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 27, 2022 Government Contracts Legal Round-Up | 2022 Issue 19

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.

Enforcement News

Deputy Attorney General Announces Revisions to DOJ's Corporate Criminal Enforcement Policies and Practices (September 15, 2022)

On September 15, 2022, Deputy Attorney General (DAG) Lisa Monaco issued a memorandum and delivered a speech, announcing several revisions to the Department of Justice's (DOJ)’s corporate criminal enforcement policies and practices. The new revisions reflect input from DOJ’s Corporate Crime Advisory Group, which DOJ convened in late 2021 to review and recommend improvements to DOJ’s approach to prosecuting corporate crimes, and the imprint of DOJ’s compliance-minded leadership. The new revisions, which will apply to current and future corporate defendants, include:

  1. Emphasizing that a corporation’s cooperation with DOJ must be timely and not strategically delayed if the corporate seeks maximum cooperation credit;
  2. Clarifying how prosecutors should evaluate a company’s record of prior misconduct when deciding how to resolve a criminal investigation;
  3. Requiring the development of additional written guidance to govern the Department’s overarching approach to voluntary self-disclosure, the selection of independent compliance monitors, and policies governing mobile devices and ephemeral messaging platforms; and 
  4. Heightened attention to DOJ’s evaluation of the effectiveness of corporate compliance programs, including detailed guidance on how prosecutors should assess employee compensation systems and the impact of compliance programs on corporate culture.

Overall, the new revisions reinforce DOJ’s commitment to the principles announced in DAG Monaco’s October 28, 2021 memorandum, while clarifying areas of potential confusion and promoting consistency across the Department on corporate crime issues. Taken together, they reflect the consistent DOJ trends of broadcasting aggressiveness against corporate crime; developing more guidance for the exercise of prosecutorial discretion; and centralizing departmental attention, if not control, over corporate prosecutions.

To read more about the memo here.

Leonard Francis Update (September 21, 2022)

For those following the Leonard Francis (a.k.a. “Fat Leonard”) saga, he has been apprehended on his way to Russia. U.S. fugitive known as 'Fat Leonard' apprehended in Venezuela after weeks on the run (nbcnews.com)

Supply Chain and Software Developments

NIST Certification for Federal Software Providers (September 14, 2022)

  • The Office of Management and Budget issued a memo titled Enhancing the Security of the Software Supply Chain through Secure Software Development Practices, M-22-18 (Sept. 14, 2022).
  • The key takeaway is OMB’s directive that: “Federal agencies must only use software provided by software producers who can attest to complying with the Government-specified secure software development practices, as described in the NIST Guidance.”
  • The operative term “NIST Guidance” refers to two publications from the National Institute of Standards and Technology (NIST): (1) the Secure Software Development Framework (SSDF), SP 800-213 and (2) the Software Supply Chain Security Guidance.
  • Agencies will be required to obtain a self-attestation of NIST-compliance from software producers before using their software. In order to use software from a producer that cannot make the complete attestation, agencies will need to obtain a Plan of Action & Milestones documenting the practices to which the producer cannot attest and those in place to mitigate any risks.

This is the latest in a long series of steps the federal government is taking to harmonize and improve agencies’ cybersecurity and software licensing practices. The requirement for affirmative certifications from software providers is sure to create all manner of compliance and implementation challenges over the next several years. Stay tuned.

Protest Cases

STG International, Inc., B-420759.4; B-420759.8 (August 24, 2022) (published September 15, 2022)

  • GAO denied a protest alleging that the agency unreasonably excluded the offeror, an incumbent contractor, from the competitive range.
  • The protester raised multiple challenges to the evaluation judgments by the Department of Homeland Security, Immigrations and Customs Enforcement (ICE), in connection with a procurement for medical staffing support services for detainees at ICE Health Service Corps clinic sites.
  • For example, the protester argued that the agency unreasonably evaluated its response to a hypothetical scenario which would be evaluated on, among other things, the extent to which it demonstrated creative and innovative techniques.
  • GAO concluded that the firm did not effectively respond to the scenario promptly, and found unobjectionable ICE’s conclusion that the firm did not articulate “new and innovative techniques,” instead pointing only to existing processes.

GAO will not disturb an agency’s evaluation of proposals where reasonable and consistent with the solicitation’s evaluation criteria, and protesters must demonstrate that protest grounds do not constitute mere disagreement with the agency’s evaluation. In cases such as this one where an agency evaluates a solution under inherently subjective factors (innovation and creativity), that burden is particularly acute. Here, the protester’s proposal had not identified its techniques as “new or innovative,” but even if it had, the protester would have had to demonstrate that ICE unreasonably determined that these new techniques were not innovative or creative. Ultimately, offerors are responsible for submitting a well-written proposal with adequately detailed information that allows meaningful review by an agency.

CATEGORIES: Bid protests, Compliance

September 13, 2022 Government Contracts Legal Round-Up | 2022 Issue 18

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.

COVID-19 Fraud Recovery Bills

The President signed the COVID-19 EIDL Fraud Statute of Limitations Act of 2002, and PPP and Bank Fraud Enforcement Harmonization Act of 2022. Each Act establishes a 10-year statute of limitation for fraud by borrowers who took advantage of these programs during the pandemic.

In United States v. Allergan, Inc. --- F.4th --- , 2022 WL 3652967, The Ninth Circuit held that the False Claims Act’s Public Disclosure Bar has a broad reach—broad enough to cover patent prosecutions by the US Patent and Trademark Office, which qualify as a type of federal “hearing.” The Ninth Circuit reasoned that the information used by relator was publicly disclosed, and large portions of the information were even available on public websites maintained by the government.

In United States v. Honeywell International, Inc., --- F.4th ---, 2022 WL 3723020, the DC Circuit ruled that a dollar-for-dollar (pro tanto) approach to settlement offsets applies to False Claims Act cases. The DC Circuit rejected the proportionate share approach sought by the government.

Fat Leonard Rides Again

Leonard Francis (a.k.a. “Fat Leonard,”), mastermind of a significant Navy procurement fraud scandal relating to Navy ship husbanding services, cut off his GPS monitoring ankle bracelet, and is on the loose. News reports say neighbors witnessed moving trucks coming and going from Mr. Francis’ home in the days before his escape.

Defense Procurement Policy

1. Department of Defense Source Selection Procedures (Aug. 20, 2022)

  • DoD updated its source selection procedures guide, previously issued in April 2016, implementing numerous changes likely to impact acquisition planning, solicitation, and evaluation.
  • Of note, the updated procedures now recognize the regulatory requirement that for “acquisitions with an estimated value of $100 million or more, Contracting Officers should conduct discussions.” This requirement has resulted in significant protest litigation relating to the extent to which Contracting Officers must document and justify a decision to forego discussions.
  • DoD also introduced a brief “Appendix E” dedicated to intellectual property issues. DoD emphasizes that “DoD cannot force contractors to agree to sell the IP that DoD may desire,” while also asserting that “source selection evaluation factors may allow proposals to be evaluated for the impact of proposed restrictions on the Government’s ability to use or disclose IP deliverables such as technical data and computer software.”

DoD updates to its Source Selection Procedures can provide insight into DoD’s policy response to pressing procurement challenges. DoD discretion to make award without discussions in large procurements and DoD’s ability to implement its IP strategy in competitive procurements are two significant policy issues that DoD has been grappling with in recent years. Contractors and their counsel should expect continued litigation and policy developments on both fronts.

Vaccine Mandate Cases

1. Georgia v. Biden, et. al., No. 21-14269 (11th Cir. Aug. 26, 2022)

  • In a split decision, the Eleventh Circuit revived the COVID-19 vaccine requirement for many government contractors by significantly narrowing a nationwide injunction that had been issued by the district court in December 2021 to only the immediate plaintiffs in the case. While striking down the district court’s nationwide injunction for being overly broad and signaling a strong wariness towards nationwide injunctions overall, the Eleventh Circuit nonetheless affirmed the substance of the preliminary injunction.
  • Echoing decisions from its sister circuits enjoining the vaccine mandate, the Court explained that the Federal Property and Administrative Services Act, or Procurement Act, does not grant the President the authority to issue directions of the type found in the vaccine mandate, but rather vests such power in Congress. The Eleventh Circuit specifically rejected the DC Circuit’s expansive reading of the Procurement Act that previously upheld the President’s “particularly direct and broad-ranging authority over those larger administrative and management issues that involve the Government as a whole.” See AFL-CIO v. Kahn, 618 F.2d 784 (D.C. Cir. 1979) (en banc).

The Eleventh Circuit’s decision complicates the vaccine mandate landscape for government contractors by lifting the nationwide injunction that had previously been in place in favor of a patchwork quilt of narrow injunctions issued by several different courts across several different jurisdictions, even while making clear that the Court believes the vaccine mandate exceeded the President’s authority. The decision’s rejection of the DC Circuit’s expansive interpretation of the President’s authority under the Procurement Act also calls into question other executive orders that are not backed by a statutory provision. Contractors should expect continued litigation and development on both fronts. Partners Matthew Haws and Ishan Bhabha and Associate Sati Harutyunyan recently published a Client Alert and Law360 Article exploring the Eleventh Circuit’s decision in greater detail and discussing considerations for government contractors. Matthew Haws was also interviewed on Federal News Network regarding the aftermath of this decision and by Law360 regarding the broader implications of this decision for the Procurement Act.

Protest Cases

1. Selex ES, Inc., B-420799 (Sept. 6, 2022) (Published Sept. 8, 2022)

  • GAO sustained a pre-award protest alleging a solicitation ambiguity regarding when certain requirements must be met in order for proposals to be found technically acceptable.
  • The Department of the Air Force issued a solicitation for development of a portable tactical air navigation system, which included a requirement to perform a successful flight check and meet certain readiness levels.
  • After issuance of the solicitation, the protester requested clarity as to whether these requirements had to be met at the time of proposal submission or after award. The Air Force declined to amend the solicitation, and Selex protested.
  • GAO found that the Solicitation contained obvious conflicting information that created an ambiguity as to when the flight check and readiness level requirements were due. This affected the protester’s ability to prepare a proposal that could respond to the agency’s actual needs. GAO thus sustained the protest and directed the Air Force to clarify its requirements.

When reviewing solicitations, contractors must consider whether there are ambiguities that hinder the ability to compete intelligently and on an equal basis. Any such protest must be filed prior to the time of proposal submission—challenging the terms of the solicitation after award is too late.

CATEGORIES: Bid protests, Claims, Compliance, FCA, SuspensionDebarment

September 13, 2022 Revised Guidance to Help Contractors Manage the Effects of Inflation

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By: David B. RobbinsMatthew L. Haws, and Carla J. Weiss

The Office of the Under Secretary of Defense, Acquisition and Sustainment, Defense Pricing and Contracting (DPC) issued revised guidance last Friday granting DoD contracting officers increased flexibility to help contractors manage the effects of inflation—including for firm-fixed-price contracts.

The new guidance is “

ased on feedback from the Department’s acquisition executives about how inflation is presently affecting the Defense Industrial Base and contractors’ ability to perform under existing firm-fixed-price contracts . . .” and notes that “there may be circumstances where an accommodation can be reached by mutual agreement of the contracting parties” to address the “acute impacts on small businesses and other suppliers.” The guidance indicates schedule relief or otherwise amending contractual requirements may be appropriate as long as the government receives “adequate consideration” in return.

It also reminds acquisition staff of the ability to seek Extraordinary Contractual Relief under Public Law 85-804 in the form of an “upward adjustment to the price of an existing firm-fixed-price contract to account for current economic conditions.”

Prior guidance had provided that “under firm-fixed-price (FFP) contracts [contractors] generally must bear the risk of cost increases, including those due to inflation.” This blunt statement led some contracting officers to conclude they had limited room to adjust firm-fixed-price contracts struggling under the weight of inflation. This new guidance is a noteworthy acknowledgement of the significant burden on the defense industrial base and the need for contracting officers to have flexibility in responding to individual circumstances and meeting the government’s needs.

Jenner and Block’s Government Contracts attorneys have significant experience helping contractors negotiate schedule relief, equitable adjustments, and appropriate consideration and we stand ready to assist.

CATEGORIES: Compliance

September 8, 2022 Government Contracts Legal Round-Up | Episode 27

Episode 27 of the Government Contracts Legal Round-Up features an unusual FOIA request related to the Department of Labor’s Office of Federal Contract Compliance Program and two notable bid protest and claims cases: G4S Secure Integration LLC, et al., v. United States and The Tolliver Group, Inc. v. United States. Partner David Robbins outlines the issues raised in these cases and key takeaways for contractors seeking to protect information in their EEO-1 Type 2 reports.

 

CATEGORIES: FOIA

PEOPLE: David B. Robbins

August 30, 2022 Government Contracts Legal Round-Up | 2022 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.

FOIA Exemption 4

1. Notice of Request Under the Freedom of Information Act for Federal Contractors' Type 2 Consolidated EEO-1 Report Data (August 19, 2022)

  • Department of Labor (DOL) Office of Federal Contract Compliance Programs (OFCCP) issued a notice warning about potential public release of federal contractors’ Equal Employment Opportunity (EEO) compliance reports. Specifically, the OFCCP is preparing to respond to a Freedom of Information Act (FOIA) request that broadly seeks federal contractor (and subcontractor) EEO-1 Type 2 Reports from 2016-2020.
  • OFCCP set a deadline of September 19, 2022 for contractors to object to release of their reports pursuant to FOIA Exemption 4, which protects confidential commercial information. Absent timely objection, it appears OFCCP will release the reports.

Contractors interested in protecting information in their EEO-1 Type 2 reports should proceed promptly, carefully, and strategically. The legal landscape around FOIA Exemption 4 is volatile, and the extent to which FOIA Exemption 4 may be used to withhold EEO-1 Type 2 reports has already been the subject of contentious litigation. Our Government Contracts team has been closely following this area of law; Special Counsel Nathan Castellano recently published a Briefing Paper summarizing best practices and recent developments for contractors using FOIA Exemption 4 to protect confidential commercial information from public release.

Protest Cases

1. G4S Secure Integration LLC, et al., v. United States, No. 22-256C (Fed. CL. August 16, 2022) 

  • This is the latest in a series of COFC bid protest decisions addressing the State Department’s interpretation of the SAM registration requirements of FAR 52.204-7(b)(1). Initially, State interpreted the rule to not require a JV entity to separately register in SAM where the individual JV members were already registered.
  • In a prior round of protest litigation, COFC Judge Hertling rejected State’s interpretation and found that the awardee JV was not properly registered in SAM. Judge Hertling ultimately denied the protest, however, because the protester suffered from the same SAM registration error, and therefore there was no possibility of prejudice. That decision is currently pending appeal before the Federal Circuit.
  • Meanwhile, in a separate but similar procurement, State decided to apply Judge Hertling’s interpretation of the SAM registration requirement and in doing so deemed several competitor’s ineligible without providing notice or amending the solicitation.
  • COFC Judge Somers held that State was required to amend the solicitation when it changed its interpretation of what was required with respect to JV SAM registration. Judge Somers held that the protesters were not raising an untimely challenge to the solicitation terms under Blue & Gold because any ambiguity in the registration requirement was latent and not revealed until the separate litigation before Judge Hertling.

This line of protest litigation addresses a host of interesting issues, including (a) the prejudice standard that applies when a protester’s proposal suffers the same defect as the awardee’s, (b) SAM registration requirements for JVs, and (c) identification of latent ambiguities under the Blue & Gold rule. The bid protest bar should keep an eye on these cases, including the potential for at least one Federal Circuit decision. In the meantime, at a minimum, contractors and agencies should pay careful attention to SAM registration requirements, particularly when a JV is involved.

Claims Cases

1. The Tolliver Group, Inc. v. United States, Fed. Cl. No. 17-1763 (August 17, 2022)

  • In an interesting turn to a long-running claim dispute that has already generated one Federal Circuit decision and significant commentary, COFC Judge Lettow held that a contractor with a firm-fixed-price, level-of-effort development contract is entitled to recover litigation costs associated with successfully defending against a qui tam action.
  • The opinion reasons that the FAR Part 31 cost principles applied to the contract, specifically FAR 31.205-47, which covers certain costs of defending against FCA allegations. Judge Lettow found that the FAR required the agency to conduct a cost analysis before awarding the relevant task order, recognizing that a firm-fixed-price, level-of-effort development contract is, in practice, more akin to a cost-type contract than a fixed-price arrangement.
  • Having concluded that FAR 31.205-47 is a mandatory and important clause, and thus incorporated into the contract by the Christian doctrine, the Court concluded that the contractor’s legal fees were reasonable and properly allocated.

This decision—which is best paired with the previous COFC and Federal Circuit opinions and oral arguments generated through this litigation—are good reminders of the need to think critically, creatively, and strategically when seeking to recover litigation costs under a government contract. Not all theories of recovery will be apparent from the face of the contract, the FAR, or even the case law.

2. Caring Hands Health Equipment & Supplies, LLC v. Department of Veterans Affairs, CBCA No. 6814 (August 23, 2022)

  • In this decision, the CBCA distinguished between a requirements contract and an indefinite delivery, indefinite quantity (ID/IQ) contract, and held that the contract at issue was an IDIQ contract because it lacked indicia of exclusivity.
  • The contractor held a series of contracts with the Department of Veterans Affairs (VA) to deliver Government-owned home medical equipment to beneficiaries. Upon discovering that the VA had placed orders from other entities, the contractor complained to the VA that its contracts were considered requirements contracts and thus the VA was obligated to place all orders with it.
  • The CBCA disagreed, finding that the contracts at issue were not requirements contracts. As the Board explained, a requirements contract is defined by an obligation to purchase exclusively from a single source, and the contracts here do not contain the FAR 52.216-21 Requirements clause “or any other provision or language containing ‘words of exclusivity.’” 

Contractors should be pay close attention to the terms of the contract in determining the parties’ rights and obligations. And the parties’ views regarding interpretation of the contract may not be controlling where the contract is unambiguous on its face.

CATEGORIES: Bid protests, Claims

August 29, 2022 Eleventh Circuit Vacates Nationwide Injunction of Contractor Vaccine Mandate and Injects Significant Uncertainty Back into Government Contracts

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By: Matthew L. HawsSati Harutyunyan, and Ishan K. Bhabha

On Friday, August 26, 2022, the Eleventh Circuit brought back to life complicated legal, management, and labor issues related to COVID-19 vaccine requirements for many government contractors. By significantly narrowing a nationwide injunction, the court left a complicated patchwork quilt of half-a-dozen more narrow injunctions and significant uncertainty for contractors.

The Eleventh Circuit’s decision follows a December 2021 district court order that enjoined nationwide the Biden Administration’s enforcement of the COVID-19 vaccine mandate for federal contractors. The district court’s decision—issued just weeks before the January 18, 2022 deadline for contractor compliance—effectively halted enforcement of the vaccine mandate “for federal contractors and subcontractors in all covered contracts in any state or territory of the United States of America.”

Already dealing with inflation, workforce, and supply chain challenges, many contractors appeared to welcome the reprieve. But the straightforward relief provided by the nationwide injunction disappeared on Friday, August 26, 2022, when a three-judge panel of the US Court of Appeals for the Eleventh Circuit issued an opinion in the Biden Administration’s appeal of the district court’s order.

A divided panel agreed with the court below that the plaintiffs were entitled to an injunction, but it disagreed (unanimously) that a nationwide injunction was appropriate. On that basis, the court “vacate[d] the injunction to the extent that it bars enforcement of the mandate against nonparty contractors through new and existing contracts.” The practical effect for government contractors is that this decision leaves contractors facing a complicated and unwieldy landscape party-specific and state-specific injunctions. 

Here are the three things every government contractor is asking: 

  1. What did the Eleventh Circuit hold? 
  2. What is the status of the contractor vaccine mandate following this decision? 
  3. What should I be doing now?

What did the Eleventh Circuit hold?

The Eleventh Circuit’s substantive holding on the authority of the President to issue a vaccine mandate is what many expected and echoes the reasoning of other courts enjoining the vaccine mandate. Focusing on the first element required for a preliminary injunction—whether the plaintiff is likely to succeed on the merits—the court held the Federal Property and Administrative Services Act, or Procurement Act, does not provide the President with authority to issue direction of the type found in the vaccine mandate. The court began by noting that the federal government has broad power to “fix the terms and conditions upon which it will make needed purchases….But that authority rests in Congress’s hands in the first instance—not the President’s.”[1] It then focused on whether Congress “authoriz[ed] the President to make procurement agreements contingent on Covid-19 vaccination.”[2] The court concluded that Congress granted no such authority to the President.

The Eleventh Circuit directly challenged the expansive interpretation of the Procurement Act by the DC Circuit in a line of cases beginning with AFL-CIO v. Kahn, 618 F.2d 784 (D.C. Cir. 1979) (en banc). In Kahn, the court held that the President could issue an executive order requiring contractors to comply with wage and price standards because the Procurement Act granted the President “particularly direct and broad-ranging authority over those larger administrative and management issues that involve the Government as a whole.”[3] The Eleventh Circuit concluded that Kahn should not be read to give the President a “blank check” or “near-limitless executive procurement authority.”[4] Specifically, the court stated that the broad preamble language does not grant the President authority, but only informs the use of the specific grants of authority elsewhere in the Procurement Act. “The purpose the Act serves is, if anything, a secondary restriction on the President’s authority rather than an expansion.” Finding that nothing in the Act “delegated the power to require widespread vaccination,” the court found that “all signs suggest that Congress retained that power rather than passing it on.”[5]

In so doing, the majority opinion further developed recent law applying the “major questions” doctrine to the Procurement Act: rejecting reliance on the purpose statement of the Procurement Act and demanding a clear substantive grant of authority to the President or a subordinate official. This is one of the first opinions to interpret West Virginia v. EPA, 142 S. Ct. 2587, 2609 (2022), a decision that is expected to have a potentially significant impact on the ability of administrative agencies to act on the outskirts of their authority. (Notably, the concurring opinion concurs only in the result and the dissenting opinion differs markedly both in the outcome and the application of the major questions doctrine).

It is worth noting two additional things:

  • First, the court rejected the argument that it should interpret the Procurement Act broadly because of the history of Executive Orders based on a broad interpretation of their authority. This line of discussion may hint at future challenges to a range of past Executive Orders.

  • Second, the Court noted that “until a final decision is reached on the merits of the challengers’ claims, many other tools for stemming the virus and reducing procurement costs remain at the federal government’s disposal.” The question of whether the federal government would seek to enforce the other requirements of the Safer Federal Workforce Task Force has lingered since the District Court clarified that its nationwide injunction only applied to the vaccine mandate. As the government determines its next move, one option is to focus on enforcement of the non-vaccine provisions of the Task Force Guidance.

Having upheld the substance of the preliminary injunction, the court then dramatically limited its scope: “[T]he district court enjoined the enforcement of the contractor vaccine mandate—against any contractor, anywhere in the United States, plaintiff in this case or not. We are both weary and wary of this drastic form of relief.”[6] The court explained its wariness and weariness as follows: “By cutting off parallel lawsuits, nationwide injunctions frustrate foundational principles of the federal court system. They encourage gamesmanship, motivating plaintiffs to seek out the friendliest forum and rush to litigate important legal questions in a preliminary posture. They disturb comity by hindering other courts from evaluating legal issues for themselves.”[7]

Based on this reasoning and citing the “proper functioning of our federal court system,” the Eleventh Circuit held that “the preliminary injunction in this case must be limited to protecting the parties in this case.”[8] Specifically, the court concluded that “any plaintiff State or member of Associated Builders and Contractors” “need not comply with the vaccination requirement in their capacity as contractors, and they are not responsible for including that requirement in lower-tier subcontracts.”[9]

What is the status of the contractor vaccine mandate following this decision?

While in line with other courts evaluating the scope of preliminary injunctions against the vaccine mandate, the elimination of the nationwide injunction creates practical challenges for many government contractors across the United States. Importantly, the latest decision reignites questions about where and to whom injunctions against enforcement of vaccine mandates apply.

The chart below captures the scope of current preliminary injunctions of the contractor vaccine mandates.

Court Decision

Scope of Preliminary Injunction

Description of Preliminary Injunction

Georgia v. Biden, et. al., Case No. 21-14269

Enjoined as to contracts with plaintiffs.

The decision preliminarily enjoins the Biden Administration from enforcing the mandate with respect to contracts with the six plaintiff states (Alabama, Georgia, Idaho, Kansas, South Carolina, Utah, and West Virginia) or in contracts with members of plaintiff Associated Builders and Contractors.

Louisiana v. Biden, 575 F. Supp. 3d 680, 695–96 (W.D. La. 2021)

Enjoined as to contracts with plaintiffs.

The decision preliminarily enjoins enforcement of the mandate with respect to contracts between plaintiff states Louisiana, Mississippi, and Indiana,and their agencies. It expressly does not extend to “contracts between private contractors and the national government.” An appeal has been filed.

Florida v. Nelson, 576 F. Supp. 3d 1017 (M.D. Fla. 2021)

Enjoined as to contracts in Florida.

The district court entered a preliminary injunctionenjoining the Biden Administration from enforcing the mandate in Florida. An appeal has been filed.

Brnovich v. Biden, 562 F. Supp. 3d 123, 132 (D. Ariz. 2022)

Enjoined as to contracts in Arizona.

The district court entered a preliminary injunction as to contracts in “the geographic boundaries of the State of Arizona” but refused to apply the nationwide scope sought by Plaintiffs.

Kentucky v. Biden, 571 F. Supp. 3d 715, 735 (E.D. Ky. 2021)

 

Kentucky v. Biden, 23 F.4th 585, 589 (6th Cir. 2022)

Enjoined as to contracts in certain locations.

The decision preliminarily enjoins enforcement in “all covered contracts in Kentucky, Ohio, and Tennessee.” The Sixth Circuit subsequently denied the Biden Administration’s request to stay the injunction pending appeal.

Missouri v. Biden, 576 F. Supp. 3d 622, 635 (E.D. Mo. 2021)

Enjoined as to contracts in certain locations.

The decision preliminarily enjoins the Biden Administration from enforcing the vaccine mandate for contracts performed in plaintiff states (Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, and Wyoming). An appeal has been filed.

What should government contractors be doing now?

Government contractors are once again faced with complicated questions of whether—or to what extent—they are subject to the contractor vaccine mandate. Contractors will be keeping a close eye on whether the government takes any action—included through revised Office of Management and Budget guidance on application of the mandate pending continued litigation or through revised Safer Federal Workforce Taskforce guidance—to provide clarity on how the government will enforce the clause. The OMB guidance on enforcement says the government will not enforce the mandate, absent further written notice from the contracting agency, where the place of performance identified in the contract is a geographic location subject to an order prohibiting enforcement. That guidance currently identifies all 50 states as subject to an injunction. Does “further written notice” before enforcement mean a contractual communication or just updating the website discussion?

Of course, the next procedural move shifts to the government—whether to appeal the Eleventh Circuit decision to a Supreme Court that already applied similar rationale in its January 14, 2022 ruling striking down the OSHA mandate or whether to voluntarily suspend enforcement of the mandate in a broader fashion.

In the meantime, Contractors should:

  • Evaluate whether they are members of any plaintiff group covered by a preliminary injunction or whether they perform contracts within states covered by another preliminary injunction.

    • The Eleventh Circuit criticized application of preliminary injunctions based on (even more limited) geographic areas—“injunctive relief operates on specific parties, not geographic territories.”

    • Thus, the geographic injunctions issued by other District courts could be subject to revision if other appellate courts follow the Eleventh Circuit ’s lead.

  • Evaluate whether they have already executed contracts with FAR 52.223-99 Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors, the clause requiring compliance with the Safer Federal Workforce Task Force guidance.

  • Alert contracting personnel to be on the lookout for new solicitations and contracts containing the clause.

  • Reinvigorate working groups on these issues to ensure that the contractor is able to monitor developments regarding the mandate and comply with any contractual obligations.

Conclusion

For many government contractors, the Eleventh Circuit’s vacating the nationwide injunction injects them back into complicated legal, management, and labor issues related to the COVID-19 vaccine and related requirements. Contractors must evaluate whether they are within the scope of a half-dozen more limited preliminary injunctions, whether they have existing agreements containing the relevant clause, or whether it is being inserted in solicitations for which they are competing. Companies will need to refocus on these challenging questions in the midst of other significant labor and inflation related challenges.

[1] Opinion at 10.
[2] Id.
[3] Id. at 789.
[4] Opinion at 25.
[5] Opinion at 30.
[6] Opinion at 34.
[7] Opinion at 39.
[8] Opinion at 46.
[9] Id. at 44.

CATEGORIES: Compliance

August 23, 2022 The Government Contracts Legal Round-Up | Episode 26

In Episode 26 of the Government Contracts Legal Round-Up, Partner David B. Robbins leverages his experience as a former acting Suspending and Debarring Official for the US Air Force to provide insights into Senators Warren and Lujan’s recent request regarding the Department of Justice’s use of its debarment authority. He also explains the implications of the latest of a dense line of decisions interpreting FOIA Exemption 4, and significant bid protest and claims cases.

 

CATEGORIES: Podcast

PEOPLE: David B. Robbins

August 16, 2022 Government Contracts Legal Round-Up | 2022 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.

Investigations and Enforcement

Last week, Senators Warren and Lujan requested that the Department of Justice use the Department’s debarment authority to exclude companies under investigation or that had been convicted/found liable. Such an approach would turn suspension and debarment practice on its head and remove buying agencies (e.g., the customer) from the exclusion process and cause exclusions to be collateral consequences of Justice Department actions. This assumes of course that Justice could clear ISDC coordination and receive lead agency in the first place.

Source material can be found here.

FOIA Exemption 4

1. Siefe v. U.S. FDA, No. 20-4072 (2d Cir. August 5, 2022)

  • The Second Circuit Court of Appeals issued a significant decision discussing the interplay between FOIA Exemption 4, the Supreme Court’s 2019 decision in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 915 (2019) and the FOIA Improvement Act of 2016 (FIA).
  • The Second Circuit affirmed the district court’s decision, which found that federal agencies had appropriately withheld certain information from public release pursuant to FOIA Exemption 4, which protects confidential commercial information.
  • After the Supreme Court held in Argus Leader that the plain language of FOIA Exemption 4 does not require a showing of competitive harm for information to be deemed “confidential,” district courts have been divided over whether the FIA (which did not apply to the FOIA request in Argus Leader) effectively codifies the requirement that agencies must find a likelihood of competitive harm before withholding information under FOIA Exemption 4.
  • The Second Circuit held that the FIA does require an agency to determine whether release of information otherwise protected by Exemption 4 would harm the submitter, arguably re-imposing a competitive harm standard similar to what the Supreme Court rejected in Argus Leader.

This is the latest of a dense line of decisions interpreting FOIA Exemption 4 in light of Argus Leader and the FIA. Special Counsel Nathaniel Castellano recently published a Briefing Paper discussing these issues in detail. In short, the procedural and substantive standards applicable to FOIA Exemption 4 are currently volatile and require careful, case-by-case consideration. As shown by this decision, even though the Supreme Court in Argus Leader seemed to reject competitive harm as a relevant consideration under Exemption 4, courts may still require a showing of competitive harm based on the FIA.

Bid Protests

1. Hydraulics International, Inc. v. United States, No. 22-364 (Fed. Cl. August 8, 2022)

  • Court of Federal Claims (COFC) Judge Holte issued a significant decision confirming that the COFC can and will exercise jurisdiction over post-award OTA protests.
  • Consistent with prior decisions from the COFC and district courts, Judge Holte explained that the question of whether an OTA protest falls within COFC jurisdiction turns on whether the Other Transaction is sufficiently “in connection with a procurement or a proposed procurement.”
  • While individual judges have approached this fact-based analysis differently, in this case the COFC found that the OTA award was in connection with a procurement or proposed procurement because there was evidence that the agency may issue a follow-on procurement contract for production. Notably, this is a common feature in solicitations for Other Transactions involving prototypes.
  • Consistent with prior OTA protest disputes, the Department of Justice zealously disputed COFC jurisdiction, arguing that Congress intended to insulate Other Transaction awards from COFC protest review. Judge Holte provided detailed analysis rejecting each of the government’s jurisdictional arguments, emphasizing that the statutory OTA provisions are silent with respect to protest jurisdiction.
  • Having found jurisdiction, the Court rejected the protest on the merits.

This is the latest in a series of COFC and district court opinions analyzing when and where judicial review of OTA protests may occur. While each decision is unique in its jurisdictional analysis, so far, they share the common theme of accepting the premise that COFC can review certain OTA protests. However, whether an OTA protest can be heard at COFC or district court will, under current precedent, require a case-specific and fact-intensive inquiry. Any company considering a bid protest relating to an OTA solicitation or award should proceed carefully.

2. ISHPI Information Technologies, Inc., B-420718.2, B-420718.3, July 29, 2022 (Publicly issued August 9, 2022)

  • GAO sustained a protest alleging that the awardee’s proposed Federal Supply Schedule (FSS) labor categories did not meet the solicitation’s minimum qualifications.
  • The solicitation, which sought to establish a Blanket Purchase Agreement with FSS holders, identified three labor categories and required all contractor personnel to meet the minimum educational and experience requirements identified for those positions. Vendors were required to map quoted FSS labor categories to the solicitation’s minimum qualifications for each labor category.
  • After filing an initial protest and gaining access to the awardee’s proposal, the protester timely filed a supplemental protest, which GAO sustained, arguing that the awardee’s quotation failed to identify FSS labor categories that mapped to the solicitation’s required minimum qualifications and that several quoted labor categories lacked the required education and experience.
  • GAO rejected the Agency’s argument that the awardee had implicitly promised to provide personnel meeting the minimum requirements, explaining that when a solicitation requires quoted FSS labor categories to meet minimum requirements, a quotation “must include some kind of affirmative representation or showing that the personnel offered will meet the solicitation’s specified experience and education requirements.”
  • Because the awardee’s quoted FSS labor categories fell “far below” the solicitation’s required qualifications, its quotation was technically unacceptable and could not properly form the basis of award.

GAO decisions in this area continue to evolve but the stakes are high because of the potential for a quotation being found unacceptable. Where a solicitation requires quoted labor categories to meet certain experience or education qualifications, GAO has clarified that the vendor must affirmatively demonstrate its capability to meet the requirements. GAO previously explained that a solicitation may be unduly restrictive of competition where labor categories must “align precisely” with minimum requirements, but where a solicitation requires 12 years of experience and a proposed FSS labor category provides for a minimum of 10 years, the vendor can expressly or implicitly propose to provide personnel with more than 10 years’ experience. Notably, the awardee’s quotation here had not affirmatively demonstrated that several labor categories met the minimum requirements, several labor categories fell “far below” the required qualifications, and the awardee’s FSS catalog did not describe the qualifications as “minimums.”

Claims Cases

1. Textron Aviation Defense v. United States, No. 20-1903C (Fed. Cl. August 12, 2022)

  • Judge Solomson issued an important decision concerning the statute of limitation (SOL) under the Contract Disputes Act (CDA).
  • In 2014, Textron acquired pension assets and liabilities associated with three employee pension plans relating to a bankrupt company, where two of the employee pension plans had been terminated in 2012.
  • In 2018, Textron submitted a payment demand seeking to recover the Government’s share of the adjustment amount for all three pension plans pursuant to CAS 413. The Contracting Officer rejected the request for payment. Textron submitted a certified claim, which the contracting officer denied in September 2020 on the basis that the pension adjustment claim was barred by the CDA SOL. Textron then appealed to COFC, and Judge Solomson granted the government’s motion to dismiss the case, agreeing that the claim was barred by the CDA SOL.
  • Judge Solomson held that Textron was not required to submit a pre-claim payment demand before submitting its claim and that Textron’s claim (or its predecessor’s) accrued no later than February 2013. Because Textron did not file a certified claim until April 2020, its claim was barred by the CDA SOL.
  • Judge Solomson rejected the argument that Textron’s CAS 413 payment demand was a “routine request” akin to a voucher or invoice that could not form the basis of a claim before the government disputed the demand. After sorting through the complex caselaw governing the distinction between routine and nonroutine requests for payment—which Judge Solomson described as a “sticky wicket of epic proportions”—the Court concluded that the request for payment was not required by any FAR provision or otherwise and emerged from the unusual circumstances of bankruptcy, and could not be routine in nature.

This decision provides important guidance for contractors when navigating the CDA claims process. Contractors must be diligent in ensuring that they meet each of the CDA’s prerequisites and seek recovery as soon as is practicable—to steer clear of any statute of limitation concerns. This case underscores the traps awaiting contractors when attempting to recover under the CDA, and why experienced counsel can be invaluable when trying to unpack, as Judge Solomson put it, the CDA’s “jurisdictional minefield of the first order.”

CATEGORIES: Bid protests, Claims, Compliance, SuspensionDebarment

August 2, 2022 Government Contracts Legal Round-Up | 2022 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.

Investigations and Enforcement

There are a number of noteworthy developments in the investigations and enforcement space:

  • Precision Metals Corp. won injunctive relief preventing DLA from maintaining the company’s debarment. DLA, which is aggressive and takes a more expansive view of suspension and debarment practice than most other federal agencies, is alleged to have denied five requests for in person meetings to address the facts underlying the company’s exclusion and focused on past data rather than current operations.
  • An individual pled to bid rigging and set aside fraud relating to more than $17 million in military contracts as part of a Procurement Collusion Strike Force related matter. Read more here.
  • Numet Machining Techniques, LLC, and affiliated entities paid more than $5 million to resolve allegations of set-aside fraud relating to government contracts won after M&A activity rendered the business other than small. Numet disclosed the misconduct and “received credit” for the disclosure as part of the resolution. This is a notable resolution because, while follow on enforcement action after this type of disclosure is possible, it is comparatively rare. Read more here.
  • And in a lower dollar settlement for procurement related misconduct, McLain and Company paid $137,500 to resolve allegations of falsified inspection documentation relating to inspection vehicles customized for work on bridges. Read more here.

Claims Cases

1. Microtechnologies LLC v. United States Attorney General, No. 2021-2169 (Fed. Cir. July 28, 2022) (nonprecedential)

  • The government contracted with MicroTech to provide commercially available software licenses and maintenance for one base year and two option years. On the first day of the base year, MicroTech purchased the software licenses and maintenance for all three years of potential performance. After accidentally executing the first option year, the government terminated the first option year for convenience on the first day of performance.
  • There was no dispute as to MicroTech’s entitlement for the completed base year of performance. MicroTech, however, sought termination costs for the option year equal to the price that MicroTech paid for a full year of the relevant software license and maintenance, even though the agency never used the software or maintenance during the first option period. MicroTech argued that the commercial software is only sold in one-year increments and cannot be refunded once purchased; therefore, according to MicroTech, once the government executed the first option year, MicroTech was obligated to incur the full year’s worth of licensing and support costs, even if never used.
  • The Civilian Board of Contract Appeals granted the government’s cross-motion for summary judgment, and the Federal Circuit affirmed in a non-precedential opinion: “The Board correctly held that the cost of software maintenance for option year one was not a ‘reasonable charge’ that ‘resulted from the termination,’ as required for recovery under FAR 52.212-4(l),” which governs convenience terminations for commercial item contracts. The panel explained that “MicroTech acknowledges that the cost was not required under any contract when it was incurred,” and therefore “even assuming that the software maintenance could only be purchased in one-year increments and that MicroTech’s purchase was nonrefundable, MicroTech cannot show that the cost of software maintenance for the first option year ‘resulted from’ the government’s termination [of the option year].”

This is the latest in a growing line of important claims decisions relating to software licensing disputes. Contractors providing government customers with access to commercial software licenses must keep in mind the risk that comes with the inherent disconnect between (i) standard FAR clauses (e.g., termination for convenience) and (ii) the terms and conditions that typically apply to commercial software licenses. Software aside, while buying in bulk at the beginning of a base year may allow for cost savings and increased profit, there is always the risk that an agency will not exercise option periods.

Protest Cases

1. KOAM Engineering Systems, Inc., B-420157.2, July 6, 2022 (Publicly issued July 18, 2022)

  • GAO denied a protest alleging that the awardee gained an unfair competitive advantage because one of the awardee’s proposed key persons is married to a Navy contracting officer’s representative (COR) on the protester’s incumbent contract.
  • The protester argued that given the marriage and the fact that both worked in close proximity at home and share a common financial interest, there should be an “irrefutable presumption of impropriety.”
  • The Navy investigated the matter, including by reviewing declarations provided by the husband and wife. Based on this investigation, the Navy found no evidence that the COR participated in the instant procurement, or that the COR disclosed competitively useful information. The Navy also concluded that the specific information for which the COR had access, i.e., historical pricing information from KOAM’s incumbent contract, would not have provided a material competitive advantage to the awardee in light of this RFP’s specific terms.
  • GAO concluded that the agency’s investigation sufficiently rebutted the protester’s allegation of the appearance of impropriety, and sufficiently demonstrated that KOAM’s proprietary or otherwise competitively useful information was not disclosed.

Contracting agencies are to avoid even the appearance of impropriety in government procurements. Where a protester alleges a conflict of interest, including one based on a marital or familial relationship, GAO will not sustain the protest if the contracting agency reasonably investigates the allegations and finds no impropriety. A marital or familial relationship, without more, does not establish that an awardee gained an unfair competitive advantage.

2. Apprio, Inc., B-420627, June 30, 2022 (Publicly issued July 18, 2022)

  • GAO sustained a protest challenging a Federal Emergency Management Agency (FEMA) task order for training services to be performed at the Center for Domestic Preparedness (CDP).
  • GAO first found unreasonable FEMA’s cost realism analysis of awardee Leidos, Inc.’s proposed costs because the contemporaneous evaluation record did not demonstrate any evaluation of the awardee’s direct labor rates and lack of escalation. Moreover, while GAO will take into account credible, post-protest explanations that provide a detailed rationale for contemporaneous conclusions and fill in previously unrecorded details, here FEMA neglected to sufficiently explain how the agency evaluated Leidos’s labor rates or how the specific conclusions of those evaluations were made.
  • For example, while Leidos proposed to staff the task order with its incumbent personnel, the awardee proposed rates for many of these personnel based on the wage determination (WD) rates and not necessarily actual labor costs on the predecessor efforts. GAO sustained the protest because the agency’s cost realism evaluation did not assess whether the WD rates proposed to be paid to the majority of the incumbent workforce would be sufficient to retain those employees.
  • GAO also found objectionable the agency’s use of a standard deviation methodology as a tool to determine realism because the solicitation here contemplated unique technical approaches by offerors, and those unique approaches were not considered when FEMA relied on a common standard deviation to assess realism.
  • And GAO sustained the protest because a weakness assigned to the protester’s proposal under the corporate experience factor was directly contradicted by the contents of Apprio’s proposal.

Where an agency intends to award a contract containing cost-reimbursable line items, an offeror’s proposed costs of performing the cost-reimbursable CLINs are not dispositive because, regardless of the costs proposed, the government is bound to pay the contractor its actual and allowable costs. Consequently, the procuring agency must perform a cost realism analysis to determine the extent to which an offeror’s proposed costs are realistic for the work to be performed, and this analysis must provide a reasonable measure of confidence that the costs proposed are realistic based on information reasonably available to the agency at the time of its evaluation. GAO will sustain a protest where an agency’s cost realism evaluation is not reasonably based.

3. Cellebrite, Inc., B-420371.2, April 28, 2022 (Publicly issued July 18, 2022)

  • GAO found unobjectionable an agency’s decision to not permit revised pricing as part of corrective action.
  • In response to a prior protest, the United States Secret Service (USSS) took corrective action by amending the solicitation to clarify language contained in the corporate experience factor and the management and staffing approach factor. The amendment also revised the curriculum demonstration factor to permit subcontractor instructors to present during the curriculum demonstration presentation, provided they were previously included in the previous key personnel proposal submission.
  • USSS denied the protester’s request that the agency allow it to amend its price because its investment and growth in the interceding 5 months, as a newly listed public company, resulted in increased efficiencies and reduced operating costs.
  • In response to the protest, the agency emphasized that Cellebrite’s request to revise its price was not based on any changes made to its proposal in response to the solicitation amendment.
  • GAO found no basis to object to the agency’s corrective action because the record established that the corrective action was narrowly tailored to clarify the procurement improprieties that the agency sought to resolve during corrective action.

Contracting officers in negotiated procurements have broad discretion to take corrective action where the agency determines that such action is necessary to ensure a fair and impartial competition, and the details of corrective action are within the sound discretion and judgment of the contracting agency. An agency may reasonably limit the scope of proposal revisions permitted during corrective action, provided such limitation is appropriate to remedy the procurement impropriety. GAO generally will not object to the specific corrective action, so long as it is appropriate to remedy the concern that caused the agency to take corrective action.

CATEGORIES: Bid protests, Claims, Compliance

July 20, 2022 Government Contracts Legal Round-Up | 2022 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.

Proposed Rule

1. Proposed Nondisplacement Rule (July 15, 2022)

The Biden Administration just issued a proposal to reinstitute the nondisplacement rule, which provides that contractors and subcontractors performing on covered Federal service contracts must in good faith offer to rehire employees supporting the predecessor contract.

  • Under the proposed rule, at least 10 business days before contract expiration, departing contractors must provide the incoming contractor a list of all service employees working on the contract during the last month of performance. The incoming contractor must then give incumbent employees express bona fide offers for employment in positions for which they are qualified. Employees must be given at least 10 business days to accept the offer.
  • There are key differences between the proposed rule and the version of the rule that existed under the Obama Administration, including that the new rule applies to contractors performing work at a different location than the predecessor contractor.

Comments on this proposed rulemaking are due August 15, 2022.

Claims Cases

1. Zafer Construction Co. v. United States, Fed. Cir. No. 21-1547 (July 18, 2022)

  • In a highly anticipated decision, the Federal Circuit discussed the distinctions between claims and Requests for Equitable Adjustment (REA) in Contract Disputes Act (CDA) litigation.
  • The unanimous opinion (authored by Judge Hughes and joined by Judges Newman and Reyna) confirms that a contractor submission qualifies as a claim under the CDA—even when styled as an REA—if it satisfies the definition of “claim”, is properly certified, and sufficiently requests a contracting officer’s decision.
  • The opinion acknowledges that this flexible standard may result in some confusion as to when exactly a claim has been submitted, and “might create room for gamesmanship,” but concludes that “the Government has tools to address this challenge.”

Contractors attempting to submit REAs should pay careful attention to this decision to understand whether their submission may be deemed a formal claim.

Protest Cases

1. ZeroAvia, Inc. v. United States, Fed. Cl. No. 21-1991 (July 11, 2022)

  • Court of Federal Claims (COFC) Judge Dietz dismissed a bid protest complaint for lack of standing based on an apparent failure to plead sufficiently detailed allegations of procurement error and prejudice.
  • While it is common for the COFC to dismiss bid protests based on procedural issues (e.g., timeliness and standing) after the case is fully briefed, it is relatively rare for the court to dismiss a bid protest complaint for lack of sufficiently detailed allegations.
  • The opinion explains that rather than reaching the merits, the COFC found that the plaintiff “has not provided sufficient factual support for its alleged procurement errors to establish that it has standing to bring its protest,” noting that the plaintiff “bears the burden to establish that it has standing as part of its complaint.”

This case is a reminder that threshold pleading standards do apply to bid protest complaints filed at the COFC, and failure to provide sufficiently detailed allegations in a complaint may in some cases warrant dismissal.

2. Quality Technology, Inc., B-420576.3 (June 30, 2022)

  • The agency initially selected QuTech for award, resulting in a GAO protest from disappointed offerors, including Sparksoft. The agency took corrective action and then selected Sparksoft for award.
  • QuTech protested the award to Sparksoft, raising a novel argument that “the agency’s consideration of the arguments presented in Sparksoft’s protest challenging the initial award to QuTech constitute discussions, which the agency conducted unequally with only Sparksoft.”
  • GAO dismissed this novel argument as legally insufficient, emphasizing that there was no evidence “that the agency communicated with Sparksoft about the firm’s proposal—or that the agency permitted Sparksoft to modify its proposal,” and GAO was not aware of any legal authority to support “the contention that the submission of a protest amounts to discussions with the agency.”

The arguments presented in this protest reflect the frustration that follows when a company receives a contract award, only to have the agency take corrective action in response to a protest and change its award decision in favor of the protester. GAO decisions typically treat two award decisions as standing alone and do not second guess the agency’s decision to take corrective action or to select a new awardee. The protester here raised a novel discussions argument in attempt to turn the tables once more, but GAO would not take the bait.

CATEGORIES: Bid protests, Claims, Compliance

July 18, 2022 The Government Contracts Legal Round-Up | Episode 25

In the latest episode of the Government Contracts Legal Round-Up, Partner David B. Robbins discusses two US Supreme Court cases that government contractors should be aware of. Mr. Robbins also outlines key takeaways for recent claims and bid protest cases related to defenses contracting, software licensing disputes, procurements that require performance in foreign countries, and cybersecurity requirements.

 

CATEGORIES: Podcast

July 18, 2022 The Government Contracts Legal Round-Up | Episode 25

In the latest episode of the Government Contracts Legal Round-Up, Partner David B. Robbins discusses two US Supreme Court cases that government contractors should be aware of. Mr. Robbins also outlines key takeaways for recent claims and bid protest cases related to defenses contracting, software licensing disputes, procurements that require performance in foreign countries, and cybersecurity requirements.

 

PEOPLE: David B. Robbins

July 15, 2022 Here We Go Again – Nondisplacement Rule Back in Effect for Contractors

By: Aime JH Joo and David B. Robbins

The Biden Administration just issued a proposal to reinstitute the nondisplacement rule, which requires services contracts that succeed contracts for the same or similar services—as well as solicitations for such contracts—to include a clause offering qualified service employees under the predecessor contract a right of first refusal of employment.  

At least 10 business days before contract expiration, departing contractors must provide the incoming contractor a list of all service employees working on the contract during the last month of performance. The incoming contractor must then give incumbent employees express bona fide offers for employment in positions for which they are qualified. Employees must be given at least 10 business days to accept the offer.

Contractors will be familiar with this rule, which existed during the Obama Administration—albeit with a few differences—and was canceled during the Trump Administration. Contractors should keep in mind the following to help ensure compliance: 

  • Unlike its Obama-era predecessor, the new rule applies to contractors performing work at a different location than the predecessor contractor.

  • The departing contractor is responsible for providing the contracting officer a list of the names of all service employees employed under the contract and subcontracts within the last month of contract performance. The departing contractor must also provide written notice to service employees of their possible right of first refusal for employment under the successor contract.

  • The incoming contractor cannot fill any openings for positions subject to the Service Contract Act before first making good faith offers of employment to incumbent employees, although the offer need not be for the same position as the employee had previously held. The incoming contractor also retains the right to determine the number of employees necessary for efficient performance and can hire more or fewer employees than the previous contractor.

  • The incoming contractor is not required to offer a right of first refusal to an employee where, based on reliable evidence of past performance, the contractor or its subcontractors reasonably believe that there would be just cause to discharge that employee.

Jenner & Block government contracts attorneys stand ready to assist with any questions about the reimposition of this rule.

CATEGORIES: Compliance

July 6, 2022 Government Contracts Legal Round-Up | 2022 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.

Investigations and Enforcement

Does the DOJ Have the Ability to Dismiss Declined Qui Tams?

The Government’s ability to dismiss qui tam cases is subject to multiple standards, from an “unfettered right” to only after intervention and on terms the court seems proper, and other stops in between. The Supreme Court granted cert in United States, ex rel. Polansky v. Executive Health Resources, Inc., to resolve this circuit split in a case which will be watched carefully by the Government, realtors’ counsel, and defense counsel alike.

Supreme Court Cases

1. Biden v. Texas, No. 21-954 (June 30, 2022)

  • The Supreme Court provided further analysis describing the options available to agencies on remand.
  • This is an important and developing issue of administrative law that often arises in bid protests, particularly at the Court of Federal Claims (COFC), where procurement decisions are frequently remanded back to agencies to either provide further explanation for a prior decision or issue a new decision altogether.
  • Biden v. Texas builds on the Supreme Court’s 2020 decision in Department of Homeland Security v. Regents of University of California, and confirms that when an agency decides to issue a new decision on remand, as opposed to simply providing further explanation for its initial decision, the agency has discretion to provide new justifications for its actions.

The mechanics and procedural rules that apply to agencies on remand is an increasingly prominent issue in COFC bid protests, particularly those involving corrective action. This is an area where protest practice is often driven by precedents outside the COFC, and even outside the Federal Circuit. Protest counsel should keep an eye on developments in this area of administrative law.

Claims Cases

1. Raytheon Co. v. United States, No. 19-883C (June 30, 2022)

  • In a much-anticipated decision from a long-running data rights dispute between Raytheon and the Army, COFC Judge Kaplan held that Raytheon’s vendor list did not constitute “technical data” covered by the standard DFARS noncommercial Rights in Technical Data clause, 252.227-7013.
  • This dispute stemmed from the Army’s attempt to require Raytheon to regularly submit its vendor lists relating to Raytheon’s contract to provide engineering services in support of the Patriot weapons system.
  • When Raytheon provided the list, it included proprietary legends restricting the Army’s ability to release the data to third parties—that is, to potential competitors.
  • The Army disputed Raytheon’s proprietary markings, contending the vendor lists qualified as “technical data.” that the Army had broader rights to use and distribute than Raytheon’s proprietary markings would allow.
  • After analyzing the text and regulatory history of the DFARS data rights clause, the court disagreed with the government’s position, granting relief in favor of Raytheon.

This case is an important contribution to the longstanding and ongoing discussion between DoD agencies and defense contractors regarding the need to balance (a) contractors’ investments in proprietary business methods and (b) DoD’s needs to maintain access to competitively priced maintenance and support services for major weapons systems. This decision is a justified win for contractors, but the discussion is far from over.

2. CiyaSoft Corp., ASBCA No. 59913 (June 1, 2022)

  • This ASBCA decision follows from a significant 2018 ASBCA opinion finding that the Army was bound by and breached a commercial software license that CiyaSoft incorporated into its contract to sell the Army translation software.
  • After finding for CiyaSoft on entitlement, the Board remanded the matter to the parties to negotiate quantum.
  • Ciyasoft returned to the Board after negotiations broke down; according to CiyaSoft, the government was continuing to dispute issues that CiyaSoft considered resolved in the entitlement decision. CiyaSoft and the Army could not agree as to (a) whether the license terms restricted the Army to 20 unique single users or permitted more than 20 individual users as long as no more than 20 copies of the software were deployed at once, and (b) whether CiyaSoft failed to mitigate its damages.
  • The Board found a genuine dispute of material fact relating to whether the license permits more than 20 single users, denying CiyaSoft’s motion for summary judgment on that issue, and disagreed with the government’s theory that CiyaSoft had a duty to mitigate damages before contract performance began.

This is the latest in an important and growing line of decisions from the ASBCA, COFC, and Federal Circuit relating to the resolution of software licensing disputes with the federal government, which can raise incredibly complex issues of sovereign immunity, jurisdiction, entitlement, and quantum. Companies and counsel working in this space should pay careful attention to the CiyaSoft litigation.

Protest Cases

1. AGMA Security Service, Inc. v. United States, No. 20-926C (June 26, 2022)

  • Judge Horn issued a decision carefully walking through the elements of a small business bid protester’s claim for attorney fees under the Equal Access to Justice Act (EAJA); the decision provides a helpful summary of this unfortunately complex area of law.
  • After analyzing legal entitlement and examining the evidence presented as to the attorney hours worked litigating the underlying bid protest and EAJA request, the court granted recovery of nearly $33,000 in fees and expenses.

While EAJA does provide a vehicle for small business protesters to recover some amount of legal fees, this decision, like many before it, confirms that EAJA litigation is remarkably complex, with significant litigation risk for the small business seeking recovery. Accordingly, the best practice is often to reach a negotiated settlement of attorney fees to avoid this additional round (if not rounds) of contentious litigation.

2. Castellano Cobra UTE MACC LEY 18-1982, B-420429.4 (June 17, 2022)

  • This protest arises from a Navy task order award to acquire base improvements in Rota, Spain.
  • Typical of procurements requiring performance in foreign countries, the solicitation required offerors to comply with various aspects of local Spanish law.
  • When the Navy made award to a US-based company, Castellano filed a protest at GAO arguing that the awardee did not have a mandatory Certificate of Classification from the Spanish government and had not properly organized its joint venture under Spanish law.
  • The Navy took corrective action, which Castellano challenged as unreasonably narrow for failure to broadly review whether the initial awardee complied with Spanish law.
  • GAO dismissed the protest as premature on the basis that the corrective action is still ongoing; however, GAO also agreed with the agency that the general solicitation requirement to comply with Spanish law is an issue of contract administration that GAO will not consider.

Special Counsel Nathaniel Castellano predicts that Castellano Cobra (no relation) will be one of the best-named GAO bid protest decisions of the decade. It also serves as a reminder of the complex issues that arise in procurements that require performance in foreign countries, which are often subject to local labor laws and other unique requirements of the host country.

3. American Fuel Cell & Coated Fabrics Company, B-420551, B-420551.2 (June 2, 2022) (Published June 13, 2022)

  • GAO denied a protest alleging that the awardee failed to comply with the requirements in DFARS 252.204-7019/7020 to perform and post in the Supplier Performance Risk Assessment (SPRS) a current NIST SP 800-171 DoD assessment.
  • During discussions, the government assigned a deficiency to an offeror for having no records in SPRS. The offeror ultimately posted a score in SPRS and received an award.
  • The protester argued that the awardee’s proposal should have been rejected for failing to demonstrate compliance with these cyber requirements. GAO agreed that that the documentation did not show that the awardee was compliant because there was no indication that the company had performed a basic assessment or posted the summary level score into SPRS, as required by the clauses.
  • GAO denied the protest, however, because the protester could not demonstrate prejudice in this multiple-award procurement given its significantly higher price and limited confidence past performance rating.

Compliance with new and evolving cybersecurity requirements continues to be an increasingly important compliance and bid protest risk area. While this protest was denied due to lack of competitive prejudice, we expect protesters to continue to raise similar grounds.

4. Chicago American Manufacturing LLC, B-420533, B-420533.2 (May 23, 2022) (Published July 5, 2022)

  • GAO sustained the protest where a firm quoted a product under its Federal Supply Schedule (FSS) contract that did not meet the solicitation’s requirement.
  • The solicitation sought new furniture in several buildings in South Korea, and included specifications and requirements for all solicited items, including a metal bunkbed that must accommodate a 38”x80” mattress.
  • The awardee’s FSS catalog, however, included a bed that was only 78 inches long, or two inches short, of the solicitation’s requirements. While the awardee’s quotation specified the correct dimensions, GAO found that this was inconsistent with the FSS contract whose terms are contractually binding and not subject to alteration.

It is well established that an agency may not use FSS procedures to purchase items not listed on a vendor’s GSA schedule. Thus, as a precondition for receiving an order, all items quoted and ordered must be on a vendor’s FSS contract.

CATEGORIES: Bid protests, Claims, Compliance

June 22, 2022 Government Contracts Legal Round-Up | 2022 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.

Claims/Appeals

1. Zafer Constr. Co. v. United States, Fed. Cir. No. 21-1547 (Argued April 2022)

  • The Federal Circuit is poised to issue a significant decision distinguishing between claims and requests for equitable adjustment (REAs) for purpose of establishing jurisdiction under the Contract Disputes Act (CDA).
  • The Court of Federal Claims (COFC) dismissed the claim for lack of jurisdiction after finding that the contractor’s submission, styled as an REA, did not qualify as a claim under the CDA.
  • On appeal, the contractor argues that its submission satisfies all of the requirements for a valid, certified claim, and that the COFC decision must be reversed for the same reasons that the Federal Circuit recently reversed the ASBCA in a similar case, Hejran Hejrat Co. Ltd. v. US Army Corps of Engineers, 930 F.3d 1354 (Fed. Cir. 2019).
  • During oral argument, Federal Circuit judges Newman, Reyna, and Hughes appeared skeptical of the government’s position and the COFC’s holding. The argument revealed some uncertainty, however, as to how to distinguish claims from REAs based on existing Federal Circuit precedent.

While it is important that proper claims are not rejected for lack of jurisdiction based on procedural formalities, it is also important that contractors are able to submit REAs that do not constitute claims triggering the CDA dispute process. Contractors and their counsel should keep an eye on this appeal to understand how (if at all) the Federal Circuit draws the line between claims and REAs.

COFC Protest Decisions

1. Connected Global Solutions, LLC v. United States, COFC No. 22-292C (June 21, 2022)

  • This is the latest decision in a long-running, high-profile protest that has already generated significant litigation before GAO and COFC.
  • In a rare procedural ruling, the court previously granted limited discovery from the awardee relating to an alleged proposal misrepresentation.
  • In this decision, the court considers whether to supplement the administrative record with various documents relevant to the alleged proposal misrepresentation, including the discovery responses.
  • The opinion provides a helpful explanation of the interplay between record supplementation, judicial notice, and the Federal Rules of Evidence.

Contractors and protest counsel should watch this litigation carefully to understand the court’s evolving approach to alleged proposal misrepresentations, discovery in bid protests, and record supplementation.

GAO Protest Decisions

1. Insight Technology Solutions, Inc., B-410534 (May 27, 2022)

  • The protester challenged a solicitation requirement that offerors demonstrate capability maturity model integration (CMMI) level 3 certification at the time of proposal submission.
  • GAO rejected the protester’s challenge to the agency requirement for CMMI level 3 certification, deferring to the agency’s determination of its own requirements.
  • GAO sustained the protest, however, finding that the agency could not support the requirement for CMMI level 3 certification at the time of proposal submission.

Solicitations typically impose compliance obligations and certification requirements. GAO will generally defer to an agency’s assessment of its requirements in this respect. GAO will, however, scrutinize the timing of those requirements, particularly where an agency demands that offerors demonstrate a certain certification or capability before performance begins. This line of precedent will be increasingly important as agencies seek to incorporate evolving cyber and information security qualifications into the procurement process.

2. Sabre Systems, Inc., B-420090.3, (June 1, 2022) (Published June 14, 2022)

  • GAO sustained a protest because the contracting agency failed to evaluate the awardee’s total compensation plan in accordance with FAR 52.222-46 (Evaluation of Compensation for Professional Employees).
  • FAR 52.222-46 contemplates evaluation of an offeror’s compensation for “professional employees, as defined in 29 CFR 541.” In this procurement, the agency determined that only a small subset of four labor categories should be considered “professional employees” as defined in 29 C.F.R. part 541. The agency reasoned that part 541 included various categories of employees, and so the agency excluded from its professional compensation analysis those employees whose duties more closely matched other categories of employees defined in part 541.
  • GAO rejected this interpretation, holding instead that the plain language of FAR 52.222-46 unambiguously requires the agency to evaluate the compensation of a proposed employee that meets the definition of “professional employees” regardless of whether that employee also meets another part 541 labor category definition. GAO found that a portion of the employees the agency excluded from its analysis of professional compensation qualified as professional employees, and GAO sustained the protest on this basis.

The purpose of evaluating proposed compensation for professional employees is to assess each offeror’s ability to provide uninterrupted, high-quality work, considering the realism of the proposed professional compensation and its impact upon recruiting and retention. GAO will sustain a protest where an agency fails to reasonably evaluate offerors’ proposed total compensation plans in accordance with FAR provision 52.222-46, for example by unreasonably excluding from the agency’s analysis certain proposed employees who meet the definition of a professional employee as defined in subpart D of part 541.

3. The Ulysses Group, LLC, B-420566 (June 7, 2022) (Published June 8, 2022)

  • GAO denied the protest challenging the Air Force’s decision to reject a late-submitted proposal where the offeror made multiple unsuccessful efforts to submit its proposal prior to the announced deadline.
  • The solicitation required offerors to submit proposal volumes through a designated online DoD portal by the stated deadline, cautioning offerors not to wait until the last minute and that no exceptions would be made to the submission deadline.
  • Beginning two days prior to the deadline for proposal submission, the company could not successfully upload its proposal to the portal. The company repeatedly sought the assistance of the portal help desk, to no avail. Prior to the deadline, the company submitted a copy of its technical volume to the help desk and discussed these issues with the contracting officer.
  • The Air Force rejected the proposal because it was not submitted in accordance with the solicitation’s requirements. GAO denied the protest, upholding the Air Force’s decision.

Offerors are well advised to submit proposals early and leave time for unexpected technical hiccups. Otherwise, and at least at GAO, hardline principles relating to the time and manner of proposal submission may prevent a contractor from obtaining relief, even if the technical issue is seemingly caused by failures in the very government system required under the solicitation.

CATEGORIES: Bid protests, Claims