R&W Builders, Inc. of O’Fallon, Ill., has agreed to pay the United States $400,000 to resolve allegations that it violated the False Claims Act by fraudulently obtaining construction contracts reserved for disadvantaged small businesses, U.S. Attorney Steven D. Weinhoeft announced Wednesday.
The Small Business Administration 8(a) Business Development Program helps provide a level playing field for small businesses owned by socially and economically disadvantaged individuals by limiting competition for certain federal contracts to Program participants. To increase the opportunities available to these disadvantaged businesses, the SBA also permits program participants to partner with another company on certain contracts through approved joint venture agreements.
The SBA requires the joint venture agreements to include specific terms to ensure the relationship is fair and provides a benefit to the disadvantaged business, including provisions designating the disadvantaged business as the managing partner of the joint venture and requiring the disadvantaged business to perform a specified percentage of the work. It is important that 8(a) joint ventures comply with the SBA’s criteria because misuse of the program deprives real disadvantaged businesses of valuable economic opportunities and undermines the program’s integrity.
In 2014, after R&W was no longer eligible to participate in the 8(a) Program, it entered into a joint venture agreement with Global Environmental, Inc. (GEI), an 8(a) Program participant based in St. Louis. R&W and GEI named the joint venture Patriot Commercial Construction, LLC and successfully secured an award set aside solely for program participants on the Multiple Award Construction Contract at Scott Air Force Base.
The United States contends that R&W falsely represented it would abide by the program requirements and the Patriot joint venture agreement to obtain the SBA’s approval.
Immediately after Patriot received an 8(a) award on the MACC, R&W began managing the joint venture and using its own employees to complete nearly all of the work Patriot performed. Over the next two years, R&W caused Patriot to receive numerous MACC task orders set aside for 8(a) Program participants when Patriot was under R&W’s control, in violation of SBA requirements, Weinhoeft said in a press release.
“The 8(a) Business Development Program is vital to helping disadvantaged businesses gain valuable experience and access to federal contracts,” Weinhoeft said. “When contractors abuse the program and divert opportunities to themselves, it takes away critical assistance from those who truly need it. We will continue to fight this type of fraud to ensure that disadvantaged businesses in Southern Illinois have the chance to compete.”
“The Defense Criminal Investigative Service will investigate all allegations of abuse related to government set aside programs designed to encourage and support veteran, woman and minority owned small businesses,” stated Gregory P. Shilling, acting special agent in charge of the DCIS Southwest Field Office. “Schemes like this one undermine not only the integrity of the programs, but the government contracting process as a whole. This cannot be allowed.”
“The Department of the Air Force takes the protection of federal SBA set-aside funds seriously, especially when abuses impact the military’s warfighting capability,” said Nicholas J. Groesbeck, special agent in charge of the Air Force Office of Special Investigations (OSI), Procurement Fraud Detachment 4. “OSI along with our joint partners are dedicated to protecting the integrity of government procurement practices from fraud, waste and abuse while ensuring those who violate the law are held accountable.”
The investigation was conducted by the SBA Office of Inspector General, Department of Defense Office of Inspector General, Air of Force OSI, and the Defense Contract Audit Agency.
The United States was represented in this matter by Assistant United States Attorney Laura Barke.