Agencies defend charges of contracting fraud

Officials say the recently reported fraud that GAO uncovered in a small-business set-aside program comes from business owners and contracting officers not understanding the program rules, but at least one member of Congress rejects that explanation.

Two federal small business program officials have warned against overreacting to a recent investigation that found 10 small companies had defrauded the government out of $100 million in contracts set aside for service-disabled veterans.

The problem isn’t evil intent,  but ignorance on the part of the business owners and the contracting officer, the two officials told the House Small Business Committee's Contracting and Technology Subcommittee on July 15.  (See video of their testimony here.)

Tim Foreman, executive director of the Veterans Affairs Department’s Office of Small and Disadvantaged Business Utilization, said the largest factor is that many service-disabled veterans in the program don't fully understand the requirements of ownership and control  for the business to be certified to compete for set-aside contracts.

“We have to be careful about how high we ramp up the guard against allowing legitimate firms in,” Foreman said.


Related stories:

Fake firms rip off SBA set-aside program for $100M

SBA leader vows to crack down on small-business fraud

GAO finds $325M awarded to ineligible firms under SBA


The hearing was based on a GAO investigation from last October that found at least 10 fake SDVOSBs had swindled roughly $100 million from the Small Business Administration’s set-aside contracts. Some were front companies that passed all of the work on to companies in foreign countries. Others were not who they claimed to be, according to the report.

In one case the GAO detailed, a contracting employee started an SDVOSB, won a contract from the Air Force and passed the $900,000 of work to a company where his wife worked, which also then passed the work on to another company, according to GAO.

Some legitimate service-disabled veterans don’t fully understand the filing and certification process and will do things incorrectly on their paperwork, Foreman said. Although that is technically fraud, those business owners often can fix their errors, file again and receive the service-disabled, veteran-owned small businesses status, he said.

“I’m very hesitant to condemn everybody,” Foreman said. “There are people who do make mistakes.”

Linda Oliver, director of the Defense Department’s Office of Small Business Programs, told the subcommittee that contracting officers say they don’t know enough about joint ventures to ask the right questions, which makes it unlikely that they will uncover a buisness that has made mistakes in its filings in time to head off inappropriate contract awards. 

But Rep. Glenn Nye (D-Va.), the subcommittee’s chairman, rejected the officials' explanation. "This report is a frustrating indication of the deplorable state of federal contracting programs,” he said.

Oliver said that one contracting officer involved in one of the GAO's cases had developed a system of market research intended to ask pointed questions to businesses in small-business programs and ensure that they're there legitimately. But Nye said he was disappointed that no one from the five agencies who sent small-business officials to testify — the VA, DOD, Environmental Protection Agency, Small Business Adminitration and the Federal Emergency Management Agency — had suspended any fraudulent companies that were uncovered by the GAO’s investigation.

While the small-business contracting dollars are increasing, “there’s a big asterisk there for me now,” Nye said.

 

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.