Kerry Investigates Contracts Awarded to Firm That Supplied Faulty Arms to Troops

WASHINGTON , April 10 /PRNewswire-USNewswire/ -- A small business recently under fire for delivering faulty munitions to Afghan security forces may have fraudulently obtained as many as 50 contracts with the Defense and State Departments by claiming...


WASHINGTON , April 10 /PRNewswire-USNewswire/ -- A small business recently under fire for delivering faulty munitions to Afghan security forces may have fraudulently obtained as many as 50 contracts with the Defense and State Departments by claiming to be a Small Disadvantaged Business. Senator John Kerry (D-Mass.) today called on the Departments of Defense and State to explain how Miami -based AEY Inc. was erroneously labeled as a Small Disadvantaged Business, which helps companies access the federal contracting arena, and if this mistaken designation helped the company secure $298 million in defense contracts in 2007.

"Faulty contracting procedures and deficient safeguards are no excuse for putting troops in Afghanistan and Iraq in greater danger," said Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship. "The Bush Administration needs to explain how and why this mistake occurred not once, but 50 times, and what steps they are taking to make sure that it never happens again."

Senator Kerry called for greater oversight of the contracting process by the Defense Department, State Department, and Small Business Administration. Under contracting guidelines, federal agencies receive credit for meeting Congressionally mandated small business goals when they contract with a Small Disadvantaged Business.

According to a recent news article, AEY was reportedly designated as a Small Disadvantaged Business on June 8, 2006 by the State Department, despite the fact that they had never filed an application or been designated as a Small Disadvantaged Business by the Small Business Administration. AEY went on to obtain 49 additional contracts despite not being designated as a Small Disadvantaged Business in the Central Contractor Registry, a database that lists firms eligible for contracts and their designation status.

Below are the letters Senator Kerry sent to the Department of Defense, the State Department, and the Small Business Administration:

April 10, 2008

The Honorable Robert Gates

U.S. Department of Defense

The Pentagon

Room 3E880

Washington , DC20301-1000

Dear Secretary Gates:

I'm writing today to express serious concerns with the oversight of small business contracting programs at the Department of Defense (DoD). Recent news reports indicate that a 22 year-old from Miami, FL was able to obtain more than $298 million in federal contracts. Not only was this individual - under the corporate name AEY Inc. - providing 40 year-old munitions from China to Afghan security forces, but reports also indicate he may have received these DoD contracts with a special Small Disadvantaged Business designation for which he was not eligible. As Chairman of the Senate Committee on Small Business and Entrepreneurship, I believe your agency owes Congress and the American public some answers.

I am concerned that a lack of oversight of contracting programs at DoD is allowing companies like AEY to erroneously access hundreds of millions of dollars in contracts as an SDB, undermining efforts to level the playing field for small firms. In order to better oversee the SDB program at the Department and to ensure that small business contracting programs are being implemented effectively, I request that you provide answers to the Committee to the following questions by April 16, 2008 :

1. Please outline the process that contracting officers at the DoD follow in order to verify the small business and socioeconomic status of vendors.

2. Please outline any oversight process that the DoD has in place to ensure that contracting officers are aware of the relevant statutes and regulations pertaining to small business programs.

3. Please explain whether AEY received any preferential benefit in contract or task order award as the result of being designated as a SDB.

4. Please explain whether DoD has taken credit under annual reporting of small business goals for any contracting dollars expended with AEY.

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