Contractor Misrepresented VOSB Status For $152 Million Lease, Says VA OIG

The VA failed to verify the accuracy of a contractor’s representation that it was a veteran-owned small business, according to a new report issued by the VA’s Office of Inspector General.

According to the VA OIG, the VA failed to verify the claim of Westar Development Company, LLC to be a VOSB–and “[t]he evidence does not support a finding that Westar is or ever has been a Veteran-Owned Small Business.”   The VA’s failure to verify Westar’s VOSB status is just one of many serious flaws identified by the VA OIG in its audit of the award of a major VA lease to Westar.

The VA OIG’s report (which is well worth a read if you have the time) examines the VA’s award of a build-to-suit lease to Westar for the new Butler Health Care Center in Butler, Pennsylvania.  The 20-year lease had a total value of $152.7 million.

The solicitation for the lease notified offerors that they would be given extra credit for SDVOSB or VOSB status.  In order to receive credit, offerors were to provide, at a minimum, evidence that they had applied for verification with the CVE’s VetBiz system, a copy of the veteran’s VA service-connected disability file, and a copy of the veteran’s DD-214.  At the time of final proposal revisions, offerors were to provide evidence of completed registration in the VetBiz VIP database.

Westar represented itself as a VOSB and received extra evaluation credit as a result.  However, according to the VA OIG, “[t]he evidence does not support a finding that Westar is or ever has been a Veteran-Owned Small Business.”  The VA OIG states that despite a subpoena to Westar, the company was unable to produce any records to show that the company had ever initiated a VetBiz application.  Further, the VA OIG contacted the CVE “and determined that no VA Form 0877s were completed or started by Westar nor has CVE ever been contacted by a company that matched Westar’s name or DUNS number.”

Although the VA OIG concluded that Westar misrepresented its VOSB status, the VA OIG also blamed the VA for failing to detect the misrepresentation:

Although it is clear that Westar misrepresented itself as a VOSB, our review determined that VA, either independently or through Public Properties, did not take appropriate actions to ensure compliance with the terms and the solicitation before awarding the four points for VOSB status.  Because Westar was not registered in VetBiz at the time it submitted its proposal, to be considered for additional points based on its status as a VOSB Westar was required to submit a copy of the automatically generated email from VetBiz or a signed acknowledgment of application from VA and a copy of the veteran’s DD-214, indicating an honorable discharge.  Westar did not submit the required documentation with its proposal and neither the CO nor Public Properties followed-up on the requirement at the time of submission or when they reviewed the technical scores.  The solicitation also stated that completed registrations in VIP was required as part of the Final Proposal Revisions.  Westar did not provide the required documentation and neither the CO nor Public Properties followed-up through Westar or by checking VetBiz.

If, in fact, Westar did misrepresent its VOSB status as the VA OIG determined, Westar should face severe penalties.  At the same time, the VA OIG’s report is also disturbing because of the VA Contracting Officer’s failure to check VetBiz or otherwise verify that Westar’s self-certification was accurate.  A database of verified SDVOSBs and VOSBs is only useful if Contracting Officers use it in the award process.  Here’s hoping that the Westar case is unusual and that, the vast majority of cases, the VetBiz database is being used as intended.

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