SBA leader vows to crack down on small-business fraud

The agency will be more aggressive in suspending and debarring companies from receiving federal contracts

The head of the Small Business Administration today said the agency has cracked down on companies posing as if they were owned by service-disabled veterans, a scheme uncovered by a recent investigation.

The Government Accountability Office exposed fraud in several of SBA’s small-business programs, including the program that sets aside contracts for small companies owned by service-disabled veterans.

GAO said at least 10 fake service-disabled, veteran-owned small businesses had swindled roughly $100 million from SBA’s set-aside contracts. For example, one company wasn’t owned by a service-disabled veteran, and another subcontracted all of its work to a large foreign company, GAO said in November.

SBA Administrator Karen Mills today said SBA has investigated the 10 companies and is looking to prosecute them. For other imposters, Mills said SBA will be more aggressive in suspending and debarring companies from receiving federal contracts.

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“We call that going after the bad actors,” she told the House Small Business Committee.

GAO has said one of the major problems behind the fraud in the veterans' program is that SBA and other contracting departments don’t have a database with lists of people who are service-disabled veterans.

Mills said SBA now has joined with the Veterans Affairs Department to use to its database of veterans’ information to better identify who actually is and is not a service-disabled veteran.

“We’re working on the front end,” she said.

To further combat fraud, SBA now gives companies that are found lying about their ownership 30 days to remove their names from the Central Contractor Registration System, so they can't scam other agencies, Mills said.

“If they don’t do it, we will, so an ineligible firm can’t stay on there, which was something that we found was a problem,” she said.

Peggy Gustafson, SBA’s inspector general, told the committee she believes Mills is serious about cracking down on companies and enforcing rules. But she said officials need to hand out tougher punishments.

She said a company rarely is debarred from government contracting, unless there’s been a conviction of a crime.

“And that’s not really what the law is,” Gustafson said. “I think it’s really important to start kicking people out of the program before they’re going to jail.”

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Tue, Sep 28, 2010

The Women program has the exact same problems as the veterans - but in much greater proportions, therefore the real businesses owned by women, unable to compete with these fake women owned business. Detriment to the intent of the program as a whole There is a glitch that needs to be fixed and regard the matter as a crime.

Mon, Jul 19, 2010

There is a new program sponsored by the VA that verifies and certifies disabled Veterans through the Center for Veterans Enterprise (CVE) We are certified and Verified for legitimately through this process which is a good start. All SDVOSB's should be certified by years end. No more self certification should also take place in the CCR. Unfortunately this article is a testament to the out of control lack of integrity within our nation. Long gone are the days of honesty, integrity, virtue and chivalry. I think the SBA is going down the right path. Thanks for your support. L. Wick USMC IFOG, LLC SDVOSB

Tue, Apr 27, 2010

It seems from my viewpoint all the people in DC are oing is talking about the abuse within the Service Disabled Veteran program and not taking any action to fix the mess they created with allowing firms to self certifly their business status. Many of the 10 firms identified in the GAO report of 19 Nov 2009 continue taking business away from the True Service Disabled Veteran Small Business. 2 weeks ago one of those firms won a contract with NAVFAC for over a million dollars respresenting their business as Service Disabled Veteran. Congress has held 2 hearings concerning the abuses one in Nov the in Dec still nothing had been done to fix the mess.

Thu, Apr 22, 2010 Fred Matt Tucson, AZ

As a SDVOSB owner I whole heartily applaud the SBA Administrator Karen Mills effort! It is long overdue the SBA be more proactive rather than being reactive. Good to hear that the SBA and the Veterans Affairs Department will be working in sharing information. Prosecution and debarring those business owners is definitely a first step in the right direction in helping clean up the mess before it gets further out of control like the HubZone debacle.

Thu, Apr 22, 2010

So how about making this article really informative by revealing the names of the companies committing the fraud.

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