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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Indictment Issued In Government Contracts Surety Bonding Case

Small government construction contractors often have difficulty obtaining required bonding–which sometimes causes them to turn to their subcontractors for bonding assistance.

But what if a subcontractor cannot (or will not) provide the necessary bonding assistance?  According to a recent federal grand jury indictment, one California man took advantage of these situations by offering fraudulent bonds–at higher premiums–to government contractors.  The man now faces the possibility of more than 30 years in prison.

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Subcontracting Ambiguity Results in Proposal Downgrade

In a recent case, a federal court held that a procuring agency properly downgraded an offeror’s proposal because the proposal was ambiguous as to how much of the contract work the offeror intended to subcontract.

According to the Court, even though the amount to be subcontracted was small in any event, the ambiguity meant that the procuring agency reasonably questioned whether the offeror understood the requirements of the solicitation.

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GAO: 8(a) Company Not Entitled To High Past Performance Score Based On Sub’s Experience

A procuring agency appropriately refused to give an 8(a) participant the highest-possible past performance score, despite the 8(a) company’s plan to subcontract to the successful incumbent contractor.

In a recent GAO bid protest decision, the GAO held that in evaluating past performance, the agency properly focused on the experience of the 8(a) prime, which was required to perform at least 51% of the contract work and manage the contract.

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Free Webinar: Teaming Agreements and Joint Venture Agreements

Interested in creating compliant and effective joint venture agreements, teaming agreements, and subcontracts?  Join me this Friday, March 15, for a free webinar sponsored by Powering Up! Small Business Teams.

The webinar will cover mandatory provisions to include in joint venture agreements under the 8(a), WOSB and SDVOSB programs, required subcontract “flow downs” and other small business teaming requirements.  In addition, we will go beyond the minimum legal requirements and discuss best practices for thorough and effective teaming documents–topics such as dispute resolution, termination, exclusivity, non-disclosure of confidential information, and more.

To register for Friday’s free webinar, or find out more information, visit the webinar’s registration page.  And if you’re interested in learning more about the ins and outs of small business teaming, mark your calendar for the upcoming teaming webinars in the Powering Up! webinar series.

Ostensible Subcontractor Rule: SBA 8(a) Mentor-Protege “Shield” Does Not Apply

The SBA 8(a) mentor-protege affiliation “shield” does not prevent a mentor and protege from being affiliated under the so-called ostensible subcontractor rule, according to a recent decision of the SBA Office of Hearings and Appeals.

In Size Appeal of InGenesis, Inc., SBA No. SIZ-5436 (2013), SBA OHA held that the broad exception from affiliation for 8(a) proteges and their mentors does not prevent the SBA from deeming the companies affiliated under the ostensible subcontractor rule.

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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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