Why the government can’t buy more like a business

April 11, 2014 by

Commonly heard issues with federal government contracting (such as, “it takes too long,” “it’s too expensive,” “it’s overly bureaucratic,” or “it’s too burdensome”) often conclude with a determination that the government should adopt commercial acquisition practices.

Government contracting does have considerable regulation associated with it. The government version of “commercial contracting,” found in the Federal Acquisition Regulation Part 12, was an attempt to address this idea and has been somewhat successful. However, additional government-unique requirements have been added over time.

In many cases, a primary hurdle is that a customer can have unique requirements, making that customer the only customer.

Keep reading this article at: http://www.federaltimes.com/article/20140327/BLG06/303270007/Why-government-can-t-buy-more-like-business

Contractor misrepresented VOSB status for $152 million lease

April 9, 2014 by

he VA failed to verify the accuracy of a contractor’s representation that it was a veteran-owned small business, according to a new report issued by the VA’s Office of Inspector General.

According to the VA OIG, the VA failed to verify the claim of Westar Development Company, LLC to be a VOSB–and “[t]he evidence does not support a finding that Westar is or ever has been a Veteran-Owned Small Business.”   The VA’s failure to verify Westar’s VOSB status is just one of many serious flaws identified by the VA OIG in its audit of the award of a major VA lease to Westar.

The VA OIG’s report (which is well worth a read if you have the time) examines the VA’s award of a build-to-suit lease to Westar for the new Butler Health Care Center in Butler, Pennsylvania.  The 20-year lease had a total value of $152.7 million.

Keep reading this article at: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/contractor-misrepresented-vosb-status-for-152-million-lease-says-va-oig/ 

Controversial IT contractor charged with murder

April 8, 2014 by

Braulio Castillo, the president of IT contractor Strong Castle, was arrested April 1 by Loudon County, Va., authorities and charged with first degree murder in the death of his estranged wife, Michelle.

Castillo gained notoriety as a result of a June 2013 hearing of the House Oversight and Government Reform Committee that examined the validity of the service-disabled veteran-owned small business (SDVOSB) status enjoyed by the firm he co-owned with his wife.

Castillo’s disability arose from a sports injury incurred at the U.S. Military Academy Preparatory School. Additionally, Castillo’s firm enjoyed a special status as a HUBZone company under a Small Business Administration program that gives preference to firms located in designated neighborhoods. SBA decertified Strong Castle’s HUBZone status in May 2013, while the Department of Veterans Affairs affirmed Strong Castles SDVOSB status last September.

keep reading this article at: http://fcw.com/articles/2014/04/02/castillo-murder-charges.aspx 

Agencies extended noncompetitive contracts past time limits, GAO says

April 3, 2014 by

Agencies are letting noncompetitive contracts awarded on the basis of “unusual and compelling urgency” run past the one year limit they’re not meant to exceed.

The Federal Acquisition Regulation (FAR) limits the total period of contracts awarded using the urgency exception to one year, unless a determination from the head of the agency is made that exceptional circumstances apply.

Awarding a noncompetitive contract on the basis of urgency is necessary in select circumstances, such as combat operations or preventing unanticipated gaps in program support, says the Government Accountability Offices in a March 26 report,

But those contracts should be limited in duration to minimize the amount of time that the government is exposed to the risks of contracts that are awarded quickly without the benefits of competition, the watchdog says.

Keep reading this article at: http://www.fiercegovernment.com/story/agencies-extended-noncompetitive-contracts-past-time-limits-gao-says/2014-03-27 


Maryland man pleads guilty to defrauding SBA and IRS over $52 million in government contracts

April 2, 2014 by

Vernon J. Smith III, age 61, of Edgewater, Maryland, pleaded guilty on Mar. 28, 2014 to conspiring to defraud the U.S. government in connection with schemes to fraudulently seek federal contracts under a Small Business Administration (SBA) program to assist socially and economically disadvantaged small businesses.  Smith also pleaded guilty to conspiring to defraud the Internal Revenue Service  (IRS).

“Today’s guilty plea sends a strong message to those who lie to obtain preferences for federal contract awards,” said Inspector General Peggy E. Gustafson of the Small Business Administration. “With our interagency partners, SBA OIG will continue to pursue those who defraud the government by lying to gain access to federal set-aside contracts. We would like to thank the U.S. Attorney’s Office for its leadership and professionalism throughout this investigation.”

“Corruption of the nature uncovered throughout the course of this investigation destroys confidence in the Government’s ability to act as a fair and effective steward of taxpayer dollars. This plea today, demonstrates the commitment of the Defense Criminal Investigative Service and its law enforcement partners to prosecute fraud to the fullest extent of the law,” said Robert E. Craig, Special Agent in Charge, Mid Atlantic Field Office, Defense Criminal Investigative Service.

“Conspiring to defraud the government in a decade long scheme and filing false tax returns is unlawful,” said Thomas J. Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office. “Bringing individuals to justice, such as Vernon Smith, who intentionally engage in this type of activity in order to defraud the IRS, ranks high on the list of IRS- CI’s enforcement priorities.”

“This complicated scheme boils down to lying and cheating to obtain government contracts,” said GSA Inspector General Brian D. Miller. “I appreciate the hard work of our special agents, law enforcement partners, and U.S. Attorney’s Office.”

According to his plea agreement, Vernon Smith was an owner and officer of Capitol Contractors, which provided roofing and construction services, primarily to U.S. government agencies. On March 3, 1993, Capitol Contractors was certified to participate in the SBA’s Section 8(a) program, which provides assistance to socially and economically disadvantaged small businesses. The majority owner of Capitol Contractors was a Native American. A small business can only participate in the Section 8(a) program for nine years before it “graduates” from the program and is no longer eligible to obtain government contracts reserved for Section 8(a) program participants. Shortly before Capitol Contractors graduated from the program in March 2002, the majority owner sold his interest in the company to Vernon Smith, who became the company’s sole owner and managed the day-to-day operations of the company. Vernon Smith did not qualify as a socially and economically disadvantaged individual under the Section 8(a) Program.

In August 1999, Vernon Smith arranged for Anthony Wright, an African-American who was a former roofer and project manager at Capitol Contractors, to form a new company to participate in the Section 8(a) program upon Capitol Contractors’ graduation from the program. On August 11, 1999, Wright incorporated Platinum One Contracting in Maryland. Wright was the president and 60% owner, and Smith’s son was vice president and owned the remaining 40% of the corporation. In reality, Vernon Smith exercised complete and undisclosed control over Platinum’s operations, including the day-to-day management and long term decision making for the company.

Vernon Smith admits that from August 1999 to June 2013, he conspired to defraud the SBA in several ways. For example, Smith directed Wright to submit an application to the SBA for certification in the Section 8(a) program which did not reveal that Vernon Smith:

  • exercised control over the company,
  • had previously supervised Wright,
  • owned more than 10% of Capitol Contractors, and
  • was related to an owner of Platinum.

From May 2004 through April 2010, Vernon Smith also caused Platinum to submit annual updates to the SBA 8(a) program that contained false information, including that the company was controlled by a socially and economically disadvantaged individual, and that no non-disadvantaged member of Platinum’s management received compensation that exceeded that received by Wright. In fact, Vernon Smith controlled the company and Platinum’s payments to Vernon Smith and other corporate officers far exceeded payments received by Wright for 2004 through 2009.  Based on the fraudulent application and annual updates, Platinum One received more than $52 million in contracts from the federal government under the 8(a) program, to which it was not entitled. The total loss to the government resulting from Vernon Smith’s illegal conduct, regarding the illicit profit he received by defrauding the SBA, and depriving a legitimate 8(a) contractor of such profit, is $6,194,828.
In addition, Vernon Smith and a co-conspirator transferred millions of dollars from Platinum to bank accounts in their own names, to Capitol Contractors, to casinos on their own behalf; and to pay for personal expenses charged to Platinum One’s credit cards. These expenses included: extensive dental work, veterinary visits for pets, lavish vacations, and limousine transportation to casinos in Atlantic City, New Jersey, among others.

Vernon Smith admits that he signed false corporate and personal tax returns for 2005 and 2006. Smith knew that the cost of goods sold and payments to contractors reported on the corporate returns were false because almost all of that money was paid to, and for the benefit of, Smith at casinos. He also knew that the income reported on his personal income taxes omitted hundreds of thousands of dollars that Capitol Contractors had paid to, and for his benefit. As a result, Smith owed additional personal income tax to the IRS totaling $264,105, and Capitol Contractors owed an additional $574,911 to the IRS for tax years 2005 and 2006. The total tax loss resulting from the conspiracy to defraud the IRS is $839,016.

Vernon Smith faces a maximum sentence of five years in prison for the conspiracy. U.S. District Judge Paul W. Grimm has scheduled his sentencing for July 2, 2014, at 9:30 a.m.

Anthony Wright, age 42, of Bowie, Maryland, pleaded guilty on June 18, 2013, to his role in the scheme and is scheduled to be sentenced on June 23, 2014.

Source: http://www.justice.gov/usao/md/news/2014/EdgewaterMarylandManPleadsGuiltyToDefraudingSBADisadvantagedSmallBusinessProgramAndIRS.html 

House committee rips SBA for unauthorized pilot programs, contracting woes

April 1, 2014 by

Members of the House Small Business Committee on Tuesday voted unanimously in favor of several revisions to the Small Business Administration’s new budget proposal, with several lawmakers criticizing the agency for committing too much money to new, unproven programs and too little to fulfilling its underlying responsibilities to small employers.

“By necessity, budgets require hard choices,” Committee Chairman Sam Graves (R-Mo.) said during a brief markup of the budget on Tuesday. “To the extent that the SBA… budget request makes hard choices, they ultimately make them in the wrong place.”

Democrats and Republicans on the panel agreed on revisions that would trim $50 million from the agency’s $710 million budget proposal that was published earlier this month as part of the president’s broader spending blueprint. The committee’s recommendations now move to the House Budget Committee for review.

SBA officials maintain that the proposal would ensure that employers have the resources they need to start and grow their businesses, and it would give the department the resources it needs to expand important exporting, capital access and other educational programs. On the agency’s blog earlier this month, Marianne Markowitz, the agency’s acting administrator, said the plan “builds on SBA’s proven track record of assisting America’s small businesses.”

Keep reading this article at: http://www.washingtonpost.com/business/on-small-business/house-committee-rips-sba-for-unauthorized-pilot-programs-contracting-woes/2014/03/26/15f84f80-b433-11e3-b899-20667de76985_story.html 

Federal contractors’ hiring goal for veterans took effect March 24

March 31, 2014 by

Effective March 24, 2014, contractors required by the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) to develop a written affirmative action program (AAP) must also establish a hiring benchmark for protected veterans each year or adopt the national benchmark provided by the Office of Federal Contract Compliance Programs (OFCCP).  Federal contractors use the VEVRAA Benchmark Database when establishing a hiring benchmark for protected veterans as required by 41 CFR 60-300.45.

Contractors must compare the percentage of employees who are protected veterans in each of their establishments to the hiring benchmark set for that establishment.  Contractors should use the result of this comparison when assessing the effectiveness of their veteran outreach and recruitment efforts.

This VEVRAA Benchmark Database provides additional information regarding the establishment of hiring benchmarks and easy access to the national and State data that may be needed to establish these benchmarks.

OFCCP has now posted the Benchmark Database required by the new regulations implementing the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA).   The database includes the annual national percentage of veterans in the civilian labor force for contractors that choose to use this number as their benchmark. It also includes data on the percentage of veterans in the labor force in each State and the number of veterans who participate in each State’s employment service, for use by those contractors choosing to develop an individualized benchmark.

To help contractors use this database, OFCCP provides detailed user instructions and examples illustrating how a contractor could use the database to set an individualized VEVRAA benchmark.

You can access the VEVRAA Benchmark Database through OFCCP’s Web site at http://www.dol-esa.gov/errd/VEVRAA.jsp.

House Small Business Committee calls for $50M cut to SBA budget request

March 28, 2014 by

The House Small Business Committee recommends cutting almost $50 million from President Obama’s fiscal 2015 budget request of $864.64 million for the Small Business Administration.

Committee Democrats will present their own views on the White House request at a later date, said Ranking Member Nydia Velázquez (D-N.Y.) at a March 25 committee markup.

Although the budget request is for $64 million less than the agency’s current year spending, the March 25 majority committee report  says there’s room for more cuts.

Keep reading this article at: http://www.fiercegovernment.com/story/house-small-business-calls-50-mil-cut-obamas-sba-budget-request/2014-03-26


GSA allows new flexibility in federal construction standards

March 26, 2014 by

The federal government’s standards for its new construction projects now simply require outcomes instead of dictating the means to achieve them.

The Public Buildings Service, part of the General Services Administration, issued the overhauled standards March 14, 2014.  As the document notes, adherence is mandatory. “It is not a guideline, textbook, handbook, training manual, nor substitute for technical competence,” it says.

An example of the increased flexibility is the HVAC system requirement, which previously had to be a type of system called variable air volume. Now, new construction must meet standards for energy efficiency, ventilation and humidity, but any system that satisfies the requirements is acceptable.

Additionally, rather than just setting minimum standards for building features, the PBS has added three tiers of performance that buildings can achieve, each more desirable than the last.

Keep reading this article at: http://www.fiercegovernment.com/story/new-flexibility-federal-construction-standards/2014-03-18 


Appeal board reminds contractors not to look the other way when an RFP is missing documents or information

March 25, 2014 by

When an RFP is missing an attachment or information, contractors simply should not look the other way.  This is the lesson of CAE USA, Inc., ASBCA No. 58006, where the Armed Services Board of Contract Appeals (ASBCA) denied a contractor’s appeal due to its failure to inquire about missing information in an RFP before preparing and submitting its bid.

Pursuant to FAR 22.1008-2 and in compliance with Service Contract Act of 1965, 41 U.S.C. § 6707 (c)(1), the contracting officer (the “CO”) provided all bidders with a copy of a collective bargaining agreement (the “CBA”) that would apply to the contract.  The CBA indicated that the contractor’s employees would participate in a corporate benefit program, but did not provide specific details.  The CBA was missing certain relevant attachments but, rather than asking for that information, CAE USA, Inc. (“CAE”) made certain general assumptions about fringe benefits when calculating its proposed rates.  After award, the CO informed CAE that the missing attachments in the CBA required the payment of additional benefits, which CAE had to pay.  CAE submitted a claim for the cost of these additional benefits, which the CO denied, and CAE appealed to the ASBCA.

Keep reading this article at: http://www.governmentcontractsadvisor.com/2014/03/18/asbca-reminds-contractors-not-to-look-the-other-way-when-an-rfp-is-missing-documents-or-information