More legislation to address the recent high-profile abuses of the SBA contracting system is in the works. A bipartisan group led by Senator Olympia Snowe (R-ME) has introduced legislation called the Small Business Contracting Fraud Prevention Act of 2011 [pdf]. Among other things, the bill would amend the provisions of the Small Business Act relating to misrepresentations as to the status of companies as small business concerns, including HUBZone, 8(a), woman-owned, and service-disabled veteran-owned small businesses.
Contractors and subcontractors doing business with the government should be aware of two notable features of this bill. First, it would set the amount of damages for the misrepresentation of small business status as the amount paid under the contract, without any offset for the fair market value of the property or service provided. This is a significant departure from False Claims Act principles, under which the government’s damages are measured by the difference between what the contractor provided and what it should have provided. The new bill even goes further than the anti-fraud provisions in the Small Business Jobs Act of 2010 [pdf], which provides for a presumption that the government’s loss is the amount paid. (We discuss that law in an earlier post.)
A second important aspect of the proposed legislation provides that each payment application will be deemed a certification of compliance with the self-performance requirements imposed on small business set-aside contracts. It would thus expand the deemed certification provision in the Small Business Jobs Act of 2010, which deems the submission of a bid or proposal or registration in CCR to be a representation as to small business status. Under the new bill, contractors or subcontractors breaching small business self-performance requirements would face False Claims Act liability, not just contract remedies.
[UPDATE: – S. 633 passed in the Senate by unanimous consent on September 21, 2011.]