H.R. 2749 strengthens enforcement over veteran owned small businesses that improperly pass through contracts. Specifically, the legislation would require participants in the Vets First Program to certify that they are performing the required percentage of work and directs VA to refer suspected violators to the Office of the Inspector General for investigation. The bill also directs the VA Secretary to consider whether existing administrative and criminal penalties for fraudulent representation would apply in each case.
When a Service-Disabled Veteran-Owned Small Business or Veteran-Owned Small Business is awarded a contract under VA’s Vets First Program, they are required to perform a certain percentage of the work. There is a longstanding problem of improper “pass-throughs” in the Vets First Program and throughout government contracting, where businesses profit from the contracts while performing little or no work while passing them off to other companies to complete. This problem has escalated since the Supreme Court issued its Kingdomware decision, which applied the Vets First Program to all VA contracts.
Although improper pass-throughs have long been prohibited by the Small Business Act of 1953, as amended, and the Federal Acquisition Regulation, VA lacks the tools to detect them and enforce the rules. Service-Disabled Veteran-Owned Small Businesses and Veteran-Owned Small Businesses that play by the rules are being sidelined for contracting opportunities by bad actors abusing the system.
The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Jul 24, 2017.
Protecting Business Opportunities for Veterans Act of 2017
(Sec. 2) This bill applies certain small business subcontracting limitations to a small business concern owned and controlled by a veteran or a veteran with a service-connected disability.
The Department of Veterans Affairs (VA) may award a contract only after obtaining a certification from the offeror that it will comply with such subcontracting limitations if awarded the contract. Such certification shall: (1) specify the applicable performance requirements, and (2) explicitly acknowledge that the certification is subject to criminal penalties for making false statements in any matter within the jurisdiction of the U.S. government.
The VA Director of Small and Disadvantaged Business Utilization and the VA Chief Acquisition Officer shall jointly refer any violation or suspected violation to the VA Inspector General.
If the VA determines that a contract recipient did not act in good faith, such recipient shall be subject to any or all of the following: (1) referral to the VA Debarment and Suspension Committee, (2) a criminal fine, and (3) criminal prosecution.
The Inspector General shall submit an annual report to Congress for each of 2018-2022 that includes: (1) the number of referred and suspected violations; and (2) the disposition of such violations, including the number of small business concerns suspended or debarred from federal contracting or referred for Department of Justice prosecution.