Georgia Tech Procurement Assistance Center

SBA’s IG questions eligibility of women-owned small businesses to receive contract set-asides

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Federal contracting officers, along with firms representing themselves as woman-owned small businesses (WOSBs) did not comply with federal regulations in 50 instances of sole-source contract awards.  As a result, there is no assurance that the contracts were awarded to firms eligible to receive sole-source awards under the WOSB program administered by the Small Business Administration (SBA).

That’s the conclusion reached by the SBA’s Office of Inspector General (OIG) in a report issued on June 20, 2018.

The OIG undertook its review of SBA’s WOSB program to determine whether the sole-source provisions that Congress included in the 2015 National Defense Authorization Act (NDAA) were being effectively implemented.   Congressional intent was to expand the number of federal contracts being awarded to WOSBs and streamline the process by which WOSB status could be validated.  Thus, in its review, the OIG wanted to determine whether sole-source contract awards comply with program requirements, and whether firms that receive the set-asides conform to the self-certification requirements.

The OIG selected a sample of 56 contracts, worth $55.7 million, to review.  The sample represented 81 percent of the sole-source contracts awarded to WOSBs between the period of Jan. 1, 2016 and Apr. 30, 2017.  The OIG determined that federal regulations were not followed by federal officials or the WOSB firms themselves in connection with 50 of the 56 contracts.  The 50 contracts were valued at $52.2 million.  Based on its findings, the OIG determined that there “was no assurance that these contracts were awarded to firms that were eligible to receive sole-source awards” under the WOSB program.

The weaknesses noted in the OIG’s report are similar to those noted in a review conducted in 2015.  Then, the OIG recommended that SBA should increase its training and outreach to both federal contracting officials and businesses regarding their responsibilities under the WOSB program.

Once again, in its latest report, the OIG makes a series of recommendations to SBA administrators to remedy the newly-identified problems.  Among them:

  • The SBA should prevent contracting personnel from awarding contracts to ineligible firms by implementing a certification process that includes “reviewing, analyzing, and making an affirmative decision that applicants are eligible to participate” in the WOSB program.
  • SBA also should strengthen controls in FPDS-NG to preclude agencies from using ineligible NAICS codes for the WOSB program’s contracts.

Overall, the OIG is recommending that the WOSB program should be operated more in line with other certification programs operated by the SBA.  In response to these recommendations, however, the SBA estimates that it will take at least another year before it implements a WOSB certification process.  SBA management also states it does not have the responsibility for improving the integrity of data in FPDS-NG.

The OIG concludes that since errors are likely to continue to be made in NAICS code selection and that WOSB firms will be allowed to continue to self-certify, the program is subjected to “unnecessary risks of fraud and abuse.”  In light of this condition, the OIG’s recent report offers six specific recommendations the SBA should take now to expand oversight and prevent agencies from awarding contracts to ineligible firms.

Small business goals are math mystery

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Here’s the bottom line.

The only way to make sense of the top graphic that shows small business goal achievement for FY17 as compared to the bottom graphic showing small business obligations for FY17 (Source: FPDS-NG) is through the double and triple-dip counting of socioeconomic dollars and the counting of dollars that were not set-aside for, but won, by small business concerns.

 

If someone can prove to me otherwise, I would happily issue an apology and retraction for teeing up this same conversation every year the government claims to have met its goals for awarding prime contracts to small businesses.

Keep reading this commentary om Linkedin by Guy Timberlake at: https://www.linkedin.com/pulse/small-business-goals-math-mystery-zoinks-guy-timberlake/

SBA sneaks in rule on small business recertification

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The Small Business Administration (SBA) issued a Direct Final Rule on March 26, 2018 that appears to address a specific holding of SBA’s Office of Hearings and Appeals (OHA) related to small business recertification rules.

This rule went into effect on May 25, 2018.

In the recently issued Analytic Strategies, Inc., SBA No. VET-268, decision, OHA held that a service-disabled veteran-owned small business concern (SDVO SBC) that recertifies its status pursuant to an acquisition or merger remains eligible for set-aside task orders under an indefinite delivery, indefinite quantity contract (IDIQ), unless the contracting officer specifically requires recertification in connection with a specific task order. This holding affirmed the widely understood interpretation of the regulations. SBA opposed this interpretation of the rule in Analytic Strategies. For more information on this case, see an earlier blog post on Analytic Strategies.

What Is the Change?

In March 2018, SBA announced what it terms as a “technical correction” under a Direct Final Rule that may be an attempt to cast doubt on the Analytic Strategies decision. This new rule, however, may prove too much as it would apply to many of the small business programs administered by SBA and not just SDVO SBCs. On the other hand, if SBA’s goal was to make contractors that have recertified their status ineligible for future set aside task orders, it is not clear this rule does it.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=701646

SBA announces results of 2017 small business federal procurement scorecard

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On Tuesday, May 22, Ken Dodds, Acting Deputy Associate Administrator for the U.S. Small Business Administration’s Office of Government Contracting and Business Development hosted a conference call to discuss the results of the 2017 Small Business Federal Procurement Scorecard.

The annual Scorecard is an assessment tool that measures how well federal agencies reach their small business and socio-economic prime contracting and subcontracting goals and reports agency-specific progress. The prime and subcontracting component goals include goals for small businesses, small businesses owned by women (WOSBs), small disadvantaged businesses (SDBs), service-disabled veteran-owned small businesses (SDVOSBs), and small businesses located in Historically Underutilized Business Zones (HUBZones).

Every fiscal year, the SBA works with each agency to set their prime and subcontracting goals and their grades are based on the agreed upon goals. Each federal agency has a different small business prime contracting goal. The SBA ensures that the sum total of all of the goals exceeds the 23 percent target established by law.

Every year, the federal government spends over $400 billion dollars on goods and services, making it the largest purchaser of goods and services in the world.  The U.S. Small Business Administration’s Office of Government Contracting and Business Development is charged with making sure that the federal government spends at least 23% of its contract dollars with small businesses annually.

SBA’s announcement notes that the federal government exceeded its small business contracting goal for the 5th consecutive year, awarding 23.88 percent in prime contract dollars to small businesses totaling $105 billion, an increase of $5 billion, to earn an “A” on SBA’s Scorecard.   This marks the first time ever small businesses received more than $100 billion in prime contracts, a very remarkable feat in an otherwise difficult contracting climate.   The federal government also awarded almost $75 billion in subcontracting dollars to small businesses.  The prime and subcontracting dollars awarded to small businesses in FY17 amount to nearly one million jobs that are supported each year through federal contracting and help to build communities and fuel the nation’s economy.

Source: https://www.sba.gov/blogs/new-sba-fy17-scorecard-shows-federal-agencies-award-record-breaking-105-billion-small-business

SBA seeks public comment on proposed subcontractor past performance pilot program

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Past performance information is a key indicator of an offeror’s ability to successfully perform a contract and is required to be considered by agencies when making most types of contract awards. Many small businesses, however, get their entrance into government contracting through subcontracts to prime contractors. These first-tier small business subcontractors often have a difficult time providing verifiable past performance because they are outside of the Contractor Performance Assessment Reporting System (CPARS) process that provides that information for prime contractors.

The good news for first-tier small business subcontractors is that the 2017 National Defense Authorization Act (NDAA) amended the Small Business Act to require the Small Business Administration (SBA) to implement a pilot program to establish past performance ratings for small business subcontractors. Under this program, a small business concern without a past performance rating as a prime contractor in the Past Performance Information Retrieval System (PPIRS) may request a past performance rating in CPARS if the small business is a first-tier subcontractor under a covered Federal Government contract requiring a subcontracting plan in accordance with FAR 19.702(a). Ratings of subcontractor performance can also be requested on subcontracts that exceed the simplified acquisition threshold, or subcontracts for architecture-engineering services valued at $35,000 or more as provided in FAR 42.1502.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=697778

See the proposed rules and how to submit comments by June 19, 2018 at: https://www.federalregister.gov/documents/2018/04/20/2018-08330/information-collection-subcontractor-past-performance-pilot-program

5 things you should know: SBA’s definition of manufacturer

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SBA’s regulations say that in order to qualify as a small business under a set-aside or sole-source contract seeking manufactured products or supply items, an offeror ordinarily must either be the manufacturer of the end item or qualify under the nonmanufacturer rule.

This post will discuss five things your small business should know about qualifying as a manufacturer under the SBA’s rules; in a future post, I’ll walk through the nonmanufacturer rule.

Let’s get to it: Here are 5 Things You Should Know about the SBA’s definition of manufacturer.

Keep reading this article at: http://smallgovcon.com/five-things/5-things-you-should-know-sbas-definition-of-manufacturer/

U.S. Attorney for Southern District of GA announces results of recent procurement fraud prosecutions

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As part of a new emphasis on procurement fraud enforcement within the Southern District of Georgia, the U.S. Attorney’s Office for the Southern District of Georgia has announced the results of a series of recent procurement fraud prosecutions.

Over the past several months, the strike force’s efforts resulted in five guilty pleas and twelve civil settlements, including the following publically available actions:

  1. United States of America v. Dwayne Fulton (1:17-CR-35)
  2. United States of America v. Calvin Lawyer (1:17-CR-35)
  3. United States of America v. Anthony Roper (1:17-CR-35)
  4. United States of America v. Audra Roper (1:17-CR-35)
  5. United States ex rel. Major Contracting Services, Inc. v. Military Training Solutions, LLC and ADCO Holdings, Inc., et al. (4:16-cv-115)
  6. United States of America v. Robert Obradovich (4:18-CR-47)

These prosecutions and civil settlements with the named individuals and entities, as well as others, stemmed from a wide variety of fraudulent conduct, including bribery of public officials, illegal kickbacks, illegal arrangements between large contracting companies and certified small or 8(a) businesses acting as “front” companies, and billing for services not rendered.  Each of the individuals who has pled guilty awaits sentencing.  The total financial recovery for the United States thus far has exceeded $7.4 million.  Several of these investigations remain ongoing.

“The Southern District of Georgia is the proud home of several major military installations that serve a vital role both in our national defense and the district’s local economy,” said United States Attorney Bobby L. Christine.  “Those who do business with these installations should be on notice – ripping off the United States will not be tolerated! This office will bring to bear the full weight of our resources to hold fraudsters accountable.”

The joint strike force that led to these convictions and settlements involved agents, investigators, and auditors from the Department of Justice, Defense Criminal Investigative Service, Army Criminal Investigation Command (Major Procurement Fraud Unit), Naval Criminal Investigative Service, the Small Business Administration Office of Inspector General.  Significant and critical assistance was also provided by civilian and military personnel from the Army, Navy, and Air Force stationed at affected military installations.

“The American public expects the Department of Defense (DoD) to spend limited taxpayer funds efficiently and economically.  Bribery and other corrupt behavior by public officials and defense contractors diverts and wastes precious dollars intended to provide critical products and services for our Warfighters.  These results demonstrate the effectiveness of investigative efforts by the Defense Criminal Investigative Service to protect the integrity of all DoD programs,” said Special Agent in Charge John F. Khin, Southeast Field Office.

“These settlements stand as proof of the tenacity of our special agents,” said Frank Robey, director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “It is important for those who conspired to profit from illegal payments take responsibility for their actions. The settlements hold the defendants accountable and send a message to others that these violations will be taken seriously.”

“Our partnership with the joint procurement fraud strike force ensures fair and open competition for U.S. Government contracts which support the training and readiness of Marine Corps personnel,” said H. Andrew Goodridge, Special Agent in Charge, NCIS Carolinas Field Office.

“SBA OIG will aggressively investigate allegations of fraud involving SBA’s preferential contracting programs, to include false statements made to gain access to contracting opportunities set aside for small businesses,” said SBA OIG Eastern Region Special Agent-in-Charge Kevin Kupperbusch.  “SBA’s preferential contracting programs are intended to promote the economy and grow and develop small businesses across the nation.  I want to thank the U.S Attorney’s Office and our law enforcement partners for their dedication and hard work throughout these investigations.”

SBA’s General Counsel, Christopher Pilkerton said, “These successful prosecutions demonstrate the tremendous results achieved through the combined efforts of federal agencies to uncover and forcefully respond to procurement fraud.  SBA is strongly committed to identifying and aggressively pursuing instances of fraud perpetrated by those participating in SBA’s procurement programs.”

The United States was represented by Assistant United States Attorneys Brian T. Rafferty, Shannon H. Statkus, J. Thomas Clarkson, Matthew A. Josephson, and Jonathan A. Porter.  Any claims resolved by the civil settlement agreements are allegations only and there has been no determination of liability.

Each of the civil settlements resolved potential liability under the False Claims Act.  Under the False Claims Act, whistleblowers can be entitled to a portion of the amount recovered by the United States.  The United States Attorney’s Office also reminds contractors that businesses and individuals that self-disclose potential violations can be eligible for significantly reduced penalties.

If you have any information regarding potential procurement fraud, please contact Assistant United States Attorney J. Thomas Clarkson at (912) 201-2601.

Source: https://www.justice.gov/usao-sdga/pr/southern-district-georgia-announces-results-recent-criminal-and-civil-procurement-fraud

SBA rejects major changes in size standard methodology

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The SBA has rejected several recommendations for major changes in how the SBA calculates small business size status.

In commentary published in the Federal Register on April 27th, the SBA rejected (among other things) recommendations that it use average employee count to evaluate the sizes of construction firms and that other firms’ sizes be measured by profits or net worth instead of average annual receipts.

The SBA’s commentary accompanied the publication of the SBA’s revised Size Standards Methodology White Paper, which is now available on the SBA’s website.  The White Paper explains how the SBA establishes, reviews, and modifies its small business size standards.

Keep reading this article at: http://smallgovcon.com/statutes-and-regulations/sba-rejects-major-changes-in-size-standard-methodology/

3 charged in fraud scheme involving small business contracts

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Last week in Wisconsin, three defendants agreed to plead guilty to federal crimes related to a long-term fraud scheme led by Brian L. Ganos involving government-funded contracts intended to benefit small businesses.

The three defendants are James E. Hubbell of Sussex, WI, Jorge Lopez of Worthington, Minnesota, and Telemachos Agoudemos  of Big Bend, WI.

According to the charges, the scheme involved Ganos, Hubbell, and others operating construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who did not actually control the companies.  The scheme participants fraudulently obtained small business program certifications to win millions of dollars in government-funded contracts to which they were not entitled.  Specifically, the following is alleged:

  • Nuvo Construction Company, Inc. (Nuvo”) was misrepresented to be majority-owned and controlled by Lopez to obtain certifications as a Small Disadvantaged Business from the U.S. Small Business Administration and as a Disadvantaged Business Enterprise from Milwaukee County.  In reality, Lopez worked full-time for a different entity in Minnesota and did not actually control Nuvo.
  • C3T, Inc. was misrepresented to be majority owned and controlled by Agoudemos to obtain verification as a Service-Disabled Veteran-Owned Small Business.  In reality, for long stretches, Agoudemos had virtually no involvement in C3T.

Hubbell and Lopez agreed to plead guilty to conspiring to defraud the United States by virtue of the scheme in violation of 18 U.S.C. § 371.  Agoudemos agreed to plead guilty to making false statements to federal agents in order to conceal that C3T, Inc. did not qualify as a Service-Disabled Veteran-Owned Small Business in violation of 18 U.S.C. § 1001.  The maximum penalties for these offenses is five years in prison and a $250,000 fine.

Earlier this month, on April 3, 2018, charges were filed against four defendants in two cases that are related to the April 18 charges.  (See: http://gtpac.org/?p=14290.) 

  • First, in Case No. 18-CR-62, an indictment was filed charging Brian L. Ganos of Muskego and Mark F. Spindler of Menomonee Falls, and the business Sonag Company, Inc. with crimes related to the fraud scheme.  The indictment also alleged that Ganos engaged in money laundering with proceeds from the scheme. The indictment included a forfeiture notice indicating that the United States seeks to forfeit a condominium located in Winter Park, Colorado; the office building used by the companies at 5500-5510 West Florist Avenue, Milwaukee, Wisconsin; a 2014 Chevrolet Corvette Stingray Convertible; and more than $2.2 million seized from two bank accounts.  Each of those assets is subject to civil forfeiture actions filed by the United States.
  • Second, in Case No. 18-CR-64, Nicholas Rivecca agreed to plead guilty to an Information charging him with conspiring with Ganos and others to use Nuvo’s DBE status to win government-funded concrete orders.  Rivecca and Ganos were the co-owners of Sonag Ready Mix, LLC, which is alleged to have filled the concrete orders in Nuvo’s name.

The following agencies are participating in the investigation that led to these charges: the Federal Bureau of Investigation; U.S. General Services Administration, Office of Inspector General; Department of Veterans Affairs, Office of Inspector General; Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service; U.S. Department of Transportation, Office of Inspector General; U.S. Small Business Administration, Office of Inspector General, Investigations Division; Defense Contract Audit Agency; and U.S. Army Criminal Investigations Command Major Procurement Fraud Unit.

Source: https://www.justice.gov/usao-edwi/pr/three-more-defendants-charged-fraud-scheme-involving-small-business-contracts

SBA is deleting ‘direct’ ownership requirement from HUBZone program

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HUBZone companies owned by U.S. citizens will no longer be required to demonstrate that the ownership is “direct.”

The SBA’s HUBZone program rules have long required that a HUBZone company owned by U.S. citizens be at least 51% directly owned by those citizens – as opposed to allowing the qualifying citizens to own those interests through legal vehicles like holding companies.  But the SBA has had second thoughts, and effective May 25, 2018, the direct ownership requirement will be eliminated.

In a direct final rule issued on March 26, the SBA writes that “[d]irect ownership is not statutorily mandated” by the portion of the Small Business Act governing the HUBZone program.  The SBA has concluded that “the purposes of the HUBZone program – capital infusion in underutilized geographic areas and employment of individuals living in those areas – may be achieved whether ownership by U.S. citizens is direct or indirect.”

Keep reading this article at: http://smallgovcon.com/hubzone-program/hubzone-program-sba-will-delete-direct-ownership-requirement/

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