Numet Machining Techniques, a Connecticut-based machined parts manufacturer for commercial and military aerospace engines, recently agreed to pay $5.2 million to settle alleged violations of the False Claims Act (FCA) for misrepresenting its size standard following an acquisition.

In 2011, Numet Machining Techniques was bought by Numet Industries Inc., an organization owned by KCO Numet Inc., a subsidiary of Kidd & Company, LLC, a private investment firm. Following the acquisition, Numet Machining no longer qualified as a “small business concern” due to its affiliation with the other businesses; however, Numet Machining continued to bid on, and win, contracts using an improper “small business” designation. Between August 2011 and February 2016, Numet Machining falsely certified itself as a “small business concern,” resulting in the improper award of 22 contracts. Numet Machining similarly inappropriately certified itself as a “women-owned small business concern” for three years, between 2013 and 2016.

Generally, an offeror’s size is determined when an offer to a solicitation is made; however, upon acquisition of a small business by a larger business, the small business may lose its “small business concern” status. In cases where a letter of intent is sufficiently clear to represent “an agreement in principle,” the Small Business Administration’s (SBA) “present effect rule” can designate the two entities as “affiliated,” disqualifying the company from bidding on small...

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