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Small Business Government Contractors Need to Watch Out for Increasing Criminal and False Claims Act Liability in Government Contracting Programs

The U.S. Small Business Administration (SBA) preference programs can be vital for small businesses trying to compete in the potentially lucrative world of U.S. government contracting, but participation in these programs is not without risk. Indeed, the programs can be fraught with peril and contain many landmines for those who do not understand and diligently comply with applicable small business program requirements.

Small Business Government Contracting Programs

The SBA works to make sure small businesses get at least 23 percent of all federal contracting dollars each year, primarily through the SBA’s small business and contracting assistance programs. These programs are designed to assist small businesses by limiting competition for certain government contracts or by awarding a certain percentage of contracts to small businesses that participate in the respective programs. The SBA has a variety of such programs, such as the small business set-aside program, 8(a) Business Development (8(a)) Program), the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, the Women-Owned Small Business (WOSB) Program, and the Historically-Underutilized Business Zone (HUBZone) Program, which were created for small businesses owned by socially and economically disadvantaged people or entities, service-disabled veterans, or women or small businesses operating in historically underutilized business zones, respectively.

A few of the small business programs have had their own issues with certifying and monitoring their participants, which has led to executive and legislative scrutiny. For example, in recent years, two separate inspectors general audited the HUBZone and SDVOSB Programs. In 2019, the SBA Office of Inspector General (SBA-OIG) released the results of an audit of 15 of 39 firms that received HUBZone certification and a HUBZone contract between April 1, 2017 and March 31, 2018. The SBA-OIG determined that three of the 15 had been improperly certified to participate in the program and that the SBA had not even made an eligibility determination for four others that were participating in the program. In February 2020, the Department of Defense (DoD) Office of Inspector General (DoD-OIG) issued a report which noted major concerns with how the DoD was confirming eligibility for SDVOSB contract awards. The report described an audit of 29 SDVOSB contractors, 16 of which did not meet SDVOSB requirements. The 16 contractors at issue received 27 contracts, collectively valued at $827.8 million. The report stated that the 16 contractors “did not have a service-disabled veteran as the owner and highest ranking officer of the company or whose publically available information and contract documentation did not support that the contractor met the requirements for SDVOSB status.” The report also noted that DoD did not verify subcontracting limitations for contracts awarded to three of the 16 contractors.

 

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