On December 27, the Washington Post reported that the Small Business Administration (“SBA”) had proposed MicroTechnologies LLC (“MicroTech”) for debarment (as well as MicroTech’s CEO and founder, Anthony Jimenez). The SBA is alleging that, among other things, MicroTech and Jimenez submitted “false and misleading statements” in connection with the company’s application to the SBA’s 8(a) Program.
Founded in 2004, MicroTech is certified as a Service-Disabled Veteran-Owned Small Business (“SDVOSB”) and 8(a) entity–designations that provide set-aside and preferential contracting opportunities to small, disadvantaged firms. While these programs are designed to help “small, disadvantaged businesses compete in the marketplace,” they continue to remain vulnerable to fraud and abuse.
The SBA’s Notice of Proposed Debarment alleges that Microtech and Jimenez misled the government about its affiliation with other firms in order to gain entry into the 8(a) Program. As the Washington Post explains:
Federal contracting rules require that small firms seeking work set aside for service-disabled veterans must not be overly reliant upon other companies through family ties, location, personnel relationships or economic interests. This is intended to prevent smaller firms from acting as fronts for or appendages to larger firm.
[For additional information about the concept of “affilation” for purposes of determining a company’s size status, you may want to read the following article that I co-authored– located here]
The SBA’s proposed debarment of MicroTech and Jimenez was likely prompted by a series of articles in the Washington Post about the company (and its CEO/founder) alleging that MicroTech’s affiliation with certain firms, including MicroLink and GovWare, rendered the company ineligible for small business contracting opportunities. The series also provided a lengthy description of Jimenez’s lavish lifestyle, calling into question MicroTech’s compliance with the 8(a) program’s stringent income requirements.
The Washington Post has also reported that MicroTech “has been linked to investigations into alleged efforts to inflate the revenues of a software company [Autonomy] ahead of its acquisition by Hewlett Packard in 2011.” These allegations (separate from the SBA fraud inquiry) prompted the Air Force to send MicroTech a “Show Cause” letter in September, asking the company to explain why it should not be debarred for allegedly engaging in accounting improprieties. According to the paper, the Air Force has since asked the SBA to be the lead agency in the MicroTech debarment proceedings.
I encourage you to read the actual Notice of Proposed Debarment that the SBA sent to MicroTech and Jimenez on December 20, 2013. It provides an extensive overview of facts that have caused the SBA to question MicroTech and Jimenez’s present responsibility. The proposed debarment has resulted in the suspension of MicroTech and Jimenez from the federal procurement system. This means that they are currently ineligible to receive new government contracts. The company and its CEO have 30 days to submit information in opposition to the proposed debarment.
In addition to raising questions about the present responsibility of MicroTech and Jimenez, this matter also highlights concerns about the vulnerability of small business programs to fraud and abuse, as well as insufficient oversight provided by the relevant government agencies. Indeed, one of the Washington Post articles is highly critical of the role the Department of Veterans Affairs (“VA”) played in MicroTech’s ascension (noting that the MicroTech/VA dealings were mutually beneficial because it enabled the agency to meet its small business contracting goals).
The Washington Post series has also prompted a flurry of investigations into this matter. “Inspectors general offices at the SBA and the General Services Administration have initiated investigations. The Small Business Committee in the House and the House Veterans Affairs Committee have begun examining the VA contracts with MicroTech.”
If the allegations against MicroTech are true, then Robert O’Harrow of the Washington Post has helped expose a troubling and complicated case of small business fraud. It has also highlighted weaknesses in this complex regime and demonstrated that more effective oversight of the system is needed. Let’s hope that this prompts some much-needed reforms to the system.