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SBA suspends 2 firms, alleging they served as fronts

Small businesses passed work on to large-business subcontractor

  • By Nick Wakeman
  • Nov 19, 2010

The Small Business Administration has accused two small businesses of acting as front companies and funneling money onto a large-business subcontractor.

The accusations against EG Solutions and MultimaxArray FirstSource involve the Homeland Security Department’s FirstSource contract, which both companies hold as prime contractors. The same contract was involved in the SBA suspension of GTSI Corp.

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EG Solutions was a joint venture of GTSI and Eyak Technologies but is now a subsidiary of Eyak, SBA said. GTSI’s suspension was lifted after its CEO agreed to resign and the company took other actions.

MultimaxArray is a joint venture formed by Multimax, later acquired by Harris Corp., and Array Information Technology. A spokeswoman for MultimaxArray FirstSource said the company was disappointed with SBA's decision and "believe[s] all our actions were appropriate." The company will "cooperate with SBA to address these important issues," she added.

According to SBA documents, EG Solutions and MultimaxArray had a subcontractor perform most, if not all, of the work under the contract. That kind of activity violates federal regulations governing small-business set-aside contracts.

MultimaxArray FirstSource also is accused of improperly representing itself as a small business.

Both companies have 30 days to respond to the suspensions.

ED Solutions did not return calls for comment.

About the Author

Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.

Reader Comments

Tue, Nov 30, 2010

The SBA is a joke. They force the issue of contracts to SDB's that financially and manpower wise have no hope of performing the task, then require adherence to politically correct rules that have nothing to do with business and then scream when this SDB has to farm out the work to have any chance of completion.

Mon, Nov 22, 2010 V-Money CA

Wow! Seems like this is the FedGov trying to look busy. What I mean by that is this type of rampant fraud is not new. In fact: Since 2003, more than a dozen federal investigations have uncovered billions of dollars in federal small business contracts, actually flowing into the hands of Fortune 500 corporations and other clearly large businesses. In Report 5-15, the Small Business Administration (SBA) Office of Inspector General referred to the issue as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” Let's start prosecuting some of these fraudsters. You the government to get out of debt. A great way would be to start fining the business that have committed the abuses and actually start sending those responsible to prison.

Mon, Nov 22, 2010

Its nice to see the SBA actually recognizing all the fraud they have allowed for so many years....

Mon, Nov 22, 2010 Frank Matt Tucson, AZ

It is about time that the SBA took actions against companies that commit fraud and are possibly involved in criminal activity! By the way, a common thread appears to be emerging here with EG Solutions, GTSI, MultimaxArray…ANCs!

Mon, Nov 22, 2010 Lance Winslow www.worldthinktank

There is ramped fraud in SBA contracting, everything from Men putting the business in their wife's name, lying about hiring from a labor surplus area, being in an enterprise zone to hiring a minority to be a 1% owner and calling them 51%. And yes the bigger stuff like these cases. I believe the cheating is the norm, not the exception. And that the SBA needs to be shut down, it's grown excessively out of control, and is so politically correct, it serves no real purpose. The loan-programs are a joke, the whole thing is a waste of money. The best thing government can do is stop the incestuous relationship with big business and let everyone compete on a level playing field and reduce regulations, then we can have jobs again in the US. No one should be surprised at these cases or the biggie that preceded it in the news. I am sure more will follow, as the oversight is inadaquate. Email me for a 35-year synopsis of reality on the SBA.

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