GTSI Settlement Could Mark Crackdown on Contracting Abuses

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The U.S. Small Business Administration has announced a tough settlement with GTSI Corp., one of the nation’s largest government contractors. GTSI, which had been accused of improperly obtaining contracts that are meant for small businesses, avoided a one-year suspension from new work for the federal government. But two of its top executives are stepping down, three others are suspended, and the company has agreed to immediately cease working as a subcontractor to small businesses serving as prime contractors.

The SBA has taken strong action here, both in bringing the charges earlier this month and in forcing this settlement. But it’s actually the SBA’s tough enforcement stance in this case that’s unusual, not the questionable practice itself.

GTSI was accused of getting contracts set aside for small businesses by putting forth smaller companies as supposed prime contractors when GTSI itself actually took the lead role in the work. GTSI, a Beltway giant that received $540 million in federal contract awards in 2009, isn’t exactly what Congress had in mind when it enacted preferences for small businesses.

Anyone who follows government contract awards knows that this type of activity represents business as usual in the contracting game. Our law firm has represented several small businesses owned by service-disabled veterans that have lost lucrative business opportunities to phony “small” or phony “service-disabled” small businesses, so we have seen this practice up close.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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