A company in Savannah Georgia, Arena Event Services, Inc. has agreed to settle with the Government to resolve allegations that it wrongfully obtained small business set-aside contracts with the Department of Defense. As part of the settlement agreement, Arena will pay $7.8 million back to the Government.
According to the settlement agreement, Arena used another company, Military Training Solutions (MTS) to obtain small business defense contracts that were supposed to be performed by MTS, but in reality were performed by Arena. As a result this scheme, millions of dollars in contracts at Fort Stewart, GA and other military installations, were performed by Arena instead of by legitimate small businesses.
Arena paid MTS to bid and obtain small business contracts that would ultimately be performed by Arena. MTS, by the way, previously entered into its own settlement agreement with the Government to resolve its liability under the scheme.
There was no indication in the Justice Department press release that the work was not accomplished or that the work was not performed properly. So from that standpoint, taxpayers didn't lose out financially. The real problem was that these contracts should have been performed by small businesses in order to further the Government's role in encouraging small businesses to participate in Government contracting opportunities.
There have been many settlements over the years involving similar activities. "Rent-a-Vet" schemes once proliferated but seem to be on the wain now that the VA and SBA have tightened up their verification process. These schemes seem to be easily uncovered. Many are brought forward by internal whistle-blowers who might have a financial incentive to do so. One case a number of years ago was exposed by an alert COTR (Contracting Officer's Technical Representative) who noticed a lot of subcontractors working on a construction project but could never seem to find the prime contractor.