SBA Gifts and Bad Money!

Welcome to a new season! We have a new format! This episode we talk about the new past performance expansion for small business by the SBA and a case of bad money and fraud by a government contractor in Columbia, MD.

SBA Expansion Rule:
https://www.federalregister.gov/documents/2022/07/22/2022-15622/past-performance-ratings-for-small-business-joint-venture-members-and-small-business-first-tier

False Claims
https://www.acquisition.gov/far/3.1003?searchTerms=false%20claims

DOJ
https://www.justice.gov/opa/pr/united-states-files-false-claims-act-lawsuit-against-maryland-contractor-and-owner

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Transcript

00:00.00

SBA Gifts and Bad Money!

Hi everyone and welcome to our podcast adventures in contracting. So this is season 3 and we have a slight change of the format so instead of seeing Vivica and I what you're gonna see now is me talking about some changes in regulatory issues or compliance issues that affect  government contractors as well as a specific case and how that affects you as a government contractor in case, you don't know me I am Leona Charles president and CEO of SPC  Business Consulting where we do all things government contracts.  In case you missed it today I want to talk to you about a gift from the SBA. The SBA has expanded its definition of acceptable past performance for subcontractors and small businesses. So this rule it doesn't take place or it doesn't go into effect until August the twenty second but here's what you need to know. So small businesses are now able to use joint venture experience as direct past performance or relevant experience. So even if you weren't the lead in in the and a J V and you just participated in the activity you were able to use its experience to gain larger contracts. Also. Your subcontracting experience can now be used as direct past performance or ah relevant experience. So you're able to request that the prime complete a past performance document and they're required to get it back to you within fifteen days so this is such a huge win for subcontractors as you know one of the hardest things about subbing is getting the prime to complete any kind of any type of fast performance. So this is a huge win the case that I want to talk to you about it's coming out of Columbia Maryland and in May of twenty twenty two. The DOJ filed a lawsuit against Intelligent Fiscal Optimal Solutions LLC so this is a false claims case.  Now false claims covers a lot of latitude but here are the facts of the case or what's alleged by the DOJ.  The DOJ alleges that IFOS and this is what I'll be referring to them as from here on out of owner Tawanda Smith and former DHS executive director of the office of management integration in the office of the Under Secretary  for management. Dr. Kenneth Beck essentially fixed a contract win for IFOS.  The DOJ alleges that while Dr Beck was still employed with DHS he met with Miss Smith and informed her of a potential opportunity that he was writing the scope of work for, he then emailed his resume to Ms. Smith via his personal email. Um.

02:41.25
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And then he informed his second in command, his Deputy Director, that he would be leaving and that she would be working with IFOS and the deputy director apparently selected IFOS As to be the successful contractor and didn't provide any meaningful evaluation of any other vendor. So after Dr Beth Back left he contracted with IFOS through his own company Transformation Systems International LLC working on the very same contract. He wrote a statement of work for so here's here's how the DOJ has working it down. Along with Miss Smith, Mr. Beck prepared and submitted a signed technical proposal to DHS that falsely identified another employee as a strategic advisor. Mr. Beck,  I'm sorry Dr Beck broke post employment restrictions um outlined in the ethics and government act. 18 USC 2933 and just to clarify. Basically what it is is. There's generally a  period once you leave government that you can't turn around and work for a ah. Consultant or another company on anything having to do with the agency that you worked  for so by him leaving forming a company and subcontracting with Miss Smith he is effectively breaking that. So keep that in mind that's gonna play out as as this develops. Um. He avoided a mandatory suitability background investigation now as we all know only the contracting officer can um, bind the government to contracts and only the contracting officer can make any material changes to a contract so that's gonna be a big sticking point in this case. Um, also they're alleging that he used his personal email text to text and and call Miss Smith and you know, kind of have conversations regarding the contract. He he uses personal cell phone to facilitate conversations to intercept conversations that kind of thing. Um, they're alleging that Dr. Beck's name was removed from IFOS  documents and that they coded his message in IFOS group emails to conceal his identity. So what. Um, big on pretty much is 31 USC 2933 and basically what that is is it requires contractors to have a um have a display with a tip line number and.

05:22.90

What the rule requires is basically any any connection to a contract or war performance or close out of any government contract. So basically anything having to do with it and it applies to both subcontractors and prime contractors. You're supposed to notify the government hey um I think something sketchy is going on. And if you don't do that then this rule allows penalties up to 3 years of suspension or for you to be debarred um, so now there are a couple things to consider um minimum qualifications and statements of work. You know minimum qualifications  are generally determined using um the qualifications of a known contractor right? This is a baseline for what we want to try to to to have happen. This is what we expect, you know it's it's a minimum a bare minimum there's nothing wrong with that . There's nothing  unfair about it. It's the government saying this is what I know at least we need to have in order to keep going so that's ah that's a fair thing. What is unfair is that you can't take someone with inside knowledge of how those qualifications are evaluated or how they're developed and then have them turn around and go out in industry and take that inside knowledge and complete a response that's gonna give them an unfair competitive advantage right? Um, the the government isn't harping on that so much with their harping on is the fact that they were defrauded billing because this person should not have ever been on the contract so according to 31 USC 3729 false claims act the amount billed by IFOS  was $633,000 so the government is seeking that plus the interest. And one of the things that they pointed out is that you're in violation of this if you've done anything with actual knowledge reckless disregard deliberate ignorance made use and or cause to be made or use false records which they did in submitting that technical proposal. Um. And taking his name off of documents statements again which they did with that technical proposal and taking his name off off of documents and certifications material to false and project claims which they did by taking his name off of those materials hiding him from. Government knowledge not submitting a mandatory suitability form and then submitting an invoice so they're going to have a uphill battle trying to prove that this was not something that they did intentionally that the key here is going to be that intent and.

08:14.90

They're going to have a really hard time.  IFOS is going to have a really hard time that is showing to the government that they did not do that knowingly that they didn't have a reckless disregard or they weren't deliberately ignorant. They're going to have a really really hard time selling that in court. Um, one of the other things that they're bringing them up on is 28 USC 1945 which is unjust enrichment. So again, they shouldn't have made that money because he should not have been on their team and of course they're they're um, trying to recoup their their court costs as well. So this is interesting and I've said this all the time if you have somebody who is the person in question right? who you think the government may present a situation where um, there could be a potential conflict of ventures I mean this is a really simple thing to to rectify. So what I generally recommend to clients is that if you have someone who the government is going to look at and say hey, um, this is this  potential to be a kind a conflict of interest what I would advise is that okay message received. Take this person remove them from the team in question put them in a whole other team right? Um, take take away their access to these documents take away their access to the emails take away their access to group chats take away their access to the proposal information take away their access to a violation and documents, take away their access to past performance anything having to do with this contract take them out of it and just move them to another team move them to another supervisor you know where they have literally no access to what is in question and what you've done is you've created an an OCI which is an organizational conflict of interest  Um, plan you, you've done what the government asked you. You've said  we recognize this could be a potential conflict and this is how we're gonna address it. This person is not gonna sit in on this on these meetings. This person is not going to have any kind of information funnel to them. This person is not in the emails. This person does not know what's going on this person, is not briefed and this person does not send it on meetings with the government regarding this contract. This person does not provide any technical feedback regarding this contract. This person does not supervised any team members working on this contract. You know it's very simple to create that and it can be done. Um, but it's obvious that IFOS did not do any of the any of the any of these things at least according to the the complaint that the DOJ has filed.

10:51.34

So this is a great interesting case I will let you guys know how it how it um plays out. But I think that what we're seeing is that they're going to have a hard time doing it and in the future. You know if you find yourself in a situation where even there's the potential for this. Just remove the person and create a wall. That's all you got to think about you got to just create a separation from the person in question whether it's fair or not fair is really irrelevant because you have to convince the government that you're doing everything that you can to take care of any perceived unfair competitive advantage so that's a big thing. Um I really appreciate you guys listening to our podcast and as always you can leave questions or comments on our Twitter,  TikTok or shoot him to us by email and I look forward to seeing you guys next time. Thanks.