House bill would punish users of front companies

The penalty for misrepresentation would be a fine or jail time, as well as suspension or debarment from government contracting

A new bill introduced in the House would penalize people who set up a company as a front to another business to get a government contract.

The Small Business Contracting Protection Act (H.R. 4420) would elevate the penalties for being a pass-through business to the level of lying about a company‚Äôs size and ownership status. Those types of companies get special privileges from the government. The penalty for misrepresentation would be a fine or prison time, as well as suspension or debarment from government contracting.

The bill, introduced by Rep. Joe Sestek (D-Pa.) on Jan. 12, includes a definition of the term "pass-through business" that uses six criteria:

  • The business shares a location with the other business
  • The business shares ordering or personnel systems with the related business
  • An officer, director, principal, stockholder, managing member or key employee of the business participates in the business decisions of the other business
  • The business has equity interest in the business owned by the second business
  • The accounts receivable of the business is directly or indirectly controlled by the other business or
  • The relationship with the business generates more than 50 percent of the income of the related business.

The bill was sent to the Small Business Committee.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Featured

  • Cybersecurity

    DHS floats 'collective defense' model for cybersecurity

    Homeland Security Secretary Kirstjen Nielsen wants her department to have a more direct role in defending the private sector and critical infrastructure entities from cyberthreats.

  • Defense
    Defense Secretary James Mattis testifies at an April 12 hearing of the House Armed Services Committee.

    Mattis: Cloud deal not tailored for Amazon

    On Capitol Hill, Defense Secretary Jim Mattis sought to quell "rumors" that the Pentagon's planned single-award cloud acquisition was designed with Amazon Web Services in mind.

  • Census
    shutterstock image

    2020 Census to include citizenship question

    The Department of Commerce is breaking with recent practice and restoring a question about respondent citizenship last used in 1950, despite being urged not to by former Census directors and outside experts.

Stay Connected

FCW Update

Sign up for our newsletter.

I agree to this site's Privacy Policy.