GAO sustains protest resulting from agency’s failure to make referral to SBA

December 5, 2014 by

A procuring agency erred by essentially assigning a small business a failing past performance score without referring the matter to the SBA.

In a recent bid protest decision, the GAO held that the assignment of a failing past performance score under a past/fail system constituted a non-responsibility determination–and that the SBA was entitled to review the agency’s determination under the SBA’s Certificate of Competency procedures.

The GAO’s decision in FitNet Purchasing Alliance, B-410263 (Nov. 26, 2014) involved a Bureau of Indian Affairs solicitation for gym floor racks, covers, and accessories.  The solicitation was posted on the FedBid reverse auction website and was set aside for small businesses.

FitNet Purchasing Alliance submitted the lowest price.  However, the Contracting Officer elected to make award to the second-lowest bidder, Nationwide Supplies.  A single-page document in the agency’s file stated that the Contracting Officer had declined FitNet’s bid because of adverse past performance information about FitNet.  The agency’s file did not mention Nationwide’s past performance, or indicate that the Contracting Officer had considered Nationwide’s past performance in making the award decision.

Keep reading this article at: http://smallgovcon.com/gaobidprotests/agency-doesnt-request-sba-coc-gao-sustains-protest/

 

Federal claims court invalidates key component of SBA’s nonmanufacturer rule

November 25, 2014 by

It has been the common understanding within the SBA, and the small business government contracting community as a whole, that the SBA’s nonmanufacturer rule applies only to contracts for the provision of supplies (i.e., goods) and not to service contracts, regardless of
whether or not such service contracts have a supply component. The SBA memorialized this understanding in a 2011 rulemaking. According to 13 C.F.R. § 121.406(b)(3), the nonmanufacturer rule does not apply to procurements that are assigned a services, construction, or specialty trade construction code.

The U.S. Court of Federal Claims (COFC) recently turned this common understanding about the nonmanufacturer rule on its head. In its September 19, 2014, decision in Rotech v. United States, COFC No. 14-502C (2014), the COFC invalidated 13 C.F.R § 121.406(b)(3).

Keep reading this article by clicking here  (pdf file).

Step-by-step instruction on 8(a) certification on Jan. 15th

November 19, 2014 by

The Georgia District Office of the U.S. Small Business Administration (SBA), along with the Office of Minority Development of the University of Georgia’s Small Business Development Center, is presenting a three-hour seminar on the 8(a) certification process on Thursday, January 15, 2015 in Atlanta.

The SBA’s 8(a) Business Development program is a part of the federal government’s effort to promote equal business access for socially and economically disadvantaged individuals, including Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, subcontinent Asian Americans, and in in some cases, women business owners. Companies with an 8(a) certification can benefit from the wide-range of services offered including government contracting opportunities, access to capital, management and technical assistance, and more.

The Jan. 15th  seminar is being held at the Georgia District office of the SBA, 233 Peachtree Street, Suite 1900, Peachtree Center – Harris Tower, Atlanta, GA, 30303.

There is no cost associated with this event, and advance registration is required.  To register, visit: http://events.sba.gov/eventmanagement/EventRegistration.aspx?id=5f3635bc-586c-e411-8238-02bfa56e2a24.

GAO says SBA needs to monitor WOSB certifiers and improve annual eligibility examinations

November 19, 2014 by

In a November 7, 2014 report the U.S. Government Accountability Office (GAO) found that the SBA performs minimal oversight of third-party certifiers of women-owned small businesses and has yet to develop procedures that provide reasonable assurance that only eligible businesses obtain contracts set-aside for women-owned small businesses.

Background

Businesses have two options to certify their eligibility for the federal government’s women-owned small business (WOSB) program. Whether self-certifying at no cost or using the fee-based services of an approved third-party certifier, businesses must attest that they are a WOSB or an economically disadvantaged women-owned small business (EDWOSB). Businesses also must submit documents supporting their attestation to a repository the Small Business Administration (SBA) maintains (required documents vary depending on certification type), and, if they obtain a third-party certification, to the certifier.

Findings

In its examination of the certification process, the GAO found that:

  • SBA generally has not reviewed certifier performance or developed or implemented procedures for such reviews, including determining whether certifiers inform businesses of the no-cost self-certification option, a requirement in the agency’s agreement with certifiers.
  • SBA also has not completed or implemented procedures to review the monthly reports that third-party certifiers must submit.

In its report, the GAO says that without ongoing monitoring and oversight of the activities and performance of third-party certifiers, the SBA cannot reasonably assure that certifiers fulfill the requirements of the agreement.

This finding is bolstered by the fact that, in 2012 and 2013, the SBA found that more than 40 percent of businesses (that previously received contracts) it examined for program eligibility should not have attested they were WOSBs or EDWOSBs at the time of the SBA’s review. SBA officials speculated about possible reasons for the results, including businesses not providing adequate documentation or becoming ineligible after contracts were awarded, but the SBA has not assessed the results of the examinations to determine the actual reasons for the high numbers of businesses found ineligible. The SBA also has not completed or implemented procedures to conduct eligibility examinations. According to federal standards for internal control, agencies should have documented procedures, conduct monitoring, and ensure that any review findings and deficiencies are resolved promptly. As a result of inadequate monitoring and controls, potentially ineligible businesses may continue to incorrectly certify themselves as WOSBs, increasing the risk that they may receive contracts for which they are not eligible.

The GAO finds that the WOSB program has had a limited effect on federal contracting opportunities available to WOSBs. Set-aside contracts under the program represent less than 1 percent of all federal contract obligations to women-owned small businesses. The Departments of Defense and Homeland Security and the General Services Administration collectively accounted for the majority of the $228.9 million in set-aside obligations awarded under the program between April 2011 and May 2014. Contracting officers, business owners, and industry advocates with whom GAO spoke identified challenges to program use and suggested potential changes that might increase program use, including allowing sole-source contracts rather than requiring at least two businesses to compete and expanding the list of 330 industries in which WOSBs and EDWOSBs were eligible for a set-aside.

A summary of the GAO’s report can be downloaded at: http://www.gao.gov/assets/670/666430.pdf

The full report can be downloaded at: http://www.gao.gov/assets/670/666431.pdf 

California company’s sales tactics raise red flags among veteran-owned contractors

November 17, 2014 by

Some in the veteran-owned contracting community are voicing concerns about implications made by a California company that its new offering provides a competitive advantage that doesn’t actually exist.

Los Angeles-based Dun & Bradstreet Credibility Corp., which did not respond to a request for comment, launched 10 Veteran VERIFIED, “a proprietary business verification and authentication service that verifies both military service and veteran business ownership,” according to the company’s press release.

“Once the verification process is completed, a military serviceperson can showcase his or her veteran status sticker in storefronts; a point of sale; on the business website; or through social media.”

What caught the attention of some in the contracting community, however, are claims that the verification could improve a company’s chances of landing contracts.

Keep reading this article at: http://www.bizjournals.com/jacksonville/news/2014/11/14/california-companys-sales-tactics-raise-red-flags.html?page=all

 

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

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/

 

SBA’s 8(a) and HUBZone eligibility workshop to be held in Atlanta on Nov. 12

November 6, 2014 by

The Georgia District Office of the Small Business Administration (SBA) is conducting a workshop on Wednesday, Nov. 12, 2014 for small businesses interested in learning about the eligibility requirements associated with the SBA’s 8(a) Business Development and Historically Underutilized Business Zone (HUBZone) programs.

The workshop will be held at 233 Peachtree St. NE, Ste. 1900, Harris Tower, Peachtree Center Mall, Atlanta, GA, 30303, from 10:00am until noon.

In order to attend, pre-registration is required.  To register, click on this link: http://events.sba.gov/eventmanagement/EventRegistration.aspx?id=838a3859-3c5d-e311-9914-02bfa56e2a24.

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