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In its February 18, 2020 Report, the Inspector General for the U.S. Department of Defense (DoD) concluded that $876.8 million in service-disabled veteran-owned small-business (SDVOSB) contracts were improperly awarded due to a lack of verification by contracting officials. The audit, which was conducted to determine whether DoD awarded contracts to businesses that actually qualified under the SDVOSB regulations, reviewed awards for 29 self-certified SDVOSBs. Of those 29 contractors, DoD found that 16 had misrepresented their status and wrongfully received a total of 27 SDVOSB set-aside awards valued at $827.8 million in fiscal years 2017 and 2018 alone. Additionally, three other contractors received SDVOSB deals notwithstanding the fact that the Small Business Administration (SBA) had previously found them ineligible for award in response to size protests.

DoD currently relies on businesses’ self-representations of SDVOSB status in the System for Award Management (SAM) when awarding contracts. The Report warns that until additional controls are established, “DoD contracting activities will continue to award SDVOSB contracts to ineligible contractors.” The Report recommends that the DoD Office of Small Business Programs take several steps to remediate the problem, including requiring the submission of documentation establishing SDVOSB status prior to award, and taking action against the contractors determined to have misrepresented their status.

Given this Report, SDVOSBs, large businesses doing business with them, and their service providers (e.g., surety firms) are well advised to pay close attention to eligibility issues.

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Photo of Amy Laderberg O'Sullivan Amy Laderberg O'Sullivan

Amy Laderberg O’Sullivan is a partner in the firm’s Washington, D.C. office, a member of the Steering Committee for the firm’s Government Contracts Group, and former chair of the firm’s Diversity Council. Her practice involves a mix of litigation, transactional work, investigations, and

Amy Laderberg O’Sullivan is a partner in the firm’s Washington, D.C. office, a member of the Steering Committee for the firm’s Government Contracts Group, and former chair of the firm’s Diversity Council. Her practice involves a mix of litigation, transactional work, investigations, and counseling for corporate clients of all sizes and levels of experience as government contractors. On the litigation side, she has represented corporate clients in bid protests (agency level, GAO, ODRA, Court of Federal Claims, Court of Appeals for the Federal Circuit, as well as state and local bid protests in numerous jurisdictions), size and status protests before the U.S. Small Business Administration, claims litigation before the various Boards of Contract Appeals, Defense Base Act claims litigation at the Administrative Law Judge and Benefits Review Board levels, civil and criminal investigations, and she has been involved in complex commercial litigation.

Photo of Brian Tully McLaughlin Brian Tully McLaughlin

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a…

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a variety of complex claims, disputes, and recovery matters. Tully’s False Claims Act experience spans procurement fraud, healthcare fraud, defense industry fraud, and more. He conducts internal investigations and represents clients in government investigations who are facing fraud or False Claims Act allegations. Tully has successfully litigated False Claims Act cases through trial and appeal, both those brought by whistleblowers / qui tam relators and the Department of Justice alike. He also focuses on affirmative claims recovery matters, analyzing potential claims and changes, counseling clients, and representing government contractors, including subcontractors, in claims and disputes proceedings before administrative boards of contract appeals and the Court of Federal Claims, as well as in international arbitration. His claims recovery experience includes unprecedented damages and fee awards. Tully has appeared and tried cases before judges and juries in federal district courts, state courts, and administrative boards of contract appeals, and he has argued successful appeals before the D.C. Circuit, the Federal Circuit, and the Fourth and Seventh Circuits.

Photo of Lyndsay Gorton Lyndsay Gorton

Lyndsay Gorton is a Government Contracts counsel in Crowell & Moring’s Washington, D.C. office. Her practice focuses on government contracts litigation and counseling, including government investigations, fraud matters under the False Claims Act, bid protests, and federal and state regulatory compliance. In addition…

Lyndsay Gorton is a Government Contracts counsel in Crowell & Moring’s Washington, D.C. office. Her practice focuses on government contracts litigation and counseling, including government investigations, fraud matters under the False Claims Act, bid protests, and federal and state regulatory compliance. In addition to her primary government contracts practice, Lyndsay has federal court litigation experience representing a broad variety of clients in commercial litigation matters, and has led and managed teams at every stage of litigation, including discovery, dispositive motion practice, trial, and settlement. She also uses her litigation experience to assist her clients with internal investigations, risk management, and compliance.