How contractors can avoid SBA scrutiny

Monday - 11/22/2010, 9:31am EST

Rob Burton, Venable Law Firm

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By Vyomika Jairam
Federal News Radio

Federal News Radio has reported that two more federal contractors have been suspended from doing business with agencies. The Washington Post reports DHS contractors EG Solutions and MultimaxArray FirstSource are accused of working with a larger company to defraud the government.

Last month, GTSI was suspended for allegedly receiving small business contracts. The firm has since been reinstated, but all of this is part of a new enforcement effort by the Small Business Administration.

Rob Burton, a former deputy administrator at the Office of Federal Procurement Policy and now with the Venable Law Firm, joined the Federal Drive with tips for companies that want to avoid similar problems.

According to Burton, the recent suspensions and debarrments by the SBA are historic.

"As far as I can recall, SBA has never taken a suspension or debarrment action against a contractor, and I think what it does signify is that SBA is taking more of a leadership role," Burton said. "Their actions have government-wide effect."

They've always had authority but have allowed specific agencies to take the lead.

"These companies seem to do this rather frequently and there were a lot of comments after GTSI was suspended that indicated that 'Boy, well this is just business as usual,'" Burton said.

So what is the underlying problem that has led contractors to this point?

"I do believe that a lot of small businesses don't even know the rules, that they don't realize that they're supposed to do over 50 percent of the work if they in fact get a set aside contract. They tend to compete for jobs that they're not eligible for and rely on these large contractors to do the work," Burton said. "Sometimes this is not fraud or conspiracy, sometimes it's just lack of understanding of the rules."

What can companies do to protect themselves? Burton says it starts with self-policing.

Small businesses self-certify themselves as SBA-qualifying companies, Burton explained. So it falls on bigger companies to do due-diligence and ensure that they are in fact working with a small business, and small business should be responsible and only compete for contracts in which they can carry out 50 percent of the work.

More importantly, this all now carries additional risk for all businesses, Burton said, because the Small Business Act signed earlier this year carries a legal presumption of fraud if companies misrepresent themselves.

"So now, the government can easily prove criminal or civil fraud with respect to small business misrepresentations," Burton said. "This is very significant."