Drum contract in fraud report

FORT DRUM — A contract for work at Fort Drum was among 10 cited in a report on fraud in a program meant to funnel federal money to small businesses owned by disabled veterans.

The report released Thursday by the Government Accountability Office looked into a handful of cases of potential fraud in the Service-Disabled Veteran-Owned Small Business Program. It found that a contract worth up to $1.1 million for "septic-tank and related services" at Fort Drum was awarded to an Austin, Texas-based firm that did not qualify for the program.

But Fort Drum officials said the base stopped doing business with the company, which provided portable toilets, after learning it wasn't eligible for the funds. Officials said the base's payments for services totaled $171,000, not $1.1 million.

The GAO report didn't name the company and Fort Drum wouldn't release its name, citing contracting rules. But the report said the Texas company used two legitimate veteran-owned businesses "as pass-throughs to obtain over $3 million in ... contracts," at both Fort Drum and Fort Irwin, Calif.

Fort Drum spokeswoman Julie A. Cupernall said the terms of the contract were for an initial one-year work period, with the possibility of renewing the contract for additional time. The contract was awarded in May 2008 and work began in June that year.

In July 2008, the U.S. Small Business Administration, acting on a complaint from a competing bidder for the work, determined that the contractor did not meet the requirement of being owned by a service-disabled veteran. At that point, the SBA notified Fort Drum of its findings, said Jonathan T. Meyer, assistant director of the Forensic Audits and Special Investigations team at the GAO that prepared the report.

"They could have canceled it at that point and they chose not to," he said.

Ms. Cupernall said that given work had already begun, and the burdensome legal process for canceling an existing contract, Fort Drum let the company complete the year's worth of contracted work, then extended it through the end of the fiscal year in September. At that point, the base decided not to renew its contract with the company.

The report recommends expanding a certification program for small businesses owned by service-disabled veterans that the Veterans Administration currently uses in awarding contracts to cut down on such instances of abuse.