Multibiillion-Dollar Defense Contractor Under Fire for Designation as Small Business

Chris Gaetano
Published Date:
Feb 18, 2021
A defense contractor that accounts for the majority of dollars spent under a program meant to link the military with small businesses has been accused of abusing the system, given that it has made billions of dollars from the Pentagon and is preparing to go public, according to the Washington Post.

The firm, Atlantic Diving Supply, has utterly dominated the Tailored Logistics Support program over other firms, consistently winning more defense spending than others in the program, to the point where, in one year, it accounted for 90 percent of funds disbursed. In 2020 alone, the company made $3 billion from the federal government. ADS has remained in the program because, despite making more than most small businesses can even hope for, it technically has fewer than 500 employees. As staffing levels, not revenues, are what determines a small business under this program, ADS has still been able to get contracts through it.

This success has come despite numerous fraud claims and inquiries over the years, including an incident where ADS tried to sell the military bicycles at inflated prices. When pricing the bicycles, the government asked a company called SEK Solutions whether ADS had offered a fair price. But a later audit found that SEK was actually an affiliate company of ADS that even shared an address. The Post said that ADS has performed similar maneuvers involving closely linked affiliated numerous times. This has led Sen.Thom Tillis (R-N.C.), among others, to suggest that the company itself is fraudulent, essentially a front for what's in truth a big business disguised as a network of small businesses. A government audit suggested that these affiliate businesses are so closely linked to ADS that their staff should count toward its count, which would kick it out of the program.  But despite this recommendation, the Pentagon continues to treat it as a small business.

ADS, through its attorneys, said that it has been both civilly and criminally exonerated and so nothing it's doing should raise even a single eyebrow, let alone many (though, it did agree to pay a $16 million settlement over the accusation that it was really a big business).

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