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HUD responds to attacks on block grant program

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December 21, 2011 by cs

The Housing and Urban Development Department on Friday moved to improve monitoring of a key block grant program for affordable home construction, following charges of fraud, delays and mismanagement aired by the media, Congress and the HUD inspector general.

A proposed rule published in Friday’s Federal Register would tighten state obligations for oversight in the HOME Investment Partnerships Program, the largest federal block grant to state and local governments designed to boost the stock of available low-income housing.

“The HOME program is a success story for housing low-income Americans and creating jobs,” HUD Secretary Shaun Donovan said in a statement on the program that was created in 1992.  “However, there’s more we can do to improve performance and accountability. Through these new steps, we want to expand HOME’s impact and ensure that every dollar is used smartly to help families afford their homes.”

The proposed rule would require state and local governments to strengthen their oversight of construction projects, develop a system for assessing the relative risk of projects and more closely monitor HOME-funded subrecipients. Block grant recipients also would be asked to assess the capacity and long-term viability of housing project developers, and they would be made to better track construction progress and report results more frequently. In addition, the proposed rule would establish more precise deadlines for completing projects or for actions to address delays.

The Washington Post earlier this year published a series showing that dozens of projects funded under HOME nationwide had been abandoned or delayed. The series was mentioned in a September report from the House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies, which stated that “HUD has done a poor job in some instances of overseeing grantees and that some grantees have squandered and misappropriated large amounts of federal taxpayer dollars.” The reported also said, “the block grants are especially susceptible to waste, fraud, and abuse because, by design, they are flexible dollars given to communities to undertake a wide range of community development activities with little input or constraint by the federal government.”

On Nov. 2, acting Deputy HUD Inspector General John McCarty testified to Congress that his office had conducted 60 audits of the HOME program during the past five years. “We believe that HUD’s information systems used to administer the HOME program are incapable of producing complete and reconcilable audit trails throughout the entire grant life cycle and are unable to produce reports which would facilitate timely identification of fraud waste and abuse in the programs,” he said.

He said such fraud, which is “facilitated through opportunity, desperation and greed,” is often “motivated by ease of access to the funds and by their ability to deceive program oversight by manipulating the grant procedures.”

The committee soon afterward approved a final conference report that cut for the HOME program’s funding by 37.5 percent.

Sheila Crowley, president and chief executive officer of the National Low Income Housing Coalition, said that “while the Washington Post series certainly encouraged Congress to make deep cuts to the HOME program, it’s hard to say how much it influenced the rule, as HUD has been considering accountability reforms for a year or more.” Overall, her group considers the proposed rule to be positive, despite some wariness of on-site inspections.

– by Charles S. Clark - Government Executive – December 19, 2011 – http://www.govexec.com/story_page.cfm?articleid=49605&dcn=e_gvet.

Lawmakers, OMB push to ban more ‘bad-actor’ contractors

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November 18, 2011 by cs

Procedures for disqualifying dishonest or incompetent federal contractors are too rarely exploited, according to a consensus of several senators, the White House and cross-agency watchdogs. But there is disagreement over whether the solution is improving application of the rules or whether Congress should make some suspensions and debarments mandatory.

At a Wednesday hearing of the Senate Homeland Security and Governmental Affairs Committee, Chairman Joe Lieberman, I-Conn., expressed alarm that a series of reports from the Government Accountability Office and inspectors general have shown a reluctance of many agencies to refer unsatisfactory contractors to the Excluded Parties List System maintained by the General Services Administration.

A Pentagon report “just last month shows that over a 10-year period, DoD awarded $255 million to contractors who were convicted of criminal fraud; and almost $574 billion to contractors involved in civil fraud cases that resulted in a settlement or judgment against the contractor,” Lieberman said. “Last year, the Department of Homeland Security’s inspector general found 23 cases where the department had canceled a contract because of poor performance, but in none of those cases did DHS suspend or debar the contractor.”

The Federal Emergency Management Agency, despite the existence of an anti-fraud task force following Hurricane Katrina in 2005, has not sent a single name to the list, Lieberman added, noting that the rarity of suspensions and debarments has been a concern of the committee as far back as 1981.

Sen. Claire McCaskill, D-Mo., said she got angry about the issue when a U.S. soldier was killed in Iraq by a negligent truck driver working for a U.S. contractor. The U.S. military continued using the contractor. “It’s a matter of character for our nation,” said McCaskill, who is preparing related legislation to implement recommendations of the recently disbanded Commission on Wartime Contracting.

She regretted that proposals to require more suspensions and debarments founder because of a fear of litigation, because it’s “too much trouble,” some contractors are seen as “too big to fail,” or “it is unclear who is accountable for a failure” to pursue that course, she said. “We need to draw a line in the sand.”

Dan Gordon, the departing administrator of the Office of Federal Procurement Policy, said the Obama administration had made significant progress on the issue over the past three years, but the system’s “weak link” is ensuring that a fraudulent contractor is flagged for action in a timely way. “Sometimes the referral takes too long, as historically agencies have been very bad about sharing, either because officials didn’t check the list, checked it too late, or because of problems in the spelling of an entity’s name,” he said.

He pointed to a memo to agencies released Tuesday by Office of Management and Budget Director Jack Lew that requires agencies to appoint a senior accountable official to “assess the agency’s suspension and debarment program — including the adequacy of available training and resources — review internal policies and procedures,” ensure databases are checked before grants and contracts are awarded, and “take corrective action if an award is improperly made to a suspended or debarred contractor.”

Gordon said OMB has been working with its Interagency Suspension and Debarment Committee to improve training and create detailed agency guidance. But he expressed skepticism toward any prospective legislation making certain referrals mandatory, saying agency cultures differ and mandatory referrals that take away discretion could undermine the role of suspension and debarment officials.

Allison Lerner, the inspector general of the National Science Foundation who co-chairs an IG working group on the issue, said suspensions and debarments “could be used more frequently and effectively.” The resistance comes from misconceptions among agency contracting officials, she said. Some fear jeopardizing investigations by disclosing negative information on contractors and some hold the incorrect beliefs that a decision must be based only on facts uncovered in a judicial process and that IG investigations cannot be cited as evidence against contractors.

Panelists agreed that the model policy is that practiced by the Air Force. Steven Shaw, deputy general counsel for contractor responsibility at the Air Force described two recent suspensions, one involving the Boeing Co.’s launch systems units and the other involving programs within L-3 Communications. Sixty-two percent of his suspensions and debarments are “fact-based,” he said, meaning his team doesn’t wait for the Justice Department to bring criminal charges. “We take a broad view of the type of misconduct, not just criminal fraud but as it relates to business integrity, tax issues, the Foreign Corrupt Practices Act or commercial fraud,” he said.

The Air Force also uses a “carrot-and-stick approach that is aggressive at the front end” but still allows contractors to prevent fraud through risk management and ethics programs.

Ranking committee member Sen. Susan Collins, R-Maine, who as a staff director worked on the 1981 hearing chaired by then-Sen. William Cohen, R-Maine, reminded the hearing that the goal of suspension and debarment is “not to punish contractors but to protect” the taxpayer, and that allowing “bad actors” to win new contracts is “not fair or ethical to the honest contractors.” She said she is considering legislation that would force agencies — she mentioned the Justice Department — to step up use of the tool.

Such a move is opposed by Alan Chvotkin, executive vice president and counsel of the Professional Services Council, a contractors trade group. He praised this week’s OMB memo as good “cross-agency coordination to bring attention” to the appropriate use of suspension and debarment. But he stressed the “very limited circumstances” under which “automatic exclusion” should be applied to a contractor.

“The government has wide flexibility to assess each individual situation to determine whether the government is at risk, including built-in due process procedures,” he said. “Doing it in an arbitrary way would be a mistake and convert it into a punishment, which it is not.”

– by Charles S. Clark - Government Executive - November 16, 2011  at http://www.govexec.com/story_page.cfm?articleid=49355&dcn=e_gvet

Man indicted for fraudulently winning gov’t contracts set-aside for service disabled vets

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November 16, 2011 by cs

A federal grand jury indicted a Luthersville man this week on charges of getting $2.85 million in government contracts by fraudulently claiming his business was controlled by a veteran.

Arthur Wayne Singleton, a 62-year old construction contractor, defrauded programs that set aside certain government contracts for businesses owned and controlled by disabled veterans, according to a federal indictment.

“This defendant allegedly took advantage of a service-disabled veteran of the Vietnam War, using the veteran’s name and disabled status to gain millions of dollars in federal contracts,” U.S. Attorney Sally Quillian Yates said. “Fraud like this deprives legitimate disabled veteran-owned small businesses of the opportunity to enter into construction contracts with the government.”

Attempts to reach Singleton or his lawyer Brian Steel for comment were unsuccessful.

The contract program is an important resource for disabled vets because they are often discriminated against in employment and business opportunities, said David Autry, spokesman for the  Disabled American Veterans in Washington DC.

“For whatever reason,” he said, “people prefer not to do business with them.”

Singleton approached a bed-ridden Vietnam vet, identified in the indictment only as “GT”, in 2007  and proposed they form a joint venture called  GMT Mechanical that could take advantage of set-aside construction contracts from the federal government, according to the indictment.  GT suffers from severe knee injuries and other health issues as a result of his service. Singleton, who had more than 30 years of construction and federal contract experience, completely controlled the enterprise, the indictment said, and federal rules required the disabled veteran to control the business and own 51 percent.

Singleton secured contracts from the Department of Veterans Affairs, the Department of Agriculture, the U.S. Coast Guard and the U.S. Army Corps of Engineers for construction projects around the country.  According to the indictment, Singleton paid GT $17,964 because he said he had  “to make it look as though GT was part of the business.”

The U.S. Attorney’s office has not indicted GT but declined to say whether he was a cooperating witness.

The payment to GT followed an inquiry by the VA, which sent a letter in February 2008 stating GMT Mechanical wasn’t eligible for “service-disabled veteran-owned contracts” because GT didn’t control the business or own 51 percent of it. But Singleton went ahead and submitted bids for a $290,000 contract in Iowa with the Agriculture Department, a $96,000 contract in Wyoming with the Homeland Security Department and a  $1.375 million contract in North Dakota with the Defense Department and forged GT’s signature on the bids, according to the indictment.

– by  Steve Visser, The Atlanta Journal-Constitution, 5:41 p.m. Thursday, November 10, 2011.  Find this article at: http://www.ajc.com/news/atlanta/man-accused-of-defrauding-1222311.html

Fraud continues in small business preference programs

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October 31, 2011 by cs

Contractor fraud in small business set-aside programs is difficult to detect and prove, but its annual costs to government are significant in dollars and damage to legitimate business that deserve the work, two federal watchdogs told a House panel Thursday.

In fulfilling the Obama administration’s goal of giving 23 percent of prime federal contracts to small business, agencies need to do better at making a public example of “bad actors” and at vetting contractors that misrepresent their qualifications for minority advantages through self-certification, according to Peggy Gustafson, inspector general for the Small Business Administration, and Brian Miller, IG for the General Services Administration.

They spoke at a hearing of the House Small Business Subcommittee on Investigations, Oversight and Regulations called by Chairman Mike Coffman, R-Colo., who sought to learn why much contractor fraud goes unpunished and unprosecuted.

“Just as we all benefit from small business prime contracting, we all suffer when fraud rears its ugly head,” Coffman said. “Legitimate small businesses lose the ability to perform when contracts go to firms that do not qualify for, or who are not following the rules associated with, the small business contracting program. The government suffers from this fraud because bad actors give all small businesses a bad name, so contacting officers are more reluctant to use the small business programs, which in turn results in less competition and a less vibrant industrial base.”

The set-aside programs consist chiefly of preferences for section 8(a) business development, Historically Underutilized Business Zones, women-owned businesses and the service-disabled veteran-owned program. Both inspectors general testified that their own agencies had fallen victim to fraud. SBA and the HUBZone certification program played a role in the sensational case exposed with the arrests earlier this month involving $20 million in fraud allegedly committed by contractors and two employees of the Army Corps of Engineers, Gustafson noted.

Miller described a recent $6 million contract awarded to a company that claimed to be run by a disabled veteran whose documents said he served three tours of duty during the Vietnam War and received medals and citations. It turned out, Miller said, he was a mechanical engineer serving stateside in the National Guard.

“It’s difficult to prove a monetary loss to the government because it did receive the goods and services,” Miller said. “But the real loss is to program integrity, to the legitimate small businesses that didn’t get the contract.” He added that fraudulent self-certification is difficult to detect and agencies rely on such information in the majority of the preference contract awards because their resources are limited.

“Strong penalties are needed to deter” the fraud, he said. “The tougher it is to detect, the tougher penalties must be,” though the rules should avoid punishing innocent companies simply because of a clerical error, he said.

Gustafson said each type of set-aside has its own level of vetting and the Section 8 program is the hardest for contractors to qualify for. She agreed that agencies could deter more fraud by publicizing their reviews of such programs, which in one instance prompted “contractors to drop out in droves.” It is acknowledged by all IGs, she added, “that the federal government doesn’t use suspension and debarment enough — that hits contractors in the pocketbook.”

Miller noted that GSA has an interactive map on its website providing other agencies with links to state databases reporting contractors that have been suspended or debarred.

Coffman asked whether agencies should take more responsibility for policing fraud. “It’s hard to draw simple rules,” Gustafson said. “Overburdened” agencies focused on awarding contracts are “not expected to know all the ins and outs” of the set-aside programs. Also, “the more difficult the rules are to administer, the harder it is to present the case to a jury,” she said.

But the issue “needs more discussion in the executive branch and guidance from Congress since it’s not always clear who’s minding the store,” she said. “If the programs don’t have integrity, we might as well throw them open to open competition.”

– by Charles S. Clark - Government Executive – October 27, 2011 – http://www.govexec.com/story_page.cfm?articleid=49156&dcn=e_gvet

Move over, FAPIIS – POGO freshens up its contractor database

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October 3, 2011 by cs

The federal government’s largest contractors have paid $25.3 billion in fines and penalties for everything from A to Z: from improper accounting practices to selling the government defective Zylon body armor. These and more than 1,400 other misconduct instances can be found in the Federal Contractor Misconduct Database (FCMD), which has now been updated with fiscal year 2010′s top 100 ranking.  [Note: The FCMD is published by the Project On Government Oversight (POGO), a nonprofit watchdog group.]

The top 100 features 7 new contractors, including international accounting firm Deloitte LLP, package delivery company United Parcel Service (UPS), and linguistic services provider Mission Essential Personnel. The FCMD now includes misconduct information on 160 of the federal government’s largest suppliers of goods and services.

The top 100 contractors received $276 billion in contracts last fiscal year,
accounting for slightly more than half of the $536 billion in contracts awarded
that year. As of today, these 100 contractors have accumulated 821 misconduct
instances. Thirty-eight of the top 100 have zero or one instance, a reminder
that misconduct need not be accepted as a cost of doing business with the
federal government.

As has occurred in the past, the USAspending.gov data on which the top 100 ranking is based
contains errors. Therefore, you will see double listings for Booz Allen
Hamilton, Lockheed Martin, and Northrop Grumman.

Among the instances you will find in the FCMD:

POGO’s FCMD complements the federal government’s contractor responsibility
database, the Federal Awardee Performance and Integrity Information System, or
FAPIIS. POGO was pleased to discover the recent addition of several new useful
features to FAPIIS, which is on its way to becoming an indispensable resource
that strengthens accountability over the more than $1 trillion in taxpayer money
spent each year on federal contracts and grants.

– Neil Gordon is a POGO Investigator.  Published Sept. 29, 2011 at http://pogoblog.typepad.com/pogo/2011/09/move-over-fapiis-pogo-freshens-up-its-contractor-misconduct-database.html.

Contractors ordered to post DOD fraud hotline info

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September 26, 2011 by cs

Make room on the bulletin board near contractor coffee makers and break rooms.

The Defense Department now requires its defense contractors to post the DOD inspector general’s fraud hotline posters in common work areas. The rule took affect Sept. 16, according to a notice in the Federal Register the same day.

The DOD IG didn’t think the old rules went far enough because the Federal Acquisition Regulation allowed a contractor to not post any other agency’s hotline numbers other than those of the Homeland Security Department if the company had its own business ethics program with a means of reporting fraud or waste.

However, the DOD IG believes the FAR might be limiting the use of its own hotline. Without a poster, an employee wouldn’t know the IG’s phone number.

“According to the DOD IG, some contractors’ posters may not be as effective as the DOD poster in advertising the hotline number, which is integral to the fraud program,” the notice explained. The DOD IG is also revising its poster to tell employees of federal whistleblower protections.

The rule amends the Defense Federal Acquisition Regulation Supplement, or DFARS.

In response to the proposal in May, some experts were concerned that the new hotline posters could replace the contractor as the first line of defense against waste and fraud. It would also get the IG involved in what often turns out to be human resource issues or concerns about day-to-day activities that may need immediate attention.

But the IG said its staff knows the difference between an urgent matter about a defense contract and a routine personnel issue.

The rule applies to contracts and subcontracts that exceed $5 million. It does not apply to purchases of commercial items or for work that will be performed entirely outside the United States if the contract exceeds $5 million.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement at Washington Technology.  This article appeared on Sept. 19, 2011 at http://washingtontechnology.com/articles/2011/09/19/dod-ig-required-fraud-hotline-posters.aspx?s=wtdaily_200911.

War-related contracting wasted up to $60 billion, commission reports

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September 6, 2011 by cs

A staggering $12 million squandered every day for the last 10 years — that was among the findings the Wartime Contracting Commission uncovered in more than two years of investigating war-related spending since 2001.

Releasing its report on Wednesday, the bipartisan commission set up by Congress urged lawmakers to enact many of its recommendations in order to prevent billions more in wasteful spending in Iraq and Afghanistan.

It found that between $31 billion and $60 billion spent on projects in Iraq and Afghanistan over the last 10 years has been lost to waste and fraud. That amounts to as much as 29 percent of the $206 billion spent on security, infrastructure, and other projects in those two countries over the last decade. If the amount of contract fraud and waste falls in the middle of the commission’s estimated range  -  and at least one commissioner said he believes it is closer to the high end — the commission concluded that it comes to $12 million wasted every day for the last 10 years.

“The commission sunsets on Sept. 30, but the problems in contingency contracting do not,” said former Rep. Chris Shays, D-Conn., the commission’s co-chair. “There is still time to make a difference in Iraq and Afghanistan, and there will be new contingencies.”

The commission acknowledged that many of its recommendations, such as the creation of a permanent inspector general for contingency operations and more personnel and resources to protect the government’s interests in war contracting, would require an upfront investment during a time of fiscal belt-tightening.

But several of the eight commissioners argued that the money required to implement the reforms would be significantly outweighed by the savings generated.

“Unfortunately, the current stress on the budget may discourage members of Congress from supporting the investments that some of our recommendations would require,” Shays said. “I appreciate the difficulty of proposing new spending in a time of revenue constraints, but some of the reforms require no new spending and some could be made by simply reallocating existing resources.”

But holding back funds and blocking the reforms that do require some upfront funds “would really be false economy,” Shays added.

Among its 15 recommendations, the commission wants Congress to provide resources for contingency contracting reform to mitigate the problems uncovered in the report. In addition, the commission wants lawmakers to pass legislation requiring the agencies to provide updates on their efforts to implement the recommendations.

Sen. Claire McCaskill, D-Mo., who chairs the Senate Homeland Security Subcommittee on Contracting Oversight and who pushed for the creation of the commission, said she intends “to go at this as hard as I know how.” McCaskill, a former state auditor, said the commission’s recommendations could save billions and could make it easier to find the significant cuts to the military’s budget that are expected over the next 10 years.

“Particularly in this budget climate, we cannot waste this kind of money under the umbrella of contracting practices,” she said during a teleconference with reporters.

There could be amendments as a result of the commission’s report made to the fiscal 2012 defense authorization and appropriations bills, which are both expected to move through the Senate this fall, McCaskill said. Several congressional committees are expected to hold hearings on the report after lawmakers return to Capitol Hill next week.

Shays, meanwhile, said he hopes the super committee charged with trimming the federal deficit by at least $1.2 trillion reviews the commission’s recommendations to find savings.

“We’re just one small part of their mammoth task, but if they don’t take a good look at it, it would be a failing,” he said.

– by Megan Scully – National Journal – August 31, 2011 – published at http://www.govexec.com/story_page.cfm?articleid=48691&dcn=e_gvet

Veteran-preferred contracting programs rife with fraud, say VA OIG, GAO

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August 8, 2011 by cs

Fraud pervades the Veterans Affairs Department’s contracting program for veteran-owned small businesses, a July 28 House panel was told.

The VA Office of Inspector General and the Government Accountability Office have found the program so rife with deceit that one lawmaker suggested the entire program be scrapped.

“I think if the American people really paid attention…[they] would blow this whole program up and start from scratch again. It is that bad,” Rep. Phil Roe (R-Tenn.) told the House Veterans Affairs’ subcommittee on oversight and investigations.

“Hopefully it will get better, ’cause it can’t get much worse.”

Seventy-six percent of the businesses reviewed by the VA Office of Inspector General in a recent audit were ineligible for either the program and/or the specific veteran-owned small businesses or service-disabled veteran-owned small businesses contract award, said Belinda Finn, assistant inspector general for audits and evaluations at the VA OIG. This could total $2.5 billion in contract awards to ineligible businesses over the next five years, Finn estimated.

“Thirty-eight percent of the reviewed businesses were not owned or controlled by a veteran and over half did not meet federal incurred cost and subcontracting thresholds. In many cases ineligible businesses passed through the majority of the contracts’ work requirements and funds to non-veteran-owned businesses,” added Finn.

Ineligible businesses received awards because VA’s office of small and disadvantaged business utilization was not thoroughly reviewing business documentation and performing site visits to verify the veteran-owned status, said Finn. The OIG also found that contracting officers did not always check VA’s enterprise veterans database, business size classification codes, or properly assess subcontracting and partnering agreements.

“This program is highly-vulnerable to fraud and abuse,” said Gregory Kutz, director of forensic audits and investigative service at GAO, who added that while the veteran business verification program has made some progress, it “has a ways to go.”

“We recommend that the Congress consider providing VA with the additional authority and resources necessary to expand the verification program governmentwide. Only 30 percent of service disabled veteran contracts are with the Department of Veteran Affairs. Thus, for the other 70 percent we continue to have a self certification program,” suggested Kutz.

Finn said VA’s verification system provides strong controls, but it also needs to strengthen it’s contracting practices, she said.

“I wouldn’t give up on it yet,” said Finn.

– by Molly Bernhart Walker – Fierce Government – Aug. 2, 2011 at: http://www.fiercegovernment.com/story/veteran-preferred-contracting-programs-rife-fraud-say-va-oig-gao/2011-08-02

All contracting authority suspended at Naval Undersea Warfare Center

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April 29, 2011 by cs

The Naval Sea Systems Command announced April 26th that it had suspended all contracting authority at the Naval Undersea Warfare Center, Newport Division, in Rhode Island in the wake of a $9.2 million kickback scheme over technology services contracts.

The Naval Undersea Warfare Center (NUWC) is a shore command of the U.S. Navy within the Naval Sea Systems Command (NAVSEA) Warfare Center Enterprise, which engineers, builds and supports America’s fleet of ships and combat systems.

After waiting six months for Congress to agree on this year’s federal budget, local companies in Newport, RI thought defense dollars would finally begin flowing back into the area.

Even with the budget in place, their wait may be longer because of the Navy’s decision to take away the authority of Newport’s NUWC to issue both new contracts and delivery orders on existing ones.

Most contractors could deal with a few weeks’ delay, said Gary Bennett, who ran the former Analysis & Technology Inc. in North Stonington, but a longer holdup could mean employers may have to delay hiring new staff or even lay people off.

On Friday, the Navy suspended the contracting authority of NUWC in the wake of a kickback scheme allegedly involving a senior systems engineer at the warfare center accepting bribes from millions in funds from Navy contracts.

The contracts that would have gone through the warfare center now have the extra step of review at the Naval Sea Systems Command in Washington, D.C., which some fear will cause delays in funding allocations.

The timing is terrible, Bennett said Wednesday, because some companies are already operating at thin margins because it took so long to pass a federal budget. These companies are “going to be faced with some tight times,” said Bennett, who in 1999 sold his engineering services company, which employed 1,700 people, and worked extensively with NUWC.

Bennett said it’s a shame that the actions of a few “now affect the whole contracting community.”

U.S. Rep. Joe Courtney, D-2nd District, called the suspension “appropriate but infuriating at the same time” since there were many projects that would have moved quickly with the budget’s passage.

“Any spillover to companies that play by the rules is just so unfair and unfortunate,” Courtney said. “But we’re certainly going to stay in close contact with NAVSEA to ensure that the disruption is minimized to the greatest extent possible.”

Local contractors will inevitably have to wait to receive funding that some may have expected six months ago, since the “contracting activity moved to a Washington office, staffed for Washington contracts,” said John Markowicz, a former president of Sonalysts Inc. and now executive director of the Southeastern Connecticut Enterprise Region.

Several companies with contracts through NUWC said Wednesday they were closely following developments but did not expect major disruptions.

Electric Boat in Groton has contracts with NUWC, primarily for research and development. Company spokesman Robert Hamilton said that because the contracting office at NUWC remains operational, with final review and approval coming from NAVSEA, “we don’t expect any impact on those contracts.”

Yardney Technical Products Inc. had not yet heard anything from NUWC about the suspension, but Kris Johanessen, director of business development, said he believed it would “have little impact on our day-to-day business.” Yardney’s contracts through the center, he said, are “not by any means the majority of our backorders.”

The Pawcatuck-based company is working on a battery for a lightweight torpedo in development at NUWC.

Jane Goldsmith, corporate spokeswoman for Sonalysts Inc., said funding may come through more slowly but the company does not expect a large impact. Sonalysts, headquartered in Waterford, provides analysis of submarine sonar systems and a variety of airborne, surface, subsurface and land-based naval systems.

The warfare center is a command within NAVSEA responsible for submarine warfare systems. This is the first time NAVSEA has suspended the contracting authority of a command, according to the Navy.

It did so because of failures to “sufficiently describe work ordered, effectively account for work ordered and received, and to provide proper surveillance and oversight of that work,” a Navy statement said. To regain its authority, the warfare center must present a detailed plan addressing the issues that led to the suspension.

Joe Marino, president of Rite-Solutions, an information technology company with an office in Pawcatuck that has worked with NUWC, said, “There are still a lot of things up in the air. And we’re still trying to get our arms around what the impact is.”

Anjan Dutta-Gupta, 58, founder and president of Advanced Solutions for Tomorrow, is expected to plead guilty today in U.S. District Court in Providence to paying bribes to Ralph Mariano, a civilian program manager and senior systems engineer at NUWC, and to others, according to U.S. Attorney Peter F. Neronha.  Advanced Solutions for Tomorrow had offices in Middletown, R.I., and Georgia.

According to court documents, Dutta-Gupta’s company paid Mariano, Mariano’s family and others at least $8 million from 1996 to 2011, largely through subcontractors. In addition, at least $1.2 million was funneled to a corporation Dutta-Gupta owned, the documents say.

In exchange for the kickbacks, Mariano made sure that millions of dollars in additional funds were added to the contracts, the documents state. Mariano, 52, of Arlington, Va., has been charged with participating in the alleged kickback scheme and is awaiting trial. He remains free on a $50,000 bond.

– from Connecticut’s TheDay.com – Apr. 28, 2011

Small-business contracts under scrutiny from several federal agencies

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December 14, 2010 by cs

A half-dozen federal agencies are looking into alleged abuses of small-business contracts, some involving Alaska native corporations that have received hundreds of millions of dollars in recent years under special set-aside rules.

Contracting specialists and government officials said the flurry of enforcement efforts signals a shift toward more oversight of contracts by the Obama administration in the wake of reports about questionable contracting practices. “This is a warning to everybody,” said Stan Soloway, president and chief executive of the Professional Services Council, a national trade group of government contractors. “Clearly, there is a signal here.”

Daniel Gordon, administrator of the White House Office of Federal Procurement Policy, said the administration supports set-aside contracts for small business and Alaska native corporations, or ANCs, but only with sufficient oversight. “We can only do that if the public . . . are confident that we are protecting those programs from fraud,” Gordon said. “The days of ‘No one is checking’ are over. For too long, there was inadequate oversight.”

The government requires agencies to devote about a quarter of procurement spending to small businesses – almost $100 billion last year. In some cases, though, small firms and ANCs allegedly have operated as fronts to pass on work and revenues to traditional companies, in violation of small-business rules.

In September, President Obama signed legislation that provides billions in new loan guarantees and other support for small businesses, with the aim of helping spur job growth and stimulating the flagging economy.

The surge in enforcement follows an unprecedented action by the Small Business Administration in October to suspend a large contractor, GTSI, from all government business. The SBA said it had evidence that GTSI had used two small firms to illegally get work from a $3 billion contracting program at the Department of Homeland Security.

Those measures came after The Washington Post detailed the relationships between the companies in a series of articles that began in September. The series has focused on abuses in the government’s small-business programs for Alaska native corporations, subsidiaries of which have received more than $29 billion in contracts over the past decade.

Among the recent enforcement and oversight efforts:

l Justice Department civil enforcement authorities are considering how to recover money from firms involved in questioned small-business contracts. The companies under scrutiny include GTSI and the two firms it worked with – EG Solutions and MultimaxArray Firstsource, according to people with knowledge of the inquiry.

In a statement, the U.S. Attorney’s Office in the District said the department is working with the SBA on civil fraud cases, but it declined to identify the companies it is reviewing.

“The U.S. attorney’s office is committed to working with SBA and inspectors general to examine whether the United States may be entitled to monetary damages and penalties from companies that abuse the small business contracting rules,” the statement said.

l Senior procurement officials at the Department of Homeland Security have launched a “comprehensive review” of the agency’s small-business contracting program, known as First Source. Officials plan to examine whether the businesses are doing the proper amount of work themselves and not handing it off to subcontractors, according to a DHS e-mail obtained by The Post.

“In light of the recent SBA’s suspensions and The Washington Post article regarding abuses in the First Source program, DHS intends to undertake a comprehensive review of all 11 First Source contracts to ensure that the program can continue forward without further risk or abuse,” the e-mail said.

In a statement, a DHS spokesman said the agency “takes very seriously the issues that resulted in the recent SBA suspensions of two of the First Source contractors.”

l The Army Criminal Investigation Command and the Defense Criminal Investigative Service have joined with the Interior Department Inspector General’s Office to examine a $250 million Army contract given to an inexperienced Alaska native corporation subsidiary, United Solutions and Services (US2).

That investigation came after The Post reported that the subsidiary received the large contract without competition, even though it could not do the work itself. Army officials said they used the company to avoid a contracting competition. They also said they knew that the firm was not doing at least half the work during much of the contract period, something that is required under SBA rules.

A spokesman for US2 said the firm “is confident that any review of this kind will show that the company and government agencies acted properly and responsibly. US2 will fully cooperate with any such inquiry in this matter.”

The SBA Inspector General’s Office also is investigating First Source contractors that SBA officials said “entered in a relationship with a subcontractor in order to defraud the government.”

The SBA is continuing to examine GTSI, even though the suspension of the company was lifted, officials said. As part of an agreement with the SBA to resume contracting, two senior GTSI executives resigned, and three others were suspended until the probe is complete.

SBA officials later also suspended the two small businesses that worked with GTSI, EG Solutions and MultimaxArray. In suspension letters to the companies, the SBA said it has evidence that the firms worked with a large company to “defraud the Government.”

Eyak Corp., the parent of EG Solutions, said in a statement that the firm is working with the SBA “to demonstrate its compliance with all relevant SBA regulations in an effort to lift the suspension and restore the company’s good standing. We are not aware of the status of any U.S. Attorney’s Office investigation but will certainly fully cooperate with any such inquiry.

“We will also work with DHS to ensure that the First Source program will continue to operate in the highly ethical manner EG Solutions adheres to.”

A spokesman for GTSI declined to comment on recent developments. An executive at MultimaxArray did not respond to inquiries.

Lars Anderson, a contracting attorney who represents a First Source contractor who raised questions about GTSI to Homeland Security officials, said there “appears to be a bellwether shift in enforcement” by the SBA and other agencies.

“I believe that this recent SBA action represents the start of a crackdown on the widespread abuses of programs meant to assist small businesses, and it is long overdue,” Anderson said.

Soloway, the trade group president, said he does not believe the problems are endemic. He said some of them stem from confusion about the government’s complex small-business rules – by contractors and government regulators alike. He said the enforcement efforts present an opportunity to clarify the regulations. “We need to be looking at the laws,” he said. “It becomes a learning moment as well as a legal moment.”

– by Robert O’Harrow Jr. – Washington Post – December 9, 2010

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