The complaint alleges that WCH claimed such small businesses would perform subcontracted work, but that those companies were used merely as pass-throughs and the actual work was performed by another subcontractor, Federal Constructors Inc. (FE&C). WCH is a prime contractor of the Department of Energy (DOE) at the Hanford Site and is owned by URS Corporation, Bechtel National Inc., and CH2M Hill Companies Ltd.
DOE fully reimburses WCH for hundreds of millions of dollars in subcontracts awarded under the River Corridor Closure Contract. Accordingly, DOE mandates that WCH award a certain percentage of those subcontracts to small businesses and to disadvantaged small businesses, including woman owned small businesses, according to the complaint. Failure of WCH to meet these requirements or to not provide subcontracts to such small businesses in good faith can result in millions of dollars withheld from WCH by DOE, the complaint alleges.
The complaint alleges that WCH falsely represented to DOE that it had awarded three different multi-million dollar subcontracts to two different subcontractors, which it claimed qualified as small businesses or woman-owned small businesses when, as alleged in the complaint, they did not so qualify. These small businesses were merely acting as pass through companies for another subcontractor, FE&C, which was not a disadvantaged small business of any kind, according to the complaint.
The complaint alleges that, in May of 2009, WCH awarded a subcontract referred to as the Truck & Pup subcontract to Phoenix Enterprises Northwest (Phoenix) claiming that Phoenix was a small business. The Small Business Administration (SBA) determined about a month later that Phoenix was merely acting as a pass through company for another subcontractor, FE&C, that did not qualify as a small business but was actually doing the work. According to the complaint, rather than re-bid the subcontract, WCH agreed to not claim small business credit and allow Phoenix and FE&C to keep the subcontract. However, beginning less than a year later in 2010, despite knowing of the SBA determination and despite having agreed not to claim the small business credit, WCH falsely represented to DOE that it was entitled to over $2.7 million worth of small business credit for modifications to the Truck & Pup Subcontract, the complaint alleges.
In November of 2010, according to the complaint, WCH awarded another multimillion dollar subcontract that involved FE&C. The complaint alleges that WCH falsely represented to DOE that it was entitled to small business credit for this subcontract, referred to as the 100 Area Subcontract, because a woman-owned small business, Sage Tec LLC, would perform on the contract with FE&C as a teaming partner. In fact, according to the allegations, Sage Tec only had one employee, its owner Laura Shikashio, and WCH and FE&C knew that Sage Tec would merely be acting as a pass through company. As alleged in the complaint, in performing on the 100 Area Subcontract Sage Tec simply used FE&C's employees, which stayed on the FE&C payroll, and in that manner merely acted as a pass through contributing only its woman-owned small business name to the project.
The complaint further alleges that in October of 2012 WCH once again awarded a multimillion dollar subcontract, worth over $15 million, that involved FE&C. As with the 100 Area Subcontract, the complaint alleges that WCH falsely represented to DOE that it was entitled to disadvantaged small business credit for this subcontract, referred to as the 300 Area Subcontract, because Sage Tec would perform on the contract with FE&C as a teaming partner. In fact, according to the allegations, Sage Tec still only had one employee, its owner Laura Shikashio, and WCH and FE&C knew that Sage Tec would be acting, once again, as a pass through company merely contributing its woman owned small business name with FE&C performing the work, just as with the previous subcontract.
The Department of Energy Office of Inspector General and the Small Business Administration Office of Inspector General is investigating the case. "SBA's set-aside contracting programs are intended to give small businesses the best opportunity to provide goods and services to the federal government," said SBA Inspector General Peggy E. Gustafson. "The fraud alleged in this complaint egregiously denied the government the opportunity to obtain tens of millions of dollars-worth of federal subcontracting from small businesses."
Pursuant to the False Claims Act, the United States is seeking damages and civil penalties from WCH, FE&C, Sage Tec, and Laura Shikashio for their roles in the alleged fraud. In filing this civil complaint the United States is partially intervening in a whistleblower law suit brought under the False Claims Act against WCH, FE&C, and others by Salina Savage and Savage Logistics LLC. Ms. Savage has pending False Claims Act allegations against WCH and FE&C that are in addition to those in the United States' complaint. In its complaint the United States is also suing WCH for breaching its contract with DOE for making the false statements about its small business subcontracting to DOE. The United States is also suing WCH, FE&C, Sage Tec, and Ms. Shikashio for payment by mistake and for being unjustly enriched as a result of the alleged fraud.
The United States' complaint is captioned as United States of America ex rel. Salina Savage, Savage Logistics LLC, vs. Washington Closure Hanford LLC, Federal Engineers and Constructors, Inc., Sage Tec LLC, and Laura Shikashio, CV-10-5051-EFS.