Friday, June 8, 2018

Settlement Reached on Contractor Use of Front Companies to Satisfy Small-Business Goals

The Tri-City Herald is reporting today that one of the (former) contractors engaged in cleaning up nuclear waste at DoE's Hanford facility Washington Closure Hanford (WCH), has reached a settlement with the Justice Department over its use of front companies to meet its small business subcontracting goals. WCH is owned by AECOM, Jacobs Engineering, and Bechtel. The reporting did not state the settlement amount. Previously, a subcontractor and two lower-tier subcontractors have settled their parts in the schemes for about $2.2 million.

Back in 2010, Savage Logistics, a small, woman-owned business doing work at Hanford, filed a whistleblower lawsuit against WCH and a couple of other firms, accusing them of awarding subcontracts reserved for small businesses (i.e. woman-owned) to front companies. The Justice Department enjoined the suit in 2013.

One of WCH's major subcontractors, FE&C (Federal Engineers & Constructors). FE&C was not a small business but it awarded lower-tier subcontracts to firms with dubious track records. For example, in 2009, WCH awarded a $4 million subcontract to Phoenix Enterprises Northwest (PEN) for hauling contaminated materials to a Hanford landfill. Problem was, PEN had been formed just four months before by an employee of FE&C and that employee remained a full-time employee at FE&C after the award.

Another lower-tier subcontractor, Sage Tec, a woman-owned small business, had no experience, equipment, or employees but proceeded to win nearly $20 million in work from FE&C. All it had to offer was its name and status as a woman-owned business. Since it had no assets, equipment, or experience, it relied heavily on FE&C for all of those things.

In 2017, FE&C settled with the Government for $2 million and shortly thereafter, Sage Tec settled for $235 thousand. Neither company admitted guilt or liability in the matter.

The Government's small business contracting (and subcontracting) goals leads contractors to sometimes be inventive and creative. After all, how many women-owned businesses are there in that very remote part of Washington State, that own a fleet of dump trucks capable of hauling contaminated materials to land-fills? Not many.

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