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March 17, 2021 By cs

A case study of the government’s struggle to police procurement fraud

On January 5, the Pentagon’s Defense Logistics Agency (DLA) awarded a contract worth up to $33 billion over 10 years to a privately held equipment supplier called Atlantic Diving Supply, Inc., or ADS.

Only small businesses were legally permitted to bid on the contract, and ADS has been accused of defrauding the Pentagon by falsely claiming to be a small business. According to the most recent official tally of top government contractors, ADS is ranked as the 24th largest federal contractor in fiscal year 2019 with more than $3 billion in sales and ADS is the only “small business” among the top 50 that year.

ADS’s gargantuan new award for work on a Pentagon logistics program landed after the company’s majority owner, Luke M. Hillier, personally agreed to pay $20 million in 2019 to settle civil charges that his company defrauded the same program by falsely claiming to be a small business, among other accusations. An ADS spokesperson told the Project On Government Oversight (POGO) that Hillier is “unavailable for comment” and emails to him went unanswered.

In the months before Hillier’s settlement, three non-ADS executives including a former state politician pleaded guilty in a felony scheme. According to the Justice Department, Hillier  — referred to as “Person Y” in court records — allegedly created the scheme to allow ADS to benefit from contracts set aside by law for small businesses owned by socially and economically disadvantaged individuals, often women- and minority-owned ventures. Companies controlled by those non-ADS executives then allegedly would partner with ADS to perform work on the contracts.  The arrangement allegedly allowed ADS to benefit even though ADS is mostly owned by Hillier and thus was not eligible to bid on the contracts directly.

Keep reading this article at: https://www.pogo.org/investigation/2021/02/how-a-small-business-kingpin-wins-billions-in-defense-contracts/

Filed Under: Government Contracting News Tagged With: abuse, bribery, DLA, DoD, economically disadvantaged, felony, fraud, minority owned business, Paycheck Protection Program, POGO, service disabled, set-aside, small business, woman owned business

March 22, 2011 By AMK

New SBA rules affect small businesses contracting programs

Newly-published rules by the Small Business Administration (SBA) address the justification and approval process associated with large sole-source contract awards to 8(a) firms; address parity among 8(a), HUBZone, and SDVOSB firms; and propose increases in the small business size standards for some industries.  Public comment is being solicited on the last item.

Specifically, the rules:

  1. Require federal agencies to issue a Justification and Approval prior to the award of 8(a) sole source contracts over $20 million;
  2. Clarify a contracting officer’s ability to use discretion when determining whether an acquisition will be restricted to small businesses participating in the 8(a), HUBZone or service-disabled veteran-owned small business (SDVOSB) programs; and
  3. Propose increases in the small business size standards for dozens of service industries in NAICS codes 54 and 81. 

The first two rules were issued as interim rules by the SBA and the Federal Acquisition (FAR) Council, and are effective immediately.  The third item is a proposed rule.  All were published on March 16, 2011 in the Federal Register.

Here are the details on the rules.

Justification and Approval for 8(a) Sole-Source Awards Above $20M

The FAR Council issued an interim rule implementing Section 811 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84), which requires federal agencies to issue a Justification and Approval (J&A) prior to awarding a sole-source contract over $20 million under the 8(a) program.  The J&A must be approved by an appropriate official (as currently defined by FAR 6.304) and made public after award of the contract.  Prior to the enactment of section 811, a sole-source award of a new contract made using the 8(a) contracting authority did not require a J&A, regardless of the dollar value.  Under the interim rule, the J&A must document the reasons for making a sole-source award rather than a competitive award under the 8(a) program.  The rule institutes no new requirements for sole-source 8(a) awards less than or equal to $20 million.  Here is the full text of the rule: Justification and Approval of Sole-Source 8a Contracts 03.16.2011.

Parity Among 8(a), HUBZone, or SDVOSB Programs

The FAR Council issued an interim rule implementing Section 1347 of the Small Business Jobs Act of 2010 (Pub. L. 111-240) and clarifying that there is parity when a contracting officer selects among small businesses participating in the 8(a), HUBZone and SDVOSB programs.  Under the interim rule, contracting officers will have the discretion to determine whether an acquisition will be restricted to one of these three programs.  The full text of the rule is available here: Socioeconomic Program Parity 03.16.2011.

This interim rule also clarifies that:

  • Although there is no order of precedence among the three programs, if a requirement has been accepted by SBA under the 8(a) program, it must remain in the 8(a) program unless SBA agrees to release it;
  • For acquisitions exceeding the simplified acquisition threshold (that is, contracts more than $150,000), contracting officers must consider a set-aside or sole source award to a small business under the 8(a), HUBZone, or SDVOSB programs before proceeding with a small business set-aside; and
  • The small business set-aside requirement under FAR 19.502-2(a) does not preclude award of a contract to a participant in the 8(a), HUBZone, or SDVOSB programs.  SBA regulations give contracting officers the authority to use these programs at dollar levels above the micro-purchase threshold and at or below the simplified acquisition threshold.

It is important to note that the interim rule does not address SBA’s new Women-Owned Small Business (WOSB) program.  The WOSB program will be addressed as a separate interim rule under FAR Case 2010-015 and implement the SBA’s WOSB Federal Contract Program final rule (75 FR 62258, October 7, 2010).  The SBA rule provides for parity between WOSBs and other small business contracting programs.

Service Industries Size Standards

The SBA issued a proposed rule increasing the small business size standards for 35 industries and one sub-industry in North American Industry Classification System (NAICS) Code 54, Professional, Scientific and Technical Services, and one industry in NAICS Code 81, Other Services.  Many of the size standards would increase significantly under the proposed rule.  For example, several of the Sector 54 size standards will increase from $4.5M or $7M, to $14M or $19M.  The full text of the proposed rule is available here: Small Business Size Standards – Proposed – 03.16.2011.

The SBA is accepting public comments on the proposed changes to the small business size standards through May 16, 2011.

Filed Under: Government Contracting News Tagged With: 8(a), acquisition workforce, federal contracting, federal regulations, government trends, HUBZone, minority owned business, SBA, SDVOSB, small business, woman owned business, WOSB

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