You Cannot be a Principal Investigator for Two Companies at the Same Time under SBIR Rules

While performing a pro-active review of  SBIR/STTR awards (Small Business Innovation Research/Small Business Technology Transfer), NASA (National Aerospace and Space Administration) found that an individual was listed as a PI (Principal Investigator) for contracts awarded to two separate companies. Investigation revealed that a group of scientists and engineers who had worked together at ATK, a defense contractor in Huntsville, Alabama, came to an agreement in 2006 with another company, Amtec, also of Huntsville, to work for Amtec with the understanding that they would eventually become their own company. These Amtec employees incorporated their own business, Scientic, Inc in 2008 and beginning in 2009 worked as dual employees of both Amtec and Scientic.

One of the dual employees began proposing SBIR projects for both Scientic and Amtec. In due course, both companies were awarded a variety of SBIR contracts with this employee acting as Principal Investigator for both.

While this employee was serving as PI for SBIR contracts at both companies, the two companies, Scientic and Amtec made certifications and representations to the Government in their contract proposals that the employee would be primarily employed during the performance of the contracts by the company submitting the documents. FAR requires that a PI be primarily employed by the company and requires that the PI spend more than half of his or her employment time during the performance of the contract with the company proposing the research.

During an interview with the NASA Office of Inspector General, the employee confirmed that he was the PI of the Amtec SBIR as well as two Scientic SBIRs. Thus, Scientic's certification that the PI was primarily employed by Scientic was false at the time of Scientic's contract performance with NASA and DoD. The Government alleged that Scientic's knowingly making this certification constituted a false statement under U.S. Code.

Yesterday, the Justice Department ordered Scientic to refund the full amount of the SBIR contracts with NASA and DoD totaling $250,000 and to pay a fine of $30,000. The Judge also placed Scientic on three years' probation. (Read more about the sentencing here.)