Full opinion text
MEMORANDUM OPINION AND AMENDED ORDER ROSENTHAL, District Judge. In 1995, relator Patrick Wilkins, a former chief operating officer of a subcontractor to a drilling contract with the Army Corps of Engineers, filed this suit under the qui tarn provisions of the False Claims Act, 31 U.S.C. §§ 3729-3730. Wilkins filed suit under seal- so that the United States government could investigate his ■allegations and determine-whether to exercise its statutory right to intervene and prosecute this lawsuit. 31 U.S.C. § 3730(b)(3). Three years later, the government completed its review and filed its complaint upon intervention. In that complaint, the government adopted most, but not all, of the relator’s claims and added claims the relator had not raised. Defendants, the general contractor and two subcontractors, subsequently moved to dismiss both complaints for failure to plead with sufficient particularity under Federal Rule of Civil Procedure 9(b) and failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In response to defendants’ motions and this court’s orders, the United States filed two amended complaints and the relator filed an amended complaint. Defendants then moved to dismiss the government’s second amended complaint and the relator’s first amended complaint, urging that no further opportunities to amend should be allowed. The complaints include three sets of allegations. The first centers on the government’s contention that the two subcontractor defendants submitted “hidden” or “padded” waste costs in an October 1992 proposal to the Army Corps of Engineers for drilling, and that all three defendants later included these hidden costs in requests for progress payments, in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1) and (a)(2). (Counts IV and V, Government’s Second Amended Complaint, Docket Entry No. 95, pp. 44-46). Defendants move to dismiss the claims based on the hidden waste costs. (Docket Entry Nos. 107 and 111). The second set of allegations is based upon a Request for Equitable Adjustment defendants submitted to the Army Corps of Engineers in May 1994. The government and the relator both allege that for the purpose of obtaining an equitable adjustment, defendants falsely claimed that the government was liable for costs related to differing site conditions and that the government had superior knowledge about these site conditions.. Based on these claims, the government asserts causes of action against the general contractor under the Contract Disputes Act, 41 U.S.C. § 604 (Count I, Second Amended Complaint, Docket Entry No. 95, p. 42) and against all defendants for violations of the False Claims Act, 31 U.S.C. §§ 3729(a)(1) and (a)(2) (Counts II and III, id., pp. 43-44); conspiracy to have the government pay false claims under 31 U.S.C. § 3729(a)(3) (Count VI, id., pp. 46-47); and common law fraud (Count VII, id., pp. 47-48). The relator asserts causes of action under 31 U.S.C. §§ 3729(a)(l)-(a)(3). Each defendant has moved to dismiss all the REA-based claims against it. (Docket Entry Nos. 105, 107, 109, 110, 111, and 113). The third set of allegations involves the relator’s claim that the parent company of one of the subcontractors is hable, both under an alter ego theory and independently. The parent company defendant has moved to dismiss this claim. (Docket Entry No. 105). In their motions to dismiss the government’s second amended complaint, the two subcontractor defendants assert that as a matter of law, the government has not sufficiently pleaded that the subcontractor defendants made false statements about waste removal costs in the bid proposal and contract. All defendants assert that the government has not sufficiently pleaded that they made false statements in connection with the Request for Equitable Adjustment (“REA”). All defendants assert that the relator’s complaint should be dismissed on the same grounds as the government’s second amended complaint. One of the defendants also asserts that the relator’s complaint should be dismissed as superseded to the extent the government adopted it and as deficiently pleaded to the extent it asserts claims the government did not adopt. This court entered a preliminary order dated March 31, 2000, on these claims. (Docket Entry No. 143). This court now issues this Memorandum Opinion and Amended Order, setting out the reasons for those rulings, and sets out the reasons for the rulings. This Memorandum Opinion and Amended Order differs from the earlier order only in that it does not dismiss any part of the government’s Contract Disputes Act claim against defendant North American Construction Company. For the reasons stated in detail below, this court GRANTS the defendants’ motions to dismiss the government’s padded waste claims without leave to amend; DENIES the defendants’ motions to dismiss the government’s claims arising from the REA; DENIES the motion to dismiss the complaint of the relator as superseded; GRANTS the motion to dismiss the claims the relator has asserted against the parent company of one of the subcontractors; and GRANTS in part the defendants’ motions to dismiss the relator’s claims relating to the REA, with leave to amend. I. Factual and Procedural Background A. The Parties and the Contracts: The Facts Relating to the Padded Waste Claim On September 16, 1991, the Army Corps of Engineers (the “Corps”) awarded North American Construction Corporation (“NACC”), a Texas corporation based in San Antonio, Texas, contract Number DACA56-91-C-0110. The contract required NACC to construct a Groundwater Treatment Facility at Tinker Air Force Base in Oklahoma. The Corps contract required NACC to construct a treatment plant to remove contaminants from groundwater underneath an aircraft maintenance facility located on the base. The contract was a competitively bid fixed-price contract. Defendant CH & A Corporation, a Texas corporation and a subsidiary of GAB Business Services, Inc. (“GAB”), became a subcontractor to NACC for certain of NACC’s contractual obligations to the Corps when CH & A acquired the personnel, assets, and the obligations to NACC under the contract of U.S. Testing, Testing Engineers Division. Relator Patrick Wilkins is a former Chief Operating Officer of CH & A. The contract originally called for five vertical wells to be drilled inside the aircraft maintenance facility. On September 24, 1992, the Corps issued unilateral contract modification 9, substituting five horizontal wells for the vertical wells. The modification fell within the scope of CH & A’s subcontract with NACC. CH & A sought competitive bids for contract modification 9. In a letter dated October 16, 1992, defendant EVI Cherrington Environmental (“ECE”), a Texas corporation and a wholly-owned subsidiary of defendant Weatherford International, Inc. during the relevant period, wrote “to confirm our price with regard to drilling five approximately 1000 feet wellbores.... ” In this letter, ECE proposed a fixed price of $1,295,000 for “Total Project Excluding Waste Disposal.” ECE proposed a flat price of $215,000 to “store, haul and dispose of the drilling wastes” up to 40 cubic yards of solid waste and 120,000 gallons of liquid waste. In the letter, ECE stated that if the quantity of waste exceeded either of these amounts, ECE and CH & A would negotiate a unit rate for the disposal of the additional waste at the then-prevailing market rate. ECE also proposed that additional demurrage charges should be levied for wastes the Corps did not allow ECE to remove within thirty days after their production.’ CH & A forwarded the bid proposals it received to the Corps administrative contracting officer, Dan Johnson. The Corps concluded that ECE had submitted the lowest responsive bid. On October 30, 1992, CH & A and ECE executed a Subcontract Agreement for part of the work called for in unilateral contract modification 9. The Subcontract Agreement identified the “Contract Amount” of $1,295,000 as covering the following tasks: “Drill, Install, and Develop Five Horizontal Extraction Wells; Install Pump Systems; Manage Wastes. Actual disposal of wastes is to be paid per the unit prices shown in item 36.C.” (Docket Entry No. 58, Ex. A, p. 19). Section 36.C of the Subcontract Agreement set out unit rate prices for the disposal of solid and liquid industrial wastes, at rates of $1.50 per gallon . of liquid hazardous waste and $175.00. per cubic yard of solid hazardous waste.. {Id., p. 18). The Subcontract Agreement broke down.the fixed contract amount into broad categories of prices: Total Well Materials; Mobilization & Demobilization; and Drill, Complete and Develop Wells. This third category was broken down only by a total price for each of the five wells. The contract set a fixed price that ECE would receive for the drilling and waste management work, but did not specify any cost component of the work. The price of the waste disposal work was not included in the fixed price of $1,295,000 and was to be paid according to the unit rate prices listed in section .36.C of the contract. During the contract work, ECE submitted progress payment requests under the Subcontract Agreement. The payment requests included amounts for drilling work and for the waste disposal work performed. Some of the payment requests broke out and separately identified cost amounts for waste management and storage. The government does not allege that these charges are incorrect or, inflated. Rather, the government contends that the payment requests, based on the percentage of work completed for each well until the total price of $1,295,000 was reached, were false because they included $280,000 in costs'for waste removal work. (Second Amended Complaint, Docket Entry No. 95, ¶¶ 33-36). The government contends that if it had known that the total contract price of $1,295,000 for drilling and waste management included $280,000 that in fact represented costs for waste removal, it would not have agreed to pay ECE that total price. B. The Facts Relating to the Request for Equitable Adjustment Claims It is undisputed that ECE encountered problems in the horizontal well drilling that delayed the completion of the work under the Subcontract Agreement and resulted in cost overruns. It is also undisputed that the government approved the work. The quality 'of the work is not an issue. During the contract work, and after its conclusion, ECE, CH & Á, and NACC had a number of discussions and meetings about the problems and delays encountered. ECE asserted that it had based its bid to CH & A on verbal representations from CH & A and on drilling logs CH & A provided that described the subsurface soil as “predominately silty glaze with some soft fractured sandstone.” Within a few ' days of beginning to drill, ECE realized that the subsurface soil was significantly harder and more heavily cemented than CH & A had described, making drilling slower and more costly. CH & A had given ECE “soil boring logs” that CH & A, rather than the Corps, had prepared. Both NACC and CH & A had other vertical well logs that the Corps had prepared and included in the bid package for the project. However, neither NACC nor CH & A gave ECE these Corps bid package logs. ECE' employees became aware of the existence of the Corps bid package contract boring logs for vertical wells at a November 6, 1992 meeting between representatives of ECE, NACC, the Corps, and CH & A. On November 10, 1992, ECE employee David May wrote to CH & A employees Bayani Abueg and David Ren-dini, stating that the logs CH & A had given to ECE did not accurately represent the subsurface soil conditions at the site. Rendini prepared a Project Summary Report dated February 24, 1993 for Patrick Wilkins, CH & A’s COO. In this report, Rendini stated that the logs CH & A gave to ECE did not materially differ from the Corps bid package contract logs that CH & A had failed to provide to ECE. Rendini also noted that ECE had been given an opportunity to obtain copies of other, horizontal Corps drilling logs produced from two previous horizontal well bores drilled in the area, although not at the same site. The Corps had not attached these horizontal well logs to any of the bid or contract documents. CH & A blamed the delays on ECE’s own “incompetence,” rather than on the inaccuracy of the logs CH & A did give to ECE or on CH & A’s failure to give ECE the Corps vertical well logs. ECE commissioned a study by American Environmental Consultants, Inc. (“the AMENCO report”) that compared the Corps contract vertical well logs CH & A did not give to ECE before it tendered its bid, the CH & A logs that ECE did receive, and the actual subsurface soil conditions. Wilkins wrote a memorandum dated June 28, 1993, to John Darden, a senior vice president of GAB, the parent company of CH & A, in which he discussed the possibility that ECE might sue CH & A over the logs. On August 25, 1993, Alton Watson and Dan Eaton of ECE met with Roger Crad-dock, Patrick Wilkins, Ed Bove, and David Rendini of CH & A to discuss ECE’s claim that it had incurred extra costs of $547,-635.66 because the logs CH & A had prepared and given to ECE did not accurately represent the subsurface soil conditions encountered. At the meeting, ECE presented a cost overrun report it had prepared. In February 1994, ECE prepared a draft of a Request for Equitable Adjustment (REA). In this draft REA, ECE asserted that it had incurred $547,635.66 in cost overruns because the CH & A well logs CH & A gave to ECE before ECE submitted its bid did not accurately describe the soil conditions. ECE attached a copy of the AMENCO Report to the REA and forwarded the REA to CH & A on February 25,1994. On March 4, 1994, a NACC employee telephoned Wilkins to express NACC’s concern that the draft REA included references to the dispute between ECE and CH & A over the different sets of drilling logs. On March 8, 1994, Doug Reitmeyer and Dan Sparkman of NACC, David Rendini and Patrick Wilkins of CH & A, and Dan Eaton of ECE met to discuss the concerns. Reitmeyer told Eaton that ECE should remove critical references to CH & A from the REA, because if CH & A and ECE blamed each other for the differing site conditions, the government would be less likely to approve the claim. ECE drafted a revised REA dated March 15, 1994. In the revised REA, ECE stated that it had expected, and based its bid on, different site conditions than it encountered. ECE referred to “government boring logs” as those on which it based its bid. In the second amended complaint, the government alleges that this deliberately ambiguous phrase in fact referred to the logs that CH & A had prepared and provided to ECE. The government alleges that ECE referred to these logs as “government boring logs,” although they were not the logs the Corps attached to the contract bid documents, on the theory that the government had paid CH & A to prepare the logs. ECE did state in the March 15, 1994 REA that when it submitted its bid, it had not received the Corps contract boring logs for vertical wells that the Corps had included in the bid package, but that CH & A had failed to transmit. ECE also stated that it had not known about either the existence or contents of the Corps logs of the experimental horizontal wells. ECE asserted that the Corps’ failure to disclose or include the logs of the horizontal wells in the bid package for the five new horizontal wells called for in unilateral contract modification 9 constituted a withholding of superior knowledge. • On March 16, 1994, CH & A forwarded ECE’s March 15, 1994 draft claim as part of CH & A’s claim submission to NACC. On April 6, 1994, Wilkins, as CH & A’s COO, signed CH & A’s certification for the March 16,1994 claim. On May 10, 1994, Reitmeyer and Spark-man (of NACC), Watson and Eaton (of ECE), and Wilkins (of CH & A) participated in a telephone conference. In their amended complaints, the government and the relator allege that Reitmeyer urged CH & A not to include in the REA any assertions that blamed ECE for the delays and cost overruns. The government and the relator allege that Reitmeyer also urged ECE to revise the REA to blame the government, not CH & A or NACC, for any misinformation as to the site conditions. Reitmeyer of NACC and Dan Eaton of ECE discussed removing the AM-ENCO report from ECE’s draft REA. The AMENCO report stated that the contract logs the Corps had given to CH & A before ECE’s bid accurately represented the site conditions. Reitmeyer suggested replacing the AMENCO report with a newspaper article, to avoid creating a gap in the exhibit list. On April 4, 1994, ECE’s president certified the ECE pass-through claim. Although the April 4, 1994 ECE claim bore a March 15, 1994 date, ECE had substituted the newspaper article for the AMENCO report and made changes to the REA text. In the April 4,1994 REA, ECE stated that it learned after it began drilling that the Corps had not included logs from the experimental horizontal wells in the bid package and had not previously disclosed the existence or contents of those logs. ECE asserted that these horizontal well logs gave the government superior knowledge of the subsurface conditions associated with drilling horizontal wells at the contract site. In this suit, the government alleges that ECE’s statement about the horizontal wfell logs in the April 1994 REA is inconsistent with other documents and false. The government points to the February 24, 1993-CH & A project summary, which states that after ECE submitted its bid, but before it began drilling, the government told both ECE and' CH & A about the logs of the experimental horizontal wells and made those logs available to ECE in a meeting. The government also points to an October 21, 1992 ECE entry in a chronology of the project, stating that ECE had asked the Corps for logs of horizontal wells at the site, showing ECE’s knowledge of the existence of those logs. In the April 1994 REA, ECE stated that it had submitted its bid based on soil boring logs that did not match the actual site conditions. ECE stated that it had based its bid on the government bid package, CH & A’s representations, and the soil boring logs CH & A had provided. However, ECE deleted the statement, included in the earlier draft REA, that the bid package CH & A gave to ECE omitted the Corps vertical well boring logs. ECE also did not include the statement from the earlier draft REA that the soil boring logs CH & A did provide were, in ECE’s judgment, faulty. ECE did not include the AMENCO report, which criticized the soil boring logs CH & A gave to ECE and found that the government logs that CH & A failed to provide were consistent with the actual site conditions. Instead, ECE asserted that the government was liable for the cost overruns due to differing site conditions and superior knowledge. In the certification of the REA, Watson, ECE’s president, stated that the REA was made in good faith; that the supporting data was accurate and complete to the best of ECE’s knowledge and belief; and that the amount requested accurately reflected the contract adjustment for which ECE believed the government to be liable. On April 6, 1994, Wilkins signed the REA certification on behalf of CH & A, stating that the claims were made in good faith; that the supporting data was accurate and complete to the best of CH & A’s knowledge and belief, and that the amount requested accurately reflected the contract adjustment for which CH & A believed the government was liable. The government alleges that Wilkins certified the March 15, 1994 draft claim, which included the AM-ENCO report. However, the government alleges that CH & A withheld from the government its belief that ECE’s own performance caused the project delays or its belief that the logs CH & A gave to ECE accurately described the subsurface conditions. On May 11, 1994, Donald Sparkman, NACC’s senior project manager, signed the REA certification, stating that the claim was made in good faith; that the supporting data was accurate and complete to the best of NACC’s knowledge and belief; and that the amount requested accurately reflected the contract adjustment for which NACC believed the government to be hable. The government alleges that before ECE bid on the modification 9 work, neither NACC nor CH & A had given ECE the Corps contract logs for vertical wells; that ECE based its bid on the logs CH & A prepared; and that the Corps had made logs for the previously drilled experimental horizontal logs available to ECE before ECE had begun to drill, though not until after it had bid. The government also, alleges that none of the defendants had examined the horizontal well logs before submitting the REA. Despite the lack of knowledge of what these logs contained, defendants certified the assertion in the REA that these logs contained “vital” information that should have been included in the bid package given to ECE. The government alleges that if defendants had examined the horizontal well logs, they would have learned that these were gamma logs, which measured radioactivity, rather than subsurface soil conditions. The government asserts that these logs contained neither “vital” nor even relevant information about subsurface soil conditions. The government concludes that defendants’ claim that the government had superior knowledge about subsurface conditions that it withheld was made either falsely or with reckless disregard for the truth. On May 16, 1994, the Corps received the REA. It included a $3.9 million claim for cost overruns and delays for differing site conditions. The government investigated the claim under the Contract Disputes Act, 41 U.S.C. §§ 601-13. As a result of the investigation, the Corps rejected the claim for cost adjustments based on differing site conditions and superior knowledge. The core of the government’s and the relator’s case is that the defendants coordinated their submissions to make it appear that the government had caused the delay and overruns, despite their belief that acts or omissions of the defendants had caused or contributed to cause the problems. II. The Issues Presented The government’s arguments as to the first set of issues, arising from the padded waste claim, require this court to focus on the extent to which a government subcontractor must either affirmatively disclose the costs of performing a government fixed price contract or risk liability under the False Claims Act. The government asserts that it reasonably assumed that the fixed price it agreed to pay for drilling the wells did not include any costs for waste removal because the price for waste removal was separately classified. Defendants ECE and CH & A respond that the government’s theory rests on a duty to disclose that has neither a contractual nor a statutory basis. Defendants assert that by bidding and approving a fixed price contract, the government chose not to impose an obligation to disclose the cost basis of the fixed price bid or contract. In the absence of such a duty to disclose, the failure to do so cannot, argue defendants, amount to a false or fraudulent claim as a matter of law. The government’s argument as to the REA rests on a very different analysis. The government asserts that in the REA, the defendants cooperated to shift the blame for increased costs and contract delays from each other to the government. The government alleges that the steps defendants took to build a case of the Corps’ superior knowledge of -differing site conditions furnish the necessary elements to state a cause of action under the False Claims Act and for common law fraud. Defendants respond that the false statements the government describes are litigation arguments the contractor and subcontractors submitted to support their position under the Contract Disputes Act. Defendants assert that the government is converting litigation arguments into false claims. Defendants also assert that the document the government makes the basis of its case, the REA that each of the defendants certified, does not assert that the government was wholly responsible for the cost overruns and delays, but merely that the government contributed to cause the problems by not earlier providing the horizontal well logs. Each of these arguments is examined below. III. The Applicable Legal Standards A. The Rule 9(b) Standard Fed. R. Civ. P. 9(b) provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud' or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” Id. “Although the particularity demanded by Rule 9(b) differs with the facts of each case, a plaintiff pleading fraud must set forth ‘the who, what, when, and where ... before access to the discovery process is granted.’ Anything less fails to provide defendants with adequate notice of the nature and grounds of the claim.” Hart v. Bayer Corp., 199 F.3d 239, 248 n. 6 (5th Cir.2000) (citing Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir.1992); Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir. 1994); and quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir.1997)) (alteration in original; internal citations omitted). The second sentence of Rule 9(b) allows a plaintiff to make conelu-sory allegations as to defendant’s knowledge of the true facts and of defendant’s intent to deceive. 5 ChaRles AlaN Wright & AethuR R. Miller, Federal Practice And Prooedure § 1297. Although a district court may dismiss a claim for failure to plead fraud with particularity, “it should not do so without granting leave to amend, unless the defect is simply incurable or the plaintiff has failed to plead with particularity after being afforded repeated opportunities to do so.” Id. (citing O’Brien v. National Property Analysts Partners, 936 F.2d 674, 675-76 (2d Cir.1991)). Despite the requirement that fraud be pleaded with particularity, “fraud may be pleaded without long or highly detailed particularity.” Guidry v. United States Tobacco Co., 188 F.3d 619, 632 (5th Cir.1999) (citing 12A Charles Alan Wright, Arthur R. Miller, Mary Kay KaNE & Riohard L. Marous, Federal Practioe And Procedure, App. D, Form 13 (1999)). Rule 9(b) must be read together with the Rule 8(a) requirement that pleadings be “ ‘simple, concise, and direct’ ”; Rule 9(b) does “not reflect a subscription to fact pleading.” Williams v. WMX Techs., Inc., 112 F.3d at 178 (quoting Fed. R. Civ. P. 8(a)(2)). The Williams court also observed that “courts have emphasized that Rule 9(b)’s ultimate meaning is context-specific.” Id. Rule 9(b) has four purposes: to ensure that the defendant has sufficient information to formulate a defense by having notice of the conduct complained of; to protect defendants against frivolous suits; to eliminate fraud actions in which all the facts are learned' after discovery; and to protect defendants from undeserved' harm to their goodwill and reputation. See Har rison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.1999). Rule 9(b) must be interpreted and applied in light of these purposes. The Fifth Circuit has specifically held that “[t]he complaint in a False Claims Act suit must fulfill the requirements of Rule 9(b).” United States ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir.1999) (citing United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997)). The Fifth Circuit has added a fifth element to the “who, what, when and where” that Rule 9(b) clearly requires, but has described this fifth element in various ways. In Tuchman, the court held that “Rule 9(b) requires the plaintiff to allege ‘the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby.’ ” Tuchman, 14 F.3d at 1068 (quoting Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1139 (5th Cir.1992)) (alteration in original; internal quotation marks omitted); see also Russell, 193 F.3d at 308. In Williams v. WMX Techs., Inc., the Fifth Circuit set out three different standards including the fifth element, and one that did not. The first standard the Williams court cites is the Tuchman “what the person obtained thereby” standard. See Williams, 112 F.3d at 177. The second is a “why” standard: “As the Second Circuit has noted, articulating the elements of fraud with particularity requires a plaintiff to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. We agree with the Second Circuit’s approach.” Williams v. WMX Techs., Inc., 112 F.3d at 177-78 (citing Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993)) (internal citation omitted) (emphasis added); see also id. at 179 (“plaintiffs must also set forth an explanation as to why the statement or omission complained of was false or misleading”). At another point in the opinion, the Fifth Circuit states a “how” standard: “ ‘who, what, when, where, and how’ [are] required by Rule 9(b).” Id. (citing Melder v. Morris, 27 F.3d 1097, 1100 n. 5 (5th Cir.1994)). Finally, the court stated a narrower, yet logically consistent, version of the rule: “[d]irectly put, the who, what, when, and where must be laid out before access to the discovery process is granted.” Id. at 178; see also Hart v. Bayer Corp., 199 F.3d at 248 n. 6. Eight courts of appeals have adopted standards that require the pleading of a fifth element of the fraud. Three other courts of appeals have announced different standards. The different formulations of this fifth element of the Rule 9(b) standard reflect the difficulty in articulating criteria that identify those allegations that describe a fraud, so as to permit discovery to proceed. Like the majority of courts of appeals, the Fifth Circuit has consistently applied the Rule 9(b) standard to require a fifth element. “[Wjhat [that person] obtained . thereby,” Tuchman at 1068, “why the statement or omission complained of was false or misleading,” Williams, at 179, and the “how required by Rule 9(b),” id., are all variants of the same rule: in cases in which the mechanism or basis of the fraud is not otherwise apparent from the face of the complaint, the plaintiff must explain how the fraud worked. In cases in which a fifth element is not expressly included in the stated standard, that element was not relevant to the outcome of the appeal. See, e.g., Hart v. Bayer Corp., 199 F.3d at 248 n. 6. The amended complaints must be measured against all five elements of the Rule 9(b) standard. B. The Rule 12(b)(6) Standard Defendants have also moved to dismiss under Rule 12(b)(6), seeking dismissal for failure to state a claim upon which relief can be granted. A claim may not be dismissed under Rule 12(b)(6) “unless it appears certain that the plaintiff cannot prove any set of facts in support of her claim which would entitle her to relief.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir.1995). In deciding a Rule 12(b)(6) motion, the factual allegations of the complaint must be accepted as true, see Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972), and the complaint construed favorably to the pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 5.Ct. 1683, 40 L.Ed.2d 90 (1974). The court may consider the facts presented in exhibits to the complaint, as well as the factual allegations of the complaint itself. See Caine v. Hardy, 943 F.2d 1406, 1411 n. 5 (5th Cir.1991); Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); see also Fed. R. Civ. Proo. 10(c) (“A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.”). “The court will not accept as true allegations that are contradicted ... by other allegations or by exhibits attached to or incorporated in the pleading.” 5A Charles AlaN Wright & Arthur R. Miller, Federal Practioe And Procedure § 1363. The Seventh Circuit has held that [a] plaintiff is under no obligation to attach to her complaint documents upon which her action is based, but a defendant may introduce certain pertinent documents if the plaintiff failed to do so. Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiffs complaint and are central to her claim. Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.1993); see also Sheppard v. Texas Dep’t of Transp., 158 F.R.D. 592, 597 (E.D.Tex.1994) (“[A] court may rely upon a defendant’s exhibit when it is referred to in the plaintiffs complaint and is central to plaintiffs claim”); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice And Procedure § 1327 (2d ed. 1990) (“[W]hen plaintiff fails to introduce a pertinent document as part of his pleading, defendant may introduce the exhibit as part of his motion attacking the pleading.”). Although the court must accept as true “well-pleaded” factual allegations in the complaint, the court need not accept as true “conelusory” allegations or allegations of inferences that are contradicted by the facts pleaded or set out in the exhibits attached to or incorporated in the pleading. See, e.g., Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir.1995) (“ ‘conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a' motion to dismiss’ ”) (quoting Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir.1993)). The government and the defendants refer to several documents as relevant to the court’s consideration of the motions to dismiss. The government has attached a “Progress Payment Request Chronology for Horizontal Well Drilling Work” to its second amended complaint. (Docket Entry No. 95, Att. A). In the second amended complaint, the government also cites or quotes excerpts from the contract between ECE and CH & A; a project summary report dated February 24, 1993 and written by David Rendini of CH & A; a letter dated July 20, 1993 from Rendini to Alton Watson, president of ECE; a letter dated June 16, 1993 from Watson "to Rendini; a February 14, 1994 facsimile transmission from Pat Stout of NACC to Rendini; a February 14, 1994 facsimile transmission from Stout to Watson; the draft REA dated February 25, 1994; a cover letter to the February 25, 1994 draft REA from Watson to Rendini; a letter dated February 28, 1994 from Daniel Eaton of ECE to Rendini; the revised draft REA dated March 15, 1994; a letter dated March 17, 1994 from Watson to Wilkins, and copied to Don Sparkman of NACC and Rendini; CH & A’s March 16, 1994 claim including the REA and submitted to NACC; the certification of the REA signed by Alton Watson, the president of ECE, and dated April 4,1994; the certification of CH & A’s March 16, 1994 claim including the REA, signed by Wilkins and dated April 6, 1994; NACC’s certification of the REA, signed by Sparkman and dated May 11, 1994; and the REA receívéd by the Corps on May 16; 1994. (Docket Entry No. 95). CH & A has attached the contract between CH & A and ECE (Docket Entry No. 58, Ex. A), one set of excerpts from the draft REA dated February 25, 1994 (Docket Entry No. 106, Ex. 1); excerpts from the submitted REA dated March 15, 1994 (Id, Ex. 2; Docket Entry No. 108, Ex. C); CH & A’s requests for progress payments for the work performed by ECE (Docket Entry No. 1.08, Ex. A); and another set of excerpts from the draft REA dated February 25,1994 (Id, Ex. B). Weatherford has attached a letter dated October 16, 1992 from David May of ECE to Bayani Abuég of NACC (Docket Entry No. 112, Ex. 13); the October 26, 1992 contract between CH & A and ECE (Id, Ex. 14); an invoice dated September 30, 1992 from ECE to NACC (Id, Ex. 15); and the certification- of the REA signed by Alton Watson, the president of ECE, and dated April 4,1994 (Id, Ex. 16). C. The False Claims Act “The test for False Claims Act liability ... is (1) whether there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due (i.e., that involved a ‘claim’).” United States ex rel. Harrison v. Westinghouse Savannah River Co., 176 F.3d at 788, cited with approval in Russell, 193 F.3d at 308. The courts generally require that the false statement or claim at issue be material. See, e.g., Harrison v. Westinghouse Savannah River Co., 176 F.3d at 785. “Materiality depends on ‘whether the false statement has a natural tendency to influence agency action or is capable of influencing agency action.’ ... Materiality is a mixed question of law and fact.’ ” Id. (internal citations omitted). The First Circuit has also held that a false claim that is not material does not support liability under the post-1986 False Claims Act. See United States v. Data Translation, Inc., 984 F.2d 1256, 1267 (1st Cir.1992). The Court of Federal Claims has held that “the FCA covers only those false statements that are material.” Tyger Constr. Co. v. United States, 28 Fed. Cl. 35, 55 (Fed.Cl.1998). See also United States v. Intervest Corp., 67 F.Supp.2d 637, 646 (S.D.Miss.1999) (“the False Claim Act imposes a materiality requirement”); United States ex rel. Walle v. Martin Marietta Corp., 1997 WL 4566 at *2 (E.D.La.1997) (unpublished decision) (“there is a requirement that the false claim be a material misrepresentation”); United States v. Job Resources for the Disabled, 2000 WL 562444 at *2 n. 9 (N.D.Ill. May 9, 2000) (materiality determination “particularly appropriate when considering a lie of omission”) (slip copy); United States ex rel. Lamers v. City of Green Bay, 998 F.Supp. 971, 991 (E.D.Wis.1998) (same), aff'd, 168 F.3d 1013 (7th Cir.1999); United States ex rel. Durcholz v. FKW Inc., 997 F.Supp. 1159, 1167 (S.D.Ind.1998), aff'd, 189 F.3d 542 (7th Cir.1999); Luckey v. Baxter Healthcare Corp., 2 F.Supp.2d 1034, 1046 (N.D.Ill.1998). But see United States ex rel. Roby v. Boeing Co., 184 F.R.D. 107 (S.D.Ohio 1998) (holding without explanation that under the Wells framework, there is no materiality requirement under the False Claims Act). Although the courts generally require materiality, the Supreme Court and the Fifth Circuit have rejected the additional requirement that the United States have suffered damages as a result of the false or fraudulent claim. See Rex Trailer Co. v. United States, 350 U.S. 148, 152, 76 S.Ct. 219, 100 L.Ed. 149 (1956) (“there is no requirement, statutory or judicial, that specific damages be shown”). The Fifth Circuit has specifically held that actual damages need not be shown. In United States v. Miller, 645 F.2d 473 (5th Cir. Unit A May 1981), the court held that the dual remedies of civil penalty and actual damages provided in the False Claim Act indicate that the government need not show actual damages. See id., 645 F.2d at 476 n. 4. The court held in United States v. Aerodex, 469 F.2d 1003 (5th Cir.1972), decided under the former version of the Act and its higher intent standard, that “[t]he mere fact that the item supplied under contract is as good as the one contracted for does not relieve defendants of liability if it can be shown that they attempted to deceive the government agency.” Id., 469 F.2d at 1007. See also United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F.Supp.2d 1017, 1047 (S.D.Tex.1998) (“a pecuniary injury to the public fisc is no longer required for an actionable claim under the FCA”) (citations omitted), on remand from United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir.1997); United States v. Hughes, 585 F.2d 284, 286 n. 1 (7th Cir.1978) (“A false claim is actionable under the Act even though the United States has suffered no measurable damages from the claim.”). D. Common Law Fraud The government also raises a claim for common law fraud as to all defendants. (Docket Entry No. 95, ¶¶ 128-32). CH & A raises, but does not argue, the issue of whether Texas law, Oklahoma law, or federal common law applies to the government’s common law fraud claim. (Docket Entry Nos. 58, p. 15 n. 6; 108, p. 27 n. 20). The government does not address the issue of which law governs. “Normally, a federal court may fashion federal common-law rules only upon a specific showing that the use of state law will create a significant conflict with, or threat to, some federal policy or interest.” Atherton v. FDIC, 519 U.S. 213, 214, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (citing O’Melveny & Myers v. FDIC, 512 U.S. 79, 87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994)). No party in this case has attempted to make such a showing. In this case, there is no substantive conflict between Texas law and Oklahoma law. The Texas Supreme Court has held that “[a] fraud cause of action requires ‘a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury.’ ” Formosa Plastics Corp. v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47-48 (Tex.1998) (citing Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex.1994); DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex.1990)). The Oklahoma Supreme Court has held that to show fraud, a plaintiff “must prove a) [the defendant] made a material representation; b) that the representation was false; c) [the defendant] knew it was false or made it recklessly, without regard for its truth; d) [the defendant] made it with the intention that [the plaintiff] act upon it; and e) injury was suffered by [the plaintiff] as a result.” McCain v. Combined Communications Corp., 975 P.2d 865, 867 (Okla.1998) (citing 76 O.S.1991 § 3)). The elements of fraud in each jurisdiction are not materially different, would not result in different outcomes in this case, and do not necessitate a conflict-of-laws analysis. The government’s and the relator’s allegations, and the exhibits they have attached and incorporated, must be examined in light of the applicable legal standards. IV. The Padded Waste Claim Defendants ECE and CH & A assert that the government’s allegations as to padded waste costs are both deficiently-pleaded under Rule 9(b) and inadequate under Rule 12(b)(6). Defendants argue that the government has collapsed, or confused, the bid and contract prices for drilling wells and removing wastes, on the one hand, and, on the other hand, the underlying costs for performing such work. The bid, the contract, and the requests for progress payments are all stated in terms of price, with no reference to, or representations about, underlying costs. Defendants assert that the government has failed to allege any misrepresentation or false statement as to the cost basis for the price that ECE bid and contracted to receive for its work. Defendants also assert that there is no allegation of any duty on the part of ECE to disclose the cost components of the prices bid, contracted, or invoiced. Finally, defendants point to the language of the bid document, the contract, and the progress payment requests attached as exhibits to the complaint, emphasizing the absence of any representation about the costs contained in those documents. The government’s claim with respect to padded waste costs is a fraud-in-the-inducement claim. In such cases, “courts, including the Supreme Court, [have] found False Claims Act liability for each claim submitted to the government under a contract, when the contract or extension of government benefit was obtained originally through false statements or fraudulent conduct.” Westinghouse Savannah, 176 F.3d at 787. Courts have imposed such liability in a variety of contexts. See, e.g., United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (finding contractors liable under the False Claims Act for claims submitted under government contacts which defendants obtained through collusive bidding); United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1420 (9th Cir.1991) (relator stated claim where county water agency and Army Corps of Engineers employee conspired to illegally lower the agency’s contractual repayment obligations); United States v. General Dynamics Corp., 19 F.3d 770 (2d Cir.1994) (defendant held liable for submitting inflated cost estimates in subcontract submitted for approval to government). In this type of fraud-in-the-inducement case, although the work contracted for is actually performed to specification at the agreed price, liability attaches under the False Claims Act because of fraud surrounding representations made to obtain a contract or to obtain payment under a contract. The courts have, however, distinguished between fraudulent statements about pricing or costs made in the bidding and invoicing process, as to which False Claims Act liability can attach, and omissions made without an obligation to disclose, on which liability cannot rest. See, e.g., United States ex rel. Berge v. Board of Trustees of Univ. of Ala., 104 F.3d 1453 (4th Cir.1997). The government argues that it alleged that “CH & A and ECE/Weatherford were obligated to present to NACC a cost and pricing breakdown of their bid proposal for modification 9 for drilling the horizontal wells. This obligation was created by contract.” (Docket Entry No. 119, Memorandum of Points and Authorities in Support of the Government’s Opposition to Defendant’s Motions to Dismiss the Government’s Second Amended Complaint, p. 8). The government cites ¶ 17 of the Second Amended Complaint as the source of this allegation. Paragraph. 17, as defendants correctly note, merely alleges that CH & A awarded the contract for the horizontal well drilling “to ECE as the lowest responsive bidder in a competitive bidding process required by the Corps.” There is no allegation that either ECE or CH & A had a contractual obligation to present NACC a cost breakdown or a more detailed pricing breakdown. The government does not allege or argue another source of the alleged duty to disclose such information. The government also points to the allegation that the Corps “reasonably assumed that ECE’s final bid proposal for the drilling costs did not include costs for storing, hauling, and disposal of drilling wastes.” (Docket Entry No. 95, Second Amended Complaint, ¶ 22). The government alleges that the Corps relied on “representations of agents and representatives of CH & A and ECE, including but not limited to Bayani Abueg and David May, that were made in the bid proposals and in conversations with the Corps ACO, ... held between September 1992 and October 1992 .... ” (Second Amended Complaint, ¶ 21). However, these allegations lack specific reference to a failure to provide information required to be disclosed, or false information, as required under Rule 9(b). The government argues that paragraph 20 of the Second Amended Complaint provides the specificity needed. In paragraph 20, the government alleges that “[t]he bid proposals submitted by CH & A and ECE/Weatherford broke down the price for performing the contract modification work into two distinct portions: drilling and waste removal costs.... The drilling portion of the bid proposal was represented to the contracting officer by Bayani Abueg of CH & A and David May of ECE/Weatherford as being priced at $1.295 million.... The waste removal costs were represented by Messrs. Abueg and May as being estimated at $215,000.” In paragraph 20, the government alleges that May and Abueg wrote the October 16, 1992 final bid proposal, which ECE submitted to CH & A, which submitted it for review to the Corps through NACC. However, the October 16,1992 final bid proposal contains no representation about the cost components of the bid. . To the contrary, the October 16, 1992 final bid proposal confirmed, a total project price for drilling the five wellbores at the Tinker Air Force Base, “excluding waste disposal,” of $1,295,000; a price of $215,000 to “store, haul and dispose of the drilling wastes” up to stated quantities; and a to-be-negotiated price at a unit (cubic yard of solid waste and gallon of liquid waste) rate for amounts of waste that exceeded those quantities. Contrary to the government’s argument, ECE’s bid proposal did not break down ECE’s proposed price into drilling costs and waste removal costs. In the bid proposal, ECE quoted fixed prices for “Well Materials,” “Mobilization/Demobilization,” and “to Drill, Complete and Develop,” for a “Total Project Excluding Waste Disposal” price of $1,295,000. (Docket Entry No. 112, Ex.-13). There are price breakdowns in the letter, but nowhere in the letter does ECE disclose its costs to buy any of the materials or perform any of the tasks bid. The government makes no allegation that the contract or a statute or regulation required a cost breakdown. The Subcontract Agreement between ECE and CH & A contained the same prices quoted in the final bid. (Docket Entry No. 58, Ex. A). The Subcontract Agreement provided that the “Contract Amount” of $1,295,000 was to be paid for performance of the following tasks: “Drill, Install, and Develop Five Horizontal Extraction Wells; Install Pump Systems; Manage Wastes.” (Id, p. 19). The contract provided that in addition to the Contract Amount, “[ajctual disposal of wastes is to be paid per the unit prices shown in item 36.C.” (Id.). The contract contains no representation as to ECE’s actual or expected costs of performing the work. The government alleges that ECE and CH & A overstated the $1,295,000 price for all costs excluding waste removal in the bid and in the Subcontract-Agreement by including in that amount $280,000 in “costs” that ECE expected to incur for “waste removal.” The government asserts that ECE’s “true” or “accurate” price was $1,015,000; the price that ECE bid and CH & A contracted for less a “fraudulently inflated” $280,000 in “waste removal costs.” The government alleges that ECE and CH & A continued the misrepresentation by billing the government the agreed upon prices, based upon the percentage of the work completed at the time of each invoice. However, the government alleges no facts to support its allegation of a lower “true” or “accurate” price, given the absence of any cost information or pricing breakdown in the documents or in any other specific representation alleged, and given the absence of a requirement to provide such information. In short, although some of the allegations as to the October 16, 1992 bid, the October 26, 1992 Subcontract Agreement, and the progress payments attached to the complaint are specific, those allegations do not specify what, why, or how the statements in those documents constitute false or fraudulent claims. ■ The government argues that it need not allege the “why” of the fraud, because there are many reasons why a defendant might commit fraud. (Docket Entry No. 119, p. 9). The government concedes that it must plead the “how” of the fraud and alleges that it has so pleaded in paragraphs 22 and 28 of the second amended complaint. (Id., pp. 9-10). Paragraphs 22 and 23 of the second amended complaint read: 22. Unbeknownst to the Corps, however, and without the Corps’ agreement or approval, ECE’s final bid of $1,295,000 for drilling operations contained a sum of $280,000 that was not related to drilling costs, but was, rather, a “padded amount” for waste removal costs. 23. ECE included the “padded amount” for waste removal costs in the drilling portion of its contract bid at CH & A’s request. David May, ECE's president at the time ECE was bidding on the horizontal well project, was verbally instructed by Bayani Abueg, CH & A’s on-site project manager, to pad the drilling price with monies for waste handling and disposal costs. The excess costs amounted to $280,000. (Docket Entry No. 95, p. 8). The “why” aspect of a False Claims Act claim does not require pleading the reasons a defendant committed the alleged fraud, but instead the reasons the conduct complained of is fraudulent. See Williams, 112 F.3d at 179 (“why the statement or omission complained of was false or misleading”); Yourish v. California Amplifier, 191 F.3d 983, 993 (9th Cir.1999) (plaintiff must explain “why the statement or omission complained of was false or misleading”); Olsen v. Pratt & Whitney Aircraft, a Div. of United Techs. Corp., 136 F.3d 273, 275 (2d Cir.1998) (complaint must “explain why the statements ... are fraudulent”). The “how” aspect of the fraud pleading must explain how the facts alleged, assumed as true, resulted in a fraud on the government. Under either formulation, the government must plead facts that show how including $280,000 in waste removal costs in a total price bid, that the Corps accepted as the lowest responsive bid, fraudulently induced the Corps to approve the contract between CH & A and ECE. The government alleges that David May, ECE’s president at the time of the bid, was “verbally instructed by Bayani Abueg, CH & A’s on-site project manager, to pad the bid for the drilling price with monies for waste handling and disposal costs,” and that “[t]he excess costs amounted to $280,-000.” (Docket Entry No. 95, Second Amended Complaint, ¶ 23, p. 8). The government also alleges that on October 31, 1992, after ECE submitted its bid and after it signed the Subcontract Agreement, ECE contracted with a waste disposal contractor, January Transport, to perform waste disposal services for ECE. January Transport charged ECE higher unit rates for disposing of solid and liquid hazard wastes than ECE charged in its Subcontract Agreement with CH & A. Based on the rates ECE agreed to pay January Transport for disposing of the waste quantity estimated in the ECE Subcontract Agreement with CH & A, the government asserts that January Transport would potentially charge ECE $495,000. The government asserts that the January Transport contract “on its face, would exceed [ECE’s] final bid proposal for waste handling and removal by $280,000, which was the exact amount by which ECE padded its bid proposal for drilling costs that had been submitted to the Corps.” (Second Amended Complaint, ¶ 28, p. 10). The government concludes that ECE made up this shortfall by padding its bid and submitting payment claims that included in the total price for drilling work the $280,-000 that “should have been” classified as part of waste handling and removal, not drilling. The government includes, in its complaint the fact that the January Transr pori/ECE subcontract had a $400,000 ceiling. (Docket Entry No. 95, Second Amended Complaint, ¶ 26, p. 9). However, in the complaint, the government apparently calculated the shortfall between ECE’s obligation to pay January Transport and CH & A’s obligation to pay ECE under the CH & A Subcontract Agreement without regard to this ceiling. With this ceiling included, the difference between the payment to ECE and what ECE had to pay January Transport is $185,000, not $280,000. The government does not explain how the ceiling affects the calculation. However, if the ceiling applies, the inference the government seeks to draw from the identity between the amount ECE had to pay and the amount of “padding” in the bill ECE submitted to the Corps does not appear to be supported by the facts alleged. Even if the facts the government alleges are assumed to be true, the government’s allegations remain deficient not only under Rule 9(b), but also under Rule 12(b)(6). The government received a fixed price bid for drilling, a fixed price bid for a certain amount of waste disposal, and a bid for unit price rates for the disposal of waste quantities above the stated amounts. The government alleges that ECE should have charged $280,000 less for the drilling and waste management work because the $1,295,000 fixed price bid agreed to, invoiced, and paid included some costs for waste handling. The government does not allege that ECE misstated its per unit' charges for waste removal in any of the invoices. Instead, the government alleges that ECE should have told the government that it could have performed the work of drilling and waste management less expensively and could have charged the government a lower price. However, “the mere fact that an activity may be accomplished less expensively in a fixed-price contract falls measurably short of fraud under the False Claims Act.” Sterling Millwrights, Inc. v. United States, 26 Cl.Ct. 49, 101 (1992). Given the fixed price nature of the bid and contract, and the absence of any required or actual disclosure of cost information, the “padding” of waste costs claim lacks materiality as a matter of law. This result is supported by two different, but not incompatible, materiality standards used in the cases. One is the standard the Fourth Circuit applied in Westinghouse Savannah. “Materiality depends on “whether the false statement has a natural tendency to influence agency action or is capable of influencing agency action.’ ” Westinghouse Savannah, 176 F.3d at 785 (quoting United States ex rel. Berge v. Board of Trustees of Univ. of Ala., 104 F.3d 1453, 1459 (4th Cir.1997)). The other is the Restatement standard the Supreme Court cited in Neder: The Restatement instructs that a matter is material if: (a) a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question; or (b) the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it. Neder, 527 U.S. at 22 n. 5, 119 S.Ct. 1827 (citing RESTATEMENT (SECOND) Of TORTS § 538 (1976)). In the context of the False Claims Act, a court applying the Restatement materiality standard does not compare the action the agency actually took to an action a “reasonable agency” might have taken had the agency known of the falsity of the statement or the fraudulent nature of the defendant’s conduct. Rather, the court compares the actions of a reasonable agency confronted with true statements with the actions of a reasonable agency confronted with the allegedly false statements and determines if there is a difference. The government does not allege facts that show why the statements it challenges would tend to influence the Corps’ action or be capable of influencing the Corps’ action. A court might find the allegations as to padded costs material if the padding alleged was in the opposite direction; that is, if the contractors were alleged to have lowered the fixed, drilling price part of the contract and increased the per unit rate waste removal price in order to submit an artificially low bid. In such a situation, the government could allege facts showing that a contractor was submitting a fraudulent bid by making the fixed price portion of the bid appear to be lower than it actually was. However, in this case, the government alleges that the contractor improperly increased the fixed price portion of the bid and contract, still had the lowest bid, and did not increase the per unit rate charges. The facts alleged, assumed as true, do not show a material misrepresentation. The government argues that but for the alleged false statements, the Corps would not have approved the contract. (Docket Entry No. 95, Government’s Complaint, ¶ 36). T