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A report released by the U.S. Department of Defense’s (DoD) Office of the Inspector General (IG) reveals that the DoD awarded $876.8 million in Service-Disabled Veteran-Owned Small Business (SDVOSB) contracts to companies that did not meet the SDVOSB subcontracting requirements.

The requirements to qualify for an SDVOSB contract is to be 51% owned by at least one service-disabled veteran or have at least one service-disabled veterans in control of management or daily operations. The IG found that 16 of the 29 contractors were ineligible for SDVOSB contracts. One of these ineligible contractors received a $5 million SDVOSB contract and another was awarded three contracts worth $209.6 million. The report also found that DoD contracting personnel did not verify compliance with the subcontracting requirements.

The IG review was conducted after the Government Accountability Office (GAO) released a report in November 2019 that some companies seeking contracts with the DoD were using “shell companies” with opaque ownership structures. The GAO report also warned that aside from ineligible companies winning contracts, some foreign companies also receive sensitive information through U.S.-based firms.

The situation puts service-disabled veterans at risk of not receiving contracts intended for them and the DoD at risk of misreporting SDVOSB participation. To address the issue, the IG suggested that the DoD’s Office of Small Business Programs require contractors to provide valid documentation for their SDVSOB status and conduct a regular review to ensure eligibility.

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