Grainger to Pay $70M in Government Contract Dispute Settlement

The General Services Administration and the U.S. Postal Service alleged Grainger failed to provide pricing agreed to in the government contracts.

Grainger (NYSE: GWW), Lake Forest, IL, 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).

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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.

Grainger entered into a contract to sell hardware products and other supplies to government customers through the GSA’s Multiple Award Schedule (MAS) program. Based on a GSA post-award audit of Grainger’s MAS contract, the GSA Office of Inspector General alleged 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, according to the GSA.

In addition, this 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.

The GSA and USPS remain 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.

As Grainger disclosed in October, it recorded a $70 million pre-tax reserve for this settlement and established a separate pre-tax reserve to resolve tax, freight and miscellaneous billing issues with these two government customers.

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