A new regulation from the Small Business Administration sets severe penalties for contractors that knowingly misrepresent themselves as small businesses.

The final rule, which became effective on Aug. 27, mandates that if a contractor obtains a federal set-aside contract based on a willful misrepresentation of its size or status, the government is presumed to be entitled to damages equal to the value of the contract.

Under that “presumption of loss” provision, the government is entitled to claim those damages even if the contract was performed to the agency’s satisfaction.

The rule allows vendors an opportunity to rebut the charge that they willfully misrepresented themselves. Whether a misrepresentation was made is a question that a judge or jury will decide.

Attorneys are warning that rebuttal might be challenging.

“As a result of this new reality, contractors need to take extra precautions when making size or status representations as of Aug. 27,” PilieroMazza PLLC wrote in its recent Legal Advisor publication.

“Experience tells us that most presumptions favoring the government are not easily reversed,” according to a recent blog entry on the new rule by Sheppard Mullin law firm.

More information: PilieroMazza http://www.pilieromazza.com/legal-advisor-newsletter
Sheppard Mullin blog: http://goo.gl/wSLWlE