Veteran-Owned Businesses Face Crackdown

By Rieva Lesonsky

Are you a military veteran whose business does work for the government? Then you need to be aware of a new crackdown that’s occurring due to recently discovered fraud. The federal Veterans Affairs Department recently discovered during an internal audit that more than 30 businesses to which it had awarded contracts set aside for veteran-owned businesses were actually ineligible for the contracts, The Los Angeles Times reports.

Thirty-two of the 42 companies the department audited should never have received contracts, the investigation found. In some cases, legitimately vet-owned businesses landed contracts, but then subcontracted the work to non-veteran-owned companies.

Service-disabled veterans, in particular, will face scrutiny because these companies get preferential treatment when seeking contracts from Veterans Affairs as well as other federal and state government agencies, the Times notes.

What does this news mean to your business? If you are trying to land a government contract, here’s what you can expect:

• You will need to prove your company is legitimately veteran-owned by sending in copies of your tax returns, bank account signature cards and other documents. In the past, agencies just required businesses to vouch that they had those documents available.
• You might have to provide copies of canceled checks from your business’s bank accounts.
• You are more likely to be visited on-site by an auditor from an agency. For example, the Department of Veterans Affairs increased site visits from under 150 in 2010 to more than 750 this year alone.

On the plus side, the Times notes, companies that do make the cut will face less competition for contracts. Since the Department of Veterans Affairs began tightening standards late last year, half of the companies on its database have been eliminated because they didn’t make the cut in some way or another.

Will this new crackdown spread to other government agencies and/or other types of specialized businesses, such as those owned by women or minorities? It remains to be seen. On the one hand, government agencies are dealing with budget and staff cuts that could hamper their ability to vet (no pun intended) businesses. On the other, calls for greater transparency could prompt more investigations. One thing is certain: If you’re trying to land government contracts of any kind, be sure you have all your ducks in a row.

Image by Flickr user Keith Burtis (Creative Commons)

This entry was posted on Wednesday, September 7th, 2011 at 6:00 am and is filed under Business Law, Compliance, Small Business, small business, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.


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