SDB Fraud: Subcontractors Pay $1.9 Million Settlement

Five subcontractors and two individuals have paid the government nearly $1.9 million to resolve allegations that they violated the False Claims Act by falsely representing themselves as small disadvantaged businesses.

According to a Department of Justice press release, the subcontractors self-certified as SDBs to their prime contractors, and those self-certifications were then passed on to the government.

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Small Business Outscored By Large Company On Small Business Participation Factor

It sounds like a tale from Bizarro World: under a recent Department of Homeland Security solicitation, a small business received a “Neutral” score for the small business participation factor, while its large competitor was awarded a “Good” score for the same factor.

One might think that the GAO would sustain a bid protest, especially because the small business in question planned to self-perform nearly two-thirds of the contract work.  Think again.  The GAO denied the protest, holding that under the solicitation, offerors could only receive small business participation credit for subcontracting to small businesses, not for self-performing at the prime contract level.

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Federal Court Upholds Agency’s 40% Small Business Subcontracting Goal

The United States Court of Federal Claims has denied a challenge to the Transportation Security Administration’s establishment of a 40% small business subcontracting goal–measured by total contract price, not total subcontracting dollars.

In Firstline Transportation Security v. The United States, No,. 12-601C (2012), Judge Thomas Wheeler  rejected arguments that the TSA’s 40% small business subcontracting goal was unreasonable, contrary to the FAR, and improperly established a partial small business set-aside.

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GAO: Large Prime Deserved “Significant Weakness” For Unmet Small Business Goals

Some folks call it “October,” others prefer the more general “fall.”  But in my family, this time of year is better known as “protest season.”  So if you’re wondering where SmallGovCon has been the last few days, thank the government and its flurry of spending at the end of the fiscal year, which briefly led to a personal routine consisting almost entirely of of eating, sleeping (when my 1-year old daughter would allow it), and protesting.

While I have been busy protesting, the GAO has continued issuing bid protest decisions.  Recently, it held that a large prime contractor was appropriately assigned a “significant weakness” due to the prime’s failure to propose meeting two of five small business subcontracting goals.  I, for one, am happy to see another indication of a procuring agency putting teeth behind the small business subcontracting goals.

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Large Primes: Meet your Subcontracting Goals–Or Else

Small businesses sometimes complain that large prime contractors are not always held accountable for failing to meet their small business subcontracting goals.  If that complaint sounds familiar, you may be cheered by the GAO’s decision in a bid protest filed by one very well-known large prime contractor.  In that case, the prime’s history of meeting (or perhaps, not always meeting) its small business subcontracting goals was a critical factor causing the large prime to lose out on a contract.

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Army Rejects Large Prime’s Proposal For Failing to Commit to Small Business Subcontracting

For small government subcontractors, here’s some good news from the U.S. Army.  In a recent GAO bid protest decision, the Army eliminated a proposal from consideration because the prime contractor appeared to ignore the small business subcontracting requirement—and the GAO denied the prime’s GAO bid protest.

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Large Contractor Downgraded for Inadequate Subcontracting Plan

Many contractors, large and small, will tell you that the government is taking its small business obligations seriously these days.  The renewed emphasis on small business can be seen not only at the prime contracting level, where we are finally getting close to the 23% government-wide goal, but also at the subcontracting level.

Contracting agencies are closely scrutinizing large businesses’ subcontracting plans for small and disadvantaged businesses.  Case in point: the agency evaluation in GAO Protest of L-3 STRATIS, B-404865 (June 8, 2011).

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