FORT DRUM — Two Syracuse-area companies have agreed to pay more than $1 million total to resolve allegations that they improperly obtained government contracts for construction work done at Fort Drum.
Grant C. Jaquith, U.S. attorney for the Northern District of New York, said in a prepared statement Wednesday that Upstate Construction Services LLC and Structural Associates Inc. obtained contracts that were supposed to be set aside for companies qualified as historically underutilized business zone (HUBZone) firms, which are required to be small businesses located in an economically distressed area.
According to Mr. Jaquith’s statement, the federal government occasionally utilizes government contracting to promote small businesses, including firms that qualify as HUBZone entities. To be eligible for these contracts, a firm must qualify as a small business, have its principal office located in a HUBZone, and have a certain percentage of employees live in a HUBZone.
The settlements announced Wednesday resolve allegations that Upstate (which was a qualified HUBZone entity) and Structural (which was not) entered into a set of agreements – including two Silent Joint Venture Agreements – that were not disclosed to the government. The agreements enabled Upstate to obtain bonding on jobs that it otherwise would not have been able to obtain, and in exchange Structural, which could not have bid on the jobs itself or as part of a joint venture with Upstate, received about half of Upstate’s profits on government contracts worth millions of dollars, according to Mr. Jaquith’s statement.
The work at issue involved contracts for the construction of hangar apron and maintenance facility at Fort Drum. One of the contracts was for $19.5 million, while a second contract was for about $11 million. To settle the matter, Upstate agreed to pay $515,000, while Structural, which has a location in the Jefferson County Corporate Park, agreed to pay $510,000. Neither company admitted to any wrongdoing.
“Openness and integrity are critical to the fair and effective implementation of federal contracting assistance programs, including programs designed to help small businesses from economically distressed communities,” Mr. Jaquith said. “Secret agreements between firms to share profits on government contracts undermine the integrity of these programs, which we will continue to protect by persistently pursuing these cases with our investigative partners.”
The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office, the Defense Criminal Investigative Service and the United States Army Criminal Investigation Command. The United States was represented by Assistant U.S. Attorney Michael D. Gadarian.