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Contractor to Pay $928K in SBA Case

Thursday, March 27, 2014

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A large, 96-year-old Utah-based construction company will pay $928,000 to settle allegations that it fraudulently obtained access to contracts set aside for small businesses, federal authorities have announced.

The settlement with Okland Construction Co. Inc., of Salt Lake City, resolved a 2011 whistleblower lawsuit filed by Saiz Construction and its owner, Abel Saiz, under the False Claims Act, the Department of Justice said Friday (March 21).

Salt Lake City Federal Courthouse
U.S. General Services Administration

Okland Construction is building a $226 million federal courthouse in Salt Lake City, which is set for completion this spring. 

Saiz Construction, also based in Salt Lake City, will receive a payout of nearly $150,000 in the case.

Okland, founded in 1918, is a top-ranking construction company in the United States, according to Engineering News Record. The company has three office locations and  600 employees and performs an array of construction projects in 28 states.

In a statement, an Okland official told D+D News that the family-owned company disputed the government's allegations, but decided to settle rather than undergo more expensive, drawn-out litigation.

“[Saiz] made a lot of money with us, and we’re disappointed in him and in the federal government,” said John McEntire, chief financial officer of Okland, according to Bloomberg Business Week.

SBA Mentor Program

Authorities say Okland entered into a “mentor-protégé agreement” in 2002 with Saiz Construction Co., a small, Native American-owned company that qualified for government jobs set aside for small businesses, through the 8(a) Program.

“The purpose of the 8(a) Program is to assist small and disadvantaged businesses to compete in the American economy,” said Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division.  

Capitol Dome
Architect of the Capitol

“The purpose of the 8(a) Program is to assist small and disadvantaged businesses to compete in the American economy,” said Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division.

The mentor-protégé program allows a large business mentor to form an SBA-approved joint venture with a small business protégé to jointly bid on and perform 8(a) contracts.

Fraud Alleged

Prosecutors alleged that Okland did not fully form a qualifying joint venture with Saiz Construction and thus was not eligible to jointly bid on or perform the primary functions of eight 8(a) contracts with Saiz Construction. Many of the projects were for jobs at Air Force bases, Bloomberg reported.

Okland prepared the bids for the contracts; had employees serve as project managers; submitted invoices; and performed payroll and other accounting functions, the prosecutors alleged. 

Okland allegedly concealed its extensive involvement in performing the 8(a) contracts by misrepresenting to the government that its employees were employees of Saiz Construction.

manager
© korayhoylu / iStock

Prosecutors said Okland employees served as project managers, prepared the bids and submitted invoices, in violation of the program requirements.

The government also alleged that Okland’s relationship with Saiz Construction violated the terms of an SBA set-aside contract awarded to Saiz that required it to perform at least 15 percent of the labor on the contract minus the cost of materials.

Improper Use of the Program

“Large businesses must not be allowed to fraudulently obtain access to contracts set aside for small businesses,” said SBA Inspector General Peggy E. Gustafson.  

“The SBA mentor-protégé program enhances the capability of 8(a) participants to compete more successfully for federal contracts through a relationship with another successful business; however, this program must not be used as a vehicle to improperly benefit large, non-disadvantaged companies.”

Whistleblower Case

The whistleblower provision of the False Claims Act permits private parties, known as relators, to file suit on behalf of the government for false claims and to share in any recovery, according to authorities. 

Saiz Construction and Abel Saiz filed the lawsuit after Saiz Construction terminated its mentor-protégé agreement with Okland in 2011. As a part of the settlement, Saiz Construction and Saiz will receive a total of $148,480.

This settlement with Okland Construction was the result of a coordinated effort among the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the District of Utah; the SBA Office of Inspector General; the SBA Office of General Counsel; the Department of the Air Force and the Army Corps of Engineers.

   

Tagged categories: Construction; Contractors; Good Technical Practice; Government contracts; Laws and litigation; Lawsuits; Small Business Administration

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