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SBA: Short for “Stopping Bad Apples?”

Posted By Guy Timberlake, The American Small Business Coalition, LLC, Monday, February 14, 2011

SBA: Short for "Stopping Bad Apples?”

Just ask EG Systems and Multimax Array who after being suspended by SBA at the start of FY2011, were recently dropped from the $3 billion First Source contract by DHS because of those suspensions.

The award for a federal agency completely reversing its image in the area of enforcement goes to…

You have to admit, when we all woke up in the new fiscal year and realized SBA had suspended GTSI from government contracting, it was impressive. Even though the eventual punishment was much lighter than deserved, the "statement” echoed throughout the industry.

That statement was recently reiterated by DHS’ decision not to renew the First Source contracts for EG Systems and Multimax Array who were implicated for doing business on a pass-through basis with GTSI. This was no mere drop in the bucket since First Source accounted for more than $270 million in awards for the two companies since 2007. On a related note, EG Systems is a subsidiary of Eyak Technology, an Alaska Native Corporation (ANC) based in Northern Virginia that was previously owned in part by GTSI.

Which brings us to the state of affairs with the ANC’s.

This situation coupled with intense scrutiny from Capitol Hill about ANC activities in the SBA 8(a) Business Development Program, has prompted SBA to work with ANC’s and other tribal organizations to ensure the benefits they are afforded actually benefit those intended to receive them, and not large companies trying to exploit the program.

There is considerable chatter throughout the community that SBA is just getting started, and rightly so since there are plenty of "in your face” examples of companies exploiting the system in the 8(a), SDVOSB, HUBZone and other programs. Too many instances of outright affiliation or exceeding the size standards of the primary NAICS Code have been able to slide by for various reasons. One can only imagine the steps SBA is taking to mitigate similar issues in the brand new Women’s Set-Aside Program launched earlier this month.

These enforcement actions are necessary, applauded, and essential to the viability of the small business assistance programs. The government sector is littered with the chalk outlines of small companies who tried to do business "by the rules” only to be mowed down by circumstance and opportunists in the form of small, medium and large companies with intentions not in the best interest of government agencies, their workers or America’s small businesses. The activities of more than just a few bad apples serve only to create additional burdens on legitimate small companies.

SBA has their work cut out for them and we wish them speedy success!


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