Service-Disabled Veteran-Owned Small Business Program Fraud

Our veterans have made tremendous sacrifices for our country, and we owe them a debt that can never fully be repaid. In an effort to honor and reward their service, the government has established a program that extends special contract opportunities to entrepreneurial veterans who have suffered service-related disabilities.

Through the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, the federal government intends to award at least 3% of federal contracting dollars to SDVOSBs. With the government purchasing $600 billion of goods and services each year, this program provides SDVOSBs with billions of dollars in potential contracting opportunities.

Qualifying for the SDVOSB Program

To be eligible for an SDVOSB contract with the federal government, a company must meet four criteria:

1. The company must be a small business.
2. The company must be at least 51% owned by one or more service-disabled veterans.
3. A service-disabled veteran must hold the highest position in the company—such as the role of CEO—and be responsible for the day-to-day operation of the company.
4. The eligible veteran(s) must have a service-connected disability.

SDVOSB Program Fraud

Unfortunately, the SDVOSB Program is often the target of fraudulent schemes. Sometimes, a contractor will falsely identify itself as a SDVOSB in order to obtain set-aside contracts. Large companies may create fraudulent SDVOSBs or use a legitimate SDVOSB as a front to obtain contracts they are not legally eligible to receive. When big businesses scam the system and obtain these contracts, legitimate service-disabled veteran small business owners are denied important opportunities they truly deserve.

Curbing fraud in the SDVOSB Program and other small-business programs represents an enforcement priority for the U.S. Department of Justice (DOJ). For example, ADS, Inc., a Virginia based defense contractor, allegedly used an SDVOSB as a front to fraudulently obtain set-aside contracts. The attorneys at Baron & Budd represented a whistleblower whose information led to nearly $37 million in settlements involving ADS, its executives, and related parties from 2017 to 2019—the largest recovery ever involving alleged small-business contracting fraud.

Identifying SDVOSB Fraud

Whistleblowers are essential in identifying, reporting, and stopping fraud in the SDVOSB Program. Whistleblowers are often employees (or former employees) of an SDVOSB or other government contractor, with inside information about fraud being committed. Sometimes, employees of legitimate SDVOSBs learn their competitors are cheating the system—this type of information can be equally valuable in detecting and stopping fraud.

SDVOSBs are often approached with proposals to commit fraud—for example, by serving as a financial “pass-through” for an ineligible business while performing very little or none of the work actually required under the contract. Other times, a company might fraudulently obtain certification as an SDVOSB to take advantage of special contracting opportunities. Whistleblowers should be on the lookout for situations in which a service-disabled veteran doesn’t actually appear to own or manage an SDVOSB, or where an SDVOSB serves as a government contractor but doesn’t actually perform work on the contract.

Whistleblowers with knowledge of schemes to defraud the SDVOSB Program should come forward and speak to a whistleblower attorney. A whistleblower who files a successful complaint under the False Claims Act is entitled to between 15% and 30% of the amount the government recovers.

Our Team

With more than 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of fraud involving the SDVOSB Program.

Please call (866) 973-7515 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower. Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.