Phony firms make the grade for HUBZone

As part of its latest undercover operation, the Government Accountability Office obtained certification in the Historically Underutilized Business Zone program ...

By Vyomika Jairam
Internet Editor

The Small Business Administration is responding to claims that it certified phony companies to work under a special contracting program. The firms were set up by GAO investigators looking into the HUBZone Program. That program is designed to help companies in Historically Underutilized Business areas compete for federal contracts. SBA has admitted the findings are valid, and they say they’re making improvements.

The HUBZone Program was created to make a portion of overall government contracts available to businesses operating in impoverished areas. SBA has mandated that 3 percent of federal contracts awarded are given to companies located in and operating around the nation’s most rural and inner-city areas.

The SBA’s role is to certify what businesses qualify for HUBZone certification, and can therefore be awarded contracts through that program. And while the GAO’s findings centers around certified companies that didn’t even exist in some cases, Joe Jordan, associate administrator for Government Contracting and Business Development at SBA says that the agency has dealt with more pervasive problems in the program.

“There have certainly been problems surfaced in the program over the last few years,” Jordan says. “These problems weren’t created overnight, they’re not going to be fixed overnight, but they are going to be fixed. So our job is to make sure that we execute and oversee this program as rigorously and effectively as possible, so that’s what we’re working hard to do.”

The fraud, waste or abuse that the SBA has dealt with most hasn’t been creation of completely fictitious firms, Jordan said, but rather firms that just don’t currently meet one of the eligibility requirements of the program.

Among the requirements are that they qualify as a small business, they must be owned and controlled by a U.S. citizen, they must employ 35 percent or more of their employees from a HUBzone area, and their primary office is within a HUBZone.

“When they fall out of compliance, hopefully if they’ve applied and they’re not in appliance we’ll catch that during the certification phase,” Jordan said. “But if they fall out of compliance once in the program, we’ve got a number of surveillance and monitoring techniques.”

These include site visits, program examinations, and interviews where business owners and managers are required to reaffirm qualification paperwork submitted on penalty of perjury.

“We’ve been trying to use the best of not just government thinking but private sector thinking” Jordan. “And the government is getting good bang for the buck.”

If found to be out of compliance, a firm is de-certified until they regain eligibility, and if SBA finds fraudulent behavior they can recommend debarment from all government contracts, and in some cases pursue criminal action.

Jordan also said that reevaluating the program has been beneficial beyond HUBZone.

“All the ways in which we’re improving the fraud waste and abuse prevention efforts in the HUBZone program, are absolutely applicable to all of our contracting programs,” Jordan said.

Among the changes the SBA has made is naming a new director of the HUBZone program, law professor Grande Lum. Lum is also founder of Accordence, a consultancy that provides negotiations, conflict management and persuasion and influence services.

SBA has not announced when Lum will start in his new position.

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