8(a) joint ventures are not 8(a) program participants, according to a recent (and commonsense) decision of the SBA Office of Hearings and Appeals.
In its decision, SBA rejected a joint venture’s argument that its 8(a) joint venture agreement was essentially an 8(a) program application, drawing a jurisdictional decision between 8(a) program certification and 8(a) joint venture agreement approval.
While an eleventh hour agreement avoided the “fiscal cliff,” it did not fully resolve potential spending cuts. The agreement delayed the sequester, but its impacts are still being felt by contractors, particularly by small businesses. These entities are at the end of the planning process, and delaying a resolution only prolongs uncertainty.
For Native contractors, there is little to be happy about, and much that raises significant concerns. The consequences of the uncertainty in the federal contracting environment caused by the still looming possibility of sequestration, coupled with the enormously harmful effects of Section 811 of the National Defense Authorization Act for FY2010 (“NDAA”), are painting a potentially very dreary picture for these companies and the communities they serve.
A proposal submitted on behalf of an 8(a) company claimed that the company had performed a $3 million NASA contract even though no such contract existed, according to a recent report issued by the SBA Office of Inspector General. As alleged in the SBA OIG report, the same honesty-challenged 8(a) company claimed to have 33 employees, even though it never had more than two.
Perhaps it is little wonder that the company in question is alleged to have passed through nearly 100% of its work on several 8(a) set-asides to its non-8(a) subcontractor.
The SBA’s waiver of the non-manufacturer rule in connection with an 8(a) sole source contract resulted in a “pass through” award to a large business, according to a report by the SBA Office of Inspector General. As a result, the 8(a) contractor in question received only $153,000 for “minimal” oversight, while the remainder of the $7.78 million 8(a) set-aside contract went to large companies.
The SBA OIG was quick to point out that the arrangement was legal, but questioned whether the pass-through provided appropriate developmental opportunities to the 8(a) contractor–as well as whether taxpayers are well-served by such large percentages of “small business” contracting dollars flowing to large companies.
Agencies have broad discretion when it comes to issuing 8(a) sole source contract awards. Although a procuring agency must provide the SBA with some justification as to why it selected a particular 8(a) company for a sole source contract, that justification can be very brief. And, as the GAO held in a recent bid protest decision, an 8(a) sole source contract justification need not explain why the 8(a) awardee was superior to another 8(a) company interested in the same contract.
A soon-to-graduate 8(a) contractor submitted a fraudulent proposal designed to evade the 8(a) Program’s sole source limits, with the full knowledge of the procuring agency in question, according to a decision issued by the U.S. Court of Federal Claims.
As described in Veridyne Corporation v. United States, No. 06-150C (Fed.Cl. 2012),Veridyne Corporation greatly underestimated the cost of a contract in order to slip it under the 8(a) Program’s sole source threshold, but the scheme eventually collapsed, leaving Veridyne liable for false claims and procurement fraud–and leaving the procuring agency in question with egg on its face and a lot of explaining to do.