Georgia Tech Procurement Assistance Center

Small business fraud leads to large monetary liability in recent cases

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Two Washington, D.C. area government contractors have agreed to pay the government for their respective roles in defrauding the U.S. Small Business Administration (SBA) in schemes to fraudulently obtain government contracts set aside for small businesses.  These two cases highlight the importance of small business compliance and the submission of accurate and complete certifications.

the first company had to pay $16 million for violating the False Claims Act (FCA).

In the second instance, company owners paid $1.25 million — and got prison time — for 8(a) set-aside contract fraud.

Keep reading this article at: https://www.jdsupra.com/legalnews/small-business-fraud-leads-to-large-36348/

 

HUBZone price preference provides a benefit to contractors – but at a price

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hubzoneThe Historically Underutilized Business Zone (HUBZone) Act (15 U.S.C. § 675a) sets forth three ways in which contracting agencies may provide contracting assistance to HUBZone contractors. The contracting agency may award contracts to HUBZone contractors on a sole source basis or they may restrict competition to just HUBZone contractors. In addition, on contracts to be awarded under full and open competition, contracting officers are to give a price preference to the prices offered by HUBZone contractors.

The HUBZone Act states that: “the price offered by a qualified HUBZone small business concern shall be deemed as being lower than the price offered by another offeror (other than another small business concern), if the price offered by the qualified HUBZone small business concern is not more than 10 percent higher than the price offered by the otherwise lowest, responsive, and responsible offeror.” In practice, how the price preference impacts award of contracts depends on the circumstances of the bids.

Keep reading this article at: http://pilieromazza.com/blog/the-hubzone-price-preference-provides-a-benefit-to-contractors-but-at-a-price

DBE program ruled burdensome but constitutional

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idotThe federal program that offers advantages for minority and women-owned businesses on highway construction contracts may disproportionately burden subcontractors, but it is still constitutional, the Seventh Circuit ruled.

Midwest Fence, a specialty contractor focused on guardrails and fencing, challenged the federal government’s program that offers help for disadvantaged business enterprises (DBEs), small businesses owned and managed by racial minorities and women.

The DBE program, in effect since 1983, establishes a goal of spending at least 10 percent of federal highway funds on contracts with disadvantaged businesses.  DBE business owners must certify their disadvantaged status, and qualify only if their net worth does not exceed $1.32 million.

Participation in the federal program is a requirement for states that want to use federal highway funds.

However, the program offers the states significant flexibility.  Contractors bidding on highway construction work in Illinois cannot be automatically rejected for failure to meet diversity goals, and quotas are flat-out prohibited. Instead, the state must determine if the bidder has made good faith efforts to find DBE subcontractors that could perform 10 percent of the work.

Keep reading this article at: http://www.courthousenews.com/2016/11/07/perks-for-minority-owned-businesses-upheld.htm

SBA to interpret Supreme Court contractor ruling for small business

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SBA logo smallThe June 16 Supreme Court decision requiring the Veterans Affairs Department to expand set-asides for veteran-owned small businesses could affect broader procurement regulations across government, says the Small Business Administration’s John Shoraka, associate administrator of SBA’s Office of Government Contracting and Business Development.  He recently told Government Executive at a contractors networking event that “the path forward is that we have to interpret how the decision impacts the Small Business Act.”

The court’s decision in Kingdomware Technologies Inc. v. the United States determined that the so-called “rule of two” requirement that the VA consider at least two bidding contractor firms (and apply a set-aside to the one that qualifies) must apply to supply orders as well as contracts.

“There was a perception that a [pre-existing GSA Schedule] order was not a contract, so the rule didn’t apply,” Shoraka told the audience. “But the Supreme Court says it is a contract, so now we know,” and the department must pick the veteran-owned small business assuming it offers a reasonable price.

Keep reading this article at: http://www.govexec.com/contracting/2016/06/sba-interpret-supreme-court-contractor-ruling-small-business/129477

VA issues interim procurement guidance in wake of Supreme Court decision

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VA-LogoIn reaction to the June 16, 2016 U.S. Supreme Court reversal of a lower court decision on the Veteran-Owned Small Business (VOSB) contracting program at the Department of Veterans Affairs (Kingdomware Technologies, Inc. v. United States), the VA has issued guidance to its acquisition team to ensure that procurements for VOSBs and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) are set-aside whenever a contracting officer has a reasonable expectation, based on market research, that two or more eligible firms are likely to submit competitive offers at a fair and reasonable price.

In the past, the VA had not implemented this rule, known as the “Rule of Two,” for orders placed against GSA and VA Schedule contracts.   The Supreme Court ruled that no exemption from the Rule of Two exists for such orders.  The Court also found that VOSB and SDVOSB set-asides should continue to be made even if and when the VA meets its goals for awards to VOSBs and SDVOSBs.

In announcing the new guidance, the VA’s Office of Acquisition and Logistics said that “additional policy and guidance will be provided via a Procurement Policy Memorandum and Class Deviation to be issued at a later date.”

Highlights of the interim guidance issued by the VA on June 22 include:

  • The VA’s Contracting Officers are to include a requirement in all solicitations that for evaluation purposes, only VA verified SDVOSBs or VOSBs in the VA’s VIP database at the time of contract award will be considered for award.  Non-VIP verified firms will be considered non-responsive and ineligible for award.
  • VA Contracting Officers are instructed to conduct and review the market research to ensure compliance with the Rule of Two, whether or not an initial decision was made to set-aside the acquisition to SDVOSBs or VOSBs.
  • For VA contracting requirements currently in the solicitation/evaluation phase, a review of the original market research is to be accomplished to confirm whether or not the Rule of Two was appropriately considered and whether offers are likely to be received from two or more qualified, capable and verified SDVOSBs or VOSBs at a fair and reasonable price. If the review results in a finding that there are two or more SDVOSBs or VOSBs, an amendment is to be be issued canceling the solicitation.
  • Where a notice to proceed has not yet been issued, VA Contracting Officers are directed to coordinate with the Head of the Contracting Activity, the Office of General Counsel and the Office of Small and Disadvantaged Business Utilization and “be prepared to proceed with issuing the notice to proceed if issued within 30 days of this guidance.”

Details on these changes can be found at: http://www.va.gov/oal/business/pps/flash16-16.asp

Supreme Court unanimously rules in favor of VOSBs in case involving the VA’s use of GSA Schedule contracts

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Supreme CourtToday – June 16, 2016 – the U.S. Supreme Court ruled in favor of the interests of Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) who challenged the practice of the Veterans Administration (VA) to not apply the veteran business preference to orders placed against GSA Schedule contracts.

According to government contract legal expert Steven Koprince, “The Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016) means that the VA will be required to truly put ‘Veterans First’ in all of its procurement actions – which is what Kingdomware, and many veterans’ advocates, have fought for all along.”

The issues involved in the Kingdomware case date back to 2006 when Congress first required the VA to restrict contract competitions to veteran-owned small businesses as long as there were at least two qualified VOSBs available to perform the work.  This is known as the “Rule of Two.”  In practice, the VA determined that this rule did not apply to orders the agency placed through GSA Schedules.  The Government Accountability Office (GAO) decided that the VA’s practices violated the law, but the VA refused to make any changes in its GSA Schedule purchasing.  Finally, in 2011, a SDVOSB company by the name of Kingdomware Technologies took the VA to court, but the U.S. Court of Federal Claims ruled against the GAO and in the VA’s favor.  Kingdomware appealed, but lost at the U.S. Court of Appeals in 2014.  One year ago, the U.S. Supreme Court agreed to hear Kingdomware’s case.

It’s been a long path to travel, but VOSBs and SDVOSBs can celebrate the unanimous decision handed down by the Supreme Court on June 16th.  The Court’s directive to the VA is clear – the written decision states that the Rule of Two “is mandatory, not discretionary.”  The Court goes on to state that the law in this case “unambiguously requires the Department [the VA] to use the ‘Rule of Two’ before applying other procedures.”

Koprince sums up the impact of the Supreme Court’s decision this way: “I expect that the Kingdomware decision will prove a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies.  The long battle is over – and SDVOSBs and VOSBs have won.”

Read the text of the Supreme Court decision here: http://www.supremecourt.gov/opinions/15pdf/14-916_6j37.pdf

Read Steven Koprince’s detailed analysis of the decision here: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/victory-sdvosbs-win-in-kingdomware-supreme-court-decision/

Read earlier articles about this case here:

Governments struggle to root out fake minority contractors

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DBE Fraud HotlineMargie Sollinger knew something wasn’t right about the companies doing business with Portland, Oregon. As the city’s ombudsman, Sollinger had for some time been hearing from business owners about fraud in the city’s minority- and women-owned contracting program. But it wasn’t until she received a specific complaint in 2013 — about a certified minority-owned construction firm doing work for Portland’s housing authority — that she decided to take action. According to the complaint, the firm was merely acting as a pass-through, winning valuable city contracts and then subcontracting the work out to non-minority companies.

Like many cities and states, Portland has a program allowing it to give special consideration to women- and minority-owned companies when handing out government contracts. The goal, of course, is to help support traditionally disadvantaged companies by giving them a leg up. But as Sollinger began to discover, the city wasn’t necessarily helping the firms it thought it was.

When she first started looking into the housing contract complaint, she wasn’t sure where to turn. “As ombudsman, the most I can really do is make recommendations,” she says. “But even still, I reached a lot of dead ends.” According to state law, the city of Portland wasn’t allowed to take action against minority-owned firms it believed to be fraudulent; those complaints had to be referred to the state. But Sollinger says the state Office of Minority, Women and Emerging Small Businesses initially shrugged her off. So she referred the case to the Oregon Department of Justice, where the investigation continued for nearly two years. Ultimately, the contracting firm was forced to relinquish its minority certification and pay $15,000 to the state. State legislators took an interest in the issue, and last year passed legislation allowing all public agencies in the state to conduct their own investigations into future allegations of minority contract fraud.

Keep reading this article at: http://www.governing.com/topics/mgmt/gov-women-minority-contracting.html

Related: http://www.governing.com/columns/col-problem-with-preferential-bids.html

Indian-owned businesses should see more procurement contracts under new ‘Buy Indian’ policy

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Buy Indian ActThe U.S. Department of the Interior’s Bureau of Indian Affairs (BIA) on Jan. 12, 2016, announced a new policy to improve the implementation of the Buy Indian Act of 1910 (Act). The policy, announced in a memorandum by Acting Deputy Assistant Secretary – Indian Affairs (Management) James Burckman, comes in response to a U.S. Government Accountability Office (GAO) report, released in July 2015, that criticized the federal government’s enforcement of the Act.

The Buy Indian Act authorized certain federal procurement contracts to be set aside for preferential awards to Indian Economic Enterprises (IEEs) for all procurement contracts issued by the BIA, the Bureau of Indian Education (BIE), the office of the Interior Assistant Secretary – Indian Affairs (AS-IA) and the Indian Health Service (IHS). In 2013, regulations were issued that defined IEEs as those companies which are at least 51 percent Indian-owned.

While the BIA and IHS have obtained services and supplies from IEEs under the Act since 1965,the GAO found that Buy Indian procurements have comprised only a small percentage of BIA and IHS annual contract obligations, the result of limited knowledge and implementation of the set-aside in regional or area offices where contracts are often awarded.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=461952

VA and Kingdomware agree: Supreme Court case isn’t moot

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Supreme CourtThe VA and Kingdomware Technologies Inc. haven’t agreed on much in recent years, but in briefs filed with the Supreme Court on November 20, 2015, they agree on one thing: the pending Kingdomware Supreme Court case is not moot.

VA sealHopefully, the fact that neither party wants the case dismissed on a technicality will help convince the Court to decide Kingdomware on the merits.

As you may recall, shortly before the Supreme Court was to hear oral argument earlier this month, the Court issued an order removing the case from its docket.  The Court asked the parties to submit briefs on whether the contracts in question have been fully performed, and if so, whether full performance renders the case moot.

Well, those briefs are in – and Kingdomware and the United States agree that the case is not moot.

Keep reading this article at: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/va-kingdomware-agree-supreme-court-case-isnt-moot/

Buy Indian Act: 105 years (and counting) of frustration

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In 1910, William Howard Taft lived in the White House, the Chicago Cubs were just two years removed from back-to-back World Series titles, and Arizona had yet to be admitted to the Union.  That summer, Congress passed the Buy Indian Act, a statute authorizing a special federal contracting program for Indian-owned businesses.

Bureau of Indian AffairsSince then, it has been mostly downhill.  It took the Bureau of Indian GAO-GovernmentAccountabilityOffice-SealAffairs (BIA) 103 years to issue regulations implementing the Act’s contracting preferences.  Now that the regulations are finally in place, the Buy Indian Act program is suffering from lack of effective oversight and implementation.  In fact, a recent Government Accountability Office (GAO) report found that the BIA and the Indian Health Service could not even clearly articulate whether Buy Indian Act set-aside contracts take priority over other set-asides.

If the Buy Indian Act is ever to live up to its potential, significant changes are needed.

Keep reading this article at: http://smallgovcon.com/statutes-and-regulations/buy-indian-act-105-years-and-counting-of-frustration/

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