Georgia Tech Procurement Assistance Center

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/

Infrastructure projects should include more minority- and women-owned contractors

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The need to rebuild, repair, operate and maintain our country’s infrastructure is, and always will be, an ongoing endeavor. The problem is that minorities, women, veterans and other groups are seldom the contractors or high-wage earners on infrastructure projects.

Historically, the primary funding source for the U.S. Dept. of Transportation and its infrastructure projects is an 18.4¢-per-gallon gasoline tax and a 24.4¢-per-gallon tax on diesel fuel that millions of consumers pay at the pump. These taxes account for nearly $200 billion annually. In addition to the federal tax, states collect gasoline taxes that often are much higher, with some state rates adding as much as 57¢ per gallon to a fuel purchase. Couple these taxes with airport fees, tolls and so on, and we see that much of America’s infrastructure is supported by consumers—people who should have the right to participate in rebuilding it. The inclusion of all Americans must be a top priority for local, state and federal representatives and the companies awarded these contracts.

As financial models for these projects become more creative, including the wider use of public-private partnerships (P3s), we need to ensure that funds are being used for their intended purpose—to rebuild infrastructure—and that all Americans benefit from this funding.

Keep reading this article at: https://www.enr.com/articles/44181-infrastructure-projects-should-include-more-minority–and-women-owned-contractors

Officer of construction company sentenced for illegally obtaining federal contracts meant for small disadvantaged businesses

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Michelle Cho, an officer of Far East Construction Corporation (Far East) and other construction companies, was sentenced on Apr. 25, 2017 to six months in prison and 24 months of supervised release on a federal charge of conspiring to commit wire fraud. Cho was also ordered to pay forfeiture in the amount of $169,166 and pay a criminal fine in the amount of $35,000.  The sentencing came about as a result of Cho’s guilty plea made on Nov. 15, 2016.

According to court documents, Cho was an initiator and mastermind of a scheme lasting more than five years to defraud a disadvantaged business assistance program of tens of millions of dollars. Cho utilized two straw companies, including Far East, to conspire with MCC Construction Company (MCC) and others to defraud the Small Business Administration (SBA).

Cho’s two companies were eligible to receive federal government contracts that had been set asides for small, disadvantaged businesses under the SBA 8(a) program. Cho and MCC understood that MCC would illegally perform all of the work on these contracts and pay three percent of the proceeds to Cho’s companies rather than have Cho’s companies perform at least 15 percent of the work as required by the SBA 8(a) program.  In so doing, MCC was able to win 27 government contracts worth over $70 million during the period 2008 to 2011. The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate small, disadvantaged businesses.

To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meets the SBA’s definition of socially and economically disadvantaged. The firm must also be a small business and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits. Also, under the program, the disadvantaged business is required to perform a certain percentage of the work. For the types of contracts investigated in this case, the SBA 8(a)-certified companies were required to perform at least 15 percent of the work with its own employees.

On Feb. 2, 2016, MCC agreed to pay $1,769,924 in criminal penalties and forfeiture. Thomas Harper, a former officer and owner of MCC, pleaded guilty on June 22, 2016, to conspiring to obstruct proceedings before a department or agency. He is to be sentenced on May 15, 2017. Walter Crummy, another former officer and owner of MCC, pleaded guilty on Aug. 23, 2016, to conspiring to commit wire fraud and was sentenced earlier this month to a year of probation, two months of which were home confinement, and forfeiture in the amount of $105,618.

The investigation was conducted by the FBI’s Washington Field Office, the SBA’s Inspector General, the Inspector General of the U.S. General Services Administration (GSA), the Central Field Office of the Defense Criminal Investigative Service (DCIS), and the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).

Source: https://www.justice.gov/opa/pr/construction-company-officer-sentenced-prison-conspiring-defraud-government

Woman in DBE front scheme gets 12 months in federal prison

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The former owner of a suburban Chicago construction business convicted of acting as an illegal front so another company could secure a lucrative city airport contract was sentenced Thursday (Mar. 16, 2017) to 12 months in federal prison.

Lawyers for Elizabeth Perino had sought probation and home confinement, but U.S. District Judge Gary Feinerman said he opted for prison to send a message to “an industry that needs to clean up its act.”

Perino’s conviction is the latest turn in an eight-year saga sparked in 2008 when Perino’s former project manager filed a whistleblower lawsuit alleging misconduct in massive projects run by industry giant McHugh Construction, a century-old company that reported more than a half-billion dollars in revenue in 2015.

That sparked a joint investigation by federal prosecutors and Illinois Attorney General Lisa Madigan resulting in the criminal charges.

Perino’s company posed as a legitimate woman-owned business, allowing Chicago-based Diamond Coring Co. to meet its requirements for hiring disadvantaged businesses in order to win a multimillion-dollar runway repair contract at O’Hare International Airport. Perino did no work for the bills submitted by her company.

Keep reading this article at: http://www.chicagotribune.com/news/local/breaking/ct-phony-woman-business-owner-sentencing-met-20170316-story.html

DBE contracting opportunities under the Trump Administration

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good-time-for-dbes-01-2017With President-elect Trump’s promise to turn America’s crumbling infrastructure into an opportunity for accelerated economic growth, there are likely to be significant investments in the next four years in transportation, construction, and other similar projects.

The new administration’s plans are likely to have a particularly big impact on the highway construction industry, which stands to ultimately receive billions in federally-financed dollars. State and local governments will be first in line to receive the funds so they can be trickled down to create thousands of new jobs. Those dollars will be filtered through prime contractors and their disadvantaged business enterprise (DBE) partners, which will be performing many of these federally-funded projects. With billions of dollars likely to hit the streets, this is a good time for firms to look into the DBE program.

While not as well-known as the Small Business Administration’s 8(a) and other small business programs, the Department of Transportation’s (DOT) DBE program has been around for some time. It was established by Congress in 1983 with legislation that required that at least 10 percent of the funds authorized for highway and transit federal financial assistance programs be expended with DBEs. The three agencies with those programs are the Federal Highway Administration, Federal Aviation Administration, and Federal Transit Administration.

Keep reading this article at: http://www.jdsupra.com/legalnews/dbe-contracting-opportunities-under-the-95974/

Court of Appeals affirms lengthy prison sentences for men engaging in DBE fraud 

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USDOTThe U.S. Attorney’s Office for the Middle District of Pennsylvania has announced that Joseph W. Nagle of Deerfield Beach, Florida and Ernest G. Fink, Jr. of Orwigsburg, Pennsylvania, the former owners of Schuylkill Products Inc., (SPI) had their sentences affirmed by the Third Circuit Court of Appeals.

Nagle was sentenced to 84 months’ imprisonment on November 30, 2015, and Fink was sentenced to 41 months’ imprisonment on February 24, 2016, for their roles in a massive conspiracy to defraud the U.S. Department of Transportation’s Disadvantage Enterprise (DBE) program.

According to USDOT, their scheme, which lasted for over 15 years and involved over $136 million in government contracts in Pennsylvania alone, is the largest reported DBE fraud in the nation’s history.

In April 2012, after a four-week jury trial, a jury convicted Nagle on 26 charges relating to the scheme, including conspiracy to defraud USDOT, mail fraud, wire fraud, and money laundering.  Fink previously pleaded guilty to conspiracy to defraud the USDOT in August 2010.

In 2014, three other former executives associated with SPI were sentenced for their roles in the scheme.

  • Romeo P. Cruz, of Westhaven, Connecticut, the former owner of Marikina Construction Corp., which operated as a front for SPI, was sentenced to 33 months’ imprisonment.
  • Timothy G. Hubler, of Ashland, Pennsylvania, SPI’s former Vice-President in charge of field operations, was sentenced to 33 months’ imprisonment.
  • Dennis F. Campbell, of Orwigsburg, Pennsylvania, SPI’s former Vice-President in charge of sales and marketing, was sentenced to 24 months’ imprisonment.

The investigation was conducted by the FBI, USDOT’s Inspector General’s Office, the U.S. Department of Labor Inspector General’s Office, and the Criminal Investigation Division of the IRS.

Source: https://www.justice.gov/usao-mdpa/pr/third-circuit-court-appeals-affirms-lengthy-prison-sentences-two-men-who-executed

 

S.C. feds allege contractor, associates bilked government of $350 million

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SC Fraud 08.2016Federal prosecutors have indicted five men, two women and two corporations, alleging they illegally won government contracts worth some $350 million by misrepresenting themselves as straw companies controlled by either low-income men and women or disabled veterans.

Most of the seven are from the Columbia, South Carolina area.

An 18-count indictment in the case charges that Thomas Brock, 49 of Camden; Jerry Eddins, 66, of Aspermont, Texas; Harry Michael White, 65, of Columbia; Cory J. Adams, 43, of Columbia; Tory Brock, 51, of Camden; Alfonza McCutchen Jr., 39, of Irmo; and Allison Amanda Sauls, 46, of New York, N.Y., secretly set up an interlocking set of businesses and conspired to defraud the federal government by falsifying their eligibility to get government contracts.

The conspirators also identified, created and recruited “businesses owned by qualifying minorities, women, veterans and disabled veterans” and “hid their roles in the companies from the Small Business Administration and the Veterans Administration,” the indictment states.

Construction company pays $5.4 million over disadvantaged business fraud claims

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DBE FraudA San Diego-based construction company has paid $5.4 million to resolve allegations that it fraudulently billed the federal government for work on multiple projects on military bases, including Camp Pendleton, the U.S. Attorney’s Office announced Wednesday.

It was alleged that Harper Construction Company Inc. knowingly used sham, small disadvantaged businesses and then falsely certified to the government that it used legitimate small disadvantaged businesses.

Harper Construction, a privately held general contractor, earns a substantial portion of its revenue through government contracting on construction projects across the country, prosecutors said.

The settlement involves four government contracts to construct facilities at Camp Pendleton and Camp Lejeune, North Carolina. The contracts required Harper to subcontract a certain percentage of work to small disadvantaged businesses.

Keep reading this article at: http://timesofsandiego.com/crime/2016/06/01/san-diego-construction-company-pays-5-4m-fraud-claims/

Read earlier report on this case at: http://gtpac.org/?p=7837

8(a) program participation down 34% since 2010

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8(a) Approval RateParticipation in the SBA’s 8(a) Program has declined from about 7,000 firms in 2010 to only around 4,500 today–a sharp drop of approximately 34% in only six years.

These startling numbers come from a recent SBA Office of Inspector General report, which focuses on whether the SBA properly documented the reasons for admitting certain 8(a) participants.  While that matter is interesting in its own right, the most revealing part of the SBA OIG report is the rapid decline in 8(a) Program participation, and the SBA’s plans to reverse it.

The SBA OIG report states that “[s]ince 2010, there has been a steady decline in the number of firms participating in the 8(a) Program from about 7,000 in 2010 to about 4,600 in 2015.”  As of January 2016, the numbers had dropped even more, to “approximately 4,495 participants.”

One potential reason for the low numbers: the administrative burdens of getting certified.

Keep reading this article at: http://smallgovcon.com/8a-program/8a-program-participation-down-34-since-2010/

SBA releases scorecard on small business participation in federal contracts

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The U.S. Small Business Administration (SBA) last week released its annual Small Business Procurement Scorecards, which provide an assessment of each federal agency’s annual small business contracting achievement against its goal using a grading system of A+ through F.  Government-wide, agencies received an “A” in FY 2015, reflecting achievement of small business goals in all categories except on behalf of HUBZone firms.

According to the SBA, the federal government reached its small business federal contracting goal for the third consecutive year, awarding 25.75 percent in federal contracts to small businesses totaling $90.7 billion.  The 25.75 percent of contracts awarded to small businesses represent the highest ever percentage of contracts awarded to small businesses by the government.

Small Business Goal Scorecard - All Agncies FY15

Last month, the SBA announced at a press conference that for the first time in history, the federal government has met the 5 percent goal for contracting with women-owned small businesses and record achievements for service disabled veteran-owned and small disadvantaged businesses. More information about these contracting figures can be found here.

At the individual agency level, five agencies’ grades increased from FY 2014, 16 agencies’ grades stayed the same and 3 agencies’ grades decreased.  The agency breakdown is as follows:

  • 3 agencies received an “A+” (GSA, SBA, and DOT)
  • 18 agencies received an “A”
  • 3 agencies received a “B” (HHS, NASA, and VA)
  • No agencies received a C, D, or F

Despite the fact that SBA awarded an “A” grade to 18 agencies, most of them did not meet all of the government’s overall small business goals.  The Energy Department, for example, did not meet any of the government’s five small business goals.  USAID met only two of the five goals.  Of the 18 agencies receiving a score of “A,” only Agriculture, Homeland Security, Interior, State, Treasury, and NRC met all five governmentwide goals.

About SBA’s Scorecard

According to the SBA, its annual Scorecard is an assessment tool to: 1) measure how well federal agencies reach their small business and socio-economic prime contracting and subcontracting goals, 2) provide accurate and transparent contracting data, and 3) report agency-specific progress.

Every 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 contracting goal, determined annually in consultation with SBA.  SBA ensures that the sum total of all of the goals exceeds the 23 percent target established by law.

The individual agency scorecards released by SBA, as well as a detailed explanation of the scorecard methodology, is available online at:  https://www.sba.gov/contracting/finding-government-customers/see-agency-small-business-scorecards.

Since SBA started the current small business procurement scorecard methodology in FY 2009, six agencies have received a grade of “A+” or “A” seven fiscal years in a row (FY 2009 through FY 2015):  the Departments of Agriculture, Homeland Security, Interior, Labor, Transportation, and the Environmental Protection Agency.

The overall federal small business prime contracting performance released on April 28, 2016 by the SBA, as well as a detailed explanation of the calculations, is available online at http://go.usa.gov/Nxxd.

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