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Contractor settles fraud claims related to 8(a) joint venture

March 1, 2021 By Andrew Smith

R&W Builders, Inc. (R&W) of O’Fallon, Illinois, has agreed to pay the United States $400,000 to resolve allegations that it violated the False Claims Act by fraudulently obtaining construction contracts reserved for disadvantaged small businesses, U.S. Attorney Steven D. Weinhoeft announced today.

The Small Business Administration (SBA) 8(a) Business Development Program helps provide a level playing field for small businesses owned by socially and economically disadvantaged individuals by limiting competition for certain federal contracts to Program participants.  To increase the opportunities available to these disadvantaged businesses, the SBA also permits Program participants to partner with another company on certain contracts through approved joint venture agreements.  The SBA requires the joint venture agreements to include specific terms to ensure the relationship is fair and provides a benefit to the disadvantaged business, including provisions designating the disadvantaged business as the managing partner of the joint venture and requiring the disadvantaged business to perform a specified percentage of the work.  It is important that 8(a) joint ventures comply with the SBA’s criteria because misuse of the Program deprives real disadvantaged businesses of valuable economic opportunities and undermines the Program’s integrity.

In 2014, after R&W was no longer eligible to participate in the 8(a) Program, it entered into a joint venture agreement with Global Environmental, Inc. (GEI), an 8(a) Program participant based in St. Louis, Missouri.  R&W and GEI named the joint venture Patriot Commercial Construction, LLC (Patriot) and successfully secured an award set aside solely for Program participants on the Multiple Award Construction Contract (MACC) at Scott Air Force Base, Illinois.

The United States contends that R&W falsely represented it would abide by the Program requirements and the Patriot joint venture agreement to obtain the SBA’s approval.  Immediately after Patriot received an 8(a) award on the MACC, R&W began managing the joint venture and using its own employees to complete nearly all of the work Patriot performed.  Over the next two years, R&W caused Patriot to receive numerous MACC task orders set aside for 8(a) Program participants when Patriot was under R&W’s control, in violation of SBA requirements.

Continue reading at:  U.S. Department of Justice

Filed Under: Contracting News Tagged With: 8(a) Business Development Program, False Claims Act

Congressional Research Service publishes updated report on SBA’s 8(a) program

February 22, 2021 By Andrew Smith

The 8(a) Business Development Program—commonly known as the “8(a) Program”—provides participating small businesses with training, technical assistance, and contracting opportunities in the form of set-aside and sole-source awards.  A set-aside award is a contract in which only certain contractors may compete, whereas a sole-source award is a contract awarded, or proposed for award, without competition.  In FY2019, 8(a) firms were awarded $30.4 billion in federal contracts, including $8.6 billion in 8(a) set-aside awards and $9.9 billion in 8(a) sole-source awards.  Other programs provide similar assistance to other types of small businesses (e.g., women-owned, HUBZone, and service-disabled veteran-owned).

8(a) Program eligibility is generally limited to small businesses “unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States” that demonstrate “potential for success.”

Members of certain racial and ethnic groups are presumed to be socially disadvantaged, although individuals who do not belong to these groups may prove they are also socially disadvantaged.  To be economically disadvantaged, an individual must have a net worth of less than $750,000 at the time of entry into the program and less than $750,000 for continuing eligibility.  In determining whether an applicant has good character, the SBA takes into account any criminal conduct, violations of SBA regulations, or debarment or suspension from federal contracting.  For a firm to demonstrate potential for success, it generally must have been in business in its primary industry classification for two years immediately prior to applying to the program.  However, small businesses owned by Alaska Native Corporations, Community Development Corporations, Indian tribes, and Native Hawaiian Organizations are eligible to participate in the 8(a) Program under somewhat different terms.  Each of these terms is further defined by the Small Business Act, Small Business Administration (SBA) regulations, and judicial and administrative decisions.

This report examines the 8(a) Program’s historical development, key requirements, administrative structures and operations, and the SBA’s oversight of 8(a) firms.  It also discusses two SBA programs designed to support 8(a) firms, the 7(j) Management and Technical Assistance Program and the All Small Mentor-Protégé Program, and provides various program statistics.  It concludes with an analysis of the following current 8(a) Program issues:

  • The SBA’s decision to address recent declines in the number of program participants by revising and streamlining the program’s application process, an action which the SBA’s Office of Inspector General (SBA OIG) reports “may erode core safeguards that prevented questionable firms from entering the 8(a) Program.”
  • Reported variation in 8(a) Program service delivery.
  • Reported deficiencies in the oversight of 8(a) Program participant’s continuing eligibility.
  • Disagreements concerning the financial thresholds used to determine economic disadvantage, including the SBA’s decision to exclude equity in a primary residence from the calculation of an individual’s net worth.
  • The adequacy of the performance measures used to evaluate the program’s effectiveness in meeting its statutory goals.

Read the full report here:  https://crsreports.congress.gov/product/pdf/R/R44844

Filed Under: Contracting News Tagged With: 8(a), 8(a) Business Development Program, SBA

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