Avoid This Costly Mistake and Get Government Contracting Lawyers to Help Avoid this $1.75Million Error.

Will the DOJ Clobber Your Company Next with $1.75 Million for Falsely Certifying Your Small Business Status After a Merger or Acquisition of a Government Contracting Business?Theodore P. Watson, Esq. The United States Government Handed Down a Hefty $1.75 million to settle civil fraud allegations that it and its subsidiaries improperly obtained government contracts that were set-aside for small businesses. The problem started after a merger and acquisition by a private equity firm, Tower Arch Capital.

As a result of the purchase of the then-government contracting small business, the government pushed False Claims Act charges for including subsequently acquired subsidiaries that falsely certified themselves as qualified small businesses in the System for Award Management (SAM.gov). After the purchase and sale of the government contracting small business company, Pavion and its subsidiaries were awarded 117 set-aside small business contracts across twenty federal agencies they were ineligible to receive.

When you are buying or selling a company with federal government contracts, one of the critical concerns is whether the purchased company will maintain its small business status.

Resolving this question can be challenging. Under 13 CFR 121.103, the SBA decides whether a small business is affiliated or whether one or more third parties control or have the power to control the purchased company.

  • Both sellers and buyers want to determine the small business status after a merger and acquisition of a company with small business government contracts.
  • Failure to properly certify the after-purchased small business size status can lead to expensive False Claims Act civil or criminal penalties.

SBA Affiliation and Change of Control

A small business’s change in control from a business sale or merger or acquisition can have a significant impact on companies with federal government contracts. It is essential to evaluate this impact thoroughly, considering factors such as management and control, voting rights and more. Notifying and seeking consent from the government contracting agency is crucial to address any concerns and ensure compliance during the transition.

Change of control,  under 13 CFR 121.103, when there is a merger and acquisition of a small business that has government contracts, is a critical issue before the M&A takes place.  Consulting with a government contracts attorney who also is familiar with SBA small business rules can be very helpful when assessing a potential government contractor M&A.

At Watson & Associates, LLC our government contracting attorneys and federal small business lawyers help buyers and sellers of companies with federal government contracts.

Call Our Defense Lawyers Today at 1.866.601.5518 for a Free Initial Consultation.