On April 20, 2021, a federal contractor settled allegations that it violated federal contracting rules by paying the Department of Justice $ 2.5 million. The settlement follows the DOJ's allegations that the contractor was affiliated with a Service Disabled Veteran Owned Small Business (SDVOSB) who was awarded 14 SDVOSB set-aside and sole source contracts.
The allegations were based on the affiliation rule. According to the allegations, the SDVOSB was affiliated with the contractor because the contractor's executive team handled day-to-day management of the SDVOSB and the two companies shared employees. It's also noteworthy that the service disabled veteran was the father of one of the owners of the contractor who ultimately paid the settlement.
This settlement is yet another example of where the DOJ has pursued economic or socially disadvantaged contractors on the basis of there alleged affiliation with a contractor who does not qualify for the same status. There are ways for disadvantaged contractors to work in qualified joint-ventures with non-disadvantaged contractors but those ventures require taking affirmative steps to ensure the venture is complying with federal regulations which avoids an affiliation finding.
If you are a federal contractor who qualifies for a special status or would like to establish a qualified joint-venture to avoid the affiliation finding, Jones Law may be able to help. We have attorneys with experience assisting federal contractors.
The DOJ's press release regarding the above referenced settlement is available here: http://www.justice.gov/usao-cdca/pr/construction-firm-pays-25-million-settle-allegations-exploiting-service-disabled.