Defense contractor, president to pay $750,000 to settle small business False Claims Act allegations

by Ben Vernia | July 29th, 2010

On July 29, the Department of Justice announced that Georgia-based Quantum Dynamics, Inc., and its president have agreed to pay $750,000 to settle charges that they defrauded the Army on contracts set aside for small businesses. According to DOJ’s press release:

The contracts had been set aside for companies that qualified for the Small Business Administration’s Historically Underutilized Business Zone (HUBZone) program. Quantum was allowed to participate in the HUBZone program based on false statements made to the government.

Under the HUBZone program, companies that maintain their principal office in a designated HUBZone and employ 35 percent of their workforce from a HUBZone, among other requirements, can apply to the Small Business Administration (SBA) for certification as a HUBZone small business company. HUBZone companies can then use this certification when bidding on government contracts. In certain cases, government agencies will restrict competition for a contract to HUBZone-certified companies.

The United States alleged that Quantum did not actually maintain its principal office in a designated HUBZone location in Washington, D.C., as they had represented to the Army and the SBA, but rather set up their office in a Virginia suburb. Additionally, the government alleged that Quantum Dynamics did not employ a sufficient percentage of employees who lived in a HUBZone. Despite not properly qualifying for the HUBZone program, Quantum Dynamics was awarded Army contracts that had been set aside for qualified HUBZone companies based upon the false statements they made to the Army and the SBA.

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