In government contracting—as in life—it’s important to be honest. And in our experience, most government contractors are honest. Where a contractor is dishonest or untruthful, it can face significant sanctions.
So it was in a recent SBA Office of Hearings and Appeals decision, in which the OHA considered the cancellation of an entity’s SDVOSB status. In CVE Appeal of Afily8 Government Solutions, LLC, SBA No. CVE-125-A (2019), the OHA affirmed the cancellation of Afily8’s SDVOSB verification based on concerns that Afily8 did not provide truthful information to the VA’s Center for Verification and Evaluation.
As part of a regular audit of SDVOSB status, CVE conducted an unannounced site visit of Afily8’s facilities. In follow-up discussions with Afily8’s owner, CVE requested additional information, including the W-2’s for Afily8’s service-disabled veteran owner.
In response, Afily8 provided its owner’s 2017 W-2 from a company called Guillaume Group. It did not, however, provide a W-2 for its owner from Afily8 for this same period.
Notwithstanding the 2017 W-2 from Guillaume Group, Afily8 insisted that its owner resigned from that company years earlier. When questioned why its owner might have a W-2 from a company he had supposedly resigned from, Afily8 responded that the resignation was “not a subject of this discussion” and challenged CVE’s reliance on evidence it “obtained with its own hand.” Afily8 did not otherwise explain the discrepancy, or provide satisfactory evidence that its owner was able to adequately control Afily8 even though he apparently still worked with Guillaume Group.
The VA’s regulations require that an SDVOSB provide CVE with truthful information. In fact, under 38 C.F.R. § 74.21(d)(1), CVE may cancel an SDVOSB’s verification for good cause, including “submission of false information in the participant’s VIP Verification application.” Citing this regulation, CVE cancelled Afily8’s SDVOSB verification based on the discrepancy between what Afily8 told CVE (that its owner had previously resigned from Guillaume Group) and what the evidence showed (that the owner continued to collect an income from Guillaume Group, even into 2017).
Afily8 appealed its cancellation to the OHA. Challenging the notion that it provided false information to CVE, Afily8 said that it did not tell CVE that its owner resigned in 2007, as the cancellation notice indicated, “but rather stated that he resigned in 2013.”
According to the OHA, this argument missed the point:
Regardless of the specific date of [his] resignation from Guillaume Group, there is no dispute that Appellant did tell CVE’s examiner that [its owner] had resigned from Guillaume Group, and did tell CVE’s examiner that [he] now works exclusively for Appellant. These statements are contradicted by [the] 2017 W-2 from Guillaume Group, which Appellant itself provided to CVE[.] Accordingly, CVE had a proper basis to question whether Appellant had provided truthful information to CVE.
The discrepancy between Afily8’s statements to CVE and the documentary evidence, in other words, was sufficient enough to call Afily8’s honesty into question. As a result, CVE had a proper basis to cancel Afily8’s SDVOSB verification under 38 C.F.R. § 74.21(d)(1).
Afily8’s appeal was denied.
Being dishonest in one’s personal life is certain to carry some consequences, although not usually criminal penalties. The same basic rule applies to government contractors. But being dishonest with the federal government can carry significant penalties—not only might a company lose its socio-economic designation (as in Afily8), but it also risks suspension or debarment or even criminal liability. The pain of dishonesty, in other words, is just too severe to risk.
Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919.