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

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 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 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

May 25, 2022 Government Contracts Legal Round-Up | 2022 Issue 10

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.

Protest Cases

1. Sekri, Inc. v. United States, No. 21-1936 (Fed. Cir. May 13, 2022)

  • This appeal asked the Federal Circuit to decide how traditional timeliness and standing rules apply to bid protests brought by mandatory source suppliers that operate under the Javits-Wagner-O’Day (JWOD) Act, which is intended to prioritize federal procurement from the blind and severely disabled.
  • The protester filed suit at the Court of Federal Claims arguing that the Defense Logistics Agency (DLA) had improperly issued a competitive solicitation for certain supplies that should have been purchased directly from SEKRI as a mandatory source pursuant to the JWOD Act.
  • The Court of Federal Claims found that it was bound to apply the Federal Circuit’s existing framework for assessing bid protest timeliness and standing and dismissed the case because SEKRI did not submit a proposal under the DLA solicitation and did not file a formal protest before the proposal submission deadline.
  • The Federal Circuit reversed, treating the case as one of first impression and holding that, based on the unique nature of the JWOD Act and mandatory source procurements, the traditional bid protest timeliness and standing rules do not bar SEKRI’s protest in this case.

This case confirms that the Federal Circuit is willing to recognize that certain government contracts cases arise in unique contexts that can warrant a departure from the traditional rules. Contractors should not assume that this holding will be interpreted to relax the otherwise strictly enforced timeliness and standing rules that apply to protests arising outside the JWOD Act. The opinion, however, is a valuable reminder of the Federal Circuit’s unique position to shape procurement law, and the potential power of a persuasive appeal.

2. BES Federal Solutions JV, LLC, B-420550 et al. (May 11, 2022) (Published May 18, 2022) 

  • GAO denied the protest where the Department of the Air Force concluded that the protester’s proposal was unacceptable under the technical (staffing plan) evaluation factor.
  • Under the mission essential plan (MEP) subfactor, the solicitation provided that offerors were required to explain how they would continue performing during a crisis, including handling employees exposed to COVID-19 and a return-to-work policy.
  • The Air Force found BES’s approach unacceptable because it did not specifically address a quarantine policy or a procedure for notifying the contracting officer’s representative regarding positive COVID-19 test results.
  • GAO rejected the protester’s argument that the Air Force’s evaluation imposed an unstated evaluation criterion. GAO explained, for example, that the Solicitation’s requirement to provide a COVID-19 testing policy reasonably encompassed an unstated requirement of where such testing would be performed.

Agencies may properly evaluate a proposal based on considerations not expressly stated in the RFP where those considerations are reasonably and logically encompassed within the stated evaluation criteria, and where there is a clear nexus between the stated and unstated criteria.

3. DCR Services & Construction, Inc., B-420179.2,B-420179.3 (April 28, 2022) (Published May 6, 2022)

  • GAO denied in part and dismissed in part a protest challenging the National Park Service’s non-selection of DCR’s quotation for the establishment of a blanket purchase agreement (BPA) for contaminated site cleanup services.
  • First, GAO denied DCR’s protest alleging flaws in its own evaluation.
  • Next, GAO dismissed DCR’s protest challenging the evaluation of the awardee’s proposal and the best-value determination, finding that DCR was not an interested party to raise these challenges.
  • GAO explained that even if DCR’s protest concerning the agency’s evaluation of the awardee’s quotation (and its treatment in the best-value determination) was sustained, DCR would not be in line to receive a BPA. The record reflects there were two other vendors that did not receive BPAs, yet the agency found their quotations to be a better value than DCR’s.

Where there is an intervening offeror who would be in line for the award if a protester’s challenge to the award were sustained, the intervening offeror has a greater interest in the procurement than the protester, and GAO generally considers the protester’s interest too remote to qualify as an interested party. Protesters should be mindful of the competitive landscape when filing protests, as they may be required to challenge not only the awardee’s evaluation, but the evaluation of other disappointed offerors.

Claims Cases

The Armed Services Board of Contract Appeals (ASBCA) issued a decision that cites an article published by Nathaniel Castellano for the observation that the Contract Disputes Act (CDA) contains traps for the unwary, despite being intended to create a fair and efficient mechanism for resolution of government contract claims. Nathaniel’s article argues that, based on a recent line of Supreme Court precedent, the CDA’s procedural requirements for claim submission, certification, and timely appeal do not qualify as jurisdictional prerequisites for maintaining CDA litigation.

Freedom of Information Act (FOIA) Exemption 4

1. Synopsis, Inc. v. Dept. of Labor, No. 20-16414, 20-16416, 2022 WL 1501094 (9th Cir. May 12, 2022)

  • The Department of Labor (DOL) declined to release certain materials in response to a FOIA request; the requester filed suit in district court challenging DOL’s decision to withhold; the district court held in favor of the requester, directing DOL to release the disputed materials.
  • After the district court issued its order directing DOL to release the materials, Synopsis attempted to intervene in the same case, claiming that the materials qualified as its confidential commercial information that must be withheld under FOIA Exemption 4. The district court denied the motion to intervene as untimely.
  • Synopsis separately filed an independent “Reverse-FOIA” action against DOL, asking the district court to enjoin DOL from releasing the same materials, again invoking Exemption 4. The district court rejected the Reverse-FOIA argument on the basis the court had already ordered DOL to release the materials.
  • Synopsis appealed. The Ninth Circuit affirmed in an unpublished decision, finding that the district court did not abuse its discretion in denying the motion to intervene, and agreeing with the district court that, under Supreme Court precedent, once the district court ordered DOL to release the materials Synopsis could no longer sue to enjoin the release of those same materials.

This decision emphasizes how important it is for companies to be vigilant when trying to protect confidential information that has been submitted to the US Government. As soon as an agency provides notice that confidential information has been requested under FOIA, the company should promptly respond with legal and factual support explaining why any proprietary or confidential commercial information must be withheld. In the event a requester files suit to obtain the materials, or the agency indicates it will release sensitive information, the company should act quickly to intervene and support the agency, or file suit to enjoin the agency, as appropriate. For those interested in learning more about FOIA Exemption 4, Nathaniel Castellano recently published a Briefing Paper discussing the latest litigation developments and best practices.

Investigations and Enforcement

The Department of Justice announced an inflation adjustment to civil False Claims Act penalties, increasing the range of penalties to $12,537 to $25,076 per claim.

CATEGORIES: Bid protests, Claims, Compliance

April 12, 2022 Government Contracts Legal Round-Up | 2022 Issue 7

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 Updates

1. OFCCP Update

The Office of Federal Contract Compliance Programs has announced a new Contractor Portal where contractors and subcontractors must register and certify their compliance with Affirmative Action Program requirements. June 30, 2022 is the deadline to submit initial certifications. After that, annual certifications will be required. Contractor Portal Link: https://contractorportal.dol.gov

2. GSA Contracting Price Increases Update

GSA published an Acquisition Letter, link AL MV-22-02: Temporary Moratorium on EPA Clauses (gsa.gov), which announces a temporary moratorium on GSA enforcement of certain limitations on contractors’ ability to seek Economic Price Adjustment (EPA). GSA cited inflation and supply chain concerns as the reasons for the moratorium. Noting that contractors are removing items from the Federal Supply Schedules to avoid selling them at a loss, GSA will permit more frequent requests for price adjustment. GSA will also make it easier for government acquisition professionals to approve such requests.

3. Goodbye DUNS, Hello Unique Entity Identifier

After years of study, the government has stopped using Dun & Bradstreet’s Data Universal Numbering System (DUNS) to identify government contractors. In its place, the government has transitioned to Unique Entity Identifiers (UEIs). Link to announcement: Unique Entity Identifier Update | GSA Contractors with existing SAM registrations have been assigned a UEI and will need to begin using the number. New registrants will request a UEI through SAM rather than register for a DUNS number as part of their SAM registration process.

Protest Cases

1. Spatial Front, Inc., B-420377 (March 7, 2022) (Published April 5, 2022)

  • GAO denied a protest challenging as unduly restrictive the terms of a solicitation issued by the Department of Commerce for enterprise-wide IT services. Specifically, the protester alleged that the requirement to possess a top-secret facility clearance (TS-FCL) was unduly restrictive and had an unreasonable impact on small businesses.
  • The protestor, a small business, argued that because only a “limited number of task orders” were likely to require the TS-FCL, the requirement was unnecessary and “unreasonably restricted competition.”
  • GAO found that the agency reasonably justified this restrictive provision. The agency documented the performance and cost issues caused by the current decentralized IT environment and the benefits that would flow from a single-award contract to implement a multi-domain environment. And the agency refuted the contention that only a subset of the work was classified, explaining that it expected classified requirements in each performance area. Moreover, the agency conducted ample market research demonstrating that a significant number of small businesses could meet the solicitation’s TS-FCL requirement.
  • GAO thus found that that the TS-FCL requirement was justified and within the agency’s discretion.

Agencies are generally afforded discretion to determine their needs and the best means to accommodate them. Where a requirement touches on matters of national security, such as in the present solicitation, an agency “has the discretion to define solicitation requirements to achieve not just reasonable results, but the highest possible reliability and/or effectiveness.”

2. Veterans Choice Medical Equipment, LLC, B-419991, B-419991.2 (October 20, 2021) (Published April 1, 2022)

  • GAO denied a protest challenging the Department of Veterans Affairs’ award of a contract for in-home oxygen and ventilator services.
  • The protester alleged that the agency unreasonably evaluated the awardee’s corporate experience because the awardee’s proposal lacked a reference contract containing all the required explanatory information. Further, the Source Selection Authority and another evaluator relied on their personal knowledge of the awardee’s experience that was not included in the proposal.
  • GAO found no basis to sustain the protest. The Solicitation’s proposal submission instructions afforded the agency discretion to consider experiences that did not conform to the submission requirements, and GAO found nothing improper with the evaluators considering corporate experience not found in the awardee’s proposal of which they had personal knowledge.

In certain circumstances, GAO has held that an agency may consider “close at hand” past performance or corporate experience information known to the agency and not found in an offeror’s proposal. But GAO has also made clear that the “close at hand” doctrine is not intended to remedy a failure to include required information in a proposal, and the burden rests on the offeror to submit a well-written proposal with adequately detailed information that allows for a meaningful review by the procuring agency.

CATEGORIES: Bid protests, Compliance

February 1, 2022 Government Contracts Legal Round-Up | 2021 Issue 26

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-Related Regulatory Developments

1. OSHA Withdraws COVID-19 ETS

  • Effective January 26, 2022, OSHA withdrew the vaccine-or-test emergency temporary standard issued on November 5, 2021, covering employers with 100 or more employees. 
  • OSHA did not withdraw the ETS as a proposed rule, however, and indicated it is working to finalize a permanent COVID-19 Healthcare Standard.
  • Given the Supreme Court’s stay of the OSHA ETS on statutory authority grounds, presumably OSHA would significantly revise the scope of any permanent standard to attempt to withstand judicial scrutiny.
  • It is worth remembering that OSHA may still attempt to pursue COVID-19-related safety issues, including under the General Duty Clause.
    • In response to the Supreme Court’s decision, on January 13, 2022, the Secretary of Labor stated: “We urge all employers to require workers to get vaccinated or tested weekly to most effectively fight this deadly virus in the workplace. Employers are responsible for the safety of their workers on the job, and OSHA has comprehensive COVID-19 guidance to help them uphold their obligation. Regardless of the ultimate outcome of these proceedings, OSHA will do everything in its existing authority to hold businesses accountable for protecting workers, including under the COVID-19 National Emphasis Program and General Duty Clause.”
    • Companies should evaluate their COVID mitigation efforts and expect that employees may submit complaints to OSHA related to those efforts.

2. Texas Court Enjoins Federal Government Employee Vaccination Mandate

  • On January 21, a judge in the Southern District of Texas issued a nationwide injunction against the mandatory vaccination requirement for federal government employees. Relying on the Supreme Court’s recent decision on the OSHA ETS, the judge held that getting vaccinated is not “workplace conduct” over which the President has authority because COVID-19 poses a universal risk no different from other day-to-day dangers. The judge noted that any broader interpretation of the President’s powers would permit regulation of “certain private behaviors by civilian federal workers outside the context of their employment.”
  • The Safer Federal Work Force Task Force has issued an updated Q&A stating that it has suspended enforcement of the vaccination requirement for federal employees pending appeal, but will continue to enforce the non-vaccine elements of the federal employee requirement.

3. The Contractor COVID-19 Mandate Stay Is Currently on Appeal in Multiple Appellate Courts

  • The federal government has appealed the multiple stays issued against the federal contractor COVID-19 vaccine mandate, including the nationwide stay issued by a Federal District Court for the Southern District of Georgia to the Eleventh Circuit.
  • The Eleventh Circuit ordered expedited briefing, which was completed on January 24, 2022.

4. The Southern District of Georgia Issued an Order in Response to the Biden Administration’s Request for Clarification of its Nationwide Injunction

  • The government requested clarification as to whether the nationwide injunction of the contractor mandate (1) “prohibit[s] private federal contractors from mutually agreeing with Defendants to include COVID-19 safety clauses in their federal contracts” and (2) “is limited to enforcement of the Safer Federal Workforce Task Force’s vaccination requirements, o[r] whether it also prevents federal agencies from enforcing requirements related masking and physical distancing and the identification of [person(s)] to coordinate COVID-19 workplace safety efforts at covered contractor workplaces.”
  • The court ordered declined to answer the first question, stating that it would be an advisory opinion. It then stated that it was unnecessary to answer the second question because its injunction was clear: it had specifically used the word “vaccine” and not mentioned any other requirements. It noted that, similarly, the underlying motion had not requested injunction of the other requirements.
  • Unlike for the federal employee COVID-19 requirements discussed above, the Safer Federal Work Force Task Force has not yet issued updated Q&As regarding enforcement of the non-vaccine elements of the contractor COVID-19 mandate. 
    • The website still provides that “[f]or existing contracts or contract-like instruments (hereinafter “contracts”) that contain a clause implementing requirements of Executive Order 14042: The Government will take no action to enforce the clause implementing requirements of Executive Order 14042, absent further written notice from the agency, where the place of performance identified in the contract is in a U.S. state or outlying area subject to a court order prohibiting the application of requirements pursuant to the Executive Order (hereinafter, “Excluded State or Outlying Area”).”
    • Contractors with contracts containing FAR 52.223-99, Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors, should be on the lookout for updates or clarifications on this issue.

Protest Cases

1. Insight Technology Solutions, Inc., B-420133.2 et al. (December 20, 2021) (Published January 20, 2022)

  • GAO sustained a protest and recommended that the agency disqualify an offeror for materially misrepresenting the qualifications of its key personnel.
  • In this procurement, the solicitation did not require that offerors submit resumes for key personnel, but offerors were required to clearly identify how proposed key personnel met or exceeded minimum qualifications.
  • The protester alleged that the awardee misrepresented the qualifications of its proposed project operations manager, claiming that publicly available information on LinkedIn showed the proposed individual to possess less experience than claimed by the awardee and less than the solicitation’s minimum requirement.
  • Following an initial unsatisfactory explanation, GAO afforded the awardee an additional opportunity to explain the discrepancy, but GAO found that the declaration submitted by the key person and the awardee’s explanation did not clearly support the experience claimed. This misrepresentation was material because the agency relied on the claimed experience to favorably evaluate the awardee.
  • GAO determined that the integrity of the procurement system “demanded no less” than the remedy of excluding the awardee from the competition, and accordingly recommended that the agency disqualify the awardee for misrepresenting its key personnel.

GAO will carefully consider allegations that an offer has materially misrepresented its capabilities, experience, and qualifications. Moreover, in considering such allegations, GAO will assess extra-record evidence that was not before the agency at the time it evaluated proposals, such as publicly available LinkedIn information. Contractors should be aware that misrepresenting key personnel capabilities and experience remains an area ripe for bid protest litigation.

Investigations and Enforcement

4th Circuit Adopts Objective Reasonableness Standard for FCA Scienter 

  • Last week the 4th Circuit adopted the objective reasonableness standard for False Claims Act scienter.
  • In U.S. ex rel. Sheldon v. Allergan Sales, LLC, 2022 WL 21172, the Fourth Circuit held that the FCA’s scienter element (or, the knowingly portion of knowingly submitting false claims) is not present if the defendant’s interpretation of the rules was objectively reasonable and no other guidance from a court or from the government warned the defendant the interpretation was not reasonable.

The Fourth Circuit is an important judicial circuit because it covers Maryland and Virginia, where a substantial number of government contractors are based. We will be watching the development of the objective reasonableness standard closely.

CATEGORIES: Bid protests, Compliance

January 19, 2022 Government Contracts Legal Round-Up | 2021 Issue 25

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.

Vaccine Update

The Supreme Court Weighs in Regarding Vaccine Mandates, Sends Signals for Government Contractors (January 13, 2022)

  • On January 13, 2022, a divided Supreme Court stayed OSHA’s vaccine-or-test emergency temporary standard (ETS) but upheld the vaccine mandate issued by Centers for Medicare & Medicaid Services (CMS).
  • In both cases, the Court’s decisions focused on the limits of statutory authority. 
    • In the OSHA case, the majority held that the Occupational Safety and Health Act does not authorize a rule as broad as the OSHA ETS because OSHA’s authority is limited to issuing occupational safety and health standards—and not universal risks such as COVID-19.
    • In the CMS case, the majority held that the CMS vaccination mandate fits neatly within the language of the statute that authorizes the Secretary of Health and Human Services to impose conditions on the receipt of Medicaid and Medicare funds.
    • Although the Court upheld one rule and struck down the other, in both cases, it signaled a focus on whether the relevant statute authorized the agency’s mandate.
  • The OSHA ruling also resolves the question of whether the OSHA ETS could apply to contractors while the contractor mandate is preliminarily enjoined or if it is permanently struck down. The answer is no.
  • These two decisions shift the focus back to the government contractor mandate, which is preliminary enjoined nationwide while litigation proceeds in different jurisdictions around the country.
    • The nationwide injunction issued by a district court in the Southern District of Georgia remains in effect and is currently on appeal in the Eleventh Circuit.
    • The more limited injunctions issued by district courts in Kentucky, Florida, and Missouri are in various stages of litigation or appeal and the Biden Administration has appealed the Eastern District of Missouri injunction.

For the time being, both the OSHA ETS and contractor mandates are currently stayed. While attention shifts back to the lower courts, the Supreme Court’s decisions indicate that those mandates face difficult odds of ever coming into force and that future decisions will also be based on the scope of permitted statutory authority. For a detailed discussion of these decisions and their implications, read our client alert here and listen to our podcast here.

Protest Cases

1. Cherokee CRC, LLC, B-420205; B-420205.2 (December 21, 2021) (Published December 28, 2021)

  • GAO denied a protest challenging (in part) that the Bureau of Indian Affairs (BIA) conducted unequal discussions when it asked Walga Ross Group JV (WRG), the awardee, to clarify its proposal.
  • Under the RFP, BIA directed offerors to propose their “best prices for each of the Price Categories in accordance with the Statement of Work (SOW) and attachments.” With regards to price, award would be made to the lowest-priced, technically acceptable offeror whose overall price was determined to be “realistic, reasonable, and complete.”
  • In its final proposal, WRG specified a dollar figure for all of the categories except one; for value engineering, WRG’s proposal simply stated “TBD during design.” The evaluators found WRG’s proposal acceptable, but suggested the contracting officer clarify their intention regarding value engineering. The contracting officer emailed WRG asking the firm to “clarify whether or not your total price . . . includes value engineering analysis services.” WRG confirmed that it did, and BIA awarded the task order to WRG.
  • Cherokee protested, arguing that this exchange constituted discussions. The protester contended that WRG’s proposal was incomplete without a dollar figure for the value engineering price category, and WRG’s proposal was, therefore, unacceptable.
  • GAO denied the protest, concluding the exchange was clarifications. Specifically, GAO disagreed that WRG’s proposal was incomplete without the missing dollar figure, finding it was reasonable and consistent with the solicitation for the agency to determine that WRG’s proposal was complete because it submitted an overall price within the required format, even if it did not submit a dollar value for one price category in one breakdown. Moreover, WRG did not change its overall, single-CLIN price.

In situations where there is a dispute regarding whether communications between an agency and an offeror constituted discussions, the acid test is whether an offeror has been afforded an opportunity to revise or modify its proposal. In such protests, GAO will carefully scrutinize the record to reach its own conclusion regarding an agency’s conduct.

2. Meridian Knowledge Solutions, LLC, B-420150 et al. (December 13, 2021) (Published December 22, 2021)

  • GAO sustained a protest where the awardees’ General Services Administration (GSA) Federal Supply Schedule (FSS) contract was scheduled to expire prior to the end of the period of performance for the Blanket Purchase Agreement (BPA) that the Agency had awarded.
  • The Department of Homeland Security (DHS or Agency) issued a solicitation under the GSA FSS, Information Technology program (schedule 70) which contemplated an ordering period of “up to ten years from award,” including one base year and nine option years.
  • The Agency established BPAs with the three highest-rated vendors, each of which offered a lower price than Meridian, the protester.
  • As relevant here, two of the awardees submitted quotations based on FSS contracts that expired in 2022 and 2030, prior to the complete ten-year period of performance. The contracts issued to these awardees were tailored to the remaining duration of the vendors’ FSS contracts, extending to 2022 and 2030 respectively. The third awardee was issued a BPA that extended the full 10-year period of performance.
  • Here, GAO held that the plain language of the solicitation required vendors’ FSS contracts to cover the entire 10-year period of performance of the resultant BPA and did not permit the establishment of BPAs with varying lengths. Because this was a material requirement, the two vendors lacking a FSS contract of sufficient duration could not have been issued a BPA consistent with the terms of the solicitation.
  • GAO also acknowledged the price evaluation implications of comparing all vendors on the basis of complete 10-year pricing despite several vendors knowing that they would be unable to compete for all 10 years.

GAO has recognized that an FSS BPA is not established directly with the contractor; rather, it is established under the contractor’s FSS contract such that FSS BPA orders are ultimately placed against the vendor’s FSS contract. As a result, as a prerequisite to placing an order under an FSS BPA, a vendor must have a valid FSS contract in place, including an FSS contract of sufficient duration to coincide with the entire period of performance for the resultant BPA.

3. Science and Technology Corporation, B-420216 (January 3, 2022) (Published January 11, 2022)

  • GAO denied a protest challenging as unduly restrictive certain terms of a National Oceanic and Atmospheric Administration (NOAA) solicitation for scientific support services.
  • As a preliminary matter, GAO found that the protester’s objection to one of the key personnel requirements was untimely because protester Science and Technology Corporation (STC) failed to raise this issue with GAO within 10 days of adverse agency action following STC’s agency-level protest.
  • More specifically, STC sent a “letter of concern” to NOAA asserting, among other things, that the lead physical scientist requirement was unduly restrictive, and requesting that the number of key personnel positions be decreased. The next day, NOAA rejected STC’s request to amend the solicitation.
  • Even though STC apparently did not intend this letter to constitute an agency-level protest, GAO still determined that it was, because the letter expressed dissatisfaction and requested relief. Consequently, STC was required to file its protest arguments related to the key personnel requirements within 10 days of NOAA’s denial of STC’s request (regardless of whether the GAO protest was filed pre-proposal submission or not). But STC waited more than two weeks to file at GAO, and GAO therefore dismissed the argument as untimely filed.
  • Next, on the merits, GAO denied STC’s other protest argument objecting to NOAA’s decision to only consider the corporate experience of the prime contractor and not also the corporate experience of the prime contractor’s team members and/or subcontractors.
  • GAO found unobjectionable NOAA’s explanation that the goal of its experience evaluation requirement was to determine whether the prime contractor had the requisite scientific support services experience.
  • GAO explained that an agency’s desire to reduce the risk of unsuccessful performance can be rationally achieved by restricting consideration of experience to the firms which are contractually obligated to meet the agency’s requirements, which was the case here.

An offeror may be surprised to learn that its communications with a contracting agency could be deemed an agency-level protest even where the offeror did not intend to lodge any protest. In this respect, GAO will consider an offeror’s communications with a contracting agency to constitute an agency-level protest where the offeror’s letter conveys the “intent to protest” by a specific expression of dissatisfaction with the agency’s procurement actions and a request for relief—even if the written statement does not state explicitly that it is or is intended to be a protest.

In addition, contracting agencies are required to specify their needs in a manner designed to permit full and open competition, and may include restrictive requirements only to the extent they are necessary to satisfy the agency’s legitimate needs or as otherwise authorized by law. Where a protester challenges a specification or requirement as unduly restrictive of competition, the procuring agency has the responsibility of establishing that the specification or requirement is reasonably necessary to meet the agency’s needs. A solicitation requirement that limits the agency’s experience evaluation to that of the prime contractor’s experience does not unduly restrict competition where the record demonstrates that the requirement is reasonably related to the agency’s needs.

Claims Cases

1. OWL, Inc. v. Dept. of Veterans Affairs, CBCA 7183 (December 20, 2021)

  • OWL held an IDIQ contract to provide transportation for VA beneficiaries within the Southern Arizona Health Care System.
  • OWL alleged that, as a result of the COVID-19 pandemic, the VA issued directives and guidance that limited the number of patients per trip and reduced trip requests, including through increased use of telemedicine. OWL sought equitable adjustment as a result of “reduction in revenue and trips.”
  • The VA argued that the contract was illusory and unenforceable because the VA had failed to include a guaranteed minimum purchase by the government.
  • The CBCA granted the VA’s motion to dismiss for failure to state a claim, finding that the IDIQ failed to state a guaranteed minimum and that such a contract is binding only to the extent it was performed. The CBCA noted that the contract was also not a requirements contract and did not require the VA to order all relevant services from OWL. The CBCA held that “neither OWL’s expectations based on the parties’ past dealings nor the pandemic” alter the contract.

Contractors must pay close attention to what the government is actually promising to do in any IDIQ contract, which is often very little. The nature of IDIQ contracts is to provide the government with flexibility and one of the few constraints is that it must order the minimum amount specified. Unfortunately, the government will exploit that flexibility—including in unusual circumstances like the pandemic.

CATEGORIES: Bid protests, Claims, Compliance

December 21, 2021 Government Contracts Legal Round-Up | 2021 Issue 24

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.

Vaccine Update

1. Legal Developments Continue Regarding Federal Contractor Vaccine Mandate (December 21, 2021)

  • After a busy few weeks in the courts, there are now multiple stays issued against the federal contractor COVID-19 vaccine mandate, including a nationwide stay issued by a Federal District Court in Georgia.
    • On December 17, 2021, the Eleventh Circuit denied the Biden Administration’s request for a stay of that nationwide injunction pending appeal.
    • The Biden Administration may appeal that denial to the Supreme Court or could determine it is better to wait and allow other COVID-19 litigation to proceed.
  • Given this nationwide stay, litigation challenging the OSHA ETS has become more relevant for government contractors.
    • On December 17, 2021, a three-judge panel of the Sixth Circuit dissolved the Fifth Circuit’s stay of the OSHA ETS.
    • The challengers immediately filed in the Supreme Court a request for emergency stay and cert before judgment (per Sup. Ct. Rule 11).
    • The Supreme Court has given the government until December 30, 2021 to respond to the request.
  • OSHA posted a notice on its website extending compliance dates under the ETS to January 10 and February 9, 2022.

We are closely tracking legal challenges to the federal contractor mandate and OSHA ETS, and stand ready to advise you on the impact of these challenges nationwide.

Protest Cases

1. Harmonia Holdings Group, LLC v. United States, Case 2020-1538 (December 7, 2021)

  • The Court of Appeals for the Federal Circuit confirmed that the Blue & Gold waiver rule is still applicable law but not as applied by the Court of Federal Claims in Harmonia’s protest.
  • In January 2020, the Court of Federal Claims (COFC) ruled that Harmonia had waived its right to protest—post-award—amendments to a Customs and Border Protection (CBP) solicitation for services in support of cargo systems applications.
  • Harmonia had raised its solicitation objections prior to the applicable submission deadline but only in an agency-level protest. Five months after CBP denied the agency-level protest and only after CBP awarded the contract to another vendor, Harmonia filed its complaint at COFC. In rejecting the protest, the court explained that “while Harmonia facially met the requirements under Blue & Gold, Harmonia nevertheless waived its right to bring those claims before this Court by failing to timely and diligently pursue its objections . . . .”
  • The Blue & Gold waiver rule—established in the Federal Circuit’s 2007 Blue & Gold Fleet, L.P. v. United States decision—generally requires that an offeror who seeks to challenge the terms of a solicitation at the Court of Federal Claims bring such a protest prior to the deadline for proposal submission. In Blue & Gold Fleet, the Circuit held that “[r]ecognition of a waiver rule, which requires that a party object to solicitation terms during the bidding process,” furthered the Tucker Act mandate that courts expeditiously resolve protests.
  • Here, the three-judge Federal Circuit panel disagreed with COFC that Blue & Gold applied in this instance.
  • The Federal Circuit explained that “the Blue & Gold waiver rule is predicated not only on the notion of avoiding delay that could benefit the delaying party, but also on the notion of preserving challenges and providing notice to interested parties . . . Harmonia’s undisputedly timely, formal challenge of the solicitation before CBP removes this case from the ambit of Blue & Gold and its progeny.” That is, by filing an agency-level protest, Harmonia had preserved its right to re-raise its solicitation objections in a post-award protest.
  • This appeal gained attention because Judge Reyna, who sat on this panel, had previously questioned the viability of the Blue & Gold waiver rule in his much talked about dissent in Inserso Corp. v. United States.

For now, the Federal Circuit’s Blue & Gold waiver rule remains the law. This means that an offeror who wishes to protest the terms of a solicitation must do so prior to the deadline for proposal submission—in any of the protest forums. Here, the Circuit established that if a timely agency-level protest is filed, the offeror has preserved its right to re-raise its objections in the Court of Federal Claim—even after award—notwithstanding the Circuit’s Blue & Gold waiver rule.

2. Science Applications International Corporation, B-420005 et al. (October 27, 2021)

  • GAO sustained a protest alleging that the agency failed to provide adequate discussions and did not advise the protester that its prices were unreasonably high.
  • GAO also sustained the protest because the agency solicited but then ignored information from the offerors regarding proposed prices.
  • After receipt of initial proposals, the agency engaged in two rounds of discussions and obtained final proposal revisions before awarding the contract to Noble Supply and Logistics. Although SAIC received overall higher non-price ratings, Noble’s proposed price of approximately $1 billion was significantly lower than SAIC’s proposed price of approximately $1.5 billion.
  • GAO agreed with the protester that the agency provided inadequate discussions. The record showed that throughout the acquisition, the agency found SAIC’s price unreasonably high, yet the agency only advised SAIC that certain of its prices were “high” without ever informing SAIC that any of its prices, either individually or overall, were “unreasonably high.”
  • GAO also found unreasonable the agency’s decision to overlook inadequate substantiating price information submitted by the awardee and requested by the agency given the significant pricing disparity between offerors.

Although the solicitation in this procurement contemplated a consideration of reasonableness (whether prices were too high) but not a realism evaluation (whether prices are too low), GAO held that the agency erred because once it requested from the offerors pricing data that could provide confidence that the offered prices were fair and reasonable, the agency was not free to ignore the requested information (or lack thereof). Here, SAIC substantiated its price with a detailed submission as requested by the agency, while Noble failed to provide adequate information.

 


 

On behalf of the entire Jenner & Block Government Contracts Practice, we thank our clients for their support this year and wish them and all our readers a happy and safe holiday.

- David Robbins, Co-Chair, Government Contracts Practice

CATEGORIES: Bid protests, Compliance

December 8, 2021 Nationwide Injunction of Federal Contractor Vaccine Mandate Issued by US District Court, Southern District of Georgia

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By: Sati HarutyunyanMatthew L. HawsGabrielle Sigel, and Scott E. Whitman

On December 7, 2021, Judge R. Stan Baker of the U.S. District Court for the Southern District of Georgia issued a nationwide injunction of the Biden Administration’s vaccine mandate for federal contractors issued on September 9, 2021 through Executive Order 14042 (EO 14042). This most recent order takes last week’s ruling from the Eastern District of Kentucky, which was limited to three states and which we covered here, a significant step further: it blocks 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.” 

In its order, the court found that there would be an “extreme economic burden” that contractors “have suffered and will continue to suffer in endeavoring to comply with EO 14042.” According to Judge Baker, these burdens include, among other things, the “extensive and costly administrative work by employers” and the predicament of “at least some individuals to choose between getting medical treatment that they do not want or losing their job.” 

Against that backdrop, Judge Baker stated that the court was “unconvinced, at this stage of the litigation,” that the Federal Property and Administrative Services Act (the Procurement Act) authorized President Biden “to direct the type of actions by agencies that are contained in EO 14042.” Specifically, the court determined that the vaccine mandate operates as a “regulation of public health.” The court concluded the Procurement Act did not “clearly authorize the President to issue the kind of mandate contained in EO 14042, as EO 14042 goes far beyond addressing administrative and management issues in order to promote efficiency and economy in procurement and contracting, and instead, in application, works as a regulation of public health, which is not clearly authorized under the Procurement Act.”

In addition to finding a lack of clear statutory authorization, the court concluded that EO 14042 does not have a sufficient nexus “to the purposes of the Procurement Act and thus does not fall within the authority actually granted to the President in that Act.” The court stated that the government defendants did not cite any cases where a court has upheld an executive order 1) aimed at public health; and 2) imposing similar burdens as EO 14042. The court asserted that under the government’s proposed reading of the Procurement Act, the President would have the “right to impose virtually any kind of requirement on businesses that wish to contract with the Government (and, thereby, on those businesses’ employees) so long as he determines it could lead to a healthier and thus more efficient workforce or it could reduce absenteeism.” 

Unlike last week’s order from the U.S. District Court for the Eastern District of Kentucky, Judge Baker concluded that an injunction with national scope was appropriate under the “unique circumstances” before the George federal court. While noting that courts typically resist universal injunctions, Judge Baker concluded that a nationwide injunction was appropriate here because one of the intervening plaintiffs is a trade association with members throughout the United States and enjoining enforcement in a more limited geographic area would mean that the trade association’s "members would not have injunctive relief as to covered contracts in other states….[and] limiting the relief to only those before the Court would prove unwieldy and would only cause more confusion.”

The nationwide applicability of this injunction adds another factor to the complex landscape facing government contractors as they approach the January 18 deadline previously in place for compliance with the vaccine mandate. For example, in response to last week’s order by the Eastern District of Kentucky, Defense Pricing and Contracting issued guidance instructing contracting officers to not include the clause requiring compliance with Task Force guidance in new solicitations, contracts, or orders, including extensions or renewals, that may be performed at least in part in Kentucky, Ohio, and/or Tennessee. This guidance is likely to be updated following Judge Baker’s order issued yesterday. Note also that, particularly with enforcement of the OSHA vaccine and testing Emergency Temporary Standard stayed and enforcement of the federal contractor vaccination mandate enjoined, private employers may be subject to several states’ requirements limiting employers’ ability to require COVID-19 vaccination. Jenner & Block is ready to assist our clients with navigating this increasingly complicated space.

CATEGORIES: Compliance