Georgia Tech Procurement Assistance Center

Diminishing federal contract program has Alaskan Native corporations diversifying

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Alaska Native regional corporations are drawing a decreasing amount of their revenue from a controversial government contracting program that gives preferential treatment to minority-owned businesses, financial reports show.

Alaska Native Claims Settlement ActFederal budget cuts, a temporary government shutdown and reform legislation spurred by Congressional critics and government watchdogs has made obtaining contracts through what’s known as the 8(a) program more difficult and costly.

“They see the writing on the wall,” Kim Reitmeier, executive director of the Alaska Native Claims Settlement Act Regional Association, said at a recent Anchorage Chamber of Commerce lunch at the Egan Center. “And so the regional corporations have diversified.”

At Calista Corp., management “continues to take steps to lessen its dependence on government contracting by expanding its investments in real estate,” the company’s 2014 annual report said. Between 2012 and 2014, the majority of Calista’s revenue came from contracts or subcontracts with federal government agencies. Of those contracts, a significant portion came from the 8(a) program.

Total revenue earned through the 8(a) contracting program by the 12 regional corporations, which comprise the membership of the ANCSA Regional Association, was $2.4 billion in 2014, down from $3.6 billion in 2010, the association’s most recent annual report said.

Keep reading this article at: http://www.adn.com/article/20151206/diminishing-federal-contracting-program-has-native-corporations-diversifying

The 3 things every small business contractor should know

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Often overshadowed by their larger, multibillion dollar prime counterparts, small business contractors are critical to the federal procurement community. With billions awarded in set-asides each year, small business has become big business for eager capture executives looking to identify new opportunities.

Small Business Set AsidesOn Nov. 10, 2015 Bloomberg Government hosted a webinar analyzing the importance of small business set-asides. The presentation discussed recent set-aside spending at civilian and defense agencies and how a growing share of small-business obligations are being awarded via set-asides.

No time to watch the replay?  No problem.  We’ve pulled together the top three things every small business contractor should know.

keep reading this article at: http://about.bgov.com/blog/the-3-things-every-small-business-contractor-should-know/

Interior Dept. issues implementation rules on Buy Indian Act, effective July 8th

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The Department of the Interior is finalizing regulations guiding implementation of the Buy Indian Act, which provides the Bureau of Indian Affairs (IA) with authority to set aside procurement contracts for American Indian-owned and controlled businesses and Alaska Native-owned and controlled businesses.

The new rule can be found at 78 Fed. Reg. 34266, dated June 7, 2013.

This rule supplements the Federal Acquisition Regulation (FAR) and the Department of the Interior Acquisition Regulation (DIAR), and the final rule is to be effective July 8, 2013.

The rule supplements the Federal Acquisition Regulation and Department of the Interior Acquisition Regulation, and will be located at 48 C.F.R. Sections 1401.301-80, 1452-280 and 1480. It also responds to and incorporates the nuances of Section 831 of the National Defense Authorization Act for Fiscal Year 1991 (Pub. Law 101-510, 10 U.S.C. 2301 note) that amended 25 U.S.C. 47 to allow American Indian firms to participate in the Department of Defense’s Mentor-Protégé Program and yet maintain eligibility for contracts awarded under the authority of the Buy Indian Act.

Indian economic enterprises interested in contracting with Indian Affairs should monitor the Federal Business Opportunities website — www.FedBizOpps.gov — to identify opportunities for which there is a Buy Indian set-aside under this rule.

Procurement chief tells agencies to focus on small business set-asides

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Agencies must report on their progress in steering federal contracting set-asides to specific types of small businesses, according to new direction from Joe Jordan, the recently installed White House chief procurement officer.

Joined by Small Business Administration chief Karen Mills, Jordan told agencies in a Wednesday memo to meet their statutory goal for contracting 23 percent with small businesses by considering the use of multiple award contracts with an eye toward “maximizing opportunities for small businesses when agencies make small dollar awards, and strengthening accountability for small business goal achievement.”

Keep reading this article at: http://www.govexec.com//contracting/2012/06/procurement-chief-tells-agencies-focus-small-business-set-asides/56188/?oref=govexec_today_nl.

See Joe Jordan memo at: http://www.whitehouse.gov/sites/default/files/omb/procurement/memo/follow-up-april_25-2012-meeting-of-the-small-business-procurement.pdf.

Do Alaska Native Corporations deserve their special contracting status?

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For many people, the government’s set-aside program for Alaska Native Corporations is a blemish on the federal acquisition system. Even people who otherwise support the idea of setting aside contracts for economically disadvantaged groups take a dim view of the program, which allows agencies to award contracts of any size to ANC firms without competition.

Ever since the death of its champion, Alaska Sen. Ted Stevens, opponents have called for the program to end. Here is an overview of the arguments for and against keeping it.

The case for the ANC program:

* It’s a time-saver. Agencies can award sole-source contracts of any size to ANCs at any time. Therefore, the ANC program lets contracting officers move quickly when they’re pressured for time or caught in emergency situations, such as preparing for a hurricane.

The contracting officer doesn’t have to spend time justifying a sole-source award when using an ANC, said Larry Allen, president of Allen Federal Business Partners.

Officials also save time by avoiding the bid protests that are always a risk during full-and-open competitions.

* It stimulates the economy. The program benefits Alaska natives in economically depressed areas in the state and other parts of the country.

A 2009 survey of 11 ANCs by the Native American Contractors Association (NACA) showed that the companies provided more than $530 million in various types of benefits to more than 67,000 shareholders from 2000 to 2008. More than $341 million of that money was in cash dividends.

Alaska natives are given the opportunity to go to college, for instance, with their shares in the ANCs, said Jennine Elias, director of external affairs at NACA.

The program also provides funding for housing and government services, such as law enforcement.

* It’s a promise-keeper. ANCs were created to settle land claims with Alaska natives and foster economic development, and the companies have been allowed to participate in the government’s 8(a) minority-owned small-business program since 1986. Therefore, the ANC program fulfills a promise to the native community, Elias said.

The case against the ANC program:

* It short-circuits the procurement process. Although sole-source provisions can help in emergencies, the process can tempt an official to award a contract when it would be better to hold a competition for the work, Allen said.

There’s no doubt that contracting officers are overworked, and the ANC program can help ease their workload. But, he cautioned, “a program with good intentions can get out of control.”

* It undermines efforts to level the playing field. There was a big push for parity in government several years ago. Companies in Historically Underutilized Business Zones used to have first crack at set-aside contracts, but Congress put all small businesses on an equal footing last year.

“The theme is parity among other guys,” said Rob Burton, former deputy administrator at the Office of Federal Procurement Policy and now a partner at Venable law firm. But because ANCs don’t have to follow the same rules as other small businesses, they have “an incredible deal.”

Other small-business owners and Federal Computer Week readers have voiced their frustrations.

“The ANC advantage is unfair to real 8(a) companies and should be disbanded,” commented one reader from Virginia.

* Its benefits to the native community are questionable. The benefits ANC shareholders receive have come under scrutiny over the years. Sen. Claire McCaskill (D-Mo.), chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee, has found some problems with the program.

In 2009, her subcommittee’s analysis revealed that only about $615 a year in money, scholarships and other benefits go to each member of the Alaska native community. The report also says the ANCs employ a relatively small percentage of shareholders and often send work to outside subcontractors. McCaskill has proposed changes to match other small-business rules.

However, Elias said ANCs are already required to report on what they’re doing in their community in the interests of transparency.

And Allen said it’s a good program that would benefit from oversight by every agency, not just the Small Business Administration.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Washington Technology. Published Nov. 8, 2011 at http://washingtontechnology.com/articles/2011/11/07/home-page-acquisition-pros-cons-anc.aspx?s=wtdaily_091111.

Who are the top 8(a)s in today’s market?

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Each year our Top 25 8(a) rankings reveal some of the hidden and not-so-hidden gems of the government market.

This year is no exception, and the gem sitting at the top of the rankings for the third year running is MicroTech LLC, a business with a record of growth that is bringing it a higher profile in the government market.

This year, MicroTech has landed at No. 1 on the 2011 Top 25 8(a) rankings, No. 2 on the Washington Technology 2011 Fast 50 list of the fastest growing government contractors, and No. 75 on our 2011 Top 100. In 2010, the company also captured spots on all three Washington Technology rankings.

The 2011 Top 25 8(a) rankings are based on an analysis of federal procurement data using the same group of product and service codes we use to rank the annual Top 100 contractors. The codes cover IT, telecommunications, systems integration, engineering services, professional services and other IT-related spending by government agencies.

The companies on the list are all participants in the Small Business Administration’s 8(a) business development program, which is designed to promote the growth of minority-owned small businesses. There are five companies on the rankings that have graduated from the program, but we left them on because their graduation dates fell so late in fiscal 2011.

We took a second step in our analysis by pulling out companies owned by Alaska Native Corporations and American Indian tribes. We’ve listed those companies in a separate chart.

In addition to MicroTech, there are eight other companies making a repeat appearance on the Top 25. These include ActioNet, USfalcon, Alon Inc., 2020 Co., Guident Technologies, Ace Info Solutions, and M2 Technology.

The capabilities and services provide by the Top 25 cover the breadth of the IT-related services that the government is buying.

For example, Primescape Solutions Inc., No. 14, provides strategic planning, software development, business intelligence, enterprise content management and IT services. Customers include the State and Health and Human Services departments, the Government Printing Office, the Army, and the Navy.

2020 Co., No. 7, has focused its solutions in three core areas: health care, education and science.

Advanced C4 Solutions, No. 18, targets military customers with enterprise IT services, intelligence, and tactical and strategic communications.

In fact, focus seems to be a common thread among these companies, with each finding and excelling in its particular niche.

“We’re a reseller, but we only resell what we are experts in,” said MicroTech’s CEO Tony Jimenez in an interview earlier this year. “That’s how you bring value.”

 

About the Author: Nick Wakeman is the editor-in-chief of Washington Technology. Published Oct. 11, 2011 at  http://washingtontechnology.com/articles/2011/10/03/small-biz-top-25-intro.aspx?s=wtdaily_171011.

SBA makes first major revision to 8(a) program in a decade

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The Small Business Administration has finalized the most comprehensive changes to its 8(a) small and disadvantaged business contacting program in more than a decade, with a sharp focus on reforming and improving the transparency of Alaska native corporations.

The long-awaited final rules, published Friday in the Federal Register, closely mirror — except for minor technical changes — the proposed rules offered by SBA in October 2009.

The lengthy final rule, which takes effect on March 14, attempts to tackle a host of 8(a) concerns, from the threshold to enter and remain in the program to tightening the rules for joint ventures and mentor-protégé relationships.

“SBA has learned through experience that certain of its rules governing the 8(a) [Business Development] program are too restrictive and serve to unduly preclude firms from being admitted to the program,” the rule states. “In other cases, SBA determined that a rule is too expansive or indefinite and sought to restrict or clarify those rules.”

The agency conducted public meetings in 10 cities and consulted with tribes in two others. SBA received more than 230 comment letters.

“Through public meetings held in cities throughout the country, SBA gained valuable input from members of the small business community on ways to strengthen the program to provide the best opportunities for eligible firms, while also stepping up efforts to combat waste, fraud and abuse,” said SBA Administrator Karen Mills.

Arguably the biggest change affects ANCs, controversial 8(a) subentities that can win sole-source contracts of any size. For the first time, firms owned by ANCs or by Indian tribes, Native Hawaiian organizations and community development corporations will be required to report the financial benefits flowing back to their communities. Several recent news reports and congressional investigations have questioned whether the profits from ANCs are reaching disadvantaged Native Alaskans.

Each firm now will be required to submit information relating to their funding of cultural programs, employment assistance, jobs, scholarships, internships and subsistence activities, SBA said. In a change from the proposed rule, only the parent company, rather than the individual businesses or subsidiaries, will be required to report. Also, the agency delayed implementation of this provision for six months to allow further meetings with the tribal and ANC community, said John Klein, SBA’s acting director of government contracting and assistant general counsel for procurement law.

Devon E. Hewitt, a partner in the Washington law firm of Piliero Mazza, said the change recognizes the intense scrutiny ANCs are facing from Congress and watchdogs. “The question is whether they have done enough,” Hewitt said.

But some lawmakers want to go further in reforming the ANC program. On Thursday, Rep. Bennie Thompson, D-Miss., ranking member of the House Homeland Security Committee, introduced a bill that would put ANCs on equal footing with all other small businesses operating in the 8(a) program. The bill is a companion to legislation previously introduced by Sen. Claire McCaskill, D-Mo.

“All too often, small businesses are crowded out of opportunities by Alaska native corporations that receive uncapped, no-bid contracts under a special provision of the 8(a) program,” Thompson said. “This bill will assure that ANCs cannot continue in a privileged status that both protects them from legitimate competition from other businesses and fails to return a fair share of profits to Native Alaskan shareholders.”

The SBA regulations make other attempts to regulate the behavior of ANCs. Firms graduating from the 8(a) program no longer will be allowed to hand off contracts to a new subsidiary owned by the same ANC. “There is a perception that these contracts are being passed from one firm to another,” Klein said.

Several ANCs that have proposed changes to the 8(a) program applauded the rules change. “The rule-making process has been long and difficult for the Alaska native community,” said Rex Rock Sr., president and chief executive officer of Arctic Slope Regional Corporation. “The SBA struck a meaningful balance by protecting government and taxpayer interests while continuing to provide economic opportunities for disadvantaged businesses.”

The final rule also makes several significant changes to the rules guiding joint ventures, which are created when a small business partners with a non-8(a) firm, typically a larger business. These joint ventures are considered small businesses eligible to receive high-value contracts without competition.

The rule attempts to assure that the nondisadvantaged firm does not unduly benefit from the program. The 8(a) partner of the joint venture must now perform at least 40 percent of the work, including those awarded through a mentor-protégé agreement. The previous statutory language required only that the small business perform a “significant portion” of the work, Hewitt said.

Joint ventures awarded to an 8(a) firm also will not be allowed to win more than three contracts during a two-year period, and these entities cannot subcontract work to a non-8(a) joint venture partner. Plus, mentors who do not provide assistance to their protégés could face consequences ranging from stop-work orders to debarment.

Other proposed changes would clarify the size, income and familial determinations needed to be eligible for the 8(a) program, including those:

  • Excluding the individual retirement accounts from the strict net worth calculations that are used to determine eligibility for the program;
  • Raising the adjusted gross income to enter into the program from $200,000 to $250,000 (the total value of the participant’s assets needed to enter the program was increased from $3 million to $4 million);
  • Increasing the adjusted gross income for continued eligibility for the program from $300,000 to $350,000 (the asset level was bumped from $4 million to $6 million);
  • Allowing immediate family members of a current or former program participant to own an 8(a) firm if they are qualified to run the business and are judged not to be a front for their family member’s company;
  • Requiring that a firm’s size status remain small for its primary industry code during its participation in the 8(a) program;
  • Limiting the type and amount of fees an agent or representative can charge for assisting an 8(a) firm (the rule prohibits unreasonable fees as well as arrangements in which the fees are a percentage of the contract award or revenue); and
  • Allowing owners of 8(a) firms called to active military status to elect to be temporarily suspended rather than lose any of their nine-year term in the program.

— by Robert Brodsky – GovExec.com – February 11, 2011

Small-business contracts under scrutiny from several federal agencies

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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

Alaska Native subsidiary got $250 million Army contract

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An Army contract worth as much as $250 million awarded to a subsidiary of Cape Fox Corp., an Alaska Native corporation in Southeast, is drawing attention two years later, according to The Washington Post. The newspaper, which has been reporting on special federal contracting privileges for Alaska Native corporations, says United Solutions and Services, known as US2 and co-owned by Cape Fox Corp., got the no-bid federal contract to help the Army in “a global campaign to prevent sexual assault and harassment, without seeking outside bids.” It was an odd contract to award US2, The Post reports: US2 “had just three employees and several small contracts for janitorial services and other work. It was based in a four-bedroom colonial, where the founder worked out of his living room.” With the Army contract, US2 needed help to complete the work:

With the Army’s knowledge, the firm subcontracted the majority of it to more established companies, a Washington Post investigation has found. Federal rules generally require prime contractors on set-aside deals to perform at least half of the work, something US2 did not do on more than $100 million worth of jobs, according to interviews with Army officials and an analysis of federal procurement data. In response to The Post’s findings, officials at the Department of the Interior, which managed the contract for the Army, said proper procedures were followed in the contract award. But they said in a statement that they have asked the department’s inspector general to investigate.

It’s not the first time Cape Fox has come under scrutiny this year. Alaska Dispatch reported in May that Cape Fox and two companies it owns — APM LLC and 1CI Inc. — were suing two of APM’s former CEOs and four of those men’s companies for $27 million in damages. Last fall, the Air Force expelled 20 contractors from its procurement list, citing an extensive scheme to exploit and deceive an award process designed to assist small and disadvantaged businesses — businesses which, if Native-owned, are given preferential treatment. Six of the companies named had direct ties to Cape Fox. The rest had ties to former APM chief executive Townsend Jackson, his brother Craig Jackson, and other family members.

Cape Fox and other Alaska Native corporations have been under fire for benefiting from a special federal contracting program. Many Native corporations have created subsidiaries that are involved in what are called 8(a) contracts with the federal government. For years, critics have claimed Native corporations have received unfair advantages compared to other small businesses and that the Small Business Administrations 8(a) program lacks oversight.

The program creates preferences for economically disadvantaged small businesses. Alaska Native companies enjoy the lion’s share — 74 percent — of federal 8(a) awards, according to a 2009 report by the U.S. Senate Subcommittee on Contracting Oversight. Native corporations can go after federal contracts without facing competition. They can also subcontract to larger companies that aren’t Native-owned but have the expertise to fulfill the contracts.

— Alaska Dispatch – Nov. 27, 2010

Alaska-connected GTSI cut off from new federal contracts

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Federal officials on Friday suspended one of the nation’s largest government contractors from receiving new work, alleging that the Northern Virginia company inappropriately went through other firms to gain access to contracts set aside for small companies.

The U.S. Small Business Administration’s action imperils hundreds of millions of dollars in revenue for GTSI Corp., a top-50 contractor that has relied on the Pentagon and the rest of the federal government for more than 90 percent of its sales in recent years.

At issue is work GTSI did as a subcontractor for small businesses serving as the prime contractors on government contracts.

“There is evidence that GTSI’s prime contractors had little to no involvement in the performance of contracts, in direct contravention of all applicable laws and regulations regarding the award of small business contracts,” an SBA official wrote in a letter to GTSI’s chief executive, Scott W. Friedlander. “The evidence shows that GTSI was an active participant in a scheme that resulted in contracts set-aside for small businesses being awarded to ineligible contractors.”

In an “open letter” to employees, customers, partners and investors Friday night, Friedlander said, “Until tonight, no government agency had made an allegation that GTSI had violated any law or regulations regarding this matter.” He said that the company looks forward “to providing you with a report on our activities as the situation warrants” and that “we appreciate your support during this time.” He added: “Please be assured that we will fight to restore our good name.”

The temporary suspension is one of the strongest contracting enforcement steps taken by the government in recent memory. GTSI can challenge the action, which could lead to a longer-lasting ban from government work, contracting specialists said.

“It’s the first time in decades that the government has completely suspended a significant player, a legitimate top-tier contractor,” said Steven Schooner, a contracting law professor at George Washington University. “It puts everybody on notice.”

The move follows an internal SBA examination of GTSI activity over the past few years. It comes after a Washington Post investigation that detailed the relationship between GTSI and three small businesses, two of them entities known as Alaska native corporations.

The Post story cited an internal GTSI e-mail in which a company vice president said one of its small-business partners was “very open to the concept of GTSI doing ALL the work” on a contract. Another document cited in the story called for GTSI to receive 99.5 percent of the revenue, even though it was a subcontractor to a small business.

The SBA suspension is based in part on those documents and The Post’s findings, officials said.

“The Small Business Administration has no tolerance for fraud, waste and abuse in any of our programs,” said SBA Administrator Karen G. Mills in a statement. “This action is based on information the agency has compiled regarding GTSI’s business practices.”

Among other allegations, the SBA said that GTSI used e-mail addresses of small businesses “so that employees of GTSI could appear to be employees” of those companies while doing government work.

Behind the SBA’s inquiry are long-simmering suspicions that large businesses have been able to gain access to billions in deals that were meant to provide a boost to the nation’s small companies. Officials have worried that increasingly large contracts awarded in recent years through small-business programs – oftentimes without competition – are paradoxically crowding out actual small businesses from federal work.

The Pentagon and a wide array of federal agencies have used such deals because they save time and enable the agencies to meet government policy targets for small-business contracts.

GTSI was founded in 1983. Operating in Herndon, it has experienced substantial growth largely as a result of federal contracts. It reported revenue of $762 million last year from the sale of a variety of information technology products and a variety of services. The company said it had 615 employees, according to its most recent annual report.

GTSI was ranked 49th on trade magazine Washington Technology’s list of Top 100 government contractors last year.

Despite its growth, GTSI has for years maintained a small-business status on some older contracts under federal rules. But the company anticipated losing direct access to set-aside deals as a consequence of its growth. Several years ago, the company disclosed a plan to “mitigate any potential adverse affect on our sales from the loss of our small business status” by developing “strategic relationships with small businesses that benefit from the small business benefits,” according to a filing with the SEC.

One relationship was with EyakTek, an Alaska native corporation. EyakTek’s parent, Eyak Corp., and GTSI founded the company in 2002. Eyak received 51 percent ownership, while GTSI received 37 percent. As an Alaska native corporation, EyakTek has special contracting privileges, including the right to receive contracts of any size without competition.

In 2006, EyakTek and GTSI formed another subsidiary called EG Solutions, which was among 11 companies chosen to provide equipment and services to the Department of Homeland Security through a $3 billion contracting program called First Source. GTSI also worked as a subcontractor for MultimaxArray FirstSource, another small business in the program. The department First Source’s contracts are cited in the SBA notice of suspension letter.

— By Robert O’Harrow Jr. – Washington Post – October 2, 2010

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