Two DHS contractors suspended in SBA probe

By Robert O'Harrow Jr.
Washington Post Staff Writer
Friday, November 19, 2010

Federal authorities suspended two Department of Homeland Security contractors Thursday, saying they have evidence that the firms worked with a large company to "defraud the Government" by passing on work and revenues from a contract intended to benefit small businesses.

The action is part of an expanding investigation by the Small Business Administration into allegations that small companies are being used by large companies to obtain small-business set-aside contracts.

The suspensions comes one month after the SBA accused Northern Virginia-based GTSI Corp., of being "an active participant in a scheme that resulted in contracts set-aside for small businesses being awarded to ineligible contractors."

The two newly suspended companies, EG Solutions and MultimaxArray Firstsource, have both used GTSI at various times as a subcontractor on First Source, a $3 billion contracting program for technology and services provided to DHS.

From 2007 through July, EG Solutions landed more than $166 million in work under First Source. MultimaxArray received $67 million.

In letters to the suspended firms, the SBA said that "the subcontractor in fact performed most if not all of the work required." The letters did not name GTSI.

"I also find that there is adequate evidence that [EG Solutions and MultimaxArray] committed fraud or a criminal offense," said the letters signed by Michael A. Chodos, the agency's suspension and debarment official.

Brian Leung, an executive with MultimaxArray, said his firm "is disappointed with the SBA's decision and believes all our actions were appropriate. We intend to fully cooperate with the SBA's investigation."

In a statement, Eyak Corp., the parent of EG Solutions, said that it is committed to "following the letter of the law regarding all SBA rules and regulations."

In a statement, SBA Administrator Karen Mills said the agency has "no tolerance for waste, fraud and abuse in small business government contracting. Federal government contracting and business development programs provide critical opportunities for small business, but can only be effective if you hold bad actors accountable."

The suspensions are part of an unprecedented enforcement effort by the SBA.

Two top GTSI executives resigned and three others were put on leave indefinitely as part of a settlement agreement that has enabled GTSI to resume receiving federal contracts.

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