Contractor to pay for allegedly misrepresenting size status

Insight Enterprises has agreed to pay the government $1 million to settle claims that its subsidiary, Insight Public Sector, fraudulently misrepresented itself as a small business to get a federal contract.

Insight, an information technology solutions provider based in Tempe, Ariz., admitted no wrongdoing in agreeing to the settlement. Lloyd Chapman, president of the American Small Business League, initially pursued the case against Insight in a Small Business Administration complaint.

Chapman believes that large companies often represent themselves as small businesses and that SBA and the General Services Administration rarely take action.

Insight's troubles arose after it acquired Comark and Comark Government and Education Services in 2002. CGES, which is now Insight Public Sector, had won a place on the GSA schedule as a small business in 1996. After investigating, the Justice Department and SBA contended that CGES had not been a small business in 1996 and had later received preference on some orders through the GSA schedule because of its reported size status.

The company disputes that claim, but agreed to settle to avoid the risk and expense of litigation, said Richard Fennessy, Insight’s president and chief executive officer, in a statement issued late last month.

Chapman said he had hoped that former SBA Administrator Hector Barreto, who resigned yesterday, would be followed by a reformer willing to tackle the problem of fraud in small-business contracting. However, the Bush administration announced yesterday that the nominee to follow Barreto is Steven Preston, executive vice president of strategic services at ServiceMaster.

Chapman said Preston is an unknown quantity.

“I predict that we will not see Mr. Preston do anything to address the 11 federal investigations that have found billions of dollars in small-business contracts have been diverted to large firms as a result of fraud, abuse and lack of oversight," Chapman said in a written statement. "If Preston is approved, he will likely foster policies that will act as barriers to small firms doing business with the federal government and continue to allow awards to Fortune 1000 companies to be reported as small-business contracts.”