The U.S. Attorney’s Office for the Middle District Florida settled its allegations against a Central Florida contractor accused of violating the Small Business Administration’s regulations by allegedly creating a sham joint venture to be awarded a project. Click here for more information about the settlement.
NASA sought bids for a demolition project that was funded by the Small Business Administration (“SBA”). A requirement of the project was that it be awarded to a business that was qualified as a small business enterprise (“SBE”). In order to qualify, Sunrise Systems of Brevard, Inc. (“Sunrise”) formed a joint venture with V&R Enterprises of Jacksonville, Inc. (“V&R”), which was qualified as both minority-owned and a SBE. Sunrise is a large contractor that does not satisfy SBE requirements.
The joint venture between Sunrise and V&R was ultimately awarded the Project. However, the U.S. Attorney’s Office later brought charges against Sunrise alleging that Sunrise violated SBA regulations by performing nearly all of the work and retaining nearly all of the profits from the project. Sunrise agreed to a fine in the amount of $500,000.00 to settle the claims without acknowledging liability.
While it is permissible to form a joint venture for the purposes of satisfying bidding requirements on a public project, the federal government will look past the joint venture to determine if the project’s requirements are being met in substance, not just in form. If a contractor is considering forming a joint venture to satisfy requirements for a public project, careful consideration should be given to ensure that the project’s goals are actually accomplished with the joint venture to avoid possible trouble after the project is awarded.