On Jan. 7, 2025, the Department of Justice announced that R&K Enterprises agreed to pay over $2.6 million to resolve allegations under the False Claims Act, 31 U.S.C. §§ 3729-3733, among other causes. The settlement was predicated on allegations that the company represented it was a small business eligible for certain small business set-aside contracts when it did not meet the program rules to qualify. This settlement underscores the importance of contractors making accurate small business certifications when bidding on set-aside contracts.
Settlement Details
In 2019, the General Services Administration awarded a One Acquisition Solution for Integrated Services Small Business Pool 1 Contract, a 100% small business set-aside program, to R&K. The government alleged that R&K impermissibly represented in its bid that it was a small business eligible for the contract when it was not eligible because it did not meet the size standard. The government alleged that R&K impermissibly novated a contract to another company, K&P Management, to meet the relevant size standard. To that end, R&K’s bid represented that it was not affiliated with K&P.
The settlement indicates that R&K and K&P were affiliated based on several factors. The wife of R&K’s owner owned K&P, all of K&P’s purported revenue came from R&K, the two companies shared executives and R&K exercised control over K&P.
Based on these factors, the government asserted that R&K should have included K&P’s revenue in R&K’s calculation of size. Although R&K denied the allegations, the company agreed to pay $2.6 million to resolve the matter.
Takeaways
This case is another example of the government’s focus on protecting small business programs from fraud and efforts by investors or other businesses to improperly gain a competitive advantage. Contractors should ensure all small business certifications are accurate under 13 C.F.R. part 121 when bidding on government contracts set aside for small businesses, or they may face liability under the False Claims Act (or, potentially, culpability under 18 U.S.C. § 1001) for making false certifications. Contractors also should review and consider the U.S. Small Business Administration’s affiliation rules under 13 CFR part 121 when declaring whether another company is an affiliate in submitting bids for government contracts.
For questions related to this outcome, small business certifications or government contracts, contact any of the authors or another member of the McGuireWoods government contracting team.