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entitled 'Service-Disabled Veteran-Owned Small Business Program: Case 
Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain 
Millions of Dollars in Contracts' which was released on November 19, 
2009. 

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Report to the Chairwoman, Committee on Small Business, House of 
Representatives: 

United States Government Accountability Office: 
GAO: 

October 2009: 

Service-Disabled Veteran-Owned Small Business Program: 

Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain 
Millions of Dollars in Contracts: 

GAO-10-108: 

GAO Highlights: 

Highlights of GAO-10-108, a report to the Chairwoman, Committee on 
Small Business, House of Representatives. 

Why GAO Did This Study: 

The Service-Disabled Veteran-Owned Small Business (SDVOSB) program is 
intended to provide federal contracting opportunities to qualified 
firms. In fiscal year 2007, the Small Business Administration (SBA) 
reported $4 billion in governmentwide sole source and set aside SDVOSB 
contract awards. Given the amount of federal contract dollars being 
awarded to SDVOSB firms, GAO was asked to determine (1) whether cases 
of fraud and abuse exist within the SDVOSB program, and (2) whether the 
program has effective fraud-prevention controls in place. 

To identify whether cases exist, GAO reviewed SDVOSB contract awards 
and protests since 2003, and complaints sent to our fraud hotline. GAO 
defined a case as one or more affiliated firms who were awarded one or 
more SDVOSB contracts. To assess fraud-prevention controls, GAO 
reviewed laws and regulations and conducted interviews with SBA and 
Department of Veterans Affairs (VA) officials. GAO did not attempt to 
project the extent of fraud and abuse in the program. 

What GAO Found: 

GAO found that the SDVOSB program is vulnerable to fraud and abuse, 
which could result in legitimate service-disabled veterans’ firms 
losing contracts to ineligible firms. The 10 case-study firms 
identified in this report received approximately $100 million from 
SDVOSB contracts through fraud or abuse of the program, or both. For 
example, contracts for Hurricane Katrina trailer maintenance were 
awarded to a firm whose owner was not a service-disabled veteran. GAO 
also found SDVOSB companies used as a pass-through for large, sometimes 
multinational corporations. In another case a full-time federal 
contract employee at MacDill Air Force Base set up a SDVOSB company 
that passed a $900,000 furniture contract on to a company where his 
wife worked, which passed the work to a furniture manufacturer that 
actually delivered and installed the furniture. The table below 
provides details for 3 of the 10 cases. 

Table: Details of 3 Ineligible SDVOSB Cases: 

Industry: Maintenance and repair; 
Award—agency: $7.5 million—Federal Emergency Management Agency (FEMA); 
Notes: Firm is not eligible because majority owner is not a service-
disabled veteran. Firm’s ineligibility was determined by SBA during a 
bid protest. Company continues to receive tens of millions in non-
SDVOSB contracts. 

Industry: Construction and janitorial services; 
Award—agency: $5 million—VA, U.S. Fish and Wildlife Service, 
Agricultural Research Service, U.S. Forest Service; 
Notes: Firm is ineligible because it does not perform any work and 
subcontracts 100 percent of the work to non-SDVOSB firms. Our 
investigation found the SDVOSB firm utilizes employees from a large non-
SDVOSB foreign-based corporation, which reported almost $12 billion in 
annual revenue in 2008, to perform contracts. 

Industry: Septic tank and related services; 
Award—agency: $200,000—Army; 
Notes: Firm and its SDVOSB joint ventures are ineligible for the 
program because a non-SDVOSB firm performs all contract work. After 
being found ineligible for the program by SBA, the firm used another 
SDVOSB joint venture to continue to receive SDVOSB contracts. Service-
disabled veteran used to qualify for current contracts lives over 1,800 
miles from contract performance location. 

Source: GAO. 

[End of table] 

GAO found that the government does not have effective fraud-prevention 
controls in place for the SDVOSB program. Specifically, SBA and 
agencies awarding SDVOSB contracts do not have processes in place to 
validate a firm’s eligibility for the program prior to bid submission. 
SBA and contracting agencies also currently do not have a database of 
individuals that are service-disabled veterans, a key eligibility 
requirement for the program. According to VA, it is developing a 
database, called VetBiz, of validated SDVOSBs, but currently it is only 
used for contracting by the VA. SBA’s bid-protest process is the only 
governmentwide control over the SDVOSB program. However, although 
ineligible firms have been identified through bid protests, firms found 
ineligible do not face real consequences, can be allowed to complete 
the contracts received, and are not suspended or debarred. 

What GAO Recommends: 

Congress should consider providing VA authority and resources to expand 
its SDVOSB eligibility process governmentwide. GAO also recommends that 
SBA and VA explore the feasibility of governmentwide use of the VA 
VetBiz verified database for SDVSOB contractors. SBA and VA generally 
agreed with the recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-10-108] or key 
components. For more information, contact Gregory Kutz at (202) 512-
6722 or kutzg@gao.gov. 

[End of section] 

Contents: 

Letter: 

Ineligible Firms Obtain Millions of Dollars in SDVOSB Contracts: 

SDVOSB Program Does Not Have Governmentwide Fraud-Prevention Controls: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Small Business Administration: 

Appendix III: Comments from the Department of Veterans Affairs: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Case-Study Firm Details: 

Figures: 

Figure 1: Case Study 5 Firm's Portable Toilets and Hand-Wash Stations 
with Non-SDVOSB Name and Phone Number: 

Figure 2: Business Mailing Address and Physical Address for Case-Study 
10 Firm: 

Figure 3: Fraud-Prevention Model: 

Abbreviations: 

CCR: Central Contractor Registration: 

EPA: Environmental Protection Agency: 

FAR: Federal Acquisition Regulation: 

FEMA: Federal Emergency Management Agency: 

FPDS-NG: Federal Procurement Data System-Next Generation: 

HUBZone: Historically Underutilized Business Zone: 

NAICS: North American Industry Classification System: 

OFPP: Office of Federal Procurement Policy: 

ORCA: Online Representations and Certifications Application: 

SBA: Small Business Administration: 

SDO: Suspension and Debarment Official: 

SDVOSB: Service-Disabled Veteran-Owned Small Business: 

USDA: United States Department of Agriculture: 

VOSB: Veteran-Owned Small Business: 

VA: Department of Veterans Affairs: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

October 23, 2009: 

The Honorable Nydia M. Velazquez: 
Chairwoman: 
Committee on Small Business: 
House of Representatives: 

Dear Madam Chairwoman: 

The federal government's long-standing policy has been to use its 
buying power--the billions of dollars it spends through contracting 
each year--to maximize procurement opportunities for small businesses. 
The Service-Disabled Veteran-Owned Small Business (SDVOSB) procurement 
program is an extension of this policy. It also is intended to honor 
the extraordinary service rendered to the United States by veterans 
with disabilities incurred or aggravated in the line of duty during 
active service with the armed forces. The Veterans Benefits Act of 
2003,[Footnote 1] which established the program, permits contracting 
officers to award set-aside and sole-source contracts to any small 
business concern owned and controlled by one or more service-disabled 
veterans. Executive Order 13360 also requires federal procurement 
officials and prime contractors to provide opportunities for these 
firms to increase their federal contracting and subcontracting. The 
statutorily-mandated prime and sub contracting goal[Footnote 2] for 
SDVOSB participation is not less than 3 percent of all federal contract 
dollars. 

In order to be eligible for a set-aside or sole-source SDVOSB contract, 
a firm must meet certain criteria. It must be majority-owned[Footnote 
3] by one or more service-disabled veterans who manage and control 
[Footnote 4] daily business operations. The term "veteran" means a 
person who served in the active military, naval, or air service, and 
who was discharged or released under conditions other than 
dishonorable. Service-disabled means that the disability occurred or 
became aggravated during the line of duty in the active military, 
naval, or air service.[Footnote 5] A firm also must qualify as a small 
business under the North American Industry Classification System 
(NAICS)[Footnote 6] industry-size standards. Firm officials are allowed 
to self-certify themselves as being an SDVOSB by attesting that they 
meet the criteria. 

The Small Business Administration (SBA), which, along with federal 
procuring activities, administers the SDVOSB program and tracks the 
government's progress towards meeting its 3 percent goal,[Footnote 7] 
reported in fiscal year 2007 that $4 billion[Footnote 8] in federal 
contracts were awarded to firms who self-certified themselves as 
SDVOSBs. Government contracts to SDVOSBs accounted for only 1 percent 
of all government contract dollars paid in fiscal year 2007. Since the 
SDVOSB program began, the government has not met its annual mandated 
goal. In addition to SBA's statutory authority over administration of 
the SDVOSB program, several other government agencies have separate 
authority over issues related to the SDVOSB program. The Veterans 
Benefits, Health Care, and Information Technology Act[Footnote 9] 
requires the Department of Veterans Affairs (VA) to maintain a database 
of SDVOSBs and Veteran-Owned Small Businesses (VOSB) so contractor 
eligibility can be verified, and requires VA to determine the 
eligibility of firms bidding on VA SDVOSB and VOSB contracts. In 
addition, The Office of Federal Procurement Policy (OFPP), within the 
Office of Management and Budget, provides overall direction for 
governmentwide procurement policies, regulations, and procedures and to 
promote economy, efficiency, and effectiveness in the acquisition 
processes. The Office's primary focus is on the Federal Acquisition 
Regulation (FAR), the governmentwide regulation governing agency 
acquisitions of goods and services, including SDVOSB set-aside and sole-
source contract actions. 

Given the billions of dollars of federal contracts being awarded to 
SDVOSB firms and the committee's concern that ineligible firms are 
receiving SDVOSB set-aside and sole-source contracts instead of 
legitimate SDVOSB firms, you requested that we perform an investigation 
to determine (1) whether cases of fraud and abuse exist within the 
SDVOSB program, and (2) whether the program has effective fraud- 
prevention controls in place. 

To identify examples of firms that received SDVOSB contracts through 
fraudulent or abusive eligibility misrepresentations, we reviewed 
SDVOSB contract awards and protests filed with SBA since the programs 
inception in 2003. We also reviewed allegations of fraud and abuse sent 
to our fraud hotline, FraudNET. In addition, we posted inquiries on our 
Web page and on several veteran advocacy-group Web pages and 
newsletters seeking information on fraud or abuse of the SDVOSB 
program. We received over 100 allegations of fraud and abuse in the 
SDVOSB program. From these sources, we selected 10 cases for further 
investigation based on a variety of factors, including facts and 
evidence provided in protests and allegations, whether a firm received 
multiple SDVOSB contracts, and whether a firm received other non-SDVOSB 
contracts. For the purposes of our investigation, we defined a case as 
one or more affiliated firms or joint ventures that obtained an SDVOSB 
contract. These cases include multiple firms owned by an individual or 
multiple firms affiliated through joint ventures and other types of 
partner agreements. To investigate these case studies, we interviewed 
firm owners and managers and reviewed relevant documentation, such as 
business filings and tax returns, to determine if SDVOSB eligibility 
requirements had been met. We also analyzed data from Federal 
Procurement Data System-Next Generation (FPDS-NG) for years 2003 
through 2009[Footnote 10] to identify SDVOSB contracts received by the 
firms since the program's inception. Furthermore, we reviewed 
certifications made by firms, such as certifications about a firm's 
size, SDVOSB status, and line of business, in the federal government's 
Online Representations and Certifications Application (ORCA).[Footnote 
11] To determine whether the program has effective fraud-prevention 
controls in place, we reviewed relevant laws and regulations governing 
the SDVOSB program. We also interviewed agency officials about their 
responsibility over the program and controls currently in place to 
prevent or detect fraud and abuse. 

Our work was not designed to identify all firms that misrepresent 
themselves as SDVOSBs or commit fraudulent or abusive activity in the 
SDVOSB program. Our work also did not attempt to identify fraud and 
abuse in SDVOSB subcontracts. Our work focused on determining whether 
selected firms met program eligibility requirements. In addition, our 
10 case study examples cannot be projected to the overall population of 
SDVOSB firms. 

We conducted our audit work and investigation from October 2008 through 
July 2009 in accordance with U.S. generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our objectives. We 
performed our investigative work in accordance with the standards 
prescribed by the Council of the Inspectors General on Integrity and 
Efficiency (CIGIE). Additional details on our scope and methodology are 
included in appendix I. 

Ineligible Firms Obtain Millions of Dollars in SDVOSB Contracts: 

Fraud and abuse in the SDVOSB program allowed ineligible firms to 
improperly receive millions of dollars in set-aside and sole-source 
SDVOSB contracts, potentially denying legitimate service-disabled 
veterans and their firms the benefits of this program. We identified 10 
case-study examples of firms that did not meet SDVOSB program 
eligibility requirements, received approximately $100 million in SDVOSB 
contracts, and over $300 million in additional dollars of 8(a), 
HUBZone, and non-SDVOSB federal government contracts. SBA found four of 
the firms ineligible for the SDVOSB program through the agency's bid 
protest process.[Footnote 12] Nevertheless, because there are no 
requirements to terminate contracts when firms are found ineligible, 
several contracting agencies allowed the ineligible firms to continue 
their work. In addition, we identified six other case-study firms that 
were not eligible for the SDVOSB program. The misrepresentations case- 
study firms made included a firm whose owner was not a service-disabled 
veteran, a serviced-disabled veteran who did not control the firm's day-
to-day operations, a service-disabled veteran who was a full-time 
contract federal employee at MacDill Air Force Base, and firms that 
served as a "pass-through" for large and sometimes foreign-based 
corporations. In the case of a pass-through, a firm or joint venture 
lists a service-disabled veteran as the majority owner, but contrary to 
program requirements, all work is performed and managed by a non- 
service-disabled person or a separate firm. 

Federal regulations set requirements for a small business to qualify as 
an SDVOSB. As stated above, SDVOSB eligibility regulations mandate that 
a firm must be a small business[Footnote 13] and at least 51[Footnote 
14] percent-owned by one or more service-disabled veterans[Footnote 15] 
who control the management[Footnote 16] and daily business operations 
of the firm. In addition, SDVOSB regulations also place restrictions on 
the amount of work that can be subcontracted. Specifically, regulations 
require the SDVOSB to incur a mandatory percentage of the cost of the 
contract performance that can range from 15 percent to 50 percent, 
depending on the type of goods or services. The Federal Acquisition 
Regulation (FAR) requires all prospective contractors to update ORCA to 
state whether their firm qualifies as an SDVOSB under specific NAICS 
codes. Pursuant to 15 U.S.C. § 657 f(d), firms that knowingly making 
false statements or misrepresentations in certifying SDVOSB status are 
subject to penalties. Of the 10 cases we identify in this report, all 
10 of them represented to be SDVOSBs in the Central Contractor 
Registration (CCR)[Footnote 17]. Table 1 provides details on our 10 
case-study firms that fraudulently or abusively misrepresented material 
facts related to their eligibility for the SDVOSB program. We plan to 
refer all 10 firms to appropriate agencies for further investigation 
and consideration for removal from the program. 

Table 1: Case-Study Firm Details: 

Case: 1; 
Industry business location: Maintenance/repair; North Las Vegas, Nev.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $7.5 
million--Federal Emergency Management Agency (FEMA); 
Case details: 
* Firm is ineligible because majority owner is not a service-disabled 
veteran; 
* Firm's ineligibility was determined by SBA during a bid protest in 
June of 2007; 
* After the SBA protest, in July of 2007 FEMA sent the firm a letter 
providing approximately 30-days to vacate SDVOSB contract awards; 
* Company continues to receive tens of millions in non-SDVOSB 
contracts; 
* SBA determined the firm was ineligible: however, the firm has not 
been suspended or debarred from receiving federal contracts. 

Case: 2; 
Industry business location: Construction and janitorial services Chico, 
Calif.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $5 
million--VA, U.S. Fish and Wildlife Service, Agricultural Research 
Service, U.S. Forest Service; 
Case details: 
* Firm is ineligible because it does not perform any work and 
subcontracts 100 percent of the work to non-SDVOSB firms; 
* Our investigation found firm employs three full-time workers and 
performs SDVOSB contract work with employees from a large international-
based corporation that reported almost $12 billion in annual revenue in 
2008; 
* Received over 20 SDVOSB contracts since 2008. 

Case: 3; 
Industry business location: Construction/maintenance/repair Carnegie, 
Pa.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $39.4 
million--VA; 
Case details: 
* Firm is ineligible because a non-service-disabled veteran manages and 
controls the firm's daily operations; 
* Firm's ineligibility was determined by SBA during a bid protest; 
* Despite being determined ineligible, VA allowed the firm to continue 
multiple SDVOSB contracts, because there are no requirements for 
agencies to terminate contracts awarded to ineligible firms; 
* Non-SDVOSB construction company, located at the same address, manages 
and performs the SDVOSB contract work; 
* Service-disabled veteran owned and managed a restaurant in another 
city over 80 miles away when the contract was awarded; 
* SBA determined the firm was ineligible: however, the firm has not 
been suspended or debarred from receiving federal contracts. 

Case: 4; 
Industry business location: Construction/environmental/defense 
technology/maintenance San Diego, Calif.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $12.2 
million--Environmental Protection Agency (EPA), FEMA; 
Case details: 
* Firm is ineligible because it is not a small business; 
* Our investigation determined that federal agencies have obligated 
approximately $171 million for payment to the firm during fiscal years 
2003 to 2009 exceeding SBA size standards for average annual receipts; 
* Firm is also ineligible because it has formed at least five SDVOSB 
joint ventures violating SBA joint-venture rules; 
* Firm uses the employees from the large firm in the joint ventures to 
perform the SDVOSB contract work. 

Case: 5; 
Industry business location: Septic tank and related services/ 
facilities support services/rental and leasing services; 
Austin, Tex.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: 
$200,000--Army; 
Case details: 
* Firm and its SDVOSB joint ventures are ineligible for the program 
because a non-SDVOSB firm performs the work; 
* Firm and first joint venture were determined ineligible during an SBA 
bid protest; 
* After the SBA determination, the non-SDVOSB firm used another SDVOSB 
joint venture to continue to receive SDVOSB contracts; 
* Over $5 million in federal contracts has been obligated to the firm 
and its SDVOSB joint ventures since SBA ruled the firm and its first 
SDVOSB joint venture ineligible for the program; 
* Service-disabled veteran used to qualify for current contracts lives 
over 1,800 miles from contract-performance location; 
* SBA determined the firm was ineligible: however, the firm has not 
been suspended or debarred from receiving federal contracts. 

Case: 6; 
Industry business location: Construction/maintenance/repair/medical and 
surgical equipment; 
Burlington, N.J.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $8.1 
million--VA; 
Case details: 
* Firm is ineligible because the service-disabled veteran owner is a 
full-time New Jersey state employee and does not manage the firm's day-
to-day operations; 
* Our investigation also found that the firm's 49 percent owner, who is 
not a service-disabled veteran, owns five additional non-SDVOSB 
construction firms at the same address as the SDVOSB firm receiving 
contracts; 
* SBA bid protest initially determined the SDVOSB firm was ineligible 
because the service-disabled veteran did not own at least 51 percent of 
the firm. SBA later reversed its decision when the firm submitted 
revised paperwork. 

Case: 7; 
Industry business location: Construction/roofing; 
Boise, Idaho; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $3.9 
million--VA, Public Buildings Service, Army; 
Case details: 
* Firm is ineligible because a non-service-disabled veteran manages and 
controls the firm's daily operations; 
* Our investigation found that the service-disabled veteran is an 
employee of the firm performing the contract work; 
* Joint venture was established as a pass-through for a non-SDVOSB 
roofing firm; 
* SDVOSB joint venture and non-SDVOSB firm share employees and adjust 
payrolls to meet program percentage of work requirements; 
* Service-disabled veteran received only 26 percent of the joint 
venture's profits. 

Case: 8; 
Industry business location: Construction/specialty trade contracting; 
Leominster, Mass.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $13.8 
million--VA, Coast Guard, Army, Public Buildings Service, National Park 
Service; 
Case details: 
* Firm is ineligible because a non-service-disabled veteran manages and 
controls the firm's daily operations; 
* During our investigation, firm executives admitted that the service-
disabled veteran is not involved with SDVOSB construction contracts; 
* Service-disabled veteran is an IT specialist who currently works from 
home on nongovernment contracts; 
* All the company construction contracts are managed by the non-service-
disabled partner of the firm; 
* The service-disabled veteran does not receive a salary from the 
company and received less in IRS 1099 distributions than the 10 percent 
minority owner of the firm; 
* Ten percent minority owner of the SDVOSB firm is also the president 
of another construction company located at the same address as the 
SDVOSB firm. 

Case: 9; 
Industry business location: Construction/maintenance/repair; 
Luthersville, Ga.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: $2.8 
million--VA, US Coast Guard, USDA, and Army; 
Case details: 
* Firm is ineligible because a non-service-disabled veteran manages and 
controls the firm's day-to-day operations and because the SDVOSB firm 
is a pass-through for a non-SDVOSB firm; 
* Firm was determined ineligible through an SBA bid protest; 
* Through interviews and our review of documents submitted by the firm, 
we found that the SDVOSB firm only has four employees and the owner of 
a non-SDVOSB firm is responsible for day-to-day operations of SDVOSB 
contracts; 
* The SDVOSB firm submitted 10 joint-venture bids within a 5-month 
period, violating federal regulations; 
* After being found ineligible by SBA, SDVOSB firm continued to receive 
approximately $1.8 million in new SDVOSB contracts; 
* SBA determined the firm was ineligible: however, the firm has not 
been suspended or debarred from receiving federal contracts. 

Case: 10; 
Industry business location: Furniture/merchant wholesaler; 
Tampa, Fla.; 
SDVOSB contracts[A] for years 2003-2009,[B] and awarding agency: 
$900,000--Air Force; 
Case details: 
* Firm is ineligible because it does not perform any work, and 
subcontracts 100 percent of the work to non-SDVOSB firms; 
* Our investigation found that the firm's service-disabled veteran 
owner works full-time as a DOD contract employee at MacDill Air Force 
Base--the same location as the contract award; 
* SDVOSB firm served as a pass-through to a company where the service-
disabled veteran's wife works, who passed the work to a furniture 
manufacturer who designed, delivered, and installed the furniture; 
* Manufacturer performed planning, design, and installation of 
contracted goods; 
* This manufacturer is also on the GSA schedule and could have provided 
the contracted goods at a significantly lower price; 
* The firm's physical address is the owner's home and its mailing 
address is a mail-box rental store; 
* Contracting officials at MacDill Air Force Base were aware of the 
pass-through structure of the firm and approved the award knowing that 
the SDVOSB would not perform the required percentage of work. 

Source: GAO analysis of FPDS, ORCA, CCR, contractor data, and 
interviews. 

[A] Obligation amounts are rounded to the nearest $100,000. 

[B] Year 2009 amounts are through July 2009. 

[End of table] 

Case 1: This firm fraudulently certified itself as an SDVOSB in CCR so 
it could compete for over $200 million in SDVOSB contract awards that 
FEMA set aside for site maintenance for trailers provided to Hurricane 
Katrina and Rita victims in Louisiana. In May 2006, the same month as 
the FEMA request for proposals were posted, the majority owner of the 
SDVOSB applied for the first time to VA for service-connected 
disability compensation related to claimed injuries incurred during 
military service in the mid-1970s. In July 2006, VA requested that the 
SDVOSB's owner provide evidence of his/her service-connected 
disability. The owner never responded. In December 2006, the VA denied 
the owner's application for compensation and status as a service- 
disabled veteran. Six months later, SBA issued a decision, in response 
to an SDVOSB status protest, stating that the owner of the firm was not 
a service-disabled veteran. In its decision, the SBA concluded the 
SDVOSB firm and its joint venture did not qualify for SDVOSB contracts. 
Based on this decision, in July 2007, FEMA sent a letter terminating 
any future task orders for the firm and the joint venture and giving 
them until the end of August 2007 to cease all operations under both 
contract awards. In the end, the firm received approximately $7.5 
million dollars from FEMA's SDVOSB set-aside contracts prior to 
termination. The firm received no other punishments or sanctions for 
the fraudulent misrepresentation and has not been suspended or debarred 
from receiving future government contracts. 

Case 2: This firm, functioning as a pass-through for non-SDVOSB firms, 
improperly received over $5 million in SDVOSB contracts. Our 
investigation revealed that this firm, located in Chico, California, 
improperly subcontracted 100 percent of the work from an SDVOSB 
contract to a corporation headquartered in Europe that reported almost 
$12 billion dollars in revenue in 2008. The firm consists of two owners 
and three full-time employees. While the majority owner listed on 
company documents is a service-disabled veteran, neither the owner nor 
the firm's employees perform any of the work related to SDVOSB 
contracts the firm receives. SDVOSB janitorial service contracts 
require that at least half of the personnel costs are incurred by 
employees of either the firm or another SDVOSB. When we interviewed the 
firm's service-disabled veteran owner, he/she acknowledged that he/she 
subcontracted all of the firm's work to other non-SDVOSB firms. The 
owner said the company's business model is to (1) use Federal Business 
Opportunities (FedBizOps)[Footnote 18] to search for SDVOSB set-asides 
that the firm can find a subcontractor to complete; then (2) take over 
a portion of the subcontractor's payroll to meet the percentage 
requirement for completing the work. The owner stated this process was 
used for the firm's $3.5 million contract for janitorial services at a 
VA hospital in California, where the SDVOSB firm functioned as a pass- 
through for a non-SDVOSB foreign-based corporation, which is one of the 
world's largest facility-service groups, with operations in 50 
countries and almost $12 billion in annual revenue in 2008. For this 
contract, all employees performing the janitorial services were from 
the foreign-based corporation. The firm--with two owners and only three 
employees--has secured 21 SDVOSB contracts in nine different states for 
janitorial, construction, and other services. The work that is passed 
through to non-SDVOSB firms is valued at $5 million. 

Case 5: Our investigation found that a non-SDVOSB company used two 
SDVOSB firms as pass-throughs to obtain over $3 million in SDVOSB 
contracts. It did not have the SDVOSB firms perform the majority of the 
contract work as required. The company located in Austin, Texas, formed 
joint ventures with the two SDVOSB firms to receive contracts for 
septic-tank and related services from the Army at Fort Drum, New York, 
and Fort Irwin, California. The Fort Drum set-aside contract was 
protested in June 2008 through the SBA bid-protest process, which 
determined that the service-disabled veteran owner was not in control 
of the business. The SBA disqualified both the non-SDVOSB company and 
its joint venture from the SDVOSB program and deemed them ineligible to 
bid on such contracts in the future; however, SBA did not process 
either the company or the SDVOSB firm for suspension or debarment, 
which would generally exclude the firms from doing business with the 
federal government. Furthermore, SBA's ruling did not result in the 
Army's termination of its contracts with the joint ventures that were 
the subject of the protest because there are no requirements to 
terminate contracts awarded to firms ineligible for SDVOSB set-aside or 
sole-source contracts. The company that used the SDVOSB as a pass- 
through was allowed to continue to provide septic-tank and related 
services at Fort Drum through 2013 for a total value of up to $1.1 
million. 

In 2009 the same non-SDVOSB company from Texas partnered with a 
different SDVOSB firm to receive a contract at Fort Irwin valued at up 
to $3 million for septic-tank and related services. Based on our case 
analysis, the SDVOSB owner does not control the SDVOSB firm. The SDVOSB 
owner is a former employee of the joint venture "partner" from Texas, 
as are 8 out of 10 employees. The SDVOSB owner also works 3 days each 
week at his brother's bar in Illinois--located 1,800 miles away from 
the project site in California. In addition, the SDVOSB owner does not 
have control over payments received from the work performed at Fort 
Irwin. The non-SDVOSB company's accountant, who is located in San 
Antonio, Texas, manages the SDVOSB firm's bank accounts. Furthermore, a 
visit to the work site at Fort Irwin in June 2009 also revealed, as 
shown in figure 1 below, that the portable toilets and hand-wash 
stations on site all displayed the name and phone number of the non- 
SDVOSB company. 

Figure 1: Case Study 5 Firm's Portable Toilets and Hand-Wash Stations 
with Non-SDVOSB Name and Phone Number: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

In June of 2009 we visited the contract performance site at Fort Irwin, 
with the intention of inspecting the site unannounced. However, a Fort 
Irwin contracting officer notified the SDVOSB firm in advance of our 
site visit. Prior to our arrival it appeared that the SDVOSB owner had 
made an effort to conceal the true management and control over the 
contract. Specifically, upon arrival, the SDVOSB owner from Illinois 
was present on site to greet us, despite the fact that he lived over 
1,800 miles away. In addition, a service truck displaying the SDVOSB 
firm's logo was prominently displayed at the contract location. Further 
investigation revealed that the truck's registration had been 
transferred the day of our visit from the non-SDVOSB company from Texas 
to the SDVOSB firm. However, the registration address remains in Texas 
at the office of the accountant for both businesses. 

Case 10: This case-study firm, functioning as a pass-through for a non- 
SDVOSB company, received approximately $900,000 for an SDVOSB contract. 
Our investigation found that the owner of the SDVOSB passed through all 
of the work for this furniture design and installation contract to a 
furniture dealer that his wife worked for, who then passed the work to 
a furniture manufacturer that actually designed and installed the 
furniture. When we interviewed the SDVOSB firm owner, he admitted that 
he had no experience in the furniture business. In addition, the SDVOSB 
owner works full-time at MacDill Air Force base--the same location as 
the contract award. This award is questionable on three counts: the 
SDVOSB owner's full-time job with another employer should make it 
impossible for him to manage and control daily business operations on a 
large SDVOSB contract; the contract work was passed through to the 
manufacturer; and the owner's daily interactions with Air Force 
personnel on base create the perception of preferential treatment. In 
addition, as shown in figure 2 below, the legitimacy of the SDVOSB firm 
is also in question because the firm's physical address is the owner's 
home and its mailing address is a mail-box rental store. 

Figure 2: Business Mailing Address and Physical Address for Case-Study 
10 Firm: 

[Refer to PDF for image: two photographs] 

Source: GAO. 

[End of figure] 

When questioned, contracting officials at the base stated that they 
were aware that the SDVOSB firm owner was also a DOD contract employee 
and that he would likely not perform a majority of the work on the 
contract. Nevertheless, they felt the contract was awarded 
appropriately. 

MacDill Air Force Base awarded the firm, which has no employees, an 
SDVOSB set-aside contract for approximately $900,000 for furniture 
layout design, delivery, and installation. The SDVOSB firm owner has 
worked at the base for over 20 years as a telecommunications contract 
employee. The base director of contracting and the legal counsel who 
approved the award had prior working relationships with the SDVOSB 
owner on the base. Contracting officials told us that during the 
decision process for the award of the furniture contract, heavy 
emphasis was placed on past performance rather than price; however, the 
SDVOSB firm had no past-performance history. Contracting officials at 
the base instead allowed the SDVOSB firm to use past performance 
ratings of the furniture dealer, where the owner's wife worked to meet 
the past-performance requirement. 

In addition, contracting officials were aware of the SDVOSB owner's 
limited involvement in performing the contract. They even stated that 
the service-disabled veteran would likely not show up until it was time 
to collect his check. The military personnel in charge of overseeing 
the furniture layout design, delivery, and installation stated that the 
manufacturer was more involved than the SDVOSB or its affiliate dealer. 
We observed the delivery and installation of some of the furniture 
related to this contract. The manufacturer was the only company present 
to lead the installation process, with the plans they designed in-hand 
and their logo clearly printed on them. Despite the fact that this 
SDVOSB award clearly functioned as a pass-through for a non-SDVOSB 
firm, base officials did not consider the award to be improper. In 
fact, the Director of Contracting at the base stated that he estimates 
90 percent of SDVOSB contracts are pass-throughs for non-SDVOSB 
companies. 

SDVOSB Program Does Not Have Governmentwide Fraud-Prevention Controls: 

The 10 case studies discussed above show that significant control 
weaknesses in the SDVOSB program allow ineligible firms to receive 
millions in SDVOSB contracts. The lack of effective fraud-prevention 
controls by SBA and agencies awarding contracts allowed these 
ineligible firms to receive approximately $100 million of sole-source 
or set-aside SDVOSB contracts over the last several years. The SDVOSB 
program is essentially an eligibility-based program. However, neither 
the SBA, except when responding to a protest, nor contracting officials 
are currently verifying the eligibility of firms claiming to be 
SDVOSBs. For example, currently the SBA and contracting agencies do not 
have a process in place to access the VA service-disabled veteran's 
database listing individuals that are valid service-disabled veterans. 
In addition, contracting officers are not required to validate that a 
firm's owner is a service-disabled veteran prior to award. Unlike other 
small business contracting programs, such as the HUBZone and 8(a) 
programs, there also are no documentation submissions to substantiate 
eligibility for the program or application process associated with the 
SDVOSB program. This lack of controls substantially increases the risk 
for fraud and abuse in the SDVOSB program. 

The only process in place to detect fraud in the SDVOSB program 
involves a formal bid protest process at the SBA, whereby interested 
parties to a contract award can protest if they feel a firm 
misrepresented its small business size or SDVOSB eligibility in its bid 
submission. However, as shown by our case studies, this self-policing 
process does not prevent ineligible firms from receiving SDVOSB 
contracts. For example, bid-protest decisions do not always result in 
the termination of contracts with ineligible firms, even when 
termination costs would be minimal in cases where contract work had not 
begun. As some of our case studies show, even when firms are found 
ineligible to receive a contract, they can still retain it because 
current regulations do not require that the contracting agency 
terminate the contract. In addition, none of the firms found ineligible 
by the SBA through SDVOSB-status protests were suspended or debarred 
from receiving SDVOSB and other government contracts. When asked about 
its bid protest process, SBA officials stated that the bid protest 
process focuses on determining the eligibility of a firm for a specific 
contract and providing details on why a firm was found to be eligible 
or ineligible. SBA officials also stated that bid protest decisions do 
not include recommendations for suspension or debarment. Recently, in 
response to the Veterans Benefits, Health Care, and Information 
Technology Act,[Footnote 19] VA has taken steps to develop a validation 
program for contracts it awards to SDVOSBs and Veteran-Owned Small 
Businesses (VOSB). While not yet fully implemented,[Footnote 20] this 
validation program includes steps to verify a firm's eligibility for 
the program including validating an owner's SDV status and his/her 
control of day-to-day operations. The VA program also includes plans 
for site visits to firms seeking VA certification as an SDVOSB or VOSB. 

Lack of Governmentwide Fraud-Prevention Controls Leaves the Government 
Vulnerable to Fraud and Abuse: 

Our 10 case studies clearly show that fraud and abuse exist within the 
SDVOSB program. Without preventive controls our case studies show that 
millions of dollars of SDVOSB set-aside and sole-source contracts are 
being awarded to ineligible firms. Fraud prevention requires a system 
of rules which, in their aggregate, minimize the likelihood of fraud 
occurring while maximizing the possibility of detecting any fraudulent 
activity at a reasonable cost. Fraud-prevention systems set forth what 
actions constitute fraudulent conduct and specifically spell out who in 
the organization handles fraud matters under varying circumstances. The 
potential of being caught and disciplined can, in some cases, persuade 
likely perpetrators not to commit the fraud. Because of this principle, 
the existence of a thorough fraud-prevention system is essential to 
fraud prevention and detection.[Footnote 21] However, as shown by our 
case studies, there are at times no consequences for firms that 
fraudulently misrepresent their status as SDVOSBs or otherwise abuse 
the current system. Not only are firms not prosecuted, suspended, or 
debarred, but in many cases, because there is no requirement for 
agencies to terminate contracts awarded to ineligible firms, the firms 
are allowed to continue performing contracts, even when contract 
termination costs would be minimal in cases where contracted work had 
not begun. In addition, ineligible firms in some instances continue 
bidding on SDVOSB contracts without consequences. 

As of July 2009, the federal government does not have in place the key 
elements of an effective fraud-prevention system for the SDVOSB 
program. As shown in figure 3 below, a well-designed fraud-prevention 
system should consist of three crucial elements: (1) up-front 
preventive controls, (2) detection and monitoring, and (3) 
investigations and prosecutions. For the SDVOSB program this would mean 
(1) front-end controls over program eligibility prior to contract 
award, (2) fraud detection and monitoring of firms already receiving 
SDVOSB contracts, and (3) the aggressive pursuit and prosecution of 
individuals committing fraud to include suspension and debarment, or 
requirement to terminate the contract. In addition, as shown in figure 
3, the organization should also use "lessons learned" from its 
detection and monitoring controls and investigations and prosecutions 
to design more-effective preventive controls. 

Figure 3: Fraud-Prevention Model: 

[Refer to PDF for image: illustration] 

Potential fraud, waste, and abuse: 

Implementation of Prevention controls: leads to: 

Smaller amount of Potential fraud, waste, and abuse: 

Implementation of detection and monitoring (lessons learned influence 
future use of prevention controls): leads to: 

Smaller amount of Potential fraud, waste, and abuse: 

Implementation of investigations and prosecutions (lessons learned 
influence future use of prevention controls). 

Source: GAO. 

[End of figure] 

Preventive Controls: 

Currently the SDVOSB program has no preventive controls in place to 
prevent fraud and abuse in the program. In addition, the SBA and 
agencies awarding contracts do not have access to a database listing 
individuals that are valid service-disabled veterans. We have 
previously reported that fraud prevention is the most efficient and 
effective means to minimize fraud, waste, and abuse.[Footnote 22] This 
is especially important in a program like the SDVOSB program where even 
firms identified as receiving contracts through fraud or abuse face no 
real consequences as discussed below. Thus, controls that prevent 
fraudulent firms and individuals from entering the program in the first 
place are the most important element in an effective fraud-prevention 
program. The most crucial element of effective fraud-prevention 
controls is a focus on substantially diminishing the opportunity for 
fraudulent access into the system through front-end controls. Currently 
there are no preventive controls in place for the SDVOSB program. The 
SDVOSB program is essentially an eligibility-based program. However 
neither the SBA or contracting officials are required to verify the 
eligibility of firms claiming to be SDVOSBs. This lack of controls 
substantially increases the risk for fraud and abuse in the SDVOSB 
program. 

Detection and Monitoring: 

Although preventive controls are the most effective way to minimize 
fraud and abuse, continual monitoring is an important component in 
detecting and deterring fraud. Monitoring and detection within a fraud- 
prevention program involve actions such as data mining for fraudulent 
and suspicious applicants and evaluating firms to provide reasonable 
assurance that they continue to meet program requirements. Currently, 
the only process in place that can detect fraud and abuse in this 
program is the bid-protest process administered by SBA. Through the bid-
protest process, interested parties self-police the SDVOSB program by 
exercising their right to challenge an SDVOSB award that is suspected 
to have been awarded to an ineligible firm. SBA will determine the 
eligibility of the firm, and if ruled ineligible, the SBA protest 
decision will state that the firm is supposed to be ineligible for 
additional SDVOSB awards. However, based on our case studies this 
process does not prevent the firms from bidding on SDVOSB contracts, 
because SBA protest decisions are not listed in CCR or ORCA, and 
therefore contracting officials may not be aware of protest decisions. 
Officials from the Inspector General offices within SBA and VA stated 
that they will respond to allegations of fraud and abuse within the 
SDVOSB program, but they do not actively monitor the program for fraud 
and abuse. Without continual monitoring of the program, the risk for 
persistent fraud and abuse increases. 

Investigation and Prosecution: 

The final element of an effective fraud prevention system is the 
aggressive investigation and prosecution of individuals who commit 
fraud against the federal government. The SBA, through the bid-protest 
process, makes determinations of eligibility status in the SDVOSB 
program. However, there is not an effective process for prosecution, 
suspension, or debarment of program abusers. Without consequences, the 
bid-protest process is not an effective control for preventing future 
abuse. As mentioned in case studies above, firms determined to be 
ineligible for SDVOSB awards are not required to terminate those 
awards. In one case, a joint venture was determined to be a pass- 
through--it completed the contract and created another pass-through 
with a different service-disabled veteran to win another SDVOSB 
contract. Furthermore, although SBA's regulations[Footnote 23] state 
that firms misrepresenting themselves as SDVOSB concerns may be 
suspended or debarred from government contracting and may suffer civil 
and criminal penalties for knowingly making false statements to the 
SBA, to-date, the SBA program office has never referred any firms for 
debarment or suspension proceedings, or both, based on SBA findings 
from its program-eligibility reviews. When asked about its bid protest 
process, SBA officials stated that the bid protest process focuses on 
determining the eligibility of a firm for a specific contract and 
providing details on why a firm was found to be eligible or ineligible. 
SBA officials also stated that bid protest decisions do not include 
recommendations for suspension and debarment. By failing to hold firms 
accountable, SBA and contracting agencies have sent a message to the 
contracting community that there is no punishment or consequences for 
committing fraud or abusing the intent of the SDVOSB program. 

VA Is Developing Controls for Its SDVOSB Contracts: 

The Veterans Benefits, Health Care, and Information Technology Act 
[Footnote 24]--which took effect in June 2007--requires VA to maintain 
a database of SDVOSBs and Veteran Owned Small Businesses (VOSB) so 
contractor eligibility can be verified. It also requires the VA to 
determine whether SDVOSBs and VOSBs are indeed owned and controlled by 
veterans or service-disabled veterans in order to bid and receive VA 
contracts. Lastly, it requires VA set-aside and sole-source awards be 
made only to firms that have had their eligibility verified. Currently 
these controls are being developed to validate eligibility for awarding 
VA contracts only. 

At the time the act took effect, VA already maintained an online 
database, VetBiz Vendor Information Pages, referred to as VA's VetBiz 
database, in which nearly 16,500 firms had self-certified as SDVOSBs or 
VOSBs. VA began accepting applications to validate eligibility for the 
SDVOSB program from firms registered in the database in May 2008, after 
it published guidelines for the verification program in an interim 
final rule.[Footnote 25] To date, VA's validation process has focused 
on cross-referencing information submitted by owners with the agency's 
own data to confirm majority ownership by veterans or service-disabled 
veterans. VA also expects to pilot procedures for more detailed reviews 
of selected firms to verify day-to-day control by a service-disabled or 
other veteran. According to VA officials, the agency will begin 
requiring its contracting officers to use the set-aside and sole-source 
award authorities only with verified SDVOSBs and VOSBs after the agency 
finalizes rule making related to implementation of these authorities. 
As of March 2009, these program controls have not been implemented. 
Until this new program becomes operational, existing VA policy states 
that firms only have to be registered in VA's database to receive set- 
aside or sole-source awards. Currently there are no plans to implement 
these controls governmentwide. 

Additional controls that VA plans to develop include its own 
certification process for prospective SDVOSB businesses. The process is 
to include a review of documents, validation of the owner's status as a 
service-disabled veteran, and potential site visits to businesses 
bidding on VA SDVOSB contracts. Requiring submission of documents to 
demonstrate ownership and control of an SDVOSB has some value as a 
deterrent--ownership documents could have prevented instances 
demonstrated in our case studies where the service-disabled veteran was 
receiving less than 51 percent of the profits. The most effective 
preventive controls involve the verification of information, such as 
verifying service-disabled status with the VA's database and service- 
disabled veteran participation in the business through an unannounced 
site visit. Verification of service-disabled veteran status by using 
the VA's database could have prevented the most egregious example of 
fraud where the owner was not even a service-disabled veteran. Although 
VA's proposed system was not intended for governmentwide use, once the 
certification system is in place, all SDVOSBs wishing to do business 
with VA will have to be certified. 

Conclusions: 

The SDVOSB program does not have effective governmentwide fraud- 
prevention controls in place and is vulnerable to fraud and abuse. In 
just the 10 cases we show in this report, the consequences of this lack 
of control include approximately $100 million of sole source and set 
aside SDVOSB contracts to companies that have figured out how to 
manipulate the current system. Even the few companies identified as 
ineligible through the bid-protest system face no real consequences, in 
times being allowed by the government to complete the contract they 
obtained through fraudulent representations. Victims of the fraud and 
abuse in this program are the legitimate service-disabled veterans and 
their firms. SBA's only requirement is a "self-certification" process, 
whereby SDVOSB concerns self-certify their eligibility. However, VA has 
begun to develop a process for certifying the eligibility of SDVOSB 
firms prior to contract award, but that process currently only relates 
to firms bidding on VA SDVOSB contracts. To address governmentwide 
vulnerabilities we identified, an effective governmentwide process is 
necessary to certify the eligibility of all firms bidding on SDVOSB 
contracts. To be effective, this process should include coordination 
between the different agencies with the authority to improve program 
controls, and some form of punishment, such as prosecution, suspension, 
and debarment of fraudulent individuals and their companies. 

Matter for Congressional Consideration: 

Our work documents numerous cases where the current governmentwide self-
certification system over the SDVOSB program has allowed ineligible 
firms to receive millions of dollars in federal contracts. However, 
through the Veterans Benefits, Health Care, and Information Technology 
Act of 2007, Congress required VA to maintain a database of SDVOSBs, 
determine whether SDVOSBs are indeed owned and controlled by service-
disabled veterans, and required VA set-aside and sole-source awards be 
made only to firms that have had their eligibility verified. Currently, 
the only efforts to put fraud prevention controls in place are at VA 
through their VetBiz program, which applies only to VA contracts. Given 
that outside of VA there is no verification program in place for SDVOSB 
contracting, Congress should consider providing VA with the authority 
and resources necessary to expand its SDVOSB eligibility verification 
process to all contractors seeking to bid on SDVOSB contracts 
governmentwide. 

Recommendations for Executive Action: 

In an effort to minimize the potential for fraud and abuse in the 
Service-Disabled Veteran-Owned Small Business (SDVOSB) program and to 
assure that legitimate service-disabled veterans and their firms reap 
the benefits of this program, we recommend that the Administrator of 
the Small Business Administration (SBA) and the Secretary of the 
Veterans Affairs (VA) coordinate with the Office of Federal Procurement 
Policy (OFPP) to explore the feasibility of: 

* expanding the use of the VA VetBiz "verified" database governmentwide 
for purposes of validating all SDVOSB eligible firms for contracting 
and, 

* requiring that all contractors who knowingly misrepresent their 
status as an SDVOSB be debarred for a reasonable period of time. 

In addition, we recommend the Administrator of SBA refer all SDVOSB 
firms that submit misrepresentations of their status to SBA's Office of 
Inspector General for review and further investigation. 

Agency Comments and Our Evaluation: 

SBA and VA provided general observations and technical comments in 
response to a draft of this report. They also responded directly to our 
recommendations. Their responses are included in appendixes II and III. 
We have made revisions based on the observations and technical comments 
where appropriate. In response to our recommendations, VA generally 
agreed with our two recommendations. In its response VA expressed that 
specific authority would be required for other agencies to be able to 
rely on the department's VetBiz database and exclude firms from 
acquisitions if not "verified" in this database. We recognize that 
additional authority may be required for other federal agencies to rely 
on certifications made in VA's VetBiz database, and have raised this 
issue in our matter for congressional consideration. In addition, VA 
stated that governmentwide applicability of authority for federal 
agencies, other than VA, to initiate debarment actions related to 
acquisitions for any firms that misrepresent information on the status 
of that firm as a small business owned and controlled by veterans or 
service-disabled veterans would require OFPP to seek a revision to the 
Federal Acquisition Regulation to add SDVOSB status misrepresentation 
as a cause for debarment. Our recommendation concerning coordination 
between VA, SBA, and OFPP addresses this concern. 

SBA's response, provided by the Associate Administrator for Government 
Contracting and Business Development, generally agreed with our 
recommendations; however, in its general observations and specific 
responses to our recommendations, SBA stated that they have limited 
responsibilities over the SDVOSB program and questioned the efficacy of 
one of our recommendations. Specifically, SBA stated that agency 
contracting officers bear the primarily the responsibility for ensuring 
only eligible SDVOSB firms perform SDVOSB set aside and sole source 
contracts. SBA also stated it is only authorized to perform eligibility 
reviews in a bid protest situation, and contracting officers, not SBA, 
are responsible for taking appropriate action after a bid protest 
decision is made. The Associate Administrator maintained that SBA was 
under no legal obligation to create a protest process for the SDVOSB 
program, and that its only statutory obligation is to report on other 
agencies' success in meeting SDVOSB contracting goals. In addition, SBA 
expressed that it was not obligated to institute any type of fraud 
prevention controls within the SDVOSB program. 

While we acknowledge that there are shared responsibilities between SBA 
and agency contracting officers when attempting to prevent fraud in the 
SDVOSB program, we do not agree that SBA does not have responsibility 
or authority to develop and implement a process to provide reasonable 
assurance that only eligible SDVOSB firms are awarded set aside and 
sole source SDVOSB contracts. Specifically, its statutory 
responsibilities date back to December 2003, when the Veterans Benefits 
Act of 2003 amended the Small Business Act to provide that "rules 
similar to the rules of paragraphs (5) and (6) of Section 8(m)" shall 
apply to the SDVOSB program.[Footnote 26] Indeed, in an interim final 
rule implementing that section of the act, SBA acknowledged that it is 
statutorily authorized to administer the SDVOSB program.[Footnote 27] 
Classified to section 637 of Title 15 of the United States Code, the 
provisions in section 8(m) of the Small Business Act specifically 
require the Administrator of SBA to establish procedures relating to 
the "filing, investigation, and disposition of any challenge of the 
eligibility of a small business concern … and the verification … of the 
accuracy of any certification made or information provided to the 
Administrator by a small business."[Footnote 28] To implement these 
verification procedures, SBA is authorized to conduct program 
examinations, including random examinations, of any certification made 
or information provided to the Administrator.[Footnote 29] To carry out 
its verification responsibilities, SBA is authorized to obtain 
information from any federal agency or department that the 
Administrator determines is necessary.[Footnote 30] In the event that 
the Administrator determines that an entity has misrepresented its 
status, that entity is subject to certain penalties.[Footnote 31] Given 
this specific legislative authority and responsibility, we believe 
that, contrary to its assertion, SBA has an obligation to assist in 
development and implementation of a verification process for the SDVOSB 
program to provide reasonable assurance that sole source and set aside 
SDVOSB contracting opportunities are only provided to eligible SDVOSB 
firms. 

In response to our first recommendation, SBA questioned the efficacy of 
expanding the use of VA's VetBiz verified database governmentwide to 
verify the eligibility of SDVOSB firms for the program because of the 
self-certification nature of the program. We believe that the expansion 
of VA's verification process to all SDVOSB contractors attempting to 
bid on federal contracts would provide assurances that only eligible 
SDVOSB firms receive the benefits of the special contract opportunities 
established by the SDVOSB program. We believe this verification is 
especially important given that the current set of controls over the 
SDVOSB program consist primarily of self-certifications made by 
contractors, as SBA represented in their response to a draft of this 
report. In SBA's other response to our first recommendation, SBA stated 
that it is the contracting officer's responsibility to enforce or 
pursue suggested penalties for firms who knowingly misrepresent their 
status as an SDVOSB firm. As stated above, we agree that there is a 
shared responsibility for prevention, detection, and punishment of 
fraud and abuse in the program between agency contracting officers and 
the SBA. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the date of this letter. We will then send copies of this report 
to interested congressional committees, the Administrator of SBA, the 
Secretary of VA, and other interested parties. The report will also be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-6722 or kutzg@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix IV. 

Sincerely Yours, 

Signed by: 

Gregory D. Kutz: 
Managing Director Forensic Audits and Special Investigations: 

[End of section] 

Appendix I: Scope and Methodology: 

To identify examples of firms that received Service-Disabled Veteran 
Owned Small Business (SDVOSB) contracts through fraudulent or abusive 
eligibility misrepresentations, we reviewed SDVOSB contract awards and 
protests filed with the Small Business Administration (SBA) since the 
programs inception in 2003. We also reviewed allegations of fraud and 
abuse sent to our fraud hotline, FraudNET. In addition, we posted 
inquiries on our Web page and on various veteran advocacy-groups' Web 
pages and newsletters seeking information on fraud or abuse of the 
SDVOSB program. We received over 100 allegations of fraud and abuse in 
the SDVOSB program. From these sources, we selected 10 cases for 
further investigation based on a variety of factors, including facts 
and evidence provided in protests and allegations, whether a firm 
received multiple SDVOSB contracts, and whether a firm received other 
non-SDVOSB contracts. For the purposes of our investigation, we defined 
a case as one or more affiliated firms or joint ventures that obtained 
an SDVOSB contract. These cases include multiple firms owned by an 
individual or multiple firms affiliated through joint ventures and 
other types of partner agreements. To investigate these case studies, 
we interviewed firm owners and managers and reviewed relevant 
documentation, such as business filings and tax returns, to determine 
if SDVOSB eligibility requirements had been met. We also analyzed data 
from Federal Procurement Data System-Next Generation (FPDS-NG) for 
years 2003 through 2009 to identify SDVOSB contracts received by the 
firms since the program's inception. Furthermore, we reviewed 
certifications made by firms, such as certifications about a firm's 
size, SDVOSB status, and line of business, in the federal government's 
Online Representations and Certifications Application (ORCA). To assess 
overall program vulnerabilities, we reviewed relevant laws and 
regulations governing the SDVOSB program. Our work was not designed to 
identify all firms that misrepresent themselves as SDVOSBs or commit 
fraudulent or abusive activity in the SDVOSB program. Our work also did 
not attempt to identify fraud and abuse in SDVOSB subcontracts. Our 
work focused on determining whether selected firms met program 
eligibility requirements. In addition, our 10 case-study examples 
cannot be projected to the overall population of SDVOSB firms. 

To determine whether the program has effective fraud-prevention 
controls in place, we interviewed agency officials from SBA, the 
Department of Veterans Affairs (VA), and various agency contracting 
officials about their responsibility over the program and controls 
currently in place to prevent, detect, and monitor fraud and abuse. We 
also reviewed information from the Federal Register--The President's 
Executive Order, the Federal Acquisition Regulation (FAR), United 
States Code, and SBA guidance on government contracting programs to 
determine the extent to which SBA and awarding agencies are required to 
verify contractor eligibility for SDVOSB contracts. Furthermore, we 
compared current controls in the SDVOSB program to a fraud-prevention 
model developed by GAO and utilized in prior small business contracting 
investigations. 

[End of section] 

Appendix II: Comments from the Small Business Administration: 

Note: Page numbers in the draft report may differ from those in this 
report. 

U.S. Small Business Administration: 
Washington, D.C. 20416: 

August 20, 2009: 

Mr. Gregory D. Kutz: 
Managing Director: 
Forensic Audits and Special Investigations: 
U.S. Government Accountability Office: 
441 G. Street, N.W. 
Washington, DC 20548: 

Dear Mr. Kutz, 

The U.S. Small Business Administration (SBA) appreciates the 
opportunity to provide comments on the Government Accountability 
Office's (GAO) draft report entitled "Service Disabled Veteran Owned 
Small Business (SDVOSB) Program: Cases Show Fraud and Abuse Allowed 
Ineligible Firms to Obtain Millions of Dollars in Contracts (GAO-09-
929)." 

The SDVOSB Program is an important procurement program that helps to 
achieve the Government's goal of distributing federal contract dollars 
to small businesses. Further, it honors the extraordinary service 
rendered to the United States by veterans with disabilities incurred or 
aggravated in the line of duty. In FY 2007, $4 billion in federal 
contracts were awarded to SDVOSB qualified firms. 

The SBA is dedicated to providing the highest quality service, 
transparency, and accountability. In the same vein, we would like to 
acknowledge our duty and commitment to eliminate fraud, waste and abuse 
in any of our programs. That said, we believe the draft report includes 
some misrepresentations of the SBA's responsibilities with regard to 
the program as well as some technical errors. We would like to submit 
the following observations/recommendations: 

General Observation: 

While the SBA shares responsibility with other Agencies (e.g. Veteran 
Administration) for ensuring the integrity of the overall program, it 
is ultimately the federal agency's Contracting Officers who administer 
the individual contracts and have the primary accountability for 
ensuring that only bona-fide SDVOSB firms perform these contracts. 

The SBA's responsibility lies in the formal bid protest process, 
whereby interested parties to a contract award can protest if they have 
credible evidence that a firm misrepresented its SDVOSB eligibility. If 
a firm is deemed not eligible via this process, the Contracting Officer 
then becomes responsible for halting contract disbursements and taking 
any further action against the firm. Moreover, the statute and 
regulations related to the SDVOSB program allow for self-certification. 
The SBA is only authorized to perform eligibility reviews in a protest 
situation, including those cases where the SBA itself has reason to 
believe that a firm has misrepresented its SDVOSB status. In this area, 
the SBA believes it has been diligent and responsible as all protest 
determinations have been provided to the appropriate Contracting 
Officer in a timely manner. The statutes and regulations dictate that 
it is then incumbent upon the Contracting Officer to take appropriate 
action when notified by the SBA subsequent to a protest that a firm is 
not eligible to claim status as an SDVOSB. 

It should also be noted that after a contract has been awarded, it is 
the Contracting Officer's responsibility to ensure that the firm is 
complying with the applicable limitations on subcontracting provisions. 
If the Contracting Officer suspects that the firm may not comply with 
these provisions prior to the award, only then would the SBA get 
involved via the certificate of competency program. 

Technical Observations/Recommendations: 

Incorporating the above general observation, we recommend the following 
changes to the draft report: 

Highlight Page: 

* Draft Report: Specifically, SBA and agencies awarding SDVOSB 
contracts do not have processes in place to validate a firm's 
eligibility for the program. 

SBA's recommendation: Specifically, SBA and agencies awarding SDVOSB 
contracts do not have processes in place to validate a firm's 
eligibility for the program prior to bid submission. 

Page 1: 

* Draft Report: The statutorily-mandated prime contracting goal for 
SDVOSB participation is 3 percent of all federal contract dollars. 

SBA's recommendation: The statutorily-mandated prime and sub 
contracting goal for SDVOSB participation is not less than 3 percent of 
all federal contract dollars. 

Page 2: 

* Draft Report: The statutorily-mandated prime contracting goal for 
SDVOSB participation is 3 percent of all federal contract dollars. 

SBA's recommendation: The statutorily-mandated prime and sub 
contracting goal for SDVOSB participation is not less than 3 percent of 
all federal contract dollars. 

The draft report states the SBA administers the SDVOSB program. This is 
incorrect. Instead, each procuring activity administers the SDVOSN 
program. The Veterans Benefits Act of 2003 (Pub. L. No. 108-183) gives 
SBA no more power to oversee the SDVOSB program than any other agency. 
We recommend either removing this statement or changing it to read 
"...which, along with all federal procuring activities, administers the 
SDVOSB." 

* The draft report states that "...the government has not met its 
annual mandated goal" with regard to the percentage of federal 
procurement opportunities being awarded to SDVOSBs. While it is true 
that the government as a whole has not met the 3% minimum requirement, 
several individual agencies have met this goal. 

Page 6: 

* The draft report discusses abuses whereby firms act as "pass 
throughs" for large and sometimes foreign corporations. After a 
contract award is made to an SDVOSB firm as the result of a sole source 
or set-aside award, it is the federal agency's Contracting Officer's 
responsibility for ensuring that the firm is complying with the 
applicable Limitations on Subcontracting (LOS) provisions. 

Page 8: 

* In discussing Case 1, the report states that the firm didn't receive 
any other punishments/sanctions for its fraudulent actions and notes 
that the firm has not been suspended or debarred from receiving future 
government contracts. Although it's noted in the report table, the case 
write-up should mention that the firm was determined ineligible by the 
SBA in a protest action. At this point it then becomes the FEMA 
Contracting Officer's responsibility to propose the firm for debarment 
or suspension as that agency was 'harmed' by the firm's actions. This 
rationale is also applicable for the case details of Case 3, Case 5 and 
Case 9. 

* In Case 2, GAO's investigation determined that the firm improperly 
subcontracted 100% of the work to an international corporation. Again, 
contract administration is the responsibility of the Agency and the 
Contracting Officer responsible for that contract. This rationale is 
also applicable for the case details of Case 4, Case 7, Case 8 and Case 
l0. 

Page l7 & 18: 

* The GAO draft report faults SBA for demonstrating a lack of effective 
fraud prevention controls. However, changes made to the Small Business 
Act by the Veterans Benefits Act of 2003 do not reference any fraud 
prevention authority or responsibility on SBA. The SBA's only statutory 
obligation with regard to the SDVOSB program is our duty to report on 
other agencies success toward meeting the 3% minimum requirement for 
contracting with SDVOSBs. 

It should be noted, however, that the SBA, acting on its own 
initiative, instituted the SDVOSB bid protest process for the following 
reason as stated in the preamble to the publication of the Agency's 
SDVOSB regulations: 

Because SDVOSBs will be attesting to their eligibility at the time of 
offer, and not through a certification process established by the SBA, 
it is important to have some mechanism to check eligibility for the 
receipt of a contract issued as a sole source or set-aside for SDVOSBs. 
[Small Business Size Regulations; Government Contracting Programs, 69 
Fed. Reg. 25,264 (May 5, 2004)] 

SBA was under no legal obligation to create a protest process for SDVOSB
procurements. As the Agency observed in the regulatory preamble, unlike 
the statutes that created the HUBZone and 8(a) Business Development 
programs, the Veterans Benefits Act of 2003 did not include any 
discussion of program certification. [Id. at 25,265] Moreover, SBA 
receives no funding from either Congress or other agencies to cover the 
considerable cost that would be incurred for administering a SDVOSB 
certification process. However, because the Agency was concerned about 
the potential that existed for fraud on the part of firms improperly 
claiming SDVOSB status, SBA voluntarily stepped into the regulatory 
void and created the bid protest process in order to avoid having this 
procurement process go entirely un-policed. 

* Further we would suggest changing the sentence: Draft Report: 
However, neither the SBA nor contracting officials are currently 
verifying the eligibility of firms claiming to be SDVOSBs. 

SBA's recommendation: However, neither the SBA, except when responding 
to a protest, or contracting officials are currently verifying the 
eligibility of firms claiming to be SDVOSBs. 

With regards to the draft reports two recommendations for executive 
action, the SBA is submitting the following responses: 

Recommendation #1: 

The Administrator of the Small Business Administration (SBA) and the 
Secretary of the Veterans Affairs (VA) coordinate with the Office of 
Federal Procurement Policy (OFPP) to explore the feasibility of: 

* Expanding the use of the VA VetBiz "verified" database government-
wide for purposes of validating all SDVOSB eligible firms for 
contracting and, 

* Requiring that all contractors who knowingly misrepresent their 
status as an SDVOSB be debarred for a reasonable period of time. 

Response: 

The SBA generally agrees that coordination among itself, VA and OFPP 
should occur to address the issues of fraud and abuse associated with 
the SDVOSB program. However, given the self-certification nature of the 
program, we question the efficacy of expanding the VA VetBiz database 
government-wide for verification purposes in detecting fraud, waste and 
abuse. 

In response to the second bullet point, the SBA agrees that firms that 
knowingly misrepresent their status as an SDVOSB, and were found to do 
so via the bid protest process, should face consequences. As such, the 
SBA will submit a recommendation to the IAE to identify the penalties 
for such an infraction. However, it is the responsibility of the 
Contracting Officer to enforce or pursue those suggested penalties. 

Recommendation #2: 

The Administrator of the SBA refers all SDVOSB firms that submit 
misrepresentations of their status to the Office of Inspector General 
for review and further investigation. 

Response: 

The SBA agrees that when the Agency determines via the protest process 
that a firm knowingly has misrepresented its SDVOSB status with the 
intent to fraudulently obtain a federal contract, SBA should continue 
its longstanding practice of referring the firm to the Office of 
Inspector General for review and further investigation. 

If you have any questions, please do not hesitate to contact us. 

Sincerely, 

Signed by: 

Joseph G. Jordan: 
Associate Administrator for Government Contracting and Business 
Development: 

[End of section] 

Appendix III: Comments from the Department of Veterans Affairs: 

Department of Veterans Affairs: 
Office of the Secretary: 

August 27, 2009: 

Mr. Greg Kutz: 
Managing Director, Forensic Audits and Special Investigations: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Kutz: 

The Department of Veterans Affairs (VA) has reviewed the Government 
Accountability Office's (GAO) draft report, Service Disabled Veteran 
Owned Small Business Program: Case Studies Show Fraud and Abuse Allowed
Ineligible Firms to Obtain Millions of Dollars in Contracts (GAO-09-
929) and generally agrees with GAO's conclusions and concurs with GAO's 
recommendations to the Department. 

The enclosure specifically addresses GAO's recommendations. VA 
appreciates the opportunity to comment on your draft report. 

Sincerely, 

Signed by: 

John R. Gingrich: 
Chief of Staff: 

Enclosure: 

[End of letter] 

Enclosure: 

Department Of Veterans Affairs (VA) Comments To GAO Draft Report, 
Service Disabled Veteran Owned Small Business Program: Case Studies 
Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of 
Dollars in Contracts (GAO-09-929): 

GAO recommendation: In an effort to minimize the potential for fraud 
and abuse in the Service-Disabled Veteran-Owned Small Business (SDVOSB) 
program and to assure that legitimate service-disabled veterans and 
their firms reap the benefits of this program, we recommend that the 
Administrator of the Small Business Administration (SBA) and the 
Secretary of Veterans Affairs (VA) coordinate with the Office of 
Federal Procurement Policy (OFPP) to explore the feasibility of: 

Recommendation 1: expanding the use of VetBiz "verified" database 
governmentwide for purposes of validating all SDVOSB eligible firms for 
contracting. 

VA comments to the draft report: Concur. VA will work with SBA and with 
OFPP to explore the feasibility in expanding the use of VetBiz. VA 
agrees that it may be effective for the Department to expand use of the 
VetBiz database to help identify firms eligible for the SDVOSB program 
and minimize the likelihood of fraud. However, specific authority would 
be required for other agencies to be able to rely on the Department's 
VetBiz database and exclude firms from acquisitions not so "verified." 
OFPP and SBA would have to determine whether that could be effectuated 
by amendment to the Federal Acquisition Regulation or whether a new 
statutory provision would be required. 

Recommendation 2: requiring that all contractors who knowingly 
misrepresent their status as an SDVOSB be debarred for a reasonable 
period of time. 

VA comments to the draft report: Concur in principle. The Department 
has specific authority to initiate debarment actions related to VA 
acquisitions for any company that misrepresents information on the 
status of that concern as a small business owned and controlled by 
Veterans or service-disabled Veterans at 38 U.S.C. 8127(g). Also, the 
VA's Verification Program regulation, 38 CFR 74.2(c), requires VA's 
Center for Veterans Enterprise to refer applicants determined to have 
submitted false information to VA's Office of Inspector General for 
review and to request that debarment proceedings be initiated by the 
Department against the concern. Governmentwide applicability of such 
authority would require, at a minimum, OFPP to seek a revision to the 
Federal Acquisition Regulation (48 CFR 9.406-2, Causes for debarment) 
to add SDVOSB status misrepresentation as a cause for debarment. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Gregory D. Kutz, Managing Director, (202) 512-6722, kutzg@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Gary Bianchi, Bruce 
Causseaux, Randy Cole, Victoria De Leon, Ken Hill, John Ledford, Deanna 
Lee, Barbara Lewis, Vicki McClure, Jonathan Meyer, Andrew O'Connell, 
George Ogilvie, Gloria Proa, Barry Shillito, and Abby Volk also 
provided assistance on this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 108-183, § 308, 117 Stat, 2651, 2662 (2003). 

[2] Veteran Entrepreneurship Act of 1999, Pub. L. No. 106-50, § 502, 
113 Stat. 233, 247 (1999). 

[3] If the business is publicly owned, at least 51 percent of the stock 
must be held by one or more service-disabled veterans. 

[4] In the case of a veteran with permanent and severe disability, the 
spouse or permanent caregiver of such veteran may control the business. 

[5] 38 U.S.C. § 101(2). 

[6] The North American Industry Classification System (NAICS) is the 
standard used by Federal statistical agencies in classifying business 
establishments for the purpose of collecting, analyzing, and publishing 
statistical data related to the U.S. business economy. 

[7] SBA's Small Business Procurement Scorecards report the annual 
percentage share of SDVOSB awards. 

[8] SBA calculates its SDVOSB total by including all dollars awarded to 
SDVOSBs, not just those received through set-aside or sole-source 
contracts. 

[9] Veterans Benefits, Heath Care, and Information Act of 2006, Pub. L. 
No. 109-461, 120 Stat. 3433 (2006). 

[10] The FPDS-NG is the central repository for capturing information on 
federal procurement actions. Dollar amounts reported by federal 
agencies to FPDS-NG represent the net amount of funds obligated and 
deobligated as a result of procurement actions. Because we did not 
obtain disbursement data, we were unable to identify the actual amounts 
received by firms. 

[11] ORCA was established as part of the Business Partner Network, an 
element of the Integrated Acquisition Environment, which is implemented 
under the auspices of White House Office of Management and Budget, 
Office of Federal Procurement Policy, and the Chief Acquisition 
Officers Council. ORCA is the primary government repository for 
contractor-submitted representations and certifications required for 
the conduct of business with the government. 

[12] 15 U.S.C. §631 et seq. 13 CFR Parts 125 and 134. 

[13] The criteria for a small business are defined in 13 CFR Part 121. 

[14] For any publicly owned business, not less than 51 percent of the 
stock must be owned by one or more service-disabled veterans. 

[15] The term "veteran" means a person who served in the active 
military, naval, or air service, and who was discharged or released 
there from under conditions other than dishonorable. 38 U.S.C. 101(2). 
Service-disabled means, with respect to disability that such disability 
was incurred or aggravated in line of duty in the active military, 
naval, or air service. 

[16] In the case of a veteran with permanent and severe disability, the 
spouse or permanent caregiver of such veteran may control the business. 

[17] Central Contractor Registration (CCR) is the primary contractor 
registrant database for the U.S. Federal Government. CCR collects, 
validates, stores and disseminates data in support of agency 
acquisition missions. 

[18] [hyperlink, http://www.FedBizOpps.gov] is the U.S. government's 
Web page for commercial vendors and government buyers to post, search, 
monitor, and retrieve opportunities solicited by the federal 
contracting community. 

[19] Veterans Benefits, Heath Care, and Information Act of 2006, Pub. 
L. No. 109-461, 120 Stat. 3433 (2006). 

[20] See GAO, Department of Veterans Affairs Contracting with Veteran- 
Owned Small Businesses, [hyperlink, 
http://www.gao.gov/products/GAO-09-391R] (Washington, D.C.: Mar. 19, 
2009). 

[21] Association of Certified Fraud Examiners, Fraud Examiners Manual, 
U.S. Edition (2007). 

[22] GAO, HUBZone Program: Fraud and Abuse Identified in Four 
Metropolitan Areas, GAO-09-440 (Washington, D.C.: Mar. 25, 2009); 
Hurricanes Katrina and Rita Disaster Relief: Prevention Is the Key to 
Minimizing Fraud, Waste and Abuse in Recovery Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-07-418T] (Washington, D.C.: Jan. 29, 
2007); and Individual Disaster Assistance Programs: Framework for Fraud 
Prevention, Detection, and Prosecution, [hyperlink, 
http://www.gao.gov/products/GAO-06-954T] (Washington, D.C.: July 12, 
2006). 

[23] 13 CFR § 125.29. 

[24] Veterans Benefits, Heath Care, and Information Act of 2006, Pub. 
L. No. 109-461, 120 Stat. 3433 (2006). 

[25] 73 Fed. Reg. 29024 (May 19, 2008). 

[26] Pub. L. No. 108-183, § 308, 117 Stat. 2651, 2662 (2003), 15 U.S.C. 
§ 657f. 

[27] Small Business Size Regulations; Government Contracting Programs, 
69 Fed. Reg. 25,262, 25,265 (May 4, 2004). 

[28] 15 U.S.C. § 637(m)(5)(A). 

[29] 15 U.S.C. §637(m)(5)(B). 

[30] 15 U.S.C. §637(m)(6). 

[31] 15 U.S.C. § 637(m) (5) (C). 

[End of section] 

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