that PRC made false statements to the government in violation of 31 U.S.C. § 3729(a)(2), his
qui tarn
suit cannot be “based upon” an audit report that considered only whether PRC made fraudulent or false
claims
in violation of § 3729(a)(1). Opp. at 21-22. This distinction is not persuasive. Allegations of false progress reports describe transactions “substantially similar” to submission of knowingly incomplete software—all involve misrepresentations made in the course of performance of the FOIS contract—such that the former are “supported by” evidence of the latter.
Findley,
Furthermore, PRC’s progress reports play a crucial role in Schwedt’s suit, but they do not constitute the universe of its allegations: The amended complaint contains six counts alleging
false claims,
and only one
count
alleging
false statements.
Schwedt’s suit therefore fits comfortably within the principle that the False Claims Act’s jurisdictional bar precludes suits by “individuals who base
any part of their allegations
on publicly disclosed information.”
United States ex rel. McKenzie v. BellSouth Telecomm., Inc.,
B.
This conclusion does not end the inquiry. 31 U.S.C. § 3730(e)(4)(B) relaxes the jurisdictional bar if the relator is an “original source”—“an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.” 31 U.S.C. § 3730(e)(4)(B) (emphasis added). PRC contends that Schwedt meets neither criterion.
*35 1.
PRC concedes that Schwedt’s knowledge of the “allegations or transactions” was independent of the public disclosure, but argues that it was not direct because he learned of the information from subordinates and outside contractors. Schwedt counters that even if he did not obtain all of the information on his own, his knowledge was direct because it was “marked by absence of an intervening agency,”
Springfield Terminal Railway,
Even knowledge that Schwedt may have obtained first-hand is not “direct ... knowledge of the information on which the allegations are based.” 31 U.S.C. § 3730(e)(4)(B). To satisfy this standard, Schwedt’s knowledge must be “of any essential element of the underlying fraud transaction,”
Springfield Terminal Railway,
2.
Even assuming direct knowledge, PRC argues that Schwedt did not “voluntarily provide[ ] the information to the Government before fifing” his qui tarn suit. 31 U.S.C. § 3730(e)(4)(B). First, PRC contends that as a matter of fact Schwedt did not come forward with the information, and that when asked by government investigators he failed to offer adequate cooperation. Second, PRC argues that as a matter of law Schwedt could not have provided information “voluntarily” because, as a management-level employee, he was duty-bound to disclose any information that he obtained concerning alleged fraud. 5 Schwedt disputes the allegation that he failed to come forward with the information. He also argues that case law holding that employees could not have “voluntarily” provided information to the government is not controlling here.
*36 Defendant has the better of this argument. As director of the PWBA’s Office of Information Management, Schwedt had, by his own admission, “primary responsibility” for developing a Field Office Information System (“FOIS”). Opp. at 26. This entailed not only managing the contractor (PRC), but also supervising employees who, working “under [his] direction,” tested the software delivered by the contractor. Id. at 26-27. Schwedt also “provided periodic written reports and frequent (daily) ... reports to [his] supervisors regarding project status.” Subm. of 2/9/99 at 2 (parentheses in original). By definition, then, Schwedt performed a management role that obligated him to alert superiors to any suspicions of contractor wrongdoing that threatened to impede development of the FOIS.
This case therefore is closely analogous to, if not indistinguishable from, those in which government auditors were held as a matter of law not to have “voluntarily” provided information to the government because of the inherent nature of their duties and responsibilities.
See, e.g., United States ex rel. Fine v. Chevron, U.S.A., Inc.,
Schwedt argues that this conclusion subverts the False Claims Act because if he could not have “voluntarily” provided information to the government, then no government employee ever could, as all are required by executive order to “disclose waste, fraud, abuse, and corruption....” Opp. at 28 (citation omitted). This is not persuasive. That Schwedt was a high-level manager vested with primary responsibility over a vast project, and that he learned of the alleged fraud in the course of performing his managerial duties, easily distinguish this case from that of other, differently situated, federal employees. Furthermore, Schwedt concedes that he was bound by Department of Labor regulations that made “[a]ll DOL employees ... responsible for ... [promptly reporting ... information that they reasonably believe indicates wrongdoing,” which was defined to include “[s]ubmission of false claims or fraudulent statements by employees, contractors, grantees or others doing business with DOL.” DLMS § 713, 704, Mot. to Dismiss Ex. C-14; Depos. of Mervyn Schwedt, Vol. IV, at 584-85, Mot. to Dismiss Ex. C-12A (agreeing that he “had no choice” but to report suspected contractor wrongdoing). Thus, whether all federal employees are precluded from “voluntarily” providing information to the government, and whether such a result would subvert the purpose of the 1986 *37 amendments to the False Claims Act, need not be addressed. 7
In view of the foregoing, PRC has established that subject-matter jurisdiction is lacking because Schwedt was not an “original source” within the meaning of 31 U.S.C. § 3730(e)(4)(B). Accordingly, its motion to dismiss will be granted.
II.
PRC’s motion to dismiss on constitutional grounds argues: 1) that the
qui tam
provisions of the False Claims Act violate the Appointments Clause of Article II of the United States Constitution; 2) that such provisions violate separation of powers principles; and 3) that relator lacks Article III standing. While each of these arguments has been rejected by several courts of appeals,
see, e.g., United States ex rel. Hall v. Tribal Dev. Corp.,
III.
Both parties also have filed cross-motions for summary judgment, which, in view of the foregoing, see infra I, likewise will be denied as moot.
An accompanying order implements the decisions announced herein.
Notes
. The PWBA is part of the Department of Labor.
. The report was titled, "PWBA’s ERISA Information System: Development Problems Delay FOIS Implementation.” The report was prepared by Hazlett, Lewis & Bieter, a public accounting firm, and was issued by the Department of Labor on March 31, 1992.
. Schwedt argues that the jurisdictional bar cannot be triggered in the absence of such an allegation. Opp. at 22-24. This overlooks the disjunctive nature of § 3730(e)(4)(A), which defines a public disclosure as revealing
either
allegations
or
transactions. Further, that the government declined to bring suit against PRC, and that it declined to intervene
*33
in the instant case, does not
a fortiori
preclude the OIG audit report from being a public disclosure. As the court recognized in
Springfield Terminal Railway, qui tam
suits are jurisdictionally barred when public disclosure of the transactions is sufficient to raise the inference of fraud for the specific, reason that "the government presumably has chosen not to pursue” the case.
. Schwedt did not pursue this argument at the February 10 hearing.
. In its amicus brief, the United States supported this argument. It took no position on the other aspects of PRC’s motion to dismiss for lack of subject-matter jurisdiction because as a non-intervening party it did not engage in affirmative discovery.
. This conclusion obviates consideration of PRC's contention that as a matter of fact Schwedt did not ''voluntarily” provide the information to the government.
. Schwedt relies on one floor statement by the principal Senate sponsor of the 1986 amendments to argue that the voluntariness requirement was not intended to foreclose a
qui tam
suit in a situation like the instant case. This precise argument, however, has been squarely rejected.
See United States ex rel. Fine v. Chevron, U.S.A., Inc.,