Small Business? Better be able to prove it

The Small Business Administration has contracting assistance programs, in place, to help small businesses by limiting competition for certain government contracts. Additionally, they work to ensure at least 23 percent of all federal contracting dollars goes to small businesses. (JD Supra August 13, 2021)

The current SBA programs are:

  • The small business set-aside program
  • 8(a) Business Development (8(a)) Program)
  • Service-Disabled Business (WOSB) Program
  • Historically-Underutilized Business Zone (HUBZone) Program (ibid)

It has come to light that some of these programs have had issues certifying and monitoring participants of the programs. Recently, two inspectors general audited the HUBZone and SDVOSB programs. The audits showed 15 of 39 firms receiving HUBZone certification and a HUBZone contract. Of the 15, three were improperly certified to participate in the program. The SBA had not made an eligibility determination for four others participating in the program. (ibid)

The Department of Defense (DoD) Office of Inspector General (DoD-OIG) recently issued a report that turned up concerns with how DoD confirms eligibility for SDVOSB contract awards. In the report, 29 SDVOSB contractors were audited. 16 contractors at issue received 27 contracts, together with values at $827.8 million. Those 16 contractors “did not have a service-disabled veteran as the owner and the 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.” (ibid)

Since the issues have come out, both criminal and civil enforcement has increased. There have been four federal indictments or guilty pleas from business owners who misrepresented their status as a small business, women-owned business, service-disabled veteran-owned business, or minority-owned business. These are all clear-cut cases of misrepresentation and fraud. Recently, a construction company obtained $250 million in government contracts set aside for SDVOSBs. The owner of the company put a disabled veteran as the apparent owner of the construction company to qualify the company as an SDVOSB. The true owner turned out to be a non-service-disabled business partner who controlled both the financial and operational control of the company. This type of fraud is known as a “rent a vet” scheme. (ibid)

The government may use the False Claims Act (FCA) (31 U.S.C 3729-3733) to root out contractors who violate small business compliance laws. The FCA has a whistleblower aspect allowing for whistleblowers to obtain a percentage of the government’s recovery from a successful resolution of the matter. The FCA is a civil enforcement statute that does not require specific intent to defraud. The reach of the FCA is broad and not to be taken lightly. (ibid)

In 2020, there were 8 key settlements, rulings, and filings regarding various small business fraud scheme allegations and five settlements in 2021 already. Just last month a Virginia-based consulting group and the president of the company agreed to pay a $4.8 settlement regarding FCA allegations. The recent civil enforcement should be a flashing light of warning to small business government contractors that inspectors general and the DOJ are actively pursuing contractors who know their actions are in violation of small business contracting rules. (ibid)

To stay compliant and reduce risk, the following guidelines should be followed:

  • Establish a company culture of compliance, with every employee understanding the rules
  • Work with subject matter experts to stay informed
  • Continuously verify the company eligibility in the program
  • Assess the eligibility of subcontractors or affiliates
  • Perform comprehensive and thorough compliance risk assessments (ibid)

Following the guidelines will allow small businesses to spend their resources on participating in government contracts and not on criminal/civil violations.

Trying to determine if you meet the guidelines? Give us a call.

 

 

 

Not everyone is sold on the Transactional Data Reporting (TDR) pilot

Almost five years ago GSA launched the Transactional Data Reporting (TDR) pilot to replace the Price Reduction Clause (PRC). GSA’s goal is to use the data received, to obtain better pricing from contractors. GSA calls TDR a success, critics are not so quick to agree. (Federal News Network May 10, 2021)

Jeff Koses, GSA’s senior procurement executive said, “GSA has successfully demonstrated the value of TDR under the existing scope of the pilot. It has shown steady progress over the past four years, met most of the pilot’s objectives in the most recent year, and has made the necessary investments to leverage TDR’s potential in the years to come. We will continue to make improvements, especially in contracting officer usage.” However, Koses made no mention of using the TDR information in 2019 or 2020 (ibid).

Some argue that TDR works on paper, but not in reality. Many contracting officers are reluctant to use the data for decision-making. One industry expert went so far as to say, “I have not experienced any negotiations based on TDR data in order to form an opinion.” Others have suggested that the data is incomplete and that GSA has no strategy to back the pilot. (ibid)

One consultant pointed out that as more companies participate in TDR, the IG’s ability to audit prices before an award is made is more difficult. She noted, “under the TDR pilot, the population of auditable contracts has ostensibly been cut in half. When you remove the major resellers and the integrators, what remains are largely professional service contractors and products companies under Schedules 84 (Law Enforcement), 71 (Furniture), and 66 (Scientific). The audit threshold for annual sales is also reduced due to the smaller pool of contracts from which the OIG is selecting. Small businesses who would never have been a blip on the OIG’s radar are now at much higher risk of pre-award audit.” (ibid)

Another complication is GSA’s move toward unpriced contracts under Section 876 of the 2018 National Defense Authorization Act. The Act makes the Price Reduction Clause as well as TDR less necessary because the burden is on vendors to provide the lowest price possible as part of contract negotiations. (ibid)

Koses said GSA will refine and consider:

  • The ability of Federal Supply Schedule contracting officers to use transactional data for price negotiations in lieu of commercial sales practices and price reduction clause disclosures
  • The impact of an expanded data collection on GSA’s ability to use the data it currently collects
  • The impact on current/future GSA schedule contract holders
  • Communication to industry partners
  • Training and tools for category managers not impacted by TDR
  • Possible impacts on other FAS initiatives such as the National Defense Authorization Act (ibid)

So when will the pilot move to production? The waters remain murky. Whether the IG will move from the production stage should be made more clear when the Inspector General report on the TDR pilot is released, in the coming weeks. Vendors should be ready to invest in systems to collect and report pricing data, should the TDR pilot go into production.

Questions concerning how to collect and report pricing data? Give us a call.

TDR Pilot Still Flying

GSA is extending the Transactional Data Reporting (TDR) pilot program for an additional year, giving everyone ample time to work on the pilot while preparing for the upcoming Schedule consolidation.  The TDR pilot program collects pricing data, including cost to the government for services and products sold under GSA contracts. Ultimately, TDR will replace GSA’s Commercial Sales Practices. (Federal Computer Week, August 19, 2019)

TDR was implemented as a noncompulsory, three-year pilot that included eight schedules and their associated SINs. GSA created TDR to reduce bureaucratic burden and increase transparency by requiring monthly reporting of transactional sales data from government-wide contracts, including Multiple Award Schedules contracts. Ultimately, TDR promotes smarter purchasing by federal agencies by allowing expedited and more comprehensive data to assure best value. (ibid)

The GSA Office of Inspector General (OIG) issued a report last summer pointing out that the TDR pilot will not produce a quantifiable measurement. According to the OIG, data is not available for use and there are no performance targets. The IG asked GSA to set performance targets for each metric used and to verify the data is available and valid. (ibid) GSA and the FAS Commissioner Alan Thomas stated that the pilot was just getting ramped up and that some tweaks might be necessary based on the OIG report. However, the extension to the TDR pilot will allow more time for additional data gathering. According to Roger Waldron, president for the Coalition for Government Procurement, the extra time will give the pilot stability while allowing the price reductions clause to be removed. (ibid)

GSA will review the pilot at the end of fiscal year 2020 and at that time determine whether to cancel or expand the program to all GSA Schedule SINs. (ibid)

Still wondering how you can take part in the TDR pilot or how GSAs multiple schedule consolidation might work in your favor? Give us a call.