SBA | The Contracting Education Academy

November 19, 2010 By AMK

Two small businesses suspended in set-aside probe

The Small Business Administration has suspended two more firms in its expanding probe of small business contracts that might be illegally passed through to large companies.

On Thursday, SBA announced the suspension of EG Solutions and MultimaxArray FirstSource based on allegations the firms misrepresented themselves on a large Homeland Security Department information technology contract.

Both firms won multimillion-dollar task orders, reserved exclusively for small businesses, on DHS’ $3 billion FirstSource contract for IT hardware, software and services. But, according to letters SBA sent to the firms on Thursday, much of the contract work actually was passed through to a larger company.

“Further evidence shows that the subcontractor in fact performed most if not all of the work required to be performed in connection with the subject contract opportunities,” SBA suspension and debarment official Michael Chodos wrote. “There is also evidence that [MultimaxArray FirstSource] and its subcontractor attempted to conceal the nature of this relationship from the government and their competitors, after concerns were raised about MAF and its subcontractor’s conduct.”

While the letters do not mention the subcontractor by name, in October SBA suspended GTSI Corp., a systems integrator in Herndon, Va., based on allegations it was performing virtually all the work on a $165 million delivery order that was awarded to MultimaxArray. GTSI also served as a subcontractor to EG Solutions on the FirstSource contract. SBA later allowed GTSI to resume most of its government work pending the results of an investigation and subject to strict oversight criteria.

Chodos wrote there is evidence EG Solutions and MultimaxArray also “committed fraud or a criminal offense in obtaining and attempting to obtain contracts and in its performance of those contracts, and that there is adequate evidence of a lack of business integrity or business honesty.”

A spokesman for MultimaxArray did not respond to a request for comment on Friday. The firm is a joint venture of Multimax and Array Information Technology.

EG Solutions, based in Dulles, Va., is a subsidiary of Eyak Corp., an Alaska native corporation. In a statement, Eyak said it takes “seriously the obligation to provide the federal government with quality contracting services in an ethical and responsible manner.”

The two firms have 30 days to formally respond to the suspension.

– by Robert Brodsky – GovExec.com – November 19, 2010

October 8, 2010 By AMK

Small-biz contracting: The nightmares continue

Federal contracting officers looking to do the right thing and award more contracts to small businesses have never had so many opportunities for their good intentions to go awry.

Sure, according to a recent report from the Small Business Administration, federal agencies increased their spending with small businesses year over year for the first time since 2005.

But contracting officers can’t be blamed if they are a bit on edge wondering who exactly is getting all that money. Recent months have brought a string of unsettling reports suggesting that small-business contracting is fraught with fraud and abuse.

The latest cause for jitters came Oct. 1, when the Small Business Administration temporarily suspended GTSI from winning new contracts because of concerns that company officials were involved in a scheme to divert money intended for small businesses into its own coffers.

The alleged scheme is a familiar one in the federal market, sources say. Contracts that are set aside for small businesses generally allow larger firms to serve as subcontractors. But in some cases, the so-called sub ends up doing most of the work — and getting most of the money. The agency might get points for small-business contracting, but small companies don’t benefit to the degree intended.

GTSI is under scrutiny at the moment, but it could have been any number of its competitors that got called on the carpet. This kind of wheeling and dealing goes on “every day of the week,” one reader wrote to Federal Computer Week’s sister publication, Washington Technology.

“I’m not sure an ‘Everybody-else-is-doing-it’ defense is going to work for GTSI if SBA prevails,” writes Washington Technology Editor-in-Chief Nick Wakeman. “But I do wonder if SBA is kicking off a crackdown, and GTSI was a good first target.’”

That’s just one hazard for federal contracting officers. GTSI’s problems began when Robert O’Harrow Jr. at the Washington Post did a front-page exposé of contracting problems involving Alaska Native Corporations (ANCs).

Under federal law, federal agencies can award a contract of any size to a company owned and managed by members of Alaska’s indigenous tribes. But O’Harrow reported what many people, including federal lawmakers, have suspected all along: ANCs, lacking both size and experience, often end up calling on larger, nonnative contractors.

SBA took action against GTSI just days after O’Harrow’s story appeared.

SBA officials say they are stepping up their oversight and enforcement of contracting fraud, according to Kent Hoover at Portfolio.com.

“It’s about time,” Hoover said. “Government contracting is a swamp that needs to be drained. Too many companies are gaming the system, getting money that should be going to legitimate small businesses.”

But where to begin? It was only two months ago, for example, that the Government Accountability Office reported that SBA had certified a number of fraudulent companies that were, in fact, GAO operatives for another one of its set-aside categories, the Historically Underutilized Business Zone program. “A simple Internet search by SBA could have revealed these as phony applications,” the GAO study states.

And in May, GAO investigators found similar problems with other categories. In one case, a business owner qualified as a small, disadvantaged firm despite owning a $450,000 yacht, a $200,000 Lamborghini and a $2.5 million home. That particular study found that federal agencies awarded $325 million in contracts to such ineligible companies, FCW reported at the time.

But perhaps the GTSI saga, however it turns out, will give would-be shady operators an opportunity to rethink their options.

“It’s the first time in decades that the government has completely suspended a significant player, a legitimate top-tier contractor,” Steven Schooner, a contracting law professor at George Washington University, told the Washington Post. “It puts everybody on notice.”

But it’s probably fair to assume that contracting officers won’t be letting down their guard just yet.

— by the staff of Federal Computer Week, Oct. 8, 2010

October 5, 2010 By AMK

SBA to launch small business program for women

Women will have their place in the Small Business Administration’s contracting programs starting in 2011.

SBA officials announced on Oct. 4 that the agency is setting up procedures to help woman-owned small businesses gain more access to the federal contracting marketplace. A final rule is expected to be published in tomorrow’s Federal Register.

Working with the Federal Acquisition Regulatory Council, SBA officials will begin a four-month implementation of the Women-Owned Small Business program. They will be building the technology and the program’s infrastructure to support the certification process and ongoing oversight.

Officials expect contracting officers will be able to start making contracts available to small businesses owned by women under the program in early 2011, SBA said. The aim is to give more opportunities to women, because, officials say, women are under-represented in government contracting.

“This rule will be a platform for changing that,” SBA Administrator Karen Mills said.

A preview of the final rule states that the purpose “is to enable contracting officers to identify and establish a sheltered market for competition.”

Under an amended statute, contracting officers can set aside a contract for women business owners without giving first preference to a particular type of small business.

In SBA’s rule, officials identified 83 industries in which women would be eligible for federal contract assistance under the new program. (Read an unabridged list of the industries.)

Officials used the analysis in a 2007 study commissioned by SBA from the Kauffman-Rand Foundation to determine where women are underrepresented.

— by Matthew Weigelt – Oct. 5, 2010 – Federal Computer Week

August 31, 2010 By AMK

FAR Council considers justifying sole-source awards

The Federal Acquisition Regulatory Council will host meetings in October to discuss rule changes on justifying large sole-source contracts to small businesses, including Alaska Native Corporations.

Because lawmakers ultimately want sole-source contracts to be beneficial for the government, the fiscal 2010 National Defense Authorization Act passed by Congress last year said an agency must have good reasons for awarding a contract worth $20 million or more without hosting a competition for the work.

The law mandates that an agency describe the contract and why it’s circumventing the competitive process. Members of Congress said they want to know that a company is offering a reasonable price and stressed the need for justification that the sole-source award is worthwhile for the government.

In addition, the law states that an agency must make the justification public within two weeks.

Agencies can award the large contracts through the Small Business Administration’s 8(a) business development program. Regulations enable contract awards to be made to socially and economically disadvantaged small businesses, even businesses owned by Indian tribes and ANCs.

In the notice, FAR Council members said they believe talking with Indian and native Alaskan tribal leaders will be valuable as they debate how to institute the new law.

Acquisition rules that allow set-aside contracts for ANCs and similar unique set-asides are a point of contention in the contractor community, and even Congress has questioned their unique status.

Many contractors say ANCs get more than their share of contracts while the ANCs say the government is obligated to help them, especially economically.

The FAR council has not set specific dates for the meetings, which will be held in Washington, D.C.; Albuquerque, N.M.; and Fairbanks, Alaska.

— by Matthew Weigelt – Aug. 31, 2010 – Federal Computer Week.

August 27, 2010 By AMK

Government receives a B in small-business contracting

The federal government received a B today from the Small Business Administration for its attempt to reach the 23 percent small-business contracting goal for fiscal 2009, according to a new report.

As a whole, the government awarded $96.8 billion to small businesses in fiscal 2009, according to SBA officials. That means that 21.89 percent of all federal contracting dollars went to small businesses.

Despite falling shy of its goal, the government awarded a larger percentage of dollars to small businesses compared to fiscal 2008. The economic stimulus law helped agencies inch closer to the 23 percent mark, SBA officials said.

This is SBA’s fourth annual assessment of federal agencies’ efforts to award prime contracts and subcontracts to small businesses.

SBA also graded 24 agencies and departments individually and gave As to:

Agriculture Department.
Education Department.
Energy Department.
Environmental Protection Agency.
Homeland Security Department.
Interior Department.
Labor Department.
SBA.
Transportation Department.
Veterans Affairs Department.

EPA received the highest score, based on SBA’s formula for tallying percentages. EPA awarded 47.32 percent of its contracting dollars to small businesses in fiscal 2009, which surpassed its 39.81 percent goal, according to SBA officials.

EPA exceeded its goal of 5 percent for small disadvantaged businesses and its 3 percent goal for contracting with small businesses owned by service-disabled veterans. It was also less than 1 percent short of its contracting goals for both woman-owned small businesses and companies located in Historically Underutilized Business Zones, the report states.

EPA also directed 59.1 percent of its economic stimulus funds to small businesses, SBA officials said.

At the other end of the grading scale, the Office of Personnel Management, the U.S. Agency for International Development and the National Science Foundation received Fs. USAID got the lowest score and missed all of its contracting and subcontracting goals, according to SBA.

— by Matthew Weigelt – Aug. 27, 2010 – Federal Computer Week

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