An interview with the Pentagon’s small-business director

November 14, 2014 by

Andre Gudger has heard the argument many times that, as he puts it, “small businesses don’t build planes and ships and nuclear weapons.”

It’s his job — or at least part of it — to change that perception.

A Maryland native, Gudger has been the director of the Defense Department’s Office of Small Business Programs since 2011. During the three years prior to his arrival, the share of the agency’s contracts awarded to small companies had shrunk every year. Moreover, in the more than three decades since federal small-business contracting goals had been put in place, the agency had never once accomplished them.

In the three years since, even amid budgetary constraints, small-business participation in Defense Department projects has expanded each year. In fact, this past year, the agency for the first time eclipsed not only its small-business goal, but also the federal government’s target, awarding roughly 23.4 percent of defense contracting dollars, representing about $53 billion, to small employers.

Keep reading this article at: http://www.washingtonpost.com/business/on-small-business/operation-small-business-an-interview-with-the-pentagons-small-business-director/2014/10/23/216d4cc8-5a12-11e4-b812-38518ae74c67_story.html

 

IG reports continued weaknesses in small business reporting and 8(a) program

November 13, 2014 by

The Office of the Inspector General (IG) of the U.S. Small Business Administration reports on 11 weaknesses in a range of SBA programs.  Two of the “challenges” identified in the Oct. 17, 2014 report pertain directly to small business participation in federal contracting:

  • Procurement flaws allow large firms to obtain small business awards, and allow agencies to count contracts performed by large firms towards their small business goals.
  • The SBA needs to modify the Section 8(a) Business Development  Program so more firms receive business development assistance, standards for  determining economic disadvantage are justifiable, and the SBA ensures that firms follow 8(a) regulations when completing contracts.

SBA - IGThe IG’s full document, entitled “Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2015″ can be downloaded here, but the text of the IG’s finding on the two point just cited appears below.

Procurement Reporting

The Small Business Act established a Government-wide goal that 23 percent of the total value of all prime contracts be awarded to small businesses each fiscal year. As the advocate for small business, the SBA should strive to ensure that only small firms obtain and perform small business awards. Further, the SBA should ensure that procuring agencies accurately report contracts awarded to small businesses when representing their progress in meeting small business contracting goals.

In September 2014, we issued a report that identified over $400 million in FY 2013 contract actions that may
have been awarded to ineligible firms. We also identified over $1.5 billion dollars in contract actions for
which the firms were in the 8(a) or HUBZone programs at the time of contract award, but were no longer in
these programs in FY 2013. Previous OIG audits and other Government studies have shown widespread
misreporting by procuring agencies, since many contract awards that were reported as having gone to small
firms have actually been performed by larger companies. While some contractors may misrepresent or
erroneously calculate their size, most of the incorrect reporting results from errors made by Government
contracting personnel, including misapplication of small business contracting rules. In addition, contracting
officers do not always review the on-line certifications that contractors enter into Government databases
prior to awarding contracts. The SBA should ensure that procuring agencies accurately report contracts
awarded to small businesses when representing their progress in meeting small business contracting goals,
and that contracting personnel are reviewing on-line certifications prior to awarding contracts.

The SBA revised its regulations to require firms to meet the size standard for each specific order to address a
loophole within General Services Administration Multiple Awards Schedule (MAS) contracts, which contain
multiple industrial codes that determine the size of the company. Previously, a company awarded an MAS
contract could identify itself as a small business on individual task orders awarded under that contract, even
though it did not meet the size criteria for the applicable task. Thus, agencies received small business credit
for using a firm classified as small, when the firm was not small for specific orders under the MAS contract. In
addition, the SBA submitted a final rule to the Federal Acquisition Regulations (FAR) Council to implement the
changes made to its regulations in the FAR. The SBA also updated its standard operating procedure (SOP) to
ensure consistency in conducting its surveillance reviews to assess Federal agencies’ management of their
small business programs and compliance with regulations and applicable procedures.

While the SBA has made substantial progress on this challenge, we are working with the Agency to verify that
the surveillance reviews were conducted in a thorough and consistent manner.

                                                                                               ***

8(a) Program

The SBA’s 8(a) Business Development (BD) Program was created to assist eligible small disadvantaged
business concerns to compete in the American economy through business development. Previously, the
SBA did not place adequate emphasis on business development to enhance the ability of 8(a) firms to
compete, and did not adequately ensure that only 8(a) firms with economically disadvantaged owners in
need of business development remained in the program. Companies that were “business successes”
were allowed to remain in the program and continue to receive 8(a) contracts, causing fewer companies
to receive most of the 8(a) contract dollars and many to receive none.

The SBA has made progress towards addressing issues that hinder its ability to deliver an effective 8(a)
BD Program. For example, the SBA expanded its ability to provide assistance to program participants
through its resource partners—small business development centers, service corps of retired executives,
and procurement technical assistance centers. In addition, the SBA has taken steps to ensure business
opportunity specialists assess program participants’ business development needs during site visits. The
SBA also revised its regulations, effective March 2011, to ensure that companies deemed “business
successes” graduate from the program. These regulations also establish additional standards to address
the definition of “economic disadvantage.” Agency officials stated that the rule-making process served
as an adequate proxy to objectively and reasonably determine effective measures for economic
disadvantage, and were not aware of any reliable sources of data to determine economic disadvantage.

However, for the second consecutive year, the SBA has not completed updating its SOP for the 8(a) BD
Program to reflect the March 2011 regulatory changes. In addition, we continue to maintain that the
SBA’s standards for determining economic disadvantage are not justified or objective based on the
absence of economic analysis. In December 2011, the SBA awarded a contract to develop and deploy a
new IT system by December 2012 to assist the SBA in monitoring 8(a) program participants. However,
the new system has not been deployed, and its delivery date and capabilities are undetermined at this
time.

Phoney SDVOSB company ordered to pay $1 million in False Claims settlement

November 11, 2014 by

A company called North Florida Shipyards and its president, Matt Self, will pay the U.S. government $1 million to resolve allegations that they violated the False Claims Act by creating a front company, Ind-Mar Services Inc., in order to be awarded Coast Guard contracts that were designated for Service Disabled Veteran Owned Small Businesses (SDVOSBs), the Justice Department announced today.  North Florida Shipyards has facilities in Jacksonville, Florida.

To qualify as a SDVOSB on Coast Guard ship repair contracts, a company must be operated and managed by service disabled veterans and must perform at least 51 percent of the labor.  The government alleged that North Florida created Ind-Mar merely as a contracting vehicle and that North Florida performed all the work and received all the profits.  The government further alleged that if the Coast Guard and the Small Business Administration (SBA) had known that Ind-Mar was nothing but a front company, the Coast Guard would not have awarded it contracts to repair five ships.

In December 2013, the SBA suspended North Florida, Matt Self, Ind-Mar and three others from all government contracting.  In April 2014, North Florida and Matt Self entered into an administrative agreement with the SBA in which they admitted to having created and operated Ind-Mar in violation of its Coast Guard contracts and SBA statutes and regulations.

“Special programs to assist service disabled veterans are an important part of the SBA’s business development initiative,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.  “False claims such as this undermine the integrity of this vital program and, where found, will be vigorously pursued by our Office.”

“This settlement sends a strong message to those driven by greed to fraudulently obtain access to contracting opportunities set-aside for deserving small businesses owned and operated by service disabled veterans,” said Inspector General Peggy E. Gustafson for the SBA.  “We are committed to helping ensure that only eligible service disabled veteran owned small businesses benefit from that SBA program.”

The settlement resolves allegations originally filed in a lawsuit by Robert Hallstein and Earle Yerger under the qui tam, or whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The act also allows the government to intervene and take over the action, as it did in this case.  Hallstein and Yerger will receive $180,000.

The claims resolved by the settlement are allegations only, except to the extent that North Florida and Matt Self have admitted to the conduct in their agreement with the SBA.

The case is captioned United States ex rel. Yerger, et al, v. North Florida Shipyards, et al., Case No. 3:11-cv-464J-32 MCR (M.D. Fla.).

Source: http://www.justice.gov/opa/pr/north-florida-shipyards-pay-1-million-resolve-false-claims-allegations

$20 billion in federal purchasing done ‘under the radar’ in recent months

November 10, 2014 by

Federal agencies collectively have spent at least $20 million in small purchases just this year.  This purchasing activity occurs “under the radar” with little or no public accountability on government credit cards (“Pcards”).  Many of these purchases are questionable, such as the recent revelation that one agency used those cards to buy $30,000 in Starbucks Coffee drinks and products in one year.

Those are among the findings of the local television affiliate of NBC News in Washington, DC in connection with records obtained via the Freedom of Information Act.

The News4 I-Team reported that “the purchases, known among federal employees as ‘micropurchases,’ are made by some of the thousands of agency employees who are issued taxpayer-funded purchase cards. The purchases, in most cases, remain confidential and are not publicly disclosed by the agencies.”    Micropurchases are transactions less than $3,000.

Recent government audits show inappropriate purchases such as a gym membership, spa service, and JC Penney clothing.

Two federal agencies — the General Services Administration (GSA) and the Department of the Interior — shared information about their Pcard purchases with the television news station, but several other agencies refused to do so.  Among those agencies declining to make their records public are the Department of Veterans Affairs, the Environmental Protection Agency, the U.S. Dept. of Transportation, the State Department, the Department of Health and Human Services, and the Department of Homeland Security.

Reasons for not making public their micropurchase records ranged from claims that there are no rules making such purchasing public to not having records in a centralized database.

The complete news report can be seen at: http://www.nbcwashington.com/investigations/Federal-Government-Made-20-Billion-in-Secret-Purchases-in-Recent-Months-280997562.html

Is the SBA ‘searching for reasons to deny’ women 8(a) status?

November 7, 2014 by

The SBA’s course of conduct in reviewing the 8(a) applications of companies owned by women “gives the distinct impression that the SBA is simply searching for reasons to deny every claim” of social disadvantage made by women applicants.

These strong words come from a recent SBA Office of Hearings and Appeals decision, in which OHA again overturned the SBA’s denial of a woman-owned business’s 8(a) application.

SBA OHA’s decision in Matter of Ironwood Commercial Builders, Inc., SBA No. BDPE-532 (2014) involved the 8(a) application of Ironwood Builders, Inc., a company owned by Nancy Brinkerhoff.  Ironwood applied to the 8(a) program in February 2012.

Keep reading this article at: http://smallgovcon.com/8a-program/8a-program-is-the-sba-searching-for-reasons-to-deny-women/

 

Woman sentenced to home confinement for $1.2M fraud as disabled-vet business

November 5, 2014 by

A New Jersey woman will serve probation with eight months of home confinement for fraudulently obtaining $1.2 million worth of government contracts, set aside for disabled veterans, for her furniture and design services business.

Miriam Friedman, 54, who ran Office Dimensions Inc. with her husband out of their home, will serve two years of probation, pay $100,000 in restitution and will have to wear an electronic monitoring device during her home confinement, according to the sentence imposed on Oct. 27, 2014 by U.S. District Judge Jose L. Linares in federal court in Newark.

In 2009, Friedman certified in a registry for government contractors that her business was a service-disabled, veteran-owned small business, federal prosecutors said.

Keep reading this article at: http://www.northjersey.com/news/teaneck-woman-sentenced-to-home-confinement-for-1-2m-fraud-as-disabled-vet-business-1.1119219

Man pleads guilty to fraudulently obtaining $2.8 million in contracts meant for 8(a) and veteran-owned businesses

November 4, 2014 by

Wesley Burnett, age 54, of Hermosa Beach, California, pleaded guilty on October 24, 2014, to conspiracy to commit wire fraud in connection with a scheme to fraudulently obtain more than $2.8 million in federal government contracts through the use of the Small Business Administration’s 8(a) program, designed to assist disadvantaged businesses.

According to his plea agreement, Burnett owned and operated Confederate Group LLC and Total Barrier Works (TBW).  These companies were in the business of maintaining and installing anti-terrorist systems and vehicle control equipment such as security barriers, bollards, gates, uninterrupted power systems (UPS) and other perimeter security anti-terrorist equipment.

Burnett admitted that at various times from 2007 until 2014, he falsely represented to the government that Confederate Group LLC was a “Hispanic-American owned business,” a “minority owned business,” a “service disabled veteran owned business,” and a “small disadvantaged business,” in order to win federal contracts at military bases and federal buildings that were reserved for firms in those categories. In fact, Burnett is not a member of any racial or ethnic minority, is not a disabled veteran and is not a member of a socially disadvantaged group, as those terms are defined by the Small Business Administration, and therefore his company was not qualified to receive contracts set aside for those categories. As a result of Burnett fraudulently claiming minority and/or disabled veteran status, from 2008 through 2014, Confederate Group LLC was awarded approximately $534,315, in contracts reserved for minorities and service disabled veterans.

In order to bid on the set-aside contracts, Burnett recruited individual who were members of racial or ethnic minorities, service disabled veterans, or members of socially disadvantaged groups, and offered them a percentage of the total value of any contract he won using their companies’ name. As part of the scheme, Burnett, using the name of the minority owned company bid on federal government contracts set aside for companies owned by minorities, service disabled veterans, or members of socially disadvantaged groups.  Burnett and TBW did all of the work covered by the contract, then paid the owner of the company in whose name the contract had been awarded a fixed percentage of the gross value of the contract, usually between four and five percent. To further this “pass thru” arrangement, Burnett falsely represented that TBW was a trade name for the minority owned company in whose name the contract had been awarded, when in fact TBW was a separate and distinct company.

For example, Yogesh K. Patel was the owner of United Native Technologies, Inc. (“UNTI”), which, according to its articles of incorporation, was formed to “perform information technology services to federal, state and local government, as well as commercial.”  In 2005, Patel applied for and was granted certification as a minority or socially disadvantaged owned business under the SBA’s 8(a) program. In addition to a broad scope of assistance from SBA, participants in the 8(a) program can receive sole source government contracts that are reserved for minority or socially disadvantaged owned companies.

Burnett met Patel at a business conference and the two agreed to use UNTI to bid on 8(a) set aside contracts at federal government installations, including military bases and federal buildings, with Burnett, TBW and individuals at Burnett’s direction actually performing the work necessary to fulfill these contracts. Burnett also agreed to pay Patel approximately 4.5% of the total value of any contract awarded to UNTI. As a result, between January 2010 and November 2013, UNTI was fraudulently awarded more than $1.8 million in 8(a) set-aside U.S. government contracts, while the work on the contracts was actually performed by Burnett’s company and employees.

Burnett admitted that he had similar arrangements with the owner of an 8(a) firm that did electrical and other work for government and commercial clients, and with the owner of a service-disabled veteran owned small business. Burnett also fraudulently obtained the personal identifying information of a service-disabled veteran, which he then used when bidding on federal government contracts.

Burnett faces a maximum penalty of 20 years in prison for the wire fraud conspiracy. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for February 2, 2015, at 10:00 a.m.

Yogesh K. Patel, age 47, of Gaithersburg, Maryland, previously pleaded guilty to his role in the scheme and is scheduled to be sentenced on January 12, 2015, at 12:00 p.m.

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrates the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

Source: http://www.justice.gov/usao/md/news/2014/BusinessOwnerPleadsGuiltyToWireFraudConspiracyToFraudulentlyObtainMoreThan2.8MillionIn.html

Got DBE fraud skeletons?

November 3, 2014 by

Every Halloween, the cute traditional images re-emerge from our closets and the attics.  Ghosts, gravestones, plastic pumpkins, and perhaps the most common of all – skeletons.  Given the recent heightened status of Disadvantaged Business Enterprises (DBE) fraud prosecutions, the massive civil penalties, the prevalence of hotlines, and increased incentives for whistle-blowers, any contractor who participates in DBE programs should use Halloween as an annual reminder to take a closer look to see if they have other skeletons in their corporate attics.

According to recent government reports and audits, DBE fraud investigations have been on the rise, in hopes of deterring widespread abuses in the programs.  According to a 2011 report from the DOT, between 2003 and 2008, the Office of Inspector General (OIG) investigations resulted in 49 indictments, 43 convictions, nearly $42 million in recovery and fines, and 419 months of jail sentences.  Moreover, from 2009 and 2010, the number of DOT investigations increased by almost 70 percent.  Based upon the headlines each month, the number of indictments keeps climbing, along with the civil and criminal penalties.

In view of these statistics and trends, one thing should be crystal clear. To the extent that DBE compliance may be a challenge, it is far better to discover the problems sooner, rather than later.

Keep reading this article at: http://www.jdsupra.com/legalnews/got-dbe-fraud-skeletons-32884/

DBE Fraud Hotline

GSA says small businesses benefitting from reverse auctions

October 30, 2014 by

Taxpayers and small businesses are benefitting from the ReverseAuctions program, the General Services Administration said.

In fiscal 2014, 85 percent of auctions awarded through the initiative went to small businesses even though 60 percent was set aside for them, and overall, reverse auctions generated 23 percent savings off standard contract price, an Oct. 21 blog post says.

Those small-business procurements totaled more than $19 million.

Additionally, more than 21 government agencies created 900 auctions and saved more than $6 million, according to the blog.

“Competition fuels savings. GSA ReverseAuction’s fiscal year 2014 performance is a testament to this principle,” wrote Charles Wingate, chief of a branch of the agency’s Federal Acquisitions Services’ Information Technology Commodities Division, on the blog.

ReverseAuctions is an online tool for agencies to use at no additional cost to buy simple commodities and services.

Keep reading this article at: http://www.fiercegovernment.com/story/gsa-small-businesses-benefitting-reverse-auctions/2014-10-22

Top federal contracting vehicles offer highest value in five years

October 29, 2014 by

The top 20 federal opportunities for the 2015 federal fiscal year offer $220.3 billion in total contract value, representing the highest value of the past five fiscal years; a continued increase from a low of $92.2 billion in fiscal 2013; and a $59.6 billion increase over the top 20 combined contract value of $160.7 billion in fiscal 2014.

Information Technology opportunities total $161.5 billion, representing 73 percent of the top 20 total contract value, a shift from last year when professional services opportunities dominated.

Driving the increase in IT value are several large follow-on contract programs expected to be solicited this year. Follow-on opportunities account for 99 percent of the value in the top 20 opportunities.

The split between this year’s defense and civilian top 20 opportunities is the most even of the past five years — essentially 50/50, with near-even values and 10 opportunities each.

Keep reading this article at: http://www.washingtonpost.com/business/capitalbusiness/deltek-top-federal-contracting-vehicles-offer-highest-value-in-five-years/2014/10/17/59d03918-53dc-11e4-809b-8cc0a295c773_story.html