Friday, December 13, 2013

One Person Company Gets a $15 Million Subcontract

The Department of Justice has just stepped in on a Qui Tam action filed by a scorned small business. Last week, the Department filed a civil complain under the False Claims Act alleging that a DOE (Department of Energy) contractor falsely claimed credit for awarding tens of millions of dollars worth of federal subcontracting business to small businesses including woman-owned small businesses.

The complaint alleges that the contractor claimed these small businesses would perform subcontracted work, but that those companies were really used merely as pass-throughs and the actual work was performed by another subcontractor who is not a small business.

The prime contractor, operating a cost reimbursable contractor for DOE (Energy) is required to award a certain percentage of subcontracts to small businesses and disadvantaged small businesses, including woman owned small businesses. Failure to meet the targets would result in a reduction of fees or profit.

In this case, the complaint alleges that the contractor falsely represented to DOE that it had awarded three different multi-million dollar subcontracts to two different woman-owned subcontractors when in fact, those entities were merely pass-through entities for another subcontractor who wasn't a small business. One of those two companies had only one employee, the owner, and received more than $15 million in subcontracts. The subcontractor farmed all the work out to the non-small business subcontractor.

According to a related article in the local newspaper, the non-small business subcontractor denied any wrongdoing stating that teaming arrangements were very common and encouraged by DOE.

This entire matter was first raised by a different small business who had bid and lost on several subcontracting opportunities. The owners investigation into the matter led to the Qui Tam action and subsequent civil suit by the DOJ. Should the Government prevail, the whistleblower stands to share in the proceeds.

You can read the DOJ's full press release here.

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