SERVICE DISABLED VETERAN OWNED SMALL BUSINESS FRAUD. United States Small Business Administration Office of the Inspector General

Transcription

1 SERVICE DISABLED VETERAN OWNED SMALL BUSINESS FRAUD United States Small Business Administration Office of the Inspector General

2 SAC Aaron Collins ASAC Kevin Kupperbusch 233 PEACHTREE STREET SUITE 1802, ATLANTA, GA

3 SERVICE DISABLED VETERAN OWNED SMALL BUSINESS PROGRAM The purpose of the Service-Disabled Veteran-Owned Small Business Concern Procurement Program is to provide procuring agencies with the authority to set acquisitions aside for exclusive competition among servicedisabled veteran-owned small business concerns, as well as the authority to make sole source awards to service-disabled veteran-owned small business concerns if certain conditions are met. (See Code of Federal Regulations (CFR) 13 C.F.R ).

4 A QUICK HISTORY The Veterans Entrepreneurship and Small Business Development Act of 1999 The Veterans Benefits Act of 2003 Set the goal of 3% of the total value of all prime contract and subcontract awards to SDVOSBs.

5 WHAT QUALIFIES AS A SERVICE DISABLED VETERAN SMALL BUSINESS The SDV must have a service-connected disability that has been determined by the Department of Veterans Affairs of or the Department of Defense. The SDVO SBC must be small under the North American Industry Classification System (NAICS) code assigned to the procurement. The SDV must unconditionally own 51% of the SDVO SBC. The SDV must control the management and daily operations of the SDVO SBC. The SDV must hold the highest officer position of the SDVO SBC.

6 OWNERSHIP A Service Disabled Veteran Owned Small Business according to FAR 2: Not less than 51% of which is owned by one or more servicedisabled veterans or, in the case of any publicly owned business, not less than 51% of the stock which is owned by one or more service disabled veterans. Ownership must be direct. A concern owned principally by another entity that is in turn owned and controlled by one or more service-disabled veterans does NOT meet this requirement.

7 CONTROL 13 CFR The management and daily business operations of the concern MUST be controlled by one or more service disabled veterans. That means that both the long term decision making and the dayto-day management and administration of the business operations must be controlled by one or more service disabled veterans. In the case of service disabled veteran with permanent and severe disability, the spouse or permanent caregiver of that veteran meets the requirement.

8 SET-ASIDE REQUIREMENTS The Contracting Officer (CO) may set-aside requirements if: The requirement is not exempted from SDVO contracting, the CO considers setting aside the requirement for 8(a), HUBZone, or SDVO SBC participation before considering setting aside the requirement as a small business set-aside. There is a reasonable expectation that at least two responsible SDVO SBC will submit offers: and The award can be made at a fair market price.

9 SET-ASIDE EXEMPTIONS A contracting activity may not make a requirement available for a SDVO SBC contract if: The requirement would be fulfilled through the award of Federal Prison Industries, Inc. or Javits-Wagner-O Day Act participating non-profit agencies for the blind and severely disabled. The requirement is currently being performed by an 8(a) participant or SBA has accepted that requirement for performance under the authority of the Section 8(a) Program.

10 SOLE SOURCE CONTRACTS A CO may award a sole source contract if: the requirement is not exempted from SDVO contracting and cannot be setaside. the CO does NOT have a reasonable expectation that at least two responsible SDVO SBCs will submit offers. the anticipated award price of the contract, including options, will not exceed: $5 million for manufacturing requirements. $3 million for all other requirements. the award can be made at a fair market price.

11 SOLE SOURCE CONTRACTS Simplified Acquisition Threshold If the requirement is below the simplified acquisition threshold, the CO may set-aside requirement for consideration among SDVO SBCs using those procedures or may award a sole source contract to a SDVO SBC. A sole source award is only permissible where there is only one SDVO SBC that perform the contract in accordance with FAR (a)(3).

12 SOLE SOURCE CONTRACTS Additional requirements Limitations on Subcontracting: SDVO SBC Prime or Sub-contractor can subcontract for: Service Contracts (except construction): 50% of the contract performance incurred for SDVO SBAC Personnel Supply Contracts: 50% of the cost of manufacturing the supplies General Construction: 15% of the contract performance incurred for SDVO SBC personnel Construction by Special Trade: 25% of the contract performance incurred for SDVO SBC personnel.

13 SOLE SOURCE CONTRACTS Non-Manufacturers The SDVO SBC does not exceed 500 employees Is primarily engaged in the retail trade Sells to the general public, and Supplies the end item of a small business (unless requirement is waived by the SBA Administrator).

14 JOINT VENTURES Joint Venture rules 1 or more other small business concern (SBC) Each SBC is small under the contract s NAICS code SDVO SBC must manage the venture JV must perform applicable percentage of work.

15 THE PROTEST A Protest is a challenge to either: Size status, in accordance with 13 CFR 121 Eligibility status, in accordance with 13 CFR 125 Ownership Control The Protest must be specific.

16 THE PROTEST Sole Source Requirement may be protested by: SBA Contracting Officer Competitive set-asides may be protested by: Any interested party. Protests are filed with SBA Director of Government Contracting or the CO. Protests must be filed within a set period of time depending on contract type. Protests will be adjudication within days.

17 THE APPEAL After the Protest is adjudicated either the protested concern, the protester, or the CO may file an appeal with the SBA Office of Hearings and Appeals within 10 days of the decision.

18 CERTIFICATION The Veterans Administration certification Center for Veterans Enterprise (CVE) certifcation VA contracts only Self Certification via SAM Certification stands until successfully protest. Negative protest finding stands until SBA re-certifies.

19 THE OPPORTUNITY

20 SCHEME #1 An existing non-qualified business hires a disabled veteran as a partner. The corporate structure is modified to indicate the veteran owns a controlling interest in the corporation and manages the day to day affairs. In truth, the veteran does not own a controlling interest, has made no investment, and does not control the business.

21 SCHEME #1 Indicators Secretary of State records show new ownership that is not supported by investment records Corporate records changed to add veteran in controlling capacity. Employee testimony: other employees may not know the veteran is supposed to be the controlling member. Payroll Records may show the veteran does not receive the highest pay at the company. Disabled veteran has little contact or on-site presence with contracting agency. Veteran my receive one time payment or lower salary payments.

22 SCHEME #2 A non-qualifying business creates or causes to be created a business owned by a disabled veteran. The new company claims the SDVO SB status and obtains contracts via that certification. The new company (the shell) will pass the work on to the non-qualifying business who will do the majority of the work.

23 SCHEME #2 Indicators Payroll records will show minimum SDVO SB work. Points of contact will be primarily through the larger company. Minimum presence at official address (may share office space with larger company)

24 SCHEME #3 The Fibber A non-qualified business will claim SDVO SB status when in truth the owner is not a disabled veteran.

25 REMEDIES Criminal Prosecution False statements Money Laundering Wire Fraud Major Fraud against the Government

26 REMEDIES Civil Prosecution False Claims 3x contract value plus penalties Qui Tam

27 REMEDIES Debarment actions Usually accompanies Civil or Criminal actions.

28 CASE EXAMPLES VCI GMT Ind/Mar

29 SOURCES OF COMPLAINT Contracting Officers Protest Officials GAO Competitors OIG Hotline