A government investigation found that fraud and abuse are diverting millions of dollars in contracts intended to go to businesses owned by service-disabled veterans.
Millions of dollars worth of government contracts designated for service-disabled veterans are being siphoned off by fraud and abuse, according to a recent government report.
In a case-study of 10 firms, including one Florida company, the Government Accountability Office found ineligible companies had won about $100 million worth of contracts earmarked for service-disabled veteran-owned companies.
The “program is vulnerable to fraud and abuse, which could result in legitimate service-disabled veterans losing contracts to ineligible firms,” according to the report, which was presented to Congress last week.
Florida is home to 1,421 service-disabled veteran-owned businesses, according to the government’s Central Contractor Registry. And while the government has a mandate to set aside 3 percent of all federal contracts for such firms, it often misses the mark.
During fiscal year 2008 — the latest data available — service-disabled small businesses won $3.3 billion worth of federal contracts, or about 1 percent. But the GAO study suggests that even those modest results are overstated.
In one case, the GAO found a full-time Department of Defense contractor, who was disabled and worked at MacDill Air Force Base in Tampa, was passing along a $900,000 contract to manufacture furniture to his wife’s company. She, in turn, passed it along to another manufacturer that actually completed the work.
The investigation found that while officials at MacDill were aware of the illegal “pass through,” they approved the contract anyway.
In another case, a Las Vegas company won a $7.5 million contract to maintain trailers in the wake of Hurricane Katrina. Even after it was discovered the owners were not service disabled, they continued to receive service-disabled contracts, the investigation found.
“Although ineligible firms have been identified through bid protests, firms found ineligible do not face real consequences, can be allowed to complete the contracts received, and are not suspended or debarred,” the report found.
Govanny Nancy Flores was in the U.S. Coast Guard for 21 years before retiring with a medical disability. Her Miami company, DD&F Industries, does light construction, security and IT work and has won contracts earmarked for veterans.
“When a project comes out and it is designated as service disabled I say ‘Thank you God,”‘ she said. “But to think that someone is utilizing a title that is not theirs is offensive. That basically takes bread out of my mouth or someone else who is even more disabled than I am.”
Among the problems identified by the report: The government has no process to validate a firm’s eligibility for the program. While the Veterans’ administration is working on such a database, it is not used by other contracting agencies.
The federal government has a poor track record of controlling government spending. A Miami Herald study of federal small business contracts performed in the state in 2008 found that massive billion-dollar companies, including General Electric and Boeing, had soaked up at least $76 million that were reported as going to small firms.
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