Government Contracts Legal Round-Up is a podcast focusing on important developments facing government contractors and grant recipients.  Hosts David Robbins and Marc Van Allen discuss key developments in this ever-changing field in an easy-to-absorb style.  Often joined by colleagues and guests, programs focus on the most relevant executive orders, regulations, proposed and final rules that affect the FAR and relevant agency FAR supplements, decisions from GAO, the boards and courts.

September 15, 2021 What is over the Horizon in Procurement Fraud, Claims and Appeals, and Bid Protests?

By: David B. RobbinsHon. Jeri K. Somers (Ret.), and Noah B. Bleicher

It can be challenging in the best of times for government contractors to “see over the horizon” and plan for future risks to their business. As this fiscal year ends, COVID-19 impacts, and budgetary changes make that exercise even harder. Jenner & Block’s former government officials have come together to offer their views to help our clients’ strategic planning and goal setting efforts. The observations are from former senior government contracts leaders, including a former Civilian Board of Contract Appeals Chief Judge, a former Government Accountability Office (GAO) senior bid protest official, and a former Air Force Deputy General Counsel (acting), Suspending and Debarring Official, and co-chair of the Department of Defense Procurement Fraud Working Group.

Procurement Fraud Trends with David Robbins

We are seeing a surge in False Claims Act and other procurement fraud investigations. Part of this is because the pandemic caused delays in investigations and that logjam is clearing now. Another part is the enhanced coordination among government procurement fraud investigators and enforcement officials created by the CARES Act and related oversight structure. The risk for contractors and awardees is at a high water mark. The risk extends beyond contractors to investors and private equity sponsors. We are also seeing more coordination between the US Department of Justice Civil and Criminal Divisions on investigations and prosecutions. Defending this requires cooperation among former prosecutors, former government agency lawyers, and others.

Claims and Appeals Trends with Hon. Jeri Somers (Ret.)

We see several major government contracting trends that initially gained significant prominence in 2020 continuing in 2021. First, President Biden’s “Executive Order on a Sustainable Public Health Supply Chain,” directs federal agencies to use the Defense Production Act to ramp up production and acquisition of anything and everything needed to combat the COVID-19 pandemic. Second, contractors should expect the Biden administration to continue to prioritize spending on US infrastructure. While contractors will benefit from the massive infusion of funding for infrastructure projects, such as the new emphasis on the development of clean energy technologies, we also see an increase in the traditional infrastructure projects in construction, transit, and telecommunication. cybersecurity and IT initiatives will also lead to more contracting opportunities. With this increased spending, we predict that we will see an increase in claims arising from such contracts.

Bid Protest Trends with Noah Bleicher

A contracting agency’s disparate treatment of competing offerors has historically been a popular basis for GAO to sustain a bid protest. But GAO’s recent adoption of the Federal Circuit’s “substantively indistinguishable” standard necessary to establish an unequal evaluation could make it more difficult for protesters to win these types of arguments. While GAO has represented publicly that the new standard does not reflect a material change in how it resolves these allegations, to date, GAO has sustained only three protests alleging disparate treatment and denied 20 under the standard, suggesting a harder path ahead for protesters. As GAO continues to issue decisions applying this standard, contractors will gain insight as to whether unequal treatment allegations remain a fruitful basis to winning a protest, or whether the pendulum truly has swung in the other direction.

Jenner & Block is equipped with some of the industry’s leading lawyers, including officials from three main government contract arenas. If you have any questions about these trends or are in need of counsel, you can reach out to David B. Robbins, Hon. Jeri Somers (Ret.), or Noah B. Bleicher.

Learn more about our Former Goverment Officials here.

CATEGORIES: Bid protests, CARES Act, Claims, FCA

September 10, 2021 The Government Contracts Legal Round-Up | Episode 15

In this episode, host David B. Robbins focuses on the latest regulatory developments and rules facing government contractors, including the new Executive Order on COVID-19 vaccinations. Mr. Robbins also provides a summary of recent bid protest cases and an update on proposed False Claims Act legislation.

CATEGORIES: Podcast

September 10, 2021 Biden Administration Calls for Prompt Vaccination of Federal Employees and Government Contractors; No Testing Opt-Out Available.

By: Sati HarutyunyanDavid B. Robbins, Hon. Jeri K. Somers (Ret.), Gabrielle Sigel, Emma J. Sullivan, and Joseph J. Torres

On September 9, 2021, the Biden Administration announced additional measures to curb the ongoing spread of COVID-19. These measures include one executive order requiring all federal executive branch workers to be vaccinated and a second order extending this mandate to federal contractors.

The first order requires COVID-19 vaccination for all federal executive branch employees as defined in 5 U.S.C. § 2105. Under the order, executive agencies must implement programs requiring vaccination for all federal employees, with exceptions only as required by law. The order calls on The Safer Federal Workforce Task Force (Task Force) to issue guidance with respect to agency implementation of the program requirements within seven (7) days of the order’s issuance. During a September 9 press briefing, the White House Press Secretary stated that federal employees will have approximately 75 days to become fully vaccinated to avoid facing possible disciplinary action. The projected compliance date falls on November 23, 2021, the Tuesday before Thanksgiving.

The second order aims to ensure “that the parties that contract with the federal government provide adequate COVID-19 safeguards to their workers performing on or in connection with” federal contracts. Under this order, agencies must ensure that federal contracts and subcontracts incorporate a clause specifying that “the contractor or subcontractor shall, for the duration of the contract, comply with all guidance for contractor or subcontractor workplace locations published by the [Task Force],” if the guidance is approved by OMB after that agency determines that the Task Force’s guidance “will promote economy and efficiency in Federal contracting.” The contract clause “shall apply to any workplace locations … in which an individual is working on or in connection with a [federal] contract or contract-like instrument.” The order requires the Task Force to issue guidance applicable to federal contractors, including definitions, protocols, and exceptions, by September 24, 2021. Consistent with the Administration’s messaging, the Task Force guidance is expected to extend to federal contractors the same vaccination requirements imposed on federal employees. While the order is designed to apply broadly, excluded from its scope are federal contracts or “contract-like instruments” that are: 

  • grants; 
  • contracts with Indian Tribes; 
  • contracts at or below the simplified acquisition threshold; 
  • contracts where the employees perform work outside the United States or its outlying areas; and 
  • subcontracts solely for the provision of products.

These executive orders reach significantly beyond President Biden’s July 2021 requirements for federal workers and on-site contractors to become vaccinated, which had allowed an employee to opt out of vaccination by taking weekly or twice-weekly tests and practicing other workplace safety measures. (See the Task Force’s July 29, 2021 guidance.) Indeed, these orders are just two components of the Biden Administration’s rollout of a broader, six-pronged plan to combat the COVID-19 pandemic as the Delta variant continues to spread. The comprehensive plan includes, among other things, the issuance of an Emergency Temporary Standard by the Occupational Safety and Health Administration (OSHA) that will require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require their unvaccinated workers to produce a negative test result on at least a weekly basis before coming to work.

Jenner & Block will be closely monitoring guidance issued by the Task Force and regulations issued by the FAR Council and OSHA, and other agency-specific actions. We will issue updated alerts as new information comes out. Our lawyers stand ready to assist our clients as they determine how to respond to the Administration’s latest requirements and guidance.

CATEGORIES: Compliance

September 7, 2021 Government Contracts Legal Round-Up | 2021 Issue 17

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Regulatory Activity

1. DFARS Case 2020-D030: Improved Energy Security for Main Operating Bases in Europe, Final Rule, Effective August 30, 2021

  • This final rule amends the DFARS to prohibit contracts for the acquisition of furnished energy for a covered military installation in Europe from inside the Russian Federation. The rule is intended to promote energy security and reduce reliance on Russia, though waivers may be sought. It applies only to contracts for furnished energy, but includes those at or below the simplified acquisition threshold and for the acquisition of commercial items, including COTS.

2. DFARS Case 2021-D019: Use of Firm-Fixed-Price Contracts for Foreign Military Sales, Final Rule, Effective August 30, 2021

  • This final rule rescinds the requirement for the use of firm-fixed-price contract types for foreign military sales unless an exception or waiver applies; DFARS 225.7301-1 is being removed and reserved.

3. DFARS Case 2021-D012: Contract Closeout Authority for DoD Services Contracts, Proposed Rule, Issued August 30, 2021; Comments due October 29, 2021

  • This proposed rule would amend the DFARS to enhance the ability to expedite contract close outs when certain conditions are met. At present, if a contract was entered into at least 17 years prior to the current fiscal year, is physically complete, and has been determined not reconcilable, the contracting officer may close the contract through a negotiated settlement.
  • This rule would reduce the number of years from 17 to 10 for military construction and shipbuilding, and to 7 years for all other contract actions. The rule would also require contracts to be physically complete at least four years prior to the current fiscal year.

4. DFARS Case 2019-D045: Maximizing the Use of American-Made Goods, Proposed Rule, Issued August 30, 2021; Comments due October 29, 2021

  • To align with previous changes to the FAR under President Trump’s Executive Order, this proposed rule would conform the definition of “domestic end product” and “domestic construction material” to differentiate between end products and material that consist wholly or predominantly of iron or steel or a combination of both, and those that do not.
  • In simple terms, end products and construction materials of iron/steel are domestic if manufactured in the US, and the cost of iron/steel not produced in the US or a qualifying country is less than 5 percent of the cost of all materials. Exceptions apply for construction fasteners.
  • If not of iron/steel, the domestic end products/construction materials must be manufactured in the US and the cost of qualifying country components and/or those mined, produced, or manufactured in the US must exceed 55 percent (an increase from 50 percent).
  • The price preference for domestic products remains at 50 percent for Department of Defense (DoD) contracts.
  • This proposed rule does not yet propose any changes stemming from President Biden’s more recent Executive Order enhancing Buy American Act requirements. Those changes have prompted a proposed FAR rule. Additional changes to the DFARS will likely follow finalization of that FAR proposed rule.

5. DFARS Case 2020-D008: Requiring Data Other Than Certified Cost or Pricing Data, Proposed Rule, Issued August 30, 2021; Comments due October 29, 2021

  • This proposed rule would prohibit contracting officers from basing the determination that the price of a contract or subcontract is fair and reasonable solely by reference to historic prices paid by the government.
  • Offerors who fail to comply with a reasonable request to submit data needed to determine price reasonableness are ineligible for award, unless the head of the contracting activity determines that it is in the best interest of the government to make the award. Despite being implemented in the FAR, this requirement must be separately adopted in the DFARS as the criteria for DoD contracts differ from those for civilian agencies.
  • This proposed rule adds the requirement that, unless exempted, a notation will be added in the Contractor Performance Assessment Reporting System (CPARS) that a contractor has denied multiple requests for submission of data other than certified cost or pricing date over the preceding three years.

6. Federal Acquisition Security Council Rule, Final Rule, Effective September 27, 2021

  • The Federal Acquisition Security Council (FASC) has issued a final rule to implement FASC operations, the sharing of supply chain risk information, and the exercise of the FASC’s authorities to recommend issuance of removal and exclusion order to address supply chain security risks.
  • Congress created the FASC in 2018 to improve executive branch coordination regarding the evaluation and sharing of threats and vulnerabilities in the acquisition of information and communications technology and services in the supply chain.
  • Although some changes were made as a result of public comments filed, the FASC rejected many suggested safeguards for companies who share information about potential security risks, and for companies accused of presenting a supply chain risk.

Protest Cases

1. Deloitte Consulting, LLP, B-418321.5; B-418321.6 (August 19, 2021) (Published September 2, 2021)

  • GAO sustained a protest ground where the awardee’s proposal failed to comply with the solicitation’s transition requirements and the agency failed to reasonably evaluate the awardee’s proposal against those requirements.
  • The Department of Health & Human Services issued a task order request for proposals for IT services.
  • The solicitation, through incorporated questions and answers, required that all offerors, including the incumbent contractor, price the six-month transition period for full performance of all PWS tasks.
  • The agency initially awarded the task order to Deloitte, but following two rounds of corrective action in response to earlier protests, the agency awarded the task order to Accenture Federal Services, the incumbent contractor.
  • Deloitte argued that the awardee failed to propose transition costs that included full performance of the PWS requirements, and GAO agreed, rejecting arguments that the solicitation requirement was ambiguous or unreasonable, or that the protest ground was untimely.
  • The protester demonstrated competitive prejudice because the awardee had only a slight technical advantage and had proposed a price that was less than one percent higher than the protester’s.
  • This protest demonstrates an instance where, in a close procurement, slight evaluation errors can tip the scales of prejudice in favor of a protester.

2. InfoPoint LLC, B-419856 (August 27, 2021)

  • GAO sustained a protest challenging an Air Force solicitation requirement that a joint venture, as opposed to the partners comprising the joint venture, possess a top-secret facility clearance.
  • The Air Force maintained that the requirement for the joint venture itself to have a facility clearance was based on guidance found in the Air Force National Industrial Security Program manual. The Air Force further argued that regulations issued by the DoD concerning security clearances should take precedence over any related regulations issued by the Small Business Administration (SBA) on this issue.
  • After seeking input from the SBA, GAO ultimately agreed with the SBA and the protester that the solicitation requirement was inconsistent with applicable law and regulation.
  • Specifically, the National Defense Authorization Act (NDAA) for Fiscal Year 2020 included a provision that a facility clearance “may not be required for a joint venture if that joint venture is composed entirely of entities that are currently cleared for access to such installation or facility.” Also, SBA regulations that implemented the NDAA provision and a related provision the Small Business Act require that only the “lead small business partner to the joint venture” possess the required facility security clearance.
  • In sustaining the protest, GAO rejected the Air Force’s various arguments, including the Air Force position that the NDAA provision was not yet effective pending regulatory implementation by DoD. GAO concluded that the provision was “an unambiguous command by Congress through a statute that DoD not require joint ventures to hold a facility clearance where the members of the joint venture hold the required facility clearances.”

Whether an unpopulated joint venture is required to meet certain security clearance requirements in a specific procurement has been an area of consternation and confusion. In this decision, GAO confirmed that DoD may not require a joint venture to hold a facility clearance where the joint venture members hold the required facility clearances.

3. Northrop Grumman Systems Corporation—Mission Systems, B-419560.3 et al. (August 18, 2021) (Published Sept. 3)

  • GAO sustained a protest because the Navy failed to reasonably consider the impact of an apparent conflict of interest stemming from the actions of a government employee who developed specifications for the solicitation at issue while at the same time engaging in employment negotiations with firm that ultimately received award.
  • The record showed that for several months in 2019, the Navy employee (referred to as X) was negotiating for employment with L3Harris while actively participating in the development of the Next Generation Jammer-Low Band Capability Block-1 specifications, and working closely with Northrop and L3Harris on the performance of their predecessor contracts.
  • GAO highlighted that applicable government ethics rules (identified under FAR 3.104-2) provide that a person should be disqualified from participating substantially in an acquisition while negotiating for employment with an offeror such as L3Harris.
  • The Navy maintained that X’s actions had no impact on the competition, but GAO rejected all of the agency’s defenses. GAO walked through the myriad ways X was involved with performance of the predecessor contracts and developing the specifications for the procurement at issue.
  • GAO noted in particular that prejudice is presumed where hard facts demonstrate a conflict of interest exists. In these instances, a protester is not required to establish bias in the solicitation or point to technical findings to establish a conflict of interest. Rather, “the hard facts that are required are those which establish the existence of the organizational conflict of interest, not the specific impact of that conflict,” according to GAO.
  • GAO ultimately concluded that X’s actions created the appearance of an unfair competitive advantage in favor of L3Harris and that the Navy’s consideration of the conflict was unreasonable. GAO recommended that the Navy conduct an independent review of the specifications and seek revised proposals from the two competitors.

Contracting agencies are to avoid even the appearance of impropriety in government procurements. Where an agency knowingly fails to investigate and resolve a question concerning whether an agency employee who actively and extensively engaged in procurement-related activities should have been recused from those activities, the existence of an actual or apparent a conflict of interest is sufficient to taint the procurement, and GAO will sustain a protest on this basis.

Claims Cases

1. Active Construction, Inc. v. Department of Transportation, CBCA 6597 (August 9, 2021)

  • Active Construction, Inc. (ACI) filed a motion to compel the Federal Highway Administration (FHWA) to produce documents to show that FHWA “surreptitiously blamed ACI for delays and changes to cover up the real cause: a lack of sufficient funding to support ACI’s contract.” FHWA refused, stating that the arguments in support of the motion to compel, i.e., that contract funding and bad faith issues, were not properly before the CBCA.
  • The CBCA held that it did not possess jurisdiction to entertain ACI’s implied duty breach claim arising from FHWA’s alleged lack of funding. The Board granted the motion to preclude ACI from raising the issue, finding the documents irrelevant to any issue properly before the CBCA.

This case provides guidance as to how the CBCA will construe and limit motions to compel. Contractors are only entitled to seek documents that relate to claims properly before the Board. The Board will not compel the government to provide documents that are unrelated to those claims.

FCA Amendments

Senator Grassley’s proposed “Anti-Fraud Amendments Act”, originally poised to pass with the upcoming infrastructure legislation, is no longer a part of the current version of the bill. The suggested changes would have required defendants to prove a lack of materiality by clear and convincing evidence, but for now at least, the burden of proof established by the Supreme Court’s 2016 decision in Universal Health Servs. v. U.S. ex rel. Escobar remains the law. That case declared the materiality standard as “demanding” and “rigorous” for the government to demonstrate. 

CATEGORIES: Bid protests, Claims, Compliance, FCA

August 24, 2021 Government Contracts Legal Round-Up | 2021 Issue 16

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Executive Actions

1. OMB Issues Memo Regarding “Protecting Critical Software Through Enhanced Security Measures” (August 10, 2021)

  • In this guidance, OMB identifies the “pressing need” for agencies to implement more rigorous protections for critical software pursuant to Executive Order 14028, Improving the Nation’s Cybersecurity (May 12, 2021).
  • “Critical software” is defined by the National Institute of Standards and Technology (NIST) as, among other things, any software that runs with elevated privileges or manages privileges; is designed to control access to data or operational technology; or performs a function critical to trust.
  • OMB’s memo provides instructions for a phased implementation that first focuses on a list of standalone, on-premises software that performs security-critical functions or poses similar significant potential for harm if compromised.
  • Subsequent phases of implementation will address additional categories of software, as determined by the Cybersecurity and Infrastructure Security Agency (CISA), including software that controls access to data, and cloud-based and hybrid software.
  • Within 60 calendar days (or by October 9), agencies must identify all agency critical software, in use or in the process of acquisition.
  • Within one year (or by August 10, 2022), agencies must implement the security measures designated by NIST for all categories of critical software included in the initial phase.
  • Contractors should anticipate new rules and/or contract requirements for enhanced security measures for federal procurement of critical software products, often purchased as commercial items.

2. DOJ Issues Memo Regarding New Vaccine Certification/Testing Requirements Instituted by President Biden (August 13, 2021)

  • The Department of Justice (DOJ) is one of the first agencies to release guidance to implement President Biden’s July 29 COVID-19-related enhanced safety standards for those accessing government facilities. We have not yet seen guidance from OMB or other agencies, but anticipate such guidance soon.
  • According to its guidance, DOJ will ascertain the vaccination status of every individual who enters a DOJ facility, specifically, DOJ employees, contractors, and visitors. DOJ will soon release an electronic link for entering this information.
  • Non-vaccinated individuals, including those not yet fully vaccinated or who decline to respond, will be required to comply with the CDC and DOJ guidance for unvaccinated individuals, including:
    • Mandatory mask wearing and physical distancing;
    • Submitting to weekly or bi-weekly COVID-19 testing;
    • Demonstrating negative test results prior to entering DOJ buildings or participating in official events at other locations; and
    • Adhering to applicable travel restrictions and protocols.
  • Further guidance for contractors will be forthcoming in the “near future.”
  • Medical information will remain confidential and may only be disclosed on a "need to know" basis.

Regulatory Update

1. FAR Case 2017-011: Section 508-Based Standards in Information and Communication Technology, Final Rule Effective September 10, 2021 (August 11, 2021)

  • This final rule will amend the Federal Acquisition Regulation (FAR) to incorporate recent revisions and updates to accessibility standards issued by the US Access Board.
  • Among other things, section 508 of the Rehabilitation Act of 1973 mandates that Federal agencies “develop, procure, maintain, or use” information and communication technology or “ICT” in a manner that ensures those with disabilities have comparable access to, and use of, such information and data.
  • The Access Board completed a multiyear effort to update its existing set of standards to address advances in ICT, harmonize with accessibility standards around the world, and ensure consistency with regulations promulgated since the late 1990s.
  • There is a generally a safe harbor for ICT acquired on or before January 18, 2018, but such products will need to be upgraded or modified to conform to the new standard if such ICT is altered after January 18, 2018, or does not comply with the original 508 standards. In addition, ICT acquired after January 18, 2018, must be upgraded or modified to conform to the new standards. The upgrades and modifications will be included in agency requirements documents.

2. FAR Case 2016-011: Revision of Limitations on Subcontracting, Final Rule Effective September 10, 2021 (August 11, 2021)

  • This final rule will amend the FAR to implement revised and standardized limitations on subcontracting, including the nonmanufacturer rule, that apply to small business concerns.
  • The purpose of this rule is to implement statutory authorities and SBA regulations that are designed to make it easier and less burdensome for small business prime contractors to comply with requirements related to how much work they may subcontract under Federal contracts, including task and delivery orders under those contracts (i.e., the “limitations on subcontracting”).
  • The changes to these requirements are intended to ease compliance costs and provide more authorized ways to subcontract.
  • A Class Deviation published on August 19, 2021, further modified FAR language to clarify the SBA intent to include some exclusions to the 50 percent limitation on subcontracting for service contracts.

3. FAR Case 2019-004: Good Faith in Small Business Subcontracting, Final Rule Effective September 10, 2021 (August 11, 2021)

  • This final rule will amend the FAR to provide examples of failure to make good faith efforts to comply with a small business subcontracting plan, which could result in the assessment of liquidated damages per FAR 52.219–16, Liquidated Damages—Subcontracting Plan.
  • As background, small business subcontracting plans are required from large prime contractors when a contract is expected to exceed $750,000 ($1.5 million for construction) and has subcontracting possibilities.
  • FAR 19.704 lists the elements of the plan, which include the contractor’s goals for subcontracting to small business concerns and a description of the efforts the contractor will make to ensure that the full panoply of eligible small business concerns have an equitable opportunity to compete.
  • FAR 19.705–7 contains examples of a good faith effort, and examples of a failure to make a good faith effort. The following may be indicators of a failure to make a good faith effort:
    • Failure to use market research to identify eligible small business concerns, including the use of Federal Systems such as SBA’s Dynamic Small Business Search or SUBNet systems.
    • Failure to designate and maintain a company official to administer the subcontracting program and monitor and enforce compliance with the plan.
    • Failure to submit required reports on time and as provided in agency regulations specified in FAR 52.219-9.
    • Failure to maintain records or otherwise demonstrate procedures adopted to comply with the plan, including subcontracting flowdown requirements.
    • Adoption of company policies that frustrate the objectives of the plan.
    • Failure to pay small business subcontractors according to the terms of their contract with the prime contractor.
    • Failure to correct substantiated findings from Federal subcontracting compliance reviews or participate in subcontracting plan management training offered by the government.
    • Falsifying records of subcontract awards to small business concerns.
  • Contractors will want to use this list as guidance for ensuring a finding that they have used good faith efforts to meet small business subcontracting goals.

Protest Cases

1. American International Movers, Inc., B-419756, July 20, 2021 (Published August 22, 2021)

  • GAO denied a protest challenging that the Air Force’s requirements for storage facilities were unduly restrictive.
  • The RFP, covering a base and four option years, sought warehouses capable of storing up to 30 million gross pounds of household goods and unaccompanied baggage annually, with remote climate sensor monitoring technology and climate control.
  • Here, the protester challenged that the combination of the storage requirement, the climate-control requirement, and the option years rendered the solicitation unduly restrictive. The protester argued that the solicitation “shift[ed] virtually all risk of contract performance to the contractor with no guaranty of any return,” and contended that small businesses were incapable of meeting the solicitation requirements.
  • GAO denied the protest, finding that the Air Force reasonably justified its requirements. Specifically, the historical data, combined with the inherent uncertainty of predicting future surges or troop realignments, supported the agency’s argument that the solicitation’s requirements were reasonable.
  • GAO also noted that there is no requirement that an agency eliminate all risk from a solicitation; to the contrary, an agency may provide for a competition that imposes maximum risks on the contractor and minimum burdens on the agency.

Where an agency reasonably identifies its needs and allows offerors the opportunity to meet those needs, the fact that a solicitation’s requirements may be burdensome or even impossible for an offeror to meet does not make them objectionable. To the chagrin of contractors, when considering protests challenging unduly restrictive requirements, GAO is highly deferential to the agency, unless there is no rational basis for the stated requirements.

2. Vertex Aerospace, LLC, B-418828.8, July 23, 2021 (published August 13, 2021)

  • GAO denied a protest challenging the Navy’s decision to cancel a solicitation for contractor logistics support and resolicit the requirements under two separate competitions following a sustain decision in an earlier protest.
  • The Navy reasonably exercised its broad discretion to cancel the solicitation because the solicitation no longer accurately reflected its needs, as many additional aircraft and locations required service.
  • GAO also denied the protest challenging the Navy’s decision to award an interim sole-source contract to the incumbent contractor.
  • Although the protester had submitted a capability statement for the interim effort, GAO found unobjectionable the Navy’s conclusion that award to the protester would create an unacceptable delay due to a break in service caused by the transition period.
  • GAO also dismissed as untimely the protester’s contention, first raised in its comments on the agency report, that the Navy should have used FAR 6.302-2, which provides for other than full and open contracting based on an unusual and compelling urgency, and violated the requirements in FAR 6.301(d) for agencies to solicit offers from as many potential sources as practicable when not providing for full and open competition.

This decision offers two takeaways for contractors regarding the latitude offered to agencies by GAO. First, GAO affords great deference to agencies in how solicitations are structured; if an agency says its needs have changed, GAO is unlikely to override the agency’s conclusion. Second, it remains difficult to challenge interim bridge contracts, even if awarded on a sole source basis, so long as the agency can articulate reasons why opening up the bridge to competition would be detrimental.

CATEGORIES: Bid protests, Compliance

August 10, 2021 Government Contracts Legal Round-Up | 2021 Issue 15

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Executive Actions

1. Biden Announces New Safety Protocols for Federal Employees and Contractors Working at Government Facilities (July 29, 2021)

  • Under President Biden’s mandate, every federal government employee and onsite contractor will be asked to attest to their vaccination status.
  • Those who does not attest to being fully vaccinated will be required to wear a mask on the job no matter their geographic location and comply with a weekly or twice weekly screening testing requirement, and be subject to restrictions on official travel.
  • Agencies have already begun implementing these requirements through directives.
  • Biden is directing his team to take steps to apply similar standards to all federal contractors.

Regulatory Developments

1. Amendments to the FAR Buy American Act Requirements, FAR Proposed Rule (July 30, 2021)

  • As required by President Biden’s Executive Order 14005, Ensuring the Future is Made in America by All of America’s Workers, the FAR Council published a proposed rule to amend the FAR’s Buy American rules.
  • While not fundamentally shifting the landscape, the proposed rule makes it more difficult to qualify as selling American-made goods and foretells of potential future changes in key questions for comment.
  • There are three areas of changes in the proposed rule:
    • First, the proposed rule includes an increase to the domestic content threshold, a schedule for future increases, and a fallback threshold that would allow for products meeting a specific lower domestic content threshold to qualify as domestic products under certain circumstances.
    • Second, the proposed rule creates a new framework for application of an enhanced price preference for a domestic product that is considered a critical product or made up of critical components.
    • Third, the proposed rule establishes a post-award domestic content reporting requirement for contractors.
  • For more details, see this Jenner & Block client alert.

2. Four-Day Extension of Comment Period for Proposed Rule on Increasing the Minimum Wage (August 4, 2021)

  • On July 22, the Department of Labor (DOL) issued a notice of proposed rulemaking (NPRM) to implement President Biden’s Executive Order 14026, which raised the federal minimum wage to $15.00 per hour, and invited public comments.
  • The comment period was scheduled to close August 23, 2021, but DOL has extended the deadline to August 27, 2021.

Protest Cases

1. Mayvin, Inc., B-419301.6, B-419301.7 (June 29, 2021) (Published July 28)

  • GAO sustained a protest ground where the agency disparately evaluated proposed methodologies for recruiting and retaining qualified personnel.
  • The United States Marshal Service (USMS) established a blanket purchase agreement (BPA) with a small business for executive, administrative, and professional support services.
  • The solicitation provided that the agency would evaluate recruitment and retention methodologies and encourage vendors to engage qualified incumbent personnel.
  • GAO agreed with the protester that the USMS disparately evaluated quotations by crediting only the awardee for proposing to retain 100% of qualified incumbent personnel. The protester had teamed with the incumbent contractor and had likewise proposed a goal of retaining 100% of qualified incumbents and detailed its approach to recruitment and retention, but Mayvin was not similarly credited with a strength on this basis.
  • The protester demonstrated competitive prejudice because the vendors were assigned identical adjectival ratings and the awardee’s recruitment and retention benefit justified the agency selecting the awardee based on its marginally lower price.

GAO issued its decision in the second round of litigation; the protester and another disappointed vendor had previously filed protests at GAO and the agency responded by taking corrective action. Agencies often use such corrective action periods to address any concerns in the evaluation record. In this case, a persistent approach to pursuing the protest resulted in a notable win for the incumbent contractor and its team.

2. Sunglim Engineering & Construction Company, Ltd., B-419067.3 (August 6, 2021)

  • GAO sustained a protest because the US Army Corps of Engineers (USACE) failed to conduct meaningful discussions.
  • USACE originally awarded the contract to Sunglim but took corrective action following an initial protest. During corrective action, the Agency conducted discussions—identifying proposal weaknesses—and solicited revised proposals. Because USACE did not identify any weaknesses in Sunglim’s proposal, the company submitted a materially unchanged proposal.
  • Following its reevaluation, the Agency awarded the contract to the company that filed the earlier protest. In reaching this conclusion, the USACE evaluation board documented a weakness in Sunglim’s proposal.
  • GAO sustained the protest because the Agency’s final evaluation of Sunglim’s materially unchanged proposal identified a weakness that was not raised during discussions.

When an agency seeks revised proposals during corrective action, its reevaluation may identify flaws in a materially unchanged proposal that the agency would have been required to discuss with the offeror had the flaws been identified when the proposal was initially evaluated. In that situation, the agency must reopen discussions in order to disclose its concerns, thereby giving all offerors similar opportunities to revise their proposals.

Claims Cases

1. Paktin Construction Company v. United States, COFC No. 19-1817

  • Paktin, an Afghan company domiciled in Afghanistan, was a subcontractor on a USACE project in Afghanistan. USACE issued a stop-work to the prime contractor, who in turn directed Paktin to vacate the project site without removing any materials pending a purported inventory by USACE.
  • Paktin attempted to obtain its materials, which culminated in USACE responding that it had given Paktin’s equipment to the Afghan National Army. Paktin sued seeking just compensation under the Fifth Amendment.
  • The Government moved to dismiss for lack of jurisdiction, arguing that: 1) as a foreigner with no direct relationship with the US Government, Paktin lacked standing to sue; and 2) the six-year statute of limitations on Paktin’s claim had run.
  • The court held Paktin had standing under the Fifth Amendment by virtue of close interaction with USACE and history of supporting more than a dozen US Government contracts, including as a prime contractor.
  • The court also held that the statute of limitations was suspended until the taking of Paktin’s property was knowable.

This decision demonstrates that contractors and subcontractors can pursue remedies beyond the Contracts Dispute Act. In some cases, even foreign entities may properly bring a constitutional claim against the US Government.

2. RocJoi Medical Imaging, LLC v. Department of Veteran Affairs, CBCA 6885, 7051 (July 23, 2021)

  • RocJoi Medical Imaging, LLC was awarded an indefinite quantity contract to review a minimum of 7,000 radiological examination results at a Veterans Affairs facility.
  • After the VA failed to exercise an option, RocJoi appealed to the Civilian Board of Contract Appeals (CBCA), alleging that the VA provided defective estimates as to the quantity it would order. The CBCA dismissed in part, holding that RocJoi failed to state claim for defective estimates.
  • Just three months after that decision, RocJoi filed another appeal alleging that “documents filed in [the first] CBCA [appeal] had revealed . . . that VA executed a delivery order dated September 27, 2017, for the estimated quantities in the Contract for the base year[,]” yet the VA failed to provide the funding for the studies.
  • The CBCA denied the second appeal, emphasizing that task orders placed under IQ contracts “represent the government’s exercising of existing contract rights and are not separate individual, individual contracts.”
  • The CBCA found that the September 2017 task order simply allocated funds that RocJoi could invoice against after providing the services requested.
  • Notably, the CBCA admonished the VA for “using the word ‘order’ in inconsistent ways[,]” and stated that it “do[es] not encourage that practice, which can foster issues of interpretation.

This CBCA decision provides useful takeaways for contractors and the government alike. For contractors, this decision is a reminder that task orders under an IDIQ are not separate contracts, and that contractors should carefully strategize when bringing two separate appeals relating to the same task order. For the government, although the CBCA found in the VA’s favor, the Board made sure to highlight its disapproval of the confusing language the Agency had used. . The big picture takeaway is that clearer and more precise drafting and communication can help avoid timely, costly, and unnecessary litigation.

3. Tetra Tech EC, Inc., ASBCA Nos. 62449, 62450

  • Tetra Tech and the Navy entered into a task order for surveying and radiological remediation.
  • In 2012, Tetra Tech addressed a soil sampling issue and implemented corrective actions and remedial measures. Tetra Tech also submitted an investigation report to the Government.
  • In 2017, two former Tetra Tech employees pled guilty for their misconduct in connection with the soil sample issue, which was also the subject of a False Claims Act case.
  • In 2019, Tetra Tech submitted two claims to the contracting officer requesting final decisions. In response, the contracting officer advised Tetra Tech that she lacked authority to issue the requested decisions due to the related fraud and False Claims Act allegations.
  • ASBCA ruled that the allegations of fraud “do not necessarily deprive the board of jurisdiction” because the Board can “consider claims when there are allegations of fraud in the contract” as long as there are no allegations of fraud in the claim itself and where the Board does not need to make “factual findings of fraud.”

Contracting Officers have increasingly sought to sidestep their obligations to issue final decisions based on a statement that fraud allegations exist related to the contract. This decision highlights that Board jurisdiction cannot be avoided merely because some allegation of fraud exists.

Proposed False Claims Act Legislation on Cusp of Passage

Senators Leahy and Grassley’s proposed “Anti-Fraud Amendments Act,” poised to pass with upcoming infrastructure legislation, would dramatically increase the burden on False Claims Act defendants. Among the changes, defendants would have to prove a lack of materiality by clear and convincing evidence. By shifting the materiality burden so dramatically to defendants, the “clear and convincing” standard is likely to reverse the trend in FCA case law following the Supreme Court’s 2016 decision in Universal Health Servs. v. U.S. ex rel. Escobar, which declared that the materiality standard is “demanding” and “rigorous” for the government to demonstrate.

CATEGORIES: Bid protests, Claims, Compliance, FCA

August 2, 2021 New Buy American Proposed Rule Increases Domestic Content Thresholds and Foretells Future Change

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By: Cynthia J. Robertson and Carla J. Weiss

As required by President Biden’s Executive Order 14005, Ensuring the Future is Made in America by All of America’s Workers, the FAR Council published on July 30, 2021 a proposed rule to amend the Buy American Act (BAA).[1] While not fundamentally shifting the landscape, the proposed rule makes it more difficult to qualify as selling American-made goods and foretells of potential future changes in key questions for comment. However, for companies who do qualify, the proposed rule provides competitive benefits.

The BAA requires the federal government to procure articles, materials, and supplies that were mined, produced, or manufactured in the United States, substantially all from domestic components, subject to certain exceptions. This is implemented through an evaluation price preference for American-made products. Under the existing regulations, large businesses offering domestic supplies receive a 20 percent price preference, and small businesses receive a 30 percent price preference.

Currently, the determination of whether a manufactured end product or construction material qualifies as domestic is made using a two-part test. First, the end product or construction material must be manufactured in the United States. Second, a certain percentage of all component parts (determined by cost of the components) must also be mined, produced, or manufactured in the United States. The second prong of the test, historically known as the “component test,” was recently was redesignated the “domestic content test.” Under this prong, for an end product that does not consist wholly or predominantly of iron or steel or a combination of both, the cost of domestic components must exceed 55 percent of the cost of all components (with certain exceptions).

At a high level, there are three areas of changes in the proposed rule. First, the proposed rule includes an increase to the domestic content threshold, a schedule for future increases, and a fallback threshold that would allow for products meeting a specific lower domestic content threshold to qualify as domestic products under certain circumstances. Next, the proposed rule creates a new framework for application of an enhanced price preference for a domestic product that is considered a critical product or made up of critical components. Finally, the proposed rule establishes a post-award domestic content reporting requirement for contractors.

Significantly, the proposed rule does not replace the existing BAA “component test” in favor of a test under which domestic content is measured by the value that is added to the product through US-based production or US job-supporting economic activity. This still may change in the future, as the FAR Council seeks additional information regarding the “component test” as currently structured, as well as input on a better calculation for domestic content to achieve the policy aims of the BAA.

Enhanced Price Preference for Critical Products and Critical Components

In an effort to bolster American production of critical products, the rule provides for a framework through which higher price preferences will be applied for end products and construction material deemed to be critical or made up of critical components. In other words, companies offering American-made products will have an even greater preference over foreign products in these areas. The proposed rule places the onus on offerors to identify in their offer domestic end products that contain a critical component, so that contracting officers can apply the higher price preferences when appropriate. 

The process for identifying critical items and critical components to receive the price preference would use the quadrennial critical supply chain review instituted in E.O. 14017, America’s Supply Chains, as well as the National COVID Strategy. Separate rulemaking will identify and add critical products and components to the FAR and to establish the associated preferences.

Post-award Reporting Requirement for Contractors

Under the proposed rule, contractors would be required to disclose to the government the specific domestic content of critical items, domestic end products containing a critical component, and domestic construction material containing a critical component, that were awarded under a contract. This reporting requirement does not apply to COTS items. The intent with this change is to provide the government with insight into the actual domestic content of products sold to the government, since currently this information is not readily available.

Applicability

The proposed rule would modify existing clauses, which will continue to apply, or not apply, to acquisitions at or below the simplified acquisition threshold (SAT) and to acquisitions for commercial and COTS items as they did prior to the proposed rule.  

The FAR Council has also proposed to add two clauses at FAR 52.225–XX, Domestic Content Reporting Requirement—Supplies, and FAR 52.225–YY, Domestic Content Reporting Requirement—Construction Materials. These clauses would apply to acquisitions at or below the SAT and to acquisitions for commercial items, excluding COTS items.

COTS Waiver

Since 2009, COTS items (with limited exceptions) have been subject to a waiver from the component test of the Buy American statute. Whether the component test will be restored to COTS items is under review by the Made in America Office in collaboration with the FAR Council and other interested parties.

Public Meeting and Comments

Domestic preference programs, such as the BAA, present an evolving landscape as the government tries to promote American-made products to benefit the American economy and American workers, as well as to protect the supply chain. This proposed rule is likely the first in a series of changes that will affect government contractors. To ensure your voice is heard throughout the rulemaking process, the FAR Council will hold a virtual public meeting on August 26, and will accept written comments on or before September 28, 2021. We stand ready to assist you in understanding the full import of this important rulemaking and in drafting comments on your behalf should that be of interest.

[1] 86 Fed. Reg. 40980.

CATEGORIES: Compliance

July 27, 2021 Government Contracts Legal Round-Up | 2021 Issue 14

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Regulatory Update

1. Increasing the Minimum Wage for Federal Contractors, Department of Labor, Notice of Proposed Rulemaking (July 22, 2021)

  • The Department of Labor has issued a proposed rule to implement President Biden’s Executive Order 14026, which raised the federal minimum wage to $15.00 per hour.
  • The proposed rule would apply only to “new contracts” with the Federal Government, which means contracts entered into on or after January 30, 2022, or contracts that are renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022.
  • The 82-page rulemaking contains extensive detail as to implementation, and builds on minimum wage regulations issued under former President Obama’s 2014 minimum wage order, but extends coverage and phases out a lower tipped wage.
  • If history is any guide, the FAR Council and DOL may work together to publish a class deviation to ensure the minimum wage deadline of January 30, 2022 is met, as they did under the Obama era minimum wage order.
  • Contractors will want to understand when and how it will apply to them, and some may even determine that across-the-board wage adjustments may simplify compliance.

Protest Cases

1. The Bionetics Corp., B-419727 (July 13, 2021) (Published July 22)

  • GAO sustained a protest where the Air Force failed to evaluate the awardee’s proposed compensation plan as required by FAR 52.222-46, Evaluation of Compensation for Professional Employees, and the solicitation.
  • FAR 52.222-46 requires offerors to submit a total compensation plan setting forth salaries and fringe benefits proposed for the professional employees who will work under the contract, which is to be evaluated to assure that it reflects a sound management approach and understanding of the contract requirements. Moreover, the agency is to consider the effects of compensation levels lower than those of predecessor contractors for the same work, and to evaluate each offeror’s ability to provide uninterrupted, high-quality work, considering “its impact upon recruiting, and retention, its realism, and its consistency with a total plan for compensation.”
  • Here, the solicitation expressly stated that the agency would not be evaluating for realism, and GAO dismissed the protester’s challenge that the agency did not consider professional compensation plans for realism as untimely. 
  • Nonetheless, GAO concluded that the Air Force failed to undertake the other non-realism analyses mandated by FAR 52.222-46, and improperly ignored the unburdened labor rates and fringe benefits information provided in these proposals. As a result, the agency never compared the awardee’s proposed salaries to incumbent salaries to determine whether the proposed salaries were lower.
  • GAO found that the protester was prejudiced, because had the proposed salaries been lower, the agency may have found sufficient risk in the awardee’s proposal to change the award decision.

This decision provides two takeaways for contractors regarding solicitations that include FAR 52.222-46, Evaluation of Compensation for Professional Employees. First, if the solicitation includes this provision but also states that proposals will not be evaluated for realism, this creates a patent ambiguity that must be challenged pre-award. Second, if you are the incumbent and the awardee’s price is substantially lower than your proposed price, the adequacy of the evaluation of professional compensation plans can be a fruitful area of protest.

Claims Cases

1. Appeal of Intellicheck, Inc., ASBCA No. 61709 (June 24, 2021)

  • Intellicheck was a subcontractor under a Navy task order for demonstration of a floating sensorized buoy network. The task order was completed six months ahead of schedule and the parties spent a year discussing disposition of the government property.
  • In August 2013, the prime contractor submitted an invoice for Intellicheck’s storage costs at that point in time. The Navy paid the invoice. Shortly thereafter, the prime contractor asserted a claim for additional labor costs. The Navy settled the claim and obtained a broad release from the prime contractor.  
  • Intellicheck continued to store government property for two more years and then submitted a certified claim for the additional storage costs. Intellicheck asserted that it had an implied-in-fact contract with the Navy to store the government property.
  • The Armed Services Board of Contract Appeals held that the Navy’s inaction in providing disposition instructions did not create an implied-in-fact contract for storage of the government property. Thus, Intellicheck could not independently assert a claim against the Navy.

This case demonstrates the confluence of two frequent challenges for contractors: government failure to promptly provide guidance on disposition of government property and the limited rights of subcontractors to assert claims against the government. Subcontractors should ensure they understand their rights to seek sponsored claims through the prime contractor under the terms of their subcontract and be sure they quickly identify claims during the performance and close out period. Otherwise, they risk being left out in the cold when the prime contractor closes out the contract.

2. Appeal of Northrop Grumman Mission Systems, ASBCA No. 62596 (June 22, 2021)

  • Northrop disclosed to the government, investigated, and ultimately reached a $30 million settlement related to time mischarging on a contract in Abu Dhabi. The government asserted that, during the course of the investigation, Northrop included investigation-related costs in its indirect cost rate proposals. The government asserted a claim for penalties for inclusion of expressly unallowable costs containing four courts, including one asserting that the costs were unallowable under FAR 31.205-15 (related to mischarging costs) and another asserting they were unallowable under FAR 31.205-47 (related to legal costs).
  • Northrop moved to dismiss for failure to state a claim, asserting that the government failed to apportion the costs between the two cost principles, failed to include the word “expressly” before “unallowable” in count two, and argued based on a settlement agreement that was not a CDA contract. The ASBCA effectively denied Northrop’s motion, rejecting its arguments of technical nonconformities.
  • The ASBCA held that it would be nonsensical to require a CO to apportion the unallowable costs between two cost principles that each result in the costs being unallowable and that the government’s inclusion of separate counts, that were not stand-alone legal theories but did relate to prior counts, did not result in failure to state a claim. 

The government pays close attention to unallowable costs related to investigations and litigation. Inclusion of expressly unallowable costs can result in steep penalties. The creative arguments in this motion were not enough to thwart the government’s march toward collecting those penalties.

CATEGORIES: Bid protests, Claims, Compliance

July 13, 2021 Government Contracts Legal Round-Up | 2021 Issue 13

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Regulatory Developments

1. DFARS Case 2018-D063: Data Collection and Inventory for Services Contracts, Final Rule (Effective July 9, 2021)

  • This final rule requires all contractors that are awarded a contract or order in excess of $3 million for services in four service acquisition portfolio groups to report contract data in the System for Award Management (SAM). The four service acquisition portfolio groups include:
    • Logistics management services;
    • Equipment-related services;
    • Knowledge-based services; or
    • Electronics and communications services.
  • The contractor is required to report the total amount invoiced for services performed during the preceding fiscal year and the number of direct labor hours, including first-tier subcontractor hours, expended on services performed during the preceding fiscal year.
  • The proposed rule instead required contractors to enter data into a DoD-unique system, Enterprise Contractor Manpower Reporting Application (ECMRA), but in response to comments received, DoD has adopted the service contract reporting process in SAM used by other Federal Agencies and no longer requires use of ECMRA.

2. Department of State Acquisition Regulation (DOSAR), Access to Contractor Records, Proposed Rule (Issued July 2, 2021)

  • Agencies may evaluate the accuracy, completeness, and currency of certified cost or pricing data required to be submitted with respect to a contract or subcontract, and examine contractor or subcontractor records related to proposals, proposal discussions, and pricing or performance of the contract or subcontract.
  • The Department has determined, after a review of existing regulations, that further clarity is required as it relates to contracts other than contracts by negotiation, which are already covered by FAR section 15.209(b). 
  • Accordingly, the Department has proposed to add section 615.209-70 to the DOSAR, requiring contracting officers to insert a new clause, Examination of Records, in all solicitations and contracts, other than contracts by negotiation.
  • Comments on the proposed rule will be accepted until August 31, 2021.

3. GSAR Case 2021-G527: Immediate and Highest Level Owner for High-Security Leased Space, Interim Rule (Effective June 30, 2021)

  • GSA has amended the General Services Administration Acquisition Regulation (GSAR) to implement requirements that address the risks of foreign ownership of Government-leased real estate and requires the disclosure of ownership information for high-security space leased by a Federal agency.
  • This interim rule applies to new lease awards, the exercise of options for current leases, lease extensions, and ownership changes for high-security leased space on or after June 30, 2021.
  • Comments on the interim rule will be accepted until August 30, 2021.

Protest Cases

1. Qwest Government Services, Inc. d/b/a CenturyLink QGS, B-419045.4; B-419045.5; B-419045.6 (June 2, 2021) (Published July 1)

  • GAO denied a protest challenging the Department of Education’s conduct of discussions, finding that a second round of discussions was not required merely because new issues came to light upon final proposal submission.
  • Following corrective action from a prior protest, the agency opened discussions and advised CenturyLink of issues identified with its pricing, including that the price proposal failed to provide a summary of total proposed costs by CLINs, left several items unpriced, and did not include labor rates or volumes for proposed labor. The firm submitted a revised proposal, and upon review the agency concluded that CenturyLink’s proposed price did not reflect a proper understanding of the agency’s requirements and was unrealistic. 
  • CenturyLink alleged that the agency engaged in inaccurate and misleading discussions by advising the protester to revise only its price proposal, but failed to advise the protester of the agency’s concerns with CenturyLink’s proposed staffing in its technical proposal.
  • GAO disagreed, finding that only after reopening discussions and receiving the protester’s final proposal did the agency have sufficient information to identify discrepancies between the protester’s price and technical proposals—and finding concerns with the protester’s revised proposal did not obligate the agency to engage in additional rounds of discussions to address the newly discovered discrepancies. Because the agency reasonably led CenturyLink into the area of its proposal requiring amplification, the agency was not required to conduct additional discussions once it determined that the price proposal, as revised, remained unrealistic.

Agencies are not obligated to hold additional discussions to inform offerors of new issues that emerge based upon final proposal submissions. While companies are often reluctant to revise any areas of their proposal not identified as a weakness or deficiency, it nonetheless is good practice to ensure that final proposal submission as a whole reflects the agency’s needs.

Claims Cases

1. Appeal of Lockheed Martin Aeronautics Co., ASBCA No. 62505, 62506 (June 24, 2021)

  • Lockheed performed aircraft upgrade work in Singapore and South Korea under the Foreign Military Sales program. The work was performed through undefinitized contract actions (UCAs).
  • The parties failed to agree on a price and to definitize the contracts. The Air Force contracting officer then unilaterally established a price.
  • Lockheed appealed this unilateral price determination to the Armed Services Board of Contract Appeals, asserting that it constituted an appealable final decision.
  • The ASBCA disagreed, holding that UCA price determinations are not claims because they merely set pricing rather than demand amounts from the contractor. The ASBCA rejected the argument that a prior decision on this issue, Bell Helicopter Textron, had been superseded by subsequent case law expanding what constitutes a claim. A unilateral price determination must still be filed as a claim to the contracting officer for a final decision.

Undefinitized contract actions are frequently used by the government to attempt to obtain performance quickly. But the failure to agree on a price at the outset often leads to problems later on, including with the government seeking to lower profit based on the fact that actual costs have become known. Pay careful attention to UCAs to avoid long-term disagreements. 

2. Appeal of Lockheed Martin Aeronautics Co., ASBCA No. 62209 (June 22, 2021)

  • Lockheed submitted a claim for excessive “over & above” work on a contract to upgrade C-5 aircraft.  
  • The claim was submitted within the six-year statute of limitations provided by the Contract Disputes Act, but the government raised an affirmative defense of laches, arguing that Lockheed had unreasonably delayed bringing the claim and that the government was prejudiced as a result, including because of the voluminous records likely to be relevant to the claim.
  • The ASBCA granted Lockheed’s motion for partial summary judgment on laches, holding that the CDA’s six-year statute of limitations precludes the assertion of a laches argument. Citing Supreme Court precedent, the Board summarized, “Where ‘Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter. The Congressional statute of limitation is definitive.’”

It is essential to comply with the six-year statute of limitations in submitting a government contract claim, but this decision ensures contractors will not also have to fight a laches argument for claims properly submitted within that time.  

CATEGORIES: Bid protests, Claims, Compliance

June 29, 2021 Government Contracts Legal Round-Up | 2021 Issue 12

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Regulatory Update

1. Department of State Acquisition Regulation; Safety Requirements, Final Rule, Effective June 28, 2021

  • The Department of State has adopted as final an interim rule amending the Department of State Acquisition Regulation (DOSAR) to provide new guidance prescribing more stringent safety requirements for certain overseas construction and services projects.

2. DoD Class Deviation 2021-O0006: Department of State Rescission of Determination Regarding Sudan, Effective June 24, 2021

  • This class deviation implements the Department of State Public Notice: 11281, Rescission of Determination Regarding Sudan, announcing removal of Sudan from the US list of state sponsors of terrorism, effective December 14, 2020. 
  • This class deviation is to be used in lieu of the provision at DFARS 252.225-7050, Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism; and the clause at DFARS 252.225-7051, Prohibition on Acquisition of Certain Foreign Commercial Satellite Services.

3. DoD Class Deviation 2020-O0012, Revision 1, Undefinitized Contract Actions During the National Emergency for the Coronavirus Disease 2019

  • This class deviation revises and supersedes the class deviation issued on April 3, 2020 regarding the same subject. 
  • Contracting officers shall follow the policies and procedures in this class deviation in lieu of those at DFARS 217.7404(a) and (a)(1)(i), 217.7404-3(a), and 217.7404-4(a) for undefinitized contract actions (UCAs) related to the national emergency for COVID-19, as determined by the head of the contracting activity (HCA).
  • This class deviation eliminates the requirement to limit obligations, after receipt of a qualifying proposal, to 75 percent of the not-to-exceed price before definitization, for UCAs related to the national emergency for COVID-19.
  • The HCA may also waive certain limitations for a COVID-19-related UCA, including a conditional waiver of the 80 percent progress-payment limit (10 U.S.C. 2307(e)(2)) for a UCA, if the HCA determines that the waiver is necessary due to the national emergency for COVID-19. The HCA may issue the 80 percent progress-payment limit waiver if:
    • The contractor has not already received increased progress payments from DoD on contractual actions other than UCAs; or
    • The contractor has received increased progress payments from DoD on other than UCA contractual actions, and can demonstrate that it is flowing the amount of the increase to its subcontractors at any tier, its suppliers, or small business concerns (evidence of which the HCA must then provide to the congressional defense committees and DPC).
    • Special certification and a 60-day extended timeline for definitization (post waiver) would apply to UCAs subject to the waiver that have not been definitized for 180 days beginning on the date the UCA was entered into.

Protest Cases

1. Journey Aviation LLC, B-419368.2; B-419368.3, June 2, 2021 (published June 16)

  • GAO denied a protest alleging that the Federal Bureau of Investigation unreasonably assigned the protester’s proposal a deficiency, which resulted in the company being deemed technically unacceptable.
  • The statement of work (SOW) required the aircraft delivered under the contract to meet or exceed approximately 35 specifications and technical requirements, one of which was to include a bipolar ionization system to ensure better air quality in the cabin. The protester’s proposed aircraft did not contain such a system; moreover, the proposal did not specify that the aircraft would be modified to add one, but rather only included a general reference to meeting the solicitation requirements. The Agency concluded this was a material failure and assigned a red/fail rating.
  • Journey argued that the assigned deficiency was unreasonable because its proposal clearly stated that the proposed aircraft would meet all of the requirements specified in the SOW.
  • GAO concluded that Journey’s blanket statement of compliance was insufficient to demonstrate the protester’s ability to meet a specific material requirement, and it was therefore reasonable for the Agency to find the protester’s proposal technically unacceptable for failing to meet minimum performance standards.

This decision is an important reminder that clear proposal drafting is critical. GAO consistently finds that blanket statements of intent to meet minimum performance standards are insufficient, and agencies can reasonably conclude that such proposals are technically unacceptable.

Claims Cases

1. ECC International Constructors, LLC, ASBCA No. 59586 (May 21, 2021)

  • ECC International contracted with the US Army Corps of Engineers to design and construct a military compound in Afghanistan. ECCI submitted a “demand for $13,519,913.91 for 329 days of alleged government delay in three categories…..” ECCI broke the demand amount into cost elements, such as labor and equipment, but didn’t break it down by individual delay categories or events alleged to have caused the damages.
  • USACE moved to dismiss for lack of jurisdiction, arguing that ECCI failed to comply with the CDA requirement to assert a sum certain as part of a claim.
  • The Armed Services Board of Contract Appeals agreed with USACE, holding that the requirement to state a sum certain applies to each separate claim, which is not the same as the entire case between the contractor and government. The ASBCA stated that claims are separate if they request different remedies or assert materially different grounds, either factually or legally.

This case highlights the importance of a thorough and granular quantum presentation of claims against the government. Demonstrating the connection between specific government actions and resulting damages is important both in developing a sum certain and, ultimately, proving the case at trial.

2. Appeal of Corinthian-WBCM, ASBCA No. 62379 (May 20, 2021)

  • Corinthian contracted to widen a road at Marine Corps Base Quantico. During performance, it submitted several requests for equitable adjustment based on the Changes and Differing Site Conditions clauses.
  • During discovery, the Navy sought Corinthian’s underlying bid data. Corinthian refused to produce it, and the Navy moved to compel production.
  • The ASBCA held that the information Corinthian relied on in preparing its proposal was relevant to two of its claims and must be produced. For example, the Board held that Corinthian asserted a differing site condition claim alleging that an existing water line was discovered in a different location than identified in the Navy’s drawings and that Corinthian had relied on those drawings in preparing its bid.

In developing a contract claim quantum, it is important to identify the basis for the calculation and provide sufficient information regarding that basis during litigation.

Investigations and Enforcement

1. CH2M Hill Plateau Remediation Company Agrees to Pay More than $3 Million to Settle Hanford Subcontract Small Business Fraud Allegations, USAO-EDWA, Department of Justice

DoJ announced a $3 million settlement with CH2M Hill Plateau Remediation Company following allegations that the company submitted false small business subcontract reports. The key allegation is that the prime contractor knew that two HUBZone subcontractors did not have that status at the time of award.

CATEGORIES: Bid protests, Claims, Compliance