McCaskill Demands Answers on Suspected Fraud for Contracts Set Aside for Disabled Veterans, Disadvantaged Businesses

Senator calls for oversight after reports find businesses fraudulently obtained more than $350 million in contracts reserved for disabled veterans, disadvantaged businesses

WASHINGTON – Following reports that three men from Kansas and Missouri fraudulently obtained government contracts worth more than $350 million that were reserved for service-disabled veterans and disadvantaged businesses, U.S. Senator Claire McCaskill demanded answers from the Small Business Administration (SBA) and the Department of Veterans Affairs (VA), both of which are responsible for these special eligibility programs. The three men set up companies that made fraudulent claims about their ownership and operation to compete for federal contracts.

“This kind of fraudulent activity prevents qualified service-disabled veterans and other small business owners from fairly competing for these contracts, and it is unacceptable,” said McCaskill, the top Democrat on the Homeland Security and Governmental Affairs Committee. “We need to get to the bottom of how these contracts were awarded, and make sure that bad actors aren’t able to defraud the system like this in the future.”

The federal government awards certain set-aside contracts for Service-Disabled Veteran-Owned Small Businesses (SDVOSB) and the 8(a) Business Development Program intended for small disadvantaged businesses, which under law must be at least 51% owned and controlled by these targeted groups. While the individuals in this case had certified that their businesses had qualified individuals as majority owners, those businesses did not actually qualify as SDVOSBs or 8(a) businesses, because these owners were not managing the day-to-day operations of the companies. The SBA and VA are tasked with vetting participants in these programs to prevent waste, fraud, and abuse.

In letters to the SBA and VA, McCaskill wrote: “I am concerned that continued challenges with vetting participants in the programs can enable this kind of fraudulent activity and will prevent qualified service-disabled veteran owned small businesses from fairly competing for government contracts. In order to better understand VA’s process for vetting participants in the program and preventing fraud in the SDVOSB program, I request that your office provide a briefing to my staff.”

McCaskill’s letter to the SBA builds on previous efforts to cut down on waste, fraud, and abuse in the 8(a) program. In 2016, she sent a letter to SBA, after a report found that the agency struggled to enforce regulations prohibiting the subsidiaries of Alaska Native Corporations (ANCs) from operating in the same primary line of business as sister firms. In 2011, she introduced legislation aimed at creating small business jobs, streamlining federal contracting, stopping large corporations from gaming the system.

McCaskill has also made oversight of VA programs a priority since joining the Senate. Last year, she demanded answers from the VA, following reports of increased whistleblower relation at the agency. She also conducted oversight of the VA last year to cut down on waste, fraud, and abuse on major VA construction projects. Aiming to continue improvements to the quality of customer service at statewide VA facilities, McCaskill created a “secret-shopper program,” the Veterans’ Customer Satisfaction Program, which allows veterans to share timely, confidential feedback about their VA health care visits, and helps provide oversight and accountability for VA health care facilities.

Read McCaskill’s letter to SBA HERE.

Read McCaskill's letter to the VA HERE.

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