Okland Construction headquartered in Utah has agreed to settle allegations made by a whistleblower in a qui tam lawsuit that it violated the False Claims Act in connection with the Small Business Administration’s (“SBA”) Section 8(a) Program for Small and Disadvantaged Businesses.
The SBA’s Section 8(a) Program is a business development program designed to assist companies that are majority owned and controlled by individuals that are socially and economically disadvantaged, as defined by the SBA. Section 8(a) approved companies are eligible to receive sole-source contracts (no-bid contracts) up to a maximum of $4 million for goods and services contracts and $6.5 million for manufacturing contracts.
Smaller 8(a) approved firms are permitted to form joint ventures with large business “mentors” to bid on and perform contracts. The Mentor-Protégé Program enhances the ability of disadvantaged firms to perform larger prime contracts and benefits new companies by demonstrating how experienced businesses operate.
According to Fox Business, Okland entered into a mentor-protégé arrangement with Saiz Construction in 2002, but did not form an SBA-approved joint venture. Without an approved joint-venture arrangement, mentor and protégé entities cannot jointly bid and perform 8(a) contracts that are set aside solely for 8(a) approved businesses.
In 2011, Saiz Construction and its owner Abel Saiz filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act alleging that Okland did not form a qualifying joint venture with Saiz Construction and was not eligible to jointly bid or perform the primary functions on multiple set aside contracts with Saiz Construction. The government alleged that Okland prepared the bids for the contracts, provided the project managers, submitted invoices and preformed accounting functions on the contracts. According to the whistleblower, Okland concealed its extensive involvement in performing the 8(a) contracts by misrepresenting that its employees were actually employees of Saiz Construction. The government contended these misrepresentations were false claims submitted in violation of the federal False Claims Act.
Okland has agreed to pay $928,000 to resolve the allegations. As their reward under the qui tam provisions of the False Claims Act, Saiz Construction and Abel Saiz will share in $148,480 of the settlement proceeds.
To read more about set aside contract fraud, click here.