Noteboom The Law Firm

New Rules Should Prevent Fraud in VA Contracts

September 27, 2010 - The Department of Veterans Affairs (VA) has had a series of problems lately with issuing contracts. More specifically, recent history has uncovered an unsettling level of fraud in programs that were intended to award federal contracts to veteran and disabled-veteran owned businesses. In 2009, more than $100 million went to businesses not qualified to have been awarded the contracts in the first place.

The Veterans First program began on January 1, 2010 and limits bidding on large contracts to veteran or disabled-veteran owned businesses. New rules will be imposed on the VA's contracting procedures starting October 1, 2010 and will stay in effect until January 1, 2012 when permanent rule changes take effect. In order to be awarded these VA contracts, business owners must prove their disability status. These same standards will be applied to veteran-owned businesses, whereas no proof is currently required.

While these changes will certainly cut down in the amount of fraud among bidding companies, the VA has to actively enforce these new rules in order for that to happen. For those service-disabled veteran owned businesses, that veteran must: 

• Have controlling interest in the firm; and
• Directly supervise its daily and long-term operations.

These rules were implemented with urgency because of the level of fraud discovered in the program. There is currently a backlog of applications from service-disabled veteran-owned businesses. This backlog prevents the certification of genuine companies. At the current pace, that backlog will not be eliminated within the next year, according to VA officials.

The burden is on the companies to supply their required verification forms. The burden will then shift to the VA to process the paperwork quickly enough to meet their deadlines so the companies could compete for the VA contracts.