Government regulators. Lawyers. Violations of the False Claims Act. A six-figure settlement.
All of those were part of the story after a general contractor was accused of breaking the rules in the Small Business Administration’s 8(a) program, which was established to help socially and economically disadvantaged companies receive at least consideration, if not a share, of government contracts.
The case, prosecuted by the U.S. Attorney’s office in North Carolina, implicated not just the contractor but also the surety providers that handled its bonding.
“By enabling fraudsters, these companies play(ed) a key part in unlawfully usurping government contract opportunities from socially and economically disadvantaged individuals who the 8(a) Program is intended to assist,” U.S. Attorney Andrew Murray said. “My office will pursue vigorously bonding companies and other entities that, by turning a blind eye or willfully ignoring blatant indicia of program fraud or abuse, enable the submission of these false claims and cause harm to the government program.”
As well it should, of course, and if you’re a women-owned construction company – or perhaps posing as one – you should know that the rules are about to change, making it harder for the sort of abuse prosecuted by Murray’s office to happen at all.
Once the changes go into effect, companies will no longer be able to self-certify as a women-owned small business or economically disadvantaged women-owned small business.
In other words, no more honor system.
Instead, companies will have to either certify through an approved third-party entity or go through SBA’s free online certification at certify.sba.gov.
These changes will mean more paperwork and generally make things more complicated for women-owned general contractors, but they’re no surprise to anyone who’s paid attention to problems in the program.
The Government Accountability Office reported last year that about 40% of the WOSB-certified businesses in its audit sample were ineligible for the program. GAO had also expressed concerns about the performance of several third-party WOSB certifiers.
“As a result, SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals,” GAO auditors wrote.
Legitimate WOSBs have long agreed, advocating in favor a more robust review process to eliminate fraudulent “front” companies from the program.
Hence the end of the way things were and the soon-to-go-into-effect new rules, all aimed at ensuring that a company receiving a government contract through these programs is, in fact, eligible to receive it.
Women’s contracting program eligibility requirements
To be eligible for the SBA’s women’s contracting program, your business must:
To qualify as an economically disadvantaged business within the women’s contracting program, your business must:
So, what happened to everyone involved in that North Carolina case? Well, the GC and its surety carrier settled with the government. While there was no determination of liability by any entity, the surety carrier did agree to pay $1.04 million to resolve the matter.
Tom Patton is a Surety Advisor with CCIG. Reach him at Tom.Patton@thinkccig.com or 720-330-7922.
CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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