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Small business group renews suit challenging SBA’s goal claims

November 23, 2016 By Andrew Smith

ASBLThe small but vocal American Small Business League this week continued its long-standing challenge to the Small Business Administration’s claims that agencies are meeting their statutory goals in awarding contracts to qualified small businesses.

In an appeal filed in the Ninth Circuit Court in San Francisco, the group’s attorney’s challenged a May ruling in the case naming SBA Administrator Maria Contreras-Sweet and seeking “injunctive and other appropriate relief” to prevent the SBA from “continuing to misrepresent the attainment of small business contracting goals to Congress and the American public.”

The league has long charged that definitions used by the SBA have allowed many large Fortune 500 companies through subsidiaries to win contracts intended as set-asides for qualified small firms.

Keep reading this article at: http://www.govexec.com/contracting/2016/11/small-business-group-renews-suit-challenging-sbas-goal-claims/133290/

Filed Under: Contracting News Tagged With: American Small Business League, ASBL, goaling, misrepresentation, SBA, small business, small business goals

Court enforces “presumed loss” rule in 8(a) fraud case

August 3, 2016 By Andrew Smith

Presumed LossIn a Memorandum Opinion issued on June 17, 2016, the U.S. District Court for the District of Columbia applied the so-called “presumed loss” rule to assess the full contract value as the measure of the government’s loss for purposes of sentencing an individual convicted of misusing the SBA’s 8(a) program to win set-aside contracts.  (See United States v. Singh, Criminal Action No. 15-173 (RBW) (D.D.C. Jun 17, 2016).

This appears to be the first published court decision enforcing the controversial rule since its passage by Congress as part of the Small Business Jobs Act of 2010.

As brief background, prior to the 2010 Jobs Act, the Government had difficulty proving damages under the False Claims Act where a contractor misrepresented its size or socio-economic status to win set-aside government contracts. Practically speaking, the Government rarely suffers any actual economic harm in such cases. The fact that an ineligible firm improperly receives a contract set aside for small businesses may violate public policy, but it rarely increases the price of the contract.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=514216 

Filed Under: Contracting News Tagged With: 8(a), false claims, False Claims Act, fraud, misrepresentation, presumption of loss, resumed loss, SBA, small business, Small Business Jobs Act

Energy IG: Solyndra knowingly ripped-off government

September 11, 2015 By Andrew Smith

There’s plenty of blame to go around in the green-energy debacle of Solyndra, but the blame begins with the executives of the solar-panel company itself.

Energy Dept.That’s a big takeaway from the Energy Department inspector general’s new report on Solyndra, a company once highly touted by the White House that collapsed in 2011 after getting a $535 million federal loan two years earlier.

The IG’s report finds that executives with the California company, ahead of winning the loan, repeatedly gave the Energy Department, the credit-rating agency Fitch, and outside analysts bad, overly rosy information about its sales contracts.

“Our investigation confirmed that during the loan guarantee application process and while drawing down loan proceeds, Solyndra provided the Department with statements, assertions, and certifications that were inaccurate and misleading, misrepresented known facts, and, in some instances, omitted information that was highly relevant to key decisions in the process to award and execute the $535 million loan guarantee,” the report states.

“In our view, the investigative record suggests that the actions of certain Solyndra officials were, at best, reckless and irresponsible or, at worst, an orchestrated effort to knowingly and intentionally deceive and mislead the Department,” it adds.

Keep reading this article at: http://www.govexec.com/oversight/2015/08/energy-report-solyndra-knowingly-ripped-government/119582/

Filed Under: Contracting News Tagged With: deception, DOE, Energy Dept., FBI, fraud, IG, Justice Dept., loan guarantee, misrepresentation, Solyndra, Treasury Dept.

Contractor misrepresented VOSB status for $152 million lease

April 9, 2014 By ei2admin

he VA failed to verify the accuracy of a contractor’s representation that it was a veteran-owned small business, according to a new report issued by the VA’s Office of Inspector General.

According to the VA OIG, the VA failed to verify the claim of Westar Development Company, LLC to be a VOSB–and “[t]he evidence does not support a finding that Westar is or ever has been a Veteran-Owned Small Business.”   The VA’s failure to verify Westar’s VOSB status is just one of many serious flaws identified by the VA OIG in its audit of the award of a major VA lease to Westar.

The VA OIG’s report (which is well worth a read if you have the time) examines the VA’s award of a build-to-suit lease to Westar for the new Butler Health Care Center in Butler, Pennsylvania.  The 20-year lease had a total value of $152.7 million.

Keep reading this article at: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/contractor-misrepresented-vosb-status-for-152-million-lease-says-va-oig/ 

Filed Under: Contracting News Tagged With: fraud, IG, misrepresentation, SDVOSB, sham, VA, verification, veteran owned business, VOSB

Federal rule mandates small business updates, imposes monetary penalties

September 24, 2013 By ei2admin

Small businesses need to pay closer attention than ever to their “small business size status.”

New rules from the Small Business Administration (SBA), recently published in the Federal Register, require that small businesses:

  1. Accurately maintain their size status with the federal government, and
  2. Face substantial financial penalties, if willful misrepresentation of size or socioeconomic status is proven.

What actions are expected to be taken by small businesses?

First and foremost, it’s imperative that every small business update its profile in the System for Award Management (SAM) at least once a year.  A small business failing to perform annual updating will no longer be identified in the SAM database as a small business.  Lack of updating also will cause a firm’s other socioeconomic designations (such as SDB, 8(a), HUBZone, WOSB, EDWOSB, VOSB and SDVOSB) to be dropped from SAM.   Losing these designations in SAM potentially means losing eligibility for federal contracts set-aside for various small business classifications.  Firms not identified as small businesses also will not likely be considered as potential subcontractors by prime contractors who are required to meet small business subcontracting goals.

The possible penalty for a business misrepresenting itself as a small business has never been as severe as now.  If the SBA finds that a business “willfully misrepresented” itself as a small business in order to win a federal contract, the agency can cancel the contract and impose a penalty equal to the total dollar value of the contract.  Previously, when a contractor misrepresented its size or small business status, the contractor had to forfeit its contract and pay back profits associated with the contract.

The bottom line is this.  Businesses should make sure they update SAM at least annually.  In addition, businesses should expect to see a new certification form in bid and proposal solicitations, requiring each small business to certify its status as a small business along with any other socioeconomic classification the firm may hold.  The form must be signed by an authorized official.  If a federal solicitation does not contain a certification section, offerors (bidders and proponents) are expected to prepare a signed certification of their own to be included in their offer.

 

Filed Under: Contracting News Tagged With: 8(a), certification, EDWOSB, federal contracts, federal regulations, fraud, HUBZone, misrepresentation, penalty, SAM, SBA, SDB, SDVOSB, small business, small disadvantaged business, socioeconomic status, veteran owned business, VOSB, woman owned business, wosb

New rule implements ‘presumption of loss’ over small business misrepresentation

July 12, 2013 By ei2admin

A new rule goes into effect Aug. 27, 2013 implementing a “presumption of loss” of the entire dollar value of any contract given to small businesses that  misrepresent their status.

The rule makes the basis of damages for a civil lawsuit equal to the value of the full  contract.

The government will consider any misrepresentation to be intentional after a  business registers itself as small in any federal database or submits a bid for  a contract as a small business.

The rule, which implements provisions from the 2010 Small Business Jobs Act, does limit liability in cases of unintentional error, technical  malfunction, “or other similar situations.” The Small Business Administration  found 200 firms that misrepresented their size in 2010.

Keep reading this article at: http://www.fiercegovernment.com/story/new-rule-implements-presumption-loss-over-small-business-misrepresentation/2013-07-08?utm_medium=nl&utm_source=internal 

Filed Under: Contracting News Tagged With: certification, False Claims Act, false statement, fraud, misrepresentation, presumption of loss, SAM, SBA, small business, small business goals, Small Business Jobs Act, System for Award Management

Small business certification is a thorny issue

March 5, 2013 By ei2admin

The ever-evolving small business government contracting landscape presents myriad ethical quandaries for small businesses seeking set-aside and sole source contracts.

Rules governing eligibility for various small business programs are becoming more complex with amendments and case law interpretation.  Hence, whether a firm is eligible for a particular small business program or procurement often presents a thorny question.

Small business government contracting programs generally rely upon a contractor’s self-certification. To
compete, a company usually only needs to certify — with no government verification — that it meets a small business program’s requirements.

Notable exceptions include the Small Business Administration’s 8(a) business development program and Historically Underutilized Business Zone (HUBZone) program and the Department of Veterans Affairs’ Veterans First contracting program for Veteran-Owned and Service-Disabled Veteran-Owned Small
Businesses.

Keep reading this article at: http://www.nationaldefensemagazine.org/archive/2013/march/Pages/SmallBusinessCertificationaThornyIssue.aspx

Filed Under: Contracting Tips Tagged With: 8(a), certification, fraud, HUBZone, misrepresentation, SDVOSB, small business, veteran owned business

Report: Billions in federal small-business contracts go to large firms

March 2, 2012 By ei2admin

Here are just a few of the companies that were considered a small business in the past year: Apple, Chevron, Verizon, Bank of America and Disney.   At least, that’s what one advocacy group found when it perused the Federal Procurement Data Systems for government contracts for the past year.

Each year, the government attempts to award at least 23 percent of all federal contracts to small businesses. But new research from the American Small Business League (ASBL) shows that 72 large companies received $16.4 billion in federal small-business contracts, which the group attributes to a combination of policy loopholes, human error and mis-categorization.

“It’s really hard for a small company to compete with a company that has 5,000 employees,” said Brian Reeder, communications director for the ASBL. “When bigger companies are actually receiving the contracts, there’s nothing left for small businesses.”

The Small Business Administration cautions that it has not yet released its official data on contracting for 2011 and therefore can’t speak to the accuracy of ASBL’s findings. SBA will publish its official 2011 Small Business Procurement Scorecard this summer

“Each federal agency is responsible for ensuring the quality of its own contracting data, but SBA conducts an additional analysis to help agencies identify any potential data anomalies,” said John Shoraka, the SBA’s Associate Administrator for Government Contracting and Business Development in an e-mail statement. “As part of its ongoing data quality efforts, SBA is continuing to work with federal agency procurement staff to provide tools to facilitate review of data, implement improvements to procurement systems and conduct training to improve accuracy.”

Holes in the system

The ASBL report, released Thursday morning, found that of the top 100 companies receiving federal small business contracts, 72 were large companies that exceeded the SBA’s small-business size standards, which vary depending on the sector.

It’s difficult to identify just one reason why the contracts are awarded as they are, but experts say there are countless small leakages in the government procurement process that can cause large businesses, either purposefully or indirectly, to occasionally win out over small ones.

Ray Bjorklund, chief knowledge officer with the government-contractor software company Deltek, said it can be hard for the SBA to pick the “right” size for a company to be considered a small business under the North American Industry Classification System (NAICS) codes, the government’s business classification system.

“When SBA is looking at one class of establishment, such as a corn farmer, there are a lot of small-business corn growers, but also large corporate growers,” Bjorklund said. “It’s not an easy thing to maintain size standards in a way that keeps up with growth in the economy and changing relationships between sectors.”

Beyond that, when agencies begin feeling the pressure to meet their 23 percent goal, Bjorklund said they sometimes choose NAICS codes that have larger-sized caps if they want a large company to fit into a small-business contract.

“If the agency is anxious to meet its socioeconomic goals, they say, ‘I can make this a small-business set aside if I can justify it this way,’” he said. “All of this is legal, but they should have been more judicious in their acquisition strategy.”

Not close enough for government work

Reeder said human error is another problem in how contracts are coded. For example, Apple was likely never registered as a small business, but Reeder speculates an agency simply needed something only Apple could provide — iPads, for example — and then neglected to change the code from “small” to “not small” before the transaction was completed. That contract would ultimately be counted toward an agency’s small-business goal.

“There are a lot of those examples, and they really add up,” he said.

The errors may stem from a larger problem in the contracting world — the thin ranks of the acquisition workforce and the paucity of the available funds to train them.

“The acquisition workforce is not as big as it should be, and they’re not as qualified, because years ago, their funding was slashed,” Bjorklund said. “These people have inboxes stacked very high, and they want to do the very best possible job, but sometimes mistakes get made.”

The SBA drew a similar conclusion in a report it issued on the same topic last October, saying, “While some contractors may misrepresent or erroneously calculate their size, most of the incorrect reporting results from errors made by government contracting personnel.”

Small, then big, but still small

There is also a loophole that allows small businesses that are bought by large companies to continue to count as “small” for the purposes of contracting for years after they’re purchased. For example, the report says that CapRock Government Solutions, which ASBL asserts received more than $200 million in small business contracts last year, is a subsidiary of Harris Corporation, a multi-billion dollar company.

“We’re not arguing the companies should lose those contracts, but it seems silly to count them as small when they’re not small,” Reeder said.

Many of these contracts were awarded to small businesses that are actually subsidiaries of large companies, Reeder said, and they, therefore, don’t face the same odds that independent small companies do.

Bjorklund said he believes there are not quite as many large companies receiving small-business contracts as the ASBL has found. Still, he said, “the problem still exists, there’s no denying that.”

Last year, the ASBL found that there were 60 large companies included among the top 100 federal small business contractors, so they say the problem has “at best, stayed the same, if not gotten worse.”

Reeder called for better enforcement of contracting standards by the SBA, but Bjorklund explained that the SBA is largely “hands-off,” and that the ultimate responsibility falls on the agency issuing the contract.

In the October report, the SBA’s Office of the Inspector General said it had made “mixed progress” on the issue of small-business contracts going to large businesses. The agency has developed a program to ensure that contracting personnel review contractor sizes, but it has made “limited progress” in developing regulations to correct the misapplication of industry codes.

So how big of a problem is this for small contractors? Medium, according to Bjorklund. Contractors of every size are losing business as the Department of Defense and other agencies cut back. Small firms don’t have quite the same lobbying clout that larger ones do, he explained, so the impacts for them might be greater — especially if they aren’t getting all the contracts they should be. Then again, at least the government is doing something for small firms.

“At least there are small-business goals that the government is trying to meet,” he said. “That makes it a little better than it would be in the commercial marketplace — where everyone is fending for themselves.”

–by Olga Khazan, The Washington Post, Published: February 22, 2012 and updated: Thursday, February 23, 8:00 AM at http://www.washingtonpost.com/business/on-small-business/report-billions-in-federal-small-business-contracts-go-to-large-firms/2012/02/22/gIQA0EV4TR_story.html.

Filed Under: Contracting News Tagged With: FPDS, misrepresentation, NAICS codes, SBA, size standards, small business, small business goals

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