Federal agencies ratcheting up scrutiny of small-business contracts after reports

By Robert O'Harrow Jr.
Washington Post Staff Writer
Friday, December 10, 2010

Half a dozen federal agencies are looking into alleged abuses of small-business contracts, some involving Alaska native corporations that have received hundreds of millions of dollars in recent years under special set-aside rules.

Contracting specialists and government officials said the flurry of enforcement efforts signals a shift toward more oversight of contracts by the Obama administration in the wake of reports about questionable contracting practices. "This is a warning to everybody," said Stan Soloway, president and chief executive of the Professional Services Council, a national trade group of government contractors. "Clearly, there is a signal here."

Daniel Gordon, administrator of the White House Office of Federal Procurement Policy, said the administration supports set-aside contracts for small business and ANCs, but only with sufficient oversight. "We can only do that if the public . . . are confident that we are protecting those programs from fraud," Gordon said. "The days of 'No one is checking' are over."

The government requires agencies to devote about a quarter of procurement spending to small businesses - almost $100 billion last year. In some cases, though, small firms and ANCs allegedly have operated as fronts to pass on work and revenues to traditional companies, in violation of small-business rules.

The surge in enforcement follows an unprecedented action by the Small Business Administration in October to suspend a large contractor, GTSI, from all government business. The SBA said it had evidence that GTSI had used two small firms to illegally get work from a $3 billion contracting program at the Department of Homeland Security.

Those measures came after The Washington Post detailed the relationships between the companies in a series of articles that began in September. The series has focused on abuses in the government's small-business programs for Alaska native corporations, subsidiaries of which have received more than $29 billion in contracts over the past decade.

Among the recent enforcement and oversight efforts:

l Justice Department civil enforcement authorities are considering how to recover money from firms involved in questioned small-business contracts. The companies under scrutiny include GTSI and the two firms it worked with - EG Solutions and MultimaxArray Firstsource, according to people with knowledge of the inquiry.

In a statement, the U.S. Attorney's Office in the District said the department is working with the SBA on civil fraud cases, but it declined to identify the companies it is reviewing.

l Senior procurement officials at the Department of Homeland Security have launched a "comprehensive review" of the agency's small-business contracting program, known as First Source. Officials plan to examine whether the businesses are doing the proper amount of work themselves and not handing it off to subcontractors, according to a DHS e-mail obtained by The Post.

"In light of the recent SBA's suspensions and The Washington Post article regarding abuses in the First Source program, DHS intends to undertake a comprehensive review of all 11 First Source contracts to ensure that the program can continue forward without further risk or abuse," the e-mail said.

In a statement, a DHS spokesman said the agency "takes very seriously the issues that resulted in the recent SBA suspensions of two of the First Source contractors."

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