CEO of fraudulent DBE firm sentenced to 51 months in prison

July 18, 2014 by

Ernest G. Fink, Jr., 68, of Orwigsburg, Pennsylvania, the former Chief Operating Officer and co-owner of Schuylkill Products Inc., was sentenced in federal court in Harrisburg, Pennsylvania, on July 14, 2014 to 51 months’ imprisonment and ordered to pay fines totaling $25,100 for his role in a massive conspiracy to defraud the Disadvantaged Business Enterprise (DBE) program, announced Peter Smith, U.S. Attorney for the Middle District of Pennsylvania. Senior U.S. District Court Judge Sylvia H. Rambo directed that Fink report to prison no later than September 8, 2014.

In handing down the sentence, Judge Rambo stated “DBE fraud is pervasive in the construction industry, and persons so inclined to commit the same kind of fraud need to be aware that they face serious consequences from DBE fraud.”

According to the U.S. Department of Transportation (USDOT), this scheme, which lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone, is the largest reported Disadvantaged Business Enterprise (DBE) fraud in the nation’s history.

On August 16, 2010, Fink pleaded guilty to conspiracy. Sentencing was deferred pending the resolution of the case against Joseph W. Nagle, SPI’s former president and co-owner.

In April 2012, after a four-week jury trial, a federal jury found Nagle guilty on 26 charges in the indictment, including conspiracy to defraud the USDOT and to commit wire and mail fraud, seven counts of wire fraud, six counts of mail fraud, conspiracy to commit money laundering and 11 counts of money laundering.

On June 30, 2014, Nagle was sentenced to 84 months’ imprisonment and ordered to pay fines totaling $27,600.

Fink was Vice-President, Chief Operating Officer and co- owner of Schuylkill Products Inc. (SPI) and its wholly-owned subsidiary CDS Engineers Inc. (CDS), until April 2009 when SPI was sold. SPI, based in Cressona, Pennsylvania, manufactured concrete bridge beams used on highway construction projects in Pennsylvania and surrounding states. CDS was SPI’s erection division and installed SPI’s bridge beams as well as other suppliers’ products on highways in Pennsylvania and surrounding states. The conspiracy defrauded USDOT, the Pennsylvania Department of Transportation (PennDOT) and the Southeastern Pennsylvania Transportation Authority (SEPTA) in connection with the federal government’s DBE program.

USDOT provides billions of dollars a year to states and municipalities for the construction and maintenance of highways and mass transit systems on the condition that small businesses, owned and operated by disadvantaged individuals, receive a fair share of these federal funds. In Pennsylvania, PennDOT and SEPTA receive these funds and requires contractors to award a percentage of their subcontracts to eligible DBE’s.

The USDOT Office of Inspector General has cautioned prime contractors and subcontractors not to engage in fraudulent DBE activity and encouraged them to report any suspected DBE fraud by contacting

Fink and his co- conspirators executed the scheme by using a small Connecticut highway construction firm known as Marikina Construction Corporation as a front company to obtain these lucrative government contracts.

Marikina was owned by Romeo P. Cruz of West Haven, Connecticut, a naturalized American citizen born in the Philippines. Marikina was certified by PennDOT and SEPTA as a DBE. Although Marikina received the DBE contracts on paper, all the work was performed by SPI and CDS personnel, and SPI and CDS received all the profits. In exchange for letting SPI and CDS use its name, Marikina was paid a small fixed-fee, set by SPI.

SPI and CDS personnel pretended to be Marikina employees by using Marikina business cards, e-mail addresses, stationery, and signature stamps, as well as using magnetic placards and decals bearing the Marikina logo to cover up SPI and CDS logos on SPI and CDS vehicles.

Earlier this year, three other former executives associated with SPI, CDS and Marikina were sentenced for their roles in the scheme.

Romeo P. Cruz, the former owner of Marikina, was sentenced to 33 months’ imprisonment, must pay $119 million in restitution and serve two years’ supervised release.

Timothy G. Hubler, of Ashland, Pennsylvania, CDS’ former Vice-President in charge of field operations, was sentenced to 33 months’ imprisonment, pay $119 million in restitution and serve two years’ supervised release.

Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former Vice-President in charge of sales and marketing was sentenced to 24 months’ imprisonment, $119 million in restitution and serve two years’ supervised release.

The investigation was conducted by the FBI, the U.S. Department of Transportation Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS. Senior Litigation Counsel Bruce Brandler handled the prosecution.


See earlier articles about this case at: and at

OFPP to issue contractor past performance guidance this summer

July 17, 2014 by

The Office of Management and Budget wants agencies to have greater transparency into contractors’ past performance before they sign on the dotted line.

Through additional guidance it hopes to help agencies better assess which vendors they should and shouldn’t work with.

White House OMB OFPP seal“We are a couple of weeks from issuing additional guidance that broadens the sources of past performance information,” said Lesley Field, acting administrator of OMB’s Office of Federal Procurement Policy.

This forthcoming guidance aims to provide agencies with timely information about how contractors are doing and will also help new entrants break into the federal contracting market, said Field, during a June 3 event in Washington, D.C. jointly hosted by the Association of Government Accountants and AFFIRM.

Keep reading this article at:

Cities and counties are upbeat about budget prospects

July 16, 2014 by

Government officials are fiscally optimistic. They see improving budgets and increased spending. More than four out of five administrators (86 percent) see their government’s budgets in the second half of 2014 equal to or greater than second half 2013 budgets, according to an exclusive E-survey of readers of Penton magazines Government Product NewsAmerican City & County and Government Procurement.

Cities and Counties Predict Larger Budgets 06.2014

Sure, times are still tough for U.S. cities and counties. Some survey respondents (about 14 percent) say they will spend less on 11 kinds of government functions (such as public transportation and water) in 2014 compared to 2013. But a total of 82 percent of survey respondents will spend more or about the same on those government functions in 2014. About 27 percent will spend more and 55 percent will spend the same in 2014.

Yes, government officials may be more upbeat than they have been in the past, based on the survey results: Almost six out of 10 respondents say they expect to receive the same level or more federal and state funding to their local government in 2015 compared to 2014.

Keep reading the Keating Report mid-year 2014 forecast on government budgets and spending at:   This article appeared in the June edition of Government Product News.   The mid-2014 edition of the Keating Report includes forecasts on government purchases of goods and services and comments from experts. More sections from the mid-2014 edition of the Keating Report, covering state and local government revenue drivers and government constructioncan be found at:

Rules proposed to implement Executive Order on minimum wage in federal contracts

July 10, 2014 by

An Executive Order, signed by President Obama in February, directed the U.S. Department of Labor (DOL) to develop guidelines to increase the minimum wage for federal contractors.   On June 12, the DOL, in conjunction with the White House, released its proposed rule that raises the minimum wage for workers on federal service and construction contracts to $10.10 per hour.

The 181-page proposed rule (found here as published in the Federal Register) would increase wages for nearly 200,000 workers, according to an economic analysis included in the proposal.

The Executive Order applies to new and renegotiated federal contracts starting January 1, 2015.

The proposed rule would apply to all construction contracts covered by the Davis-Bacon Act; service contracts covered by the Service Contract Act; concessions contracts, such as contracts to furnish food and lodging on federal property; and contracts to provide services, such as child care or dry cleaning, in federal buildings.  Tipped employees of government contractors and their subcontractors would also receive a raise under the proposed rule.

The DOL’s Wage and Hour Division will be responsible for enforcing the proposed rule. The proposed rule contains a mechanism for investigations and informal complaint resolution as well as remedies for violations, including the payment of back wages and debarment as well as an anti-retaliation provision to protect whistle blowers or complainants.

July-Sept. federal contracts expected to be more than $63 billion

July 9, 2014 by

Last year’s fourth quarter in federal government contracting is set to be eclipsed by its 2014 successor: The number of regional opportunities remains the same, but with a much higher dollar value.

Deltek anticipates that more than 1,300 regional solicitations — with a combined value of more than $63 billion — will be released in the fourth quarter of fiscal 2014. Last year, 1,375 regional solicitations were released with a combined value of $42.2 billion.

Comparison of FY13 and FY14 Federal Contracting Activity

Like last year, the Mid-Atlantic region has the most robust opportunity pipeline of any region, offering both the highest number of end-of-fiscal-year opportunities and total value: more than 450 solicitations are anticipated, worth $28 billion.

The southeast and south central regions round out the top areas, with $10 billion and $4 billion, respectively.

Keep reading this article at:

See Deltek’s full analysis at:

Revenue-based small business size standards to increase on July 14

July 8, 2014 by

You probably know that the federal government’s definition of a small business is based on either the number of people that a company employs or the amount of revenue it earns annually.  The number-of-employees or the gross-revenue standards are applied to individual North American Industrial Classification System (NAICS) codes.  One or more NAICS codes apply to every business.

Thus, in order to determine whether a company is a small business in the eyes of the government, one must first determine which NAICS code or codes apply to the business, and then see what size standard (employees or revenue) applies to each NAICS code.  If a business has fewer employees or earns less annual revenue (averaged over the past three years) than the standard, then that business can represent itself to the federal government as a small business.  This is an important determination to make since the federal government sets an annual goal of awarding 23 percent of its contract dollars to small businesses.

It’s been more than five years since the Small Business Administration (SBA) updated the revenue size standards for small businesses.  Therefore, as of July 14, 2014, the SBA is adjusting virtually all of its size standards that are based upon revenue, to account for the years of inflation since the last adjustment. 

The forthcoming adjustment affects almost half of all NAICS code categories.    In all,  476  industrial categories will be affected by the update,  including most service, construction, retail, agricultural and transportation industries. 

With these increases, the new small business size standards range between $5.5 million and $38.5 million.

Using the Gross Domestic Product price index to obtain the most comprehensive measure of inflation, the SBA determined that the amount of inflation that occurred between the first quarter of 2008 and the last quarter of 2013 was 8.73 percent.   The SBA then calculated the new size standards by multiplying the current size standards by 1.0873 and then rounding that total to the nearest $500,000.  After these adjustments,

This latest adjustment of the revenue-based size standards for inflation is separate from the comprehensive review of all size standards that the SBA is supposed to perform at least every five years.

The new size standards can be found at:!documentDetail;D=SBA-2014-0009-0001.  Busineeses have until August 11, 2014 to submit any comments on these rules which technically are “interim final rules” at this point.

Because these new size standards will apply to certificates of small business size status signed on or after July 14, 2014, small (and near-small) businesses should review the new size standards to determine whether they now qualify as a small business concern.   Businesses also should visit the System for Award Management (SAM) and verify that their profile and certifications are up to date based on the revised size standards.

See more details on the SBA’s website at:

Businessmen sentenced for bribery in connection with Camp Pendleton contracts

July 7, 2014 by

The presidents of two California contracting firms were sentenced on June 27, 2014 to prison terms after pleading guilty to bribing a federal employee to get construction and service contracts worth millions of dollars at Camp Pendleton.

Hugo Hernandez Alonso, 50, of Chula Vista was sentenced to a year in prison and fined almost $127,000. Bayani Yabut Abueg Jr., 51, of San Diego was sentenced to six months in prison and fined $366,140.

The two admitted to bribing Natividad Lara Cervantes, a civilian employee of the Department of Defense who was the supervisor for construction and service contracts in the inspection branch of the department. Cervantes pleaded guilty in January and is set to be sentenced in July.

The bribes stretch back from 2008 to 2011, with Cervantes receiving thousands of dollars in cash and remodeling work on his San Diego condominium, according to documents filed in San Diego federal court, where the cases were decided.

Keep reading this article at:

Read update on sentencing here:

What tests today’s contractors

July 3, 2014 by

With federal contract spending near its lowest levels in a decade, agencies are upping their solicitations and award-hungry companies are increasing their bid protests. Chief factors in the spending reductions are the drawdowns of the wars in Iraq and Afghanistan (the Pentagon being by far the largest contracting agency) and sequestration.

These and related trends are captured in the following five charts drawn from a new report on fiscal 2013 contracting released this month by the National Contract Management Association (NCMA) in partnership with Bloomberg Government.

See charts like the one below at:

Gov't Prime Contract Spending by FY 03-13


Federal government again falls short of its small business goals

July 1, 2014 by

The federal government is falling short of its goals for awarding contracts to small businesses in some industries where it spends the most money, according to the Small Business Administration.

The government has an overall goal of giving 23 percent of its contracting dollars to small businesses. It has routinely missed that goal in recent years.

An analysis of federal spending by the SBA’s Office of Advocacy shows small businesses got less than 12 percent of contracting dollars spent at manufacturers during the 2012 fiscal year. The government spent nearly $200 billion on manufacturing contracts, the most in a single industry.

One problem is not the number of contracts going to small businesses, but the amount of those contracts, the analysis says. And in industries like manufacturing, a high amount of contract dollars go to a small number of companies — for example, defense contractors like Lockheed Martin Corp. or Boeing Co. that each get billions of dollars annually.

One concern continually raised by lawmakers is that some large companies with federal contracts don’t live up to agreements to give subcontracts to small businesses.

Small businesses, meanwhile, got 22.5 percent of the $141 billion spent at companies providing professional, scientific and technical services. They received 21.3 percent of the $43 billion spent at companies providing administrative and support, waste management and restoration services.

Keep reading this article at: 

Defense acquisition rule requiring contractors to report counterfeit parts set to be included in the FAR

June 30, 2014 by

In May, the Department of Defense amended the Defense Federal Acquisition Regulation Supplement (DFARS) to require certain contractors to detect and report counterfeit electronic parts.  (See DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts” by clicking here.)

Now, the Federal Acquisition Regulation (FAR) Council has published a proposed rule to greatly expand counterfeit reporting obligations.  The newly proposed rule sets forth sweeping requirements for contractors and subcontractors to report nonconforming items.

Unlike the DFARS rule, which limits application to particular electronic parts and a certain category of contractors, the proposed FAR rule extends beyond electronic parts and specific contractors.  In fact, the proposed rule is designed to effect all contracts for acquisition of supplies or services that include supplies.

Under the proposed rule, contractors and subcontractors at all tiers must screen the Government-Industry Exchange Program (GIDEP) as part of their quality control processes.  Further, the proposed rule requires reporting in GIDEP of any “common” items purchased that are counterfeit, suspected to be counterfeit, or contain “major nonconformance” or “critical nonconformance.”   In addition, contractors must notify Contracting Officers, in writing, when they become aware that “any end item, component, subassembly, part or material contracted in supplies purchased by the government” is counterfeit or suspected to be counterfeit.

Written comments on the proposed rule are due by August 11, 2014.   Comments are to be submitted via the Federal eRulemaking portal by searching for ‘‘FAR Case 2013–002’’.    Select the link ‘‘Comment Now’’ that corresponds with ‘‘FAR Case 2013–002.’’ Follow the instructions provided at the ‘‘Comment Now’’ screen. Please include your name, company name (if any), and ‘‘FAR Case 2013-002’’ on your attached document.  Comments may be faxed to 202–501–4067 or mailed to: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405.