Alawsuit by the American Small Business League, heading for trial, is suggestingthat a Defense Department program intended to promote small businesssubcontracting may well be conducted in a deceitful way.

Discoveryin the lawsuit ― against the Defense Department and Sikorsky, amajor helicopter maker ― has suggested that major defensecontractors manipulate data to falsely claim they are meeting their smallbusiness subcontracting targets. Over its lifetime, then, the program wouldfail to provide promised small business subcontracting on hundreds of billionsof federal contracting dollars. Small business would lose out on theopportunities that Congress and the public want small business to get.

TheASBL and its president, Lloyd Chapman, seek the program's records under theFreedom of Information Act. Ahead of the trial, set for December, the ASBL hasobtained documents and depositions about Sikorsky's defense contracting.

The ASBL discovery and other information point to one waycontractors can evade their subcontracting obligations.

Aprime contractor may commit to the government to meet a goal that, say, 30% ofits subcontracting will go to small business. And it may report that it did soin the first half of 2017. But what the contractor actually does may be termeda sham pass-through. The prime contractor picks out some large contractors towhich it wishes to subcontract important products for installation in itshelicopters, planes or other products for its prime contract. Then the primecontractor gets a small company to agree for some nominal fee (like1%) to "buy" the product from the large contractor and then turn around,without doing any work, and "sell" the product to the prime contractor. All thesmall company has to do is sign a contract and some receipts.

Theprime contractor then lists the full percentage of products bought through suchsham pass-throughs as qualifying as subcontracting to small business.

Infact, the prime contractor can take this one phony step further. The smallcompany chosen as the sham pass-through may qualify as one of the specializedkinds of small business that have special federal assistance programs, likewomen-owned small business or service-disabled veteran-owned small business.In that case, the prime contractor may have the cheek to count the phony smallbusiness subcontracting as compliance with its duties for those special federalassistance programs.

Wheredoes the Defense Department program, traditionally known as the ComprehensiveSubcontracting Plan Test Program, come in?

Again,the ASBL discovery and other information suggest the Test Program reducesthe specificity and transparency of large contractor reporting of assertedsmall business subcontracting. This, in turn, emboldens the large contractorsto conduct a phony system. For example, much of Sikorsky's sales to thegovernment are sole source, meaning Sikorsky has no competitors. Sole sourcingmeans Sikorsky has no legitimate fear that disclosing its small business subcontractingfigures for the sole-sourced products would give an advantage to its(non-existent) competitors. Yet Sikorsky has tried to keep its informationsecret, conveniently veiling its claims about its asserted small-businesssubcontracting.

Underthe program, large contractors need not plan or report on individual contracts;they can just create a vague overall plan for their nationwide contracting.With so little transparency, the small business subcontracting may occur onlyon a sham basis, if that small business subcontracting occurs at all.

TheASBL has calculated that the Pentagon may have deprived small business ofsubcontracting on $2 trillion since the program was started in 1989. Andunfortunately, under the 2017 National Defense Authorization Act, theprogram was extended to 2027. This would bring the so-called test, supposedlyan experimental program, to its 38^th year, which hasto be some kind of unfortunate record for a test program.

In a previous round ofthis case, in November 2014, the trial judge, William Alsup, accused thePentagon and Sikorsky of trying to "suppress the evidence." He instructed thePentagon and Sikorsky on two separate occasions to "highlight the parts thatare supposedly confidential" or that they believed were proprietary and toexplain why they believed the information should be exempt.

WhenJudge Alsup ruled for the ASBL, the Ninth Circuit reversed the decision. But itdid not end or even stall the case, sending it back to Judge Alsup fordiscovery and trial. Judge Alsup's order allowing ASBL to depose Sikorsky andPentagon witnesses in the case indicates that the case is going forward. So themask of the program may finally be removed.

For the full article, clickhere: https://www.forbes.com/sites/charlestiefer/2017/08/15/spuriously-conducted-federal-subcontracting-program-revealed-in-sikorsky-case/2/#2e5f7a754041