The Department of Justice (DOJ) recently announced a $949,696.90 False Claims Act (FCA) settlement with GS Foods Group Inc. (GS Foods) for improperly bidding on contracts reserved for small businesses despite not qualifying as a small business. The DOJ settlement underscores the critical need for accurate small business representations and certifications in government contracting. Visit this link to register for our webinar, “PilieroMazza Annual Review: What DOJ’s 2024 FCA Report Means for Government Contractors” and check out our podcast Ex Rel. Radio.
Briefly, the FCA serves as a powerful tool for the government to combat fraud in federal contracting. The FCA imposes liability on entities that knowingly submit, or cause to be submitted, false claims for payment to the government. Violators of the FCA may be subject to treble damages plus substantial penalties. FCA cases span a wide array of issues in government contracting, including improper billing practices and non-compliance with manufacturing specifications, cybersecurity requirements, and small business set-aside program requirements.
In its recent settlement with GS Foods, the DOJ alleged that between October 1, 2018, and March 8, 2024, GS Foods and its subsidiaries, GoodSource Solutions Inc. and Dori Foods Inc., improperly bid on contracts and orders reserved or set aside exclusively for small businesses. The government claimed that GS Foods did not qualify as a small business due to its affiliations with other companies, thereby rendering it ineligible for these set-aside contracts.
Importantly, GS Foods took proactive steps that entitled it to credit for cooperation. After self-reporting the issue to the DOJ’s Office of Inspector General, the company engaged fully with the investigation by identifying key witnesses and documents, making employees available for interviews, and implementing corrective measures. These measures included updating its code of conduct, forming an Ethics and Compliance Management Committee, appointing a Chief Compliance Officer, and enhancing employee training.
Takeaways
As this settlement demonstrates, failure to accurately assess affiliation with other businesses can lead to significant legal and financial consequences, including facing allegations of false representations and certifications related to small business status. Beyond FCA liability, companies may face SBA size protests and reputational damage. Proactive compliance measures, such as internal policies and procedures for assessing the company’s size and affiliation and prompt investigation of any discrepancies, are critical to mitigating risks associated with small business contracting. This case serves as a timely reminder for businesses to prioritize compliance with small business certification requirements to avoid severe penalties and maintain eligibility for federal contracting opportunities.
If you have questions about this settlement or other FCA-related matters, please contact Jackie Unger or another member of PilieroMazza’s False Claims Act or Audits & Investigations practice groups. Visit this link to register for our webinar, “PilieroMazza Annual Review: What DOJ’s 2024 FCA Report Means for Government Contractors” and check out our podcast Ex Rel. Radio. Special thanks to Nathan Jahnigen for his assistance with this blog.
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If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.
