What is Set-Aside Fraud?

Set-aside fraud is a type of contractor fraud. It is a violation of the False Claims Act (31 USC Sections 3729 to 3733) and involves defrauding the United States government in order to get contracts. 

It is called “set-aside” fraud because it involves making false claims to procure contracts and money “set aside” for Small and Disadvantaged Business Enterprises, or DBEs. 

DBEs are:

  • Small businesses with less than 500 employees and less than $5,000,000 in annual revenue.
  • Minority-owned businesses
  • Women-owned businesses
  • Veteran-owned businesses

In the case of minority-owned, women-owned, and veteran-owned businesses the minority, woman, or veteran must own at least 51% of the business. 

Set-aside fraud occurs when a company claims they are eligible for these contracts when, in fact, they are not. There are a variety of ways that this happens.

  • Some companies use a DBE as an intermediary, paying them a percentage of the contract for the service.
  • Some misrepresent the amount of control minorities, women, or veterans hold in their organization.
  • Some misrepresent the size or revenue of the organization.

However it is done, set-aside fraud is a crime. In addition to being punishable with prison time, you can be required to pay 3 times the amount of the contract, plus $5,500 to $11,000 per false claim or invoice. It does not matter if your company actually did the work as promised, as the theft is not just against the United States government, but against the DBEs who might otherwise have received the contract. 

In addition, you might be charged with other crimes, such as mail fraud, or conspiracy to defraud the United States government.

If you are part of a company that may have committed set-aside fraud it is wise to consult with a lawyer. While you may be able to protect yourself as a whistleblower, it is always wise to understand what your personal criminal liability might look like.

In addition, if you have been charged with set-aside fraud or any other kind of fraud against the United States Government you will need a federal criminal defense attorney to help you mitigate the consequences of these criminal charges. Reach out to Koch Law to get help today.

See also:

What is the False Claims Act?

What is Bid Rigging?

What is the Procurement Collusion Strike Force?