Government Contracts Legal Forum : Government Contracts Lawyers & Attorneys for Litigation & Counseling

Guaranteed to create uncertainty, the Consolidated Appropriations Act of 2012 (Pub. L. 112-74), which President Obama signed into law on December 23, 2011 (the “Act”), included several little-noticed provisions generally excluding the use of federal funds for any corporation convicted of a felony within the past 24 months. All of these provisions establish a unique procedure whereby the statutory exclusion is only triggered when the awarding agency is “aware of the conviction” and the agency’s consideration of suspension and debarment provides the relief from the statutory exclusion for the contractor. 

And it gets even more curious. The Act is a consolidation of nine different appropriations bills (delineated as Divisions under the Act) appropriating funds for FY 2012. As set forth below, Congress has inexplicably included the exclusion provisions in only five of the nine divisions comprising the Act, and equally inexplicably used different standards in the exclusion provisions. The covered divisions of the Act and the specific language include:

 

DIVISION A—DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, 2012

SEC. 8125. None of the funds made available by this Act may be used to enter into a contract, memorandum of understanding, or cooperative agreement with, make a grant to, or provide a loan or loan guarantee to, any corporation that was convicted of a felony criminal violation under any Federal law within the preceding 24 months, where the awarding agency is aware of the conviction, unless the agency has considered suspension or debarment of the corporation and made a determination that this further action is not necessary to protect the interests of the Government.

DIVISION B—ENERGY AND WATER DEVELOPMENT APPROPRIATIONS ACT, 2012

SEC. 504. None of the funds made available by this Act may be used to enter into a contract, memorandum of understanding, or cooperative agreement with, make a grant to, or provide a loan or loan guarantee to any corporation that was convicted (or had an officer or agent of such corporation acting on behalf of the corporation convicted) of a felony criminal violation under any Federal law within the preceding 24 months, where the awarding agency is aware of the conviction, unless the agency has considered suspension or debarment of the corporation, or such officer or agent, and made a determination that this further action is not necessary to protect the interests of the Government.

(emphasis added).
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Thursday, January 19, 2012, from 2:00 - 3:30 pm EST, please join us for this webinar, "What Will the New Year Bring for Government Contractors? Top Headlines, Headaches, and Legal Developments to Watch in 2012.” As we begin the new year, government contractors are facing significant unknowns that could have a direct impact on the bottom-line:

• How will the continuing budget pressures impact contractors? Will we see more terminations because of these budget realities? How will the shrinking procurement budget impact the number of protests? Will there be more in-sourcing?
• Will the recent uptick in investigations continue? How about suspension and debarment activity?
• Will the SBA crackdown on enforcement continue to impact teaming relationships with small businesses?
• How will the presidential election influence the climate for government contractors? What will the vacancy at OFPP mean for contractors?
• How should contractors prepare for potential revisions to OFCCP’s affirmative action and nondiscrimination obligations regarding veterans and individuals with disabilities? What can contractors expect in an audit under OFCCP’s proposed revised scheduling letter and how should they prepare?
• What do the new personal conflict of interest regulations mean for your company?
• How has the treatment of technical data for major systems changed?

Join Crowell & Moring’s team of government contracts attorneys for a special free webinar that examines the answers to these questions and many more. Our team invites you to participate in a discussion of what we believe are likely to be many of the key issues facing government contractors in 2012, including topics such as terminations, suspension & debarment, bid protests, conflicts of interest, data rights, OFCCP, grants, compliance & ethics, international, small business, cyber security, and procurement fraud. The presenters include some of the most experienced attorneys in the field, and we hope you can make it.

Please click here to register for this free event. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

GSA has now topped the $128 million settlement it reached in 2009 with NetApp – then the largest settlement reached in an FCA action against a GSA Schedule contractor – by settling with Oracle Corporation and Oracle America Inc. this past week in the amount of $199.5 million plus interest. The settlement resolves an FCA action brought by former Oracle employee, Paul Frascella, under the qui tam provisions of the statute, in which the Department of Justice intervened.

The Government’s and relator’s complaints had alleged that Oracle provided false, incomplete, and inaccurate information to the government during its negotiation of the Schedule contract; failed to disclose deep discounts given to the most favored commercial customers; and submitted false certifications. The Government’s complaint also alleged that Oracle actively took steps to ensure that its commercial sales to its basis of award customers did not trigger the Price Reduction Clause by means such as increasing the order size to exceed the contract’s maximum order threshold, arranging for the sale through a reseller rather than directly from Oracle, or changing the terms of the software license sold to the commercial customer so that it differed from the terms of the licenses on the GSA Schedule contract. 

While it would have been interesting to watch the outcome of the case had it been litigated, given the unusual allegations of fraudulent schemes to circumvent the Price Reduction Clause, the settlement amount indicates there were sufficient facts supporting at least some of the allegations, such that the company chose to settle rather than fight the case.

How to avoid being GSA’s (or a whistleblower’s) next target for a fraud action:

• Ensure your commercial pricing disclosures are current, accurate, and complete
• Negotiate a Basis of Award customer that your company can competently and consistently monitor with respect to discounts and changes in commercial pricing
• Implement a rigorous tracking system to ensure that price reductions given to the Basis of Award customer(s) are also given to Government customers
• Ensure that any certifications signed and submitted to the Government are 100% accurate
• Implement internal controls and policies that require company personnel – from the sales force to the managers of the Schedule contract – to comply with the contractual requirements
• Require mandatory training of company personnel to educate individuals on the contractual requirements and the importance of compliance
• Implement a reporting system that allows employees to report concerns about the company’s compliance with the contract requirements and that ensures such concerns are properly addressed and resolved.   

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Freedom of Information Act (“FOIA”), 5 U.S.C. §552, is intended to uphold the principles of transparency and open government, so that citizens can assess government accountability and actions. Since its enactment in 1966, FOIA has also been used by companies to obtain information about their competitors' prices and contract performance, as well as by watchdog organizations, qui tam plaintiffs and others who have used the fruits of FOIA requests to support their litigation goals. Kirk Schindler, the relator in a qui tam suit recently heard by the United States Supreme Court, is an example of someone who worked for a company, suspected that the company violated certain laws, and before proceeding with allegations against his employer, used FOIA as a tool to obtain documentation to support his case. As discussed in C&M’s recently published article in the BNA Federal Contracts Report, the use of a response to a FOIA request to support qui tam allegations may bar one's ability to maintain the suit.

The article discusses the U.S. Supreme Court’s decision holding that a federal agency’s written response to a FOIA request for records constitutes a “report” within the meaning of the public disclosure bar in the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. (See Schindler Elevator Corp. v. United States ex rel Kirk). The article provides background on the role of the public disclosure bar under the False Claims Act, describes the facts and procedural posture of the Schindler case, recounts various Circuit Court’s previous decisions with regard to FOIA requests and the public disclosure bar, analyzes the future of the public disclosure bar as a defense to the FCA, and discusses the practical effect of the new law for procurement contractors.

Click here to view article.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Both Derek Mullins and Gunjan Talati contributed to this post.

In One Largo Metro LLC et al., B-404896 (June 20, 2011), GAO sustained protests by three disappointed offerors, challenging GSA’s award regarding a lease of office space in suburban Maryland for the Department of Health and Human Services. Crowell & Moring attorneys represented King Farm Associates, LLC (“King Farm”), one of the protesters. 

In sustaining the protests, GAO found that the Head of the Contracting Activity (“HCA”) rejected the lower-level evaluators’ conclusions without articulating an adequate basis for doing so. The Agency’s source selection evaluation board (“SSEB”) had initially recommended award to King Farm. The source selection authority (“SSA”), however, raised concerns about the SSEB’s rationale for its ratings and directed it to reevaluate its recommendation. After a second evaluation that identified numerous technical differences between the proposals, the SSEB again recommended award to King Farm. The SSA, despite disagreement with the SSEB’s conclusion about the relative technical merits of the offerors, adopted the recommendation. The HCA then reviewed the SSA’s source selection decision. Rejecting the ultimate conclusions of the SSEB and SSA, the HCA summarily decided that Fishers Lane presented the best value to the Government.

Although GAO acknowledged the well-settled rule that source selection officials are not bound by the recommendations of lower-level evaluators, GAO found that the HCA failed to meaningfully consider not only a number of evaluated differences between the proposals, but also “considerable disagreement between the SSEB and the SSA concerning the relative merits of the proposals.” Instead, GAO determined that the HCA mechanically compared the percentages of adjectival ratings assigned to each offer by the SSEB and issued a conclusory pronouncement that Fishers Lane represented the best value to the government. GAO concluded: “In the absence of a documented, meaningful consideration of the technical differences between the offerors’ proposals, the HCA could not perform a reasonable tradeoff analysis.” 

GAO also sustained King Farm’s challenge to GSA’s evaluation of proposals under the access to amenities subfactor. The solicitation provided that offerors’ proposals would be evaluated for both the “quantity and variety” of specified amenities within a certain distance of the proposed office space, but GAO found that GSA improperly deviated from this requirement by considering only the amount of amenity categories. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On June 2, 2011, the Department of Justice (“DoJ”) announced a $2.7 million settlement of a False Claims Act (“FCA”) case brought against Ultralife Corporation (“Ultralife”). The complaint alleges that Ultralife violated the FCA through the submission of false claims based on “defective pricing” under three contracts with the U.S. Army to provide lithium-manganese dioxide non-rechargeable batteries.  The settlement arose out of a government investigation following a 2005 Defense Contract Audit Agency (“DCAA”) audit suggesting a potential $1.4 million pricing adjustment related to the contracts.

The settlement was first made public in April, 2011, in Ultralife’s Form 8-K filing. The Form 8-K reported that, in light of the possible treble damages and penalties associated with the pricing adjustment, the Company had decided to enter into settlement negotiations with the government. As Ultralife described in further detail: “We had certain ‘exigent’, non-bid contracts with the U.S. government, which were subject to audit and final price adjustment, which resulted in decreased margins compared with the original terms of the contracts.” The DCAA suggested the adjustment based on reductions in the cost of materials prior to the final negotiation of the contracts. This finding prompted a 2007 Department of Defense Office of Inspector General inquiry, which was later consolidated with the DCAA audit by the U.S. Attorney’s Office for the Western District of New York.

In negotiating with the Government, Ultralife took the position that the proposed adjustments could be offset with other cost increases also occurring prior to the final negotiation of the contracts. But, citing its desire to avoid further time and expenses, Ultralife agreed to a settlement with the Government to resolve the matter. In contrast to Ultralife’s description of the inquiry, the DoJ characterized it as a routine defective pricing allegation. According to the DoJ’s press release last Thursday, Ultralife provided government contracting personnel with false certifications regarding the company’s cost and pricing information for the three contracts in question; and thus, “improperly pass[ed] inflated costs on to the American taxpayers . . . .” 

Because of the settlement, the complete details will not be discovered. But Ultralife’s characterization of the matter raises several issues. Most importantly, if the Army’s need to procure the batteries was so urgent that the Army only approached Ultralife, why was it necessary for it to require the company to submit a proposal, including certified cost or pricing data? Also—assuming Ultralife’s characterization is correct—is it possible to provide defective pricing data on a “non-bid” contract? Although the answers are unknown, at the very least, this settlement should serve as a warning to those contractors who enter into such “exigent” contracts with government agencies.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Earlier this week the Pentagon issued a statement that cyber-attacks by a foreign nation could be considered an act of war that could elicit a traditional military response. Specifically, Pentagon spokesperson Col. Dave Lapan said that “a response to a cyber-incident or attack on the US would not necessarily be a cyber-response. All appropriate options would be on the table.” This statement comes as the United States grapples with putting together a comprehensive cybersecurity and warfare policy. The development of such a policy must involve a complete understanding of the laws and authority surrounding cyber warfare. Yet, these laws and authorities are, for the most part, uncharted waters. 

The American Bar Association has several committees dedicated to charting these waters and on June 13, 2011, at 12:00 pm EDT, the Science & Technology Law (SciTech) Section’s Homeland Security Committee, the Public Contract Law (PCL) Section’s Cybersecurity Committee and the Standing Committee on Law and National Security are co-sponsoring a joint program focusing on the emerging—and often unsettled—legal and policy issues arising out of cyber warfare. 

The panel for the joint program includes:

• Dr. Herbert S. Lin, Chief Scientist, Computer Science & Telecommunications Board, National Research Council of the National Academies & Study Director for Technology, Policy, Law, and Ethics regarding U.S. Acquisition and Use of Cyberattack Capabilities;
• Dr. Catherine Lotrionte, Executive Director, Institute for Law, Science and Global Security at Georgetown University and former Counsel to the President’s Foreign Intelligence Advisory Board at the White House;
• Suzanne Spaulding, Principal, Bingham Consulting Group and former General Cousnel for the Senate Select Committee on Intelligence and Assistant General Counsel at CIA; and
• The program will be moderated by David Z. Bodenheimer, a partner at Crowell & Moring LLP, Co-Chair of the SciTech Homeland Security Committee and Vice Co-Chair of PCL Cybersecurity Committee. 

The program will be held at the offices of Crowell & Moring LLP at 1001 Pennsylvania Ave., N.W., Washington, D.C. and lunch will be served to those attending in person. You can also attend by phone. The cost to attend (either by phone or in person) is $15. 

Please register here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On April 26, 2011, the government issued a proposed rule governing organizational conflicts of interest.  This proposed rule diverges substantially from the current framework in FAR 9.5, from the DFARS rule proposed last year, and from certain aspects of decades of decisional law from GAO and the Court of Federal Claims. Please click here for our summary of the FAR proposal.

 There are four differences that are particularly interesting:

•  Analysis Of Risk. The proposed FAR provision asserts that there are two kinds of risk that can flow from OCIs – (i) harm to the integrity of the competitive acquisition system and (ii) harm to the government’s business interests. The proposed rule sets forth different treatment based on that distinction.
•  Acceptance Of Risk Of Harm To Government Business Interests. In circumstances where the OCI harms the competitive acquisition system, the OCI must be substantially reduced, eliminated, or waived. However, in contrast, the FAR Councils’ proposal provides that the risk of harm to the government’s business interests may sometimes be assessed as an acceptable performance risk and further action may not be necessary to address the conflict.
•  Recognition Of Corporate Structural Barriers And Internal Controls. The proposed FAR provision recognizes that corporate structural barriers – such as independent boards of directors – may, in some circumstances, constitute sufficient mitigation.
•  Removal Of Unequal Access To Nonpublic Information From The OCI Framework. The proposed FAR provision removes the concept of unequal access to nonpublic information from the definition of OCIs, and treats it separately under FAR Part 4.

 In addition, the government has asked industry to focus on specific issues in formulating comments (which are due on or before June 27, 2011), including:

•  Is the definition of “organizational conflict of interest” sufficiently comprehensive to address all potential forms of such conflicts?
•  Do the enumerated techniques for addressing OCIs adequately address the Government’s interests? Are any too weak or overbroad? Are there other techniques that should be addressed?
•  Do the proposed solicitation provisions and contract clauses adequately implement the policy framework set forth in the proposed rule? For example, is a clause limiting future contracting an operationally feasible means of resolving a conflict? Would it be beneficial and appropriate for this information generally to be made publicly available, such as through a notice on FedBizOpps? Do the solicitation provisions and contract clauses afford sufficient flexibility to help an agency meet its individual needs regarding a prospective or actual conflict?
•  Does the proposed rule strike the right balance between providing detailed guidance for contracting officers and allowing appropriate flexibility for dealing with the variety of forms that organizational conflicts of interest take and the variety of circumstances under which they arise?
•  Are there certain types of contracts, or contracts for certain types of services, that warrant coverage that is more strict than that provided by the proposed rule?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As we blogged previously, as of today - April 15, 2011 - the public has access to all information (excluding past performance reviews) in the Federal Awardee Performance and Integrity Information System ("FAPIIS"). FAPIIS was created in 2010 as a one-stop shop for contracting officers to review information about prospective contractors' business ethics, integrity, and performance. Click here for the public portal, which is now live and ready for use.

The public will now have access to contractor-provided information about criminal, civil, and administrative proceedings, as well as government-provided information about contract terminations for default or cause and suspension and debarment. With respect to information entered in FAPIIS before April 15, 2011, it will be subject to the Freedom of Information Act process and is unlikely to be available in FAPIIS.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Women-owned small businesses (WOSBs) should now have greater access to federal contracts as a result of a long-awaited interim rule, published April 1, 2011, which provides guidelines for the WOSB program and allows contracting officers to set aside contracts for certified WOSBS and economically-disadvantaged WOSBs. To qualify for this new program, which helps agencies achieve the statutory goal of awarding five percent of federal contracting dollars to WOSBs, a WOSB must be more than 51% owned and controlled by women and must meet the regulatory definitions of a small business. In a March 31 web chat, Michele Chang of the SBA said that agencies are “teeing up opportunities” and the SBA expect contracts to be awarded in the fourth quarter, which is historically when the majority of small business contracts are awarded.

However, despite the momentum from these new regulations and the Small Business Administration's (SBA) intent to provide WOSBs "with the oxygen they need to take their business to the next level," until the SBA approves third-party certifiers, access to government contracts for non-8(a) WOSBs will be limited to a self-certifying entities and contingent upon the submission of a laundry list of corporate and other documentation for each procurement, thus imposing burdens on WOSBs and contracting officers.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

With billions of dollars at stake in one procurement alone, or the future viability of a company hanging in the balance of a single contract award, federal Government procurements are highly competitive. And, as these procurements have been increasingly the subject of bid protests – which can alter both the terms of the solicitation or the outcome of the evaluation – contractors simply cannot afford to be ignorant of the bid protest strategies, process, and procedures. Did you realize that this right to protest was put in place to give all offerors an opportunity to ensure a fair and objective chance at competing for and winning government business? Did you know that protests are not just for large business and lawyers – they are important for all contractors seeking to do business with the government? And, most importantly, did you know that if you aren’t aware of the procurement rules and your own rights to challenge, you could lose your ability to protest?

Because of the significant role bid protests play in your company’s business as a government contractor, you might be interested in reading the 2010-2011 edition primer on bid protests by Crowell & Moring’s own contributing editors, Partner Amy Laderberg O’Sullivan and Counsel Puja Satiani. This book explains the key advance-planning, decision-making, litigation, and litigation avoidance practice pointers for bid protests before an agency, the U.S. Government Accountability Office (GAO), and the U.S. Court of Federal Claims.  It also offers guidance for newcomers on the fundamentals of where and how to protest and provides information on substantive developments for seasoned practitioners. Before filing a protest, the book explains:

• How to maximize the information obtained during a debriefing;
• Considerations that must be weighed when deciding whether to protest; and
• Advantages and disadvantages of the three forums.

The book also explains the full lifecycle of a protest and the related procedural requirements, including:

• Jurisdictional issues such as timeliness traps and standing concerns;
• Protective orders and associated pitfalls;
• Development of a protest, such as shaping the scope of the agency record;
• The standard of review applied by the adjudicator;
• Potential outcomes, including corrective action, withdrawal, or decision, and the types of relief available; and
• Options available after an unfavorable decision.

The book is available from West Publishing at http://west.thomson.com/productdetail/160715/40769688/productdetail.aspx.  . Using the book as a course manual, Amy and Puja also teach a full day seminar on bid protests for Federal Publications. Details and on-line registration for the seminar are available at: http://www.fedpubseminars.com/Basics/Government-Contracts-Bid-Protests-Practice-Procedure-and-Strategy/.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Last week showed that U.S. Government contracting in Afghanistan is more problematic than ever. According to an October 27 audit report by the Special Inspector General for Afghanistan Reconstruction (SIGAR), U.S. government agencies, including DOD, State, and USAID, have paid nearly $18 billion to roughly 7,000 contractors for reconstruction work in Afghanistan; however, SIGAR is unable to determine who is being hired for what or the financial mechanisms used. Earlier this year, SIGAR was itself audited and got a failing grade on management and standards. Contractors, too, are reportedly failing according to another October 27 SIGAR audit showing that several Afghan National Police facilities recently built by U.S. Army Corps of Engineers contractors were so poorly constructed that they are unusable. All of this is likely to translate into more scrutiny for companies doing reconstruction work--assuming they are not forced out by President Karzai's imminent ban on security contractors first.

President Karzai has yet to bow to international concerns regarding his intention to oust all security contractors, but he has relaxed his original December 17 deadline for their expulsion. On October 27, he announced that a special committee--led by the Ministry of Interior and including representatives of NATO and international donors--would prepare a timetable by November 15 for disbanding companies that guard development projects. Once each company is told its dissolution date, it will have up to 90 days to move out. Details are still sketchy, however, and the plans are likely to evolve significantly over the coming weeks. 

Several development contractors are saying that, without security contractors, they will have no choice but to leave because there simply are not enough Afghan police or military officers to provided needed protection. Those that do leave may be faced with contract termination and a host of related legal consequences. Those that stay may have contract claims, tort claims, and Defense Base Act issues to contend with. Either way, the security, political, and legal environment for Afghan reconstruction contractors is fraught with practical and legal risk.

Watch this space for news about an upcoming Crowell & Moring event on these topics, featuring Ambassador Zalmay Khalilzad.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

By now, most government contractors are (or most certainly should be) aware of the Federal Acquisition Regulation (“FAR”) provisions governing organizational conflicts of interest. While OCIs have been a hot issue for some time in the federal procurement world, OCIs are becoming an increasing risk area in the state procurement arena as well.   

By way of background, pursuant to the FAR, an “OCI arises when, because of other relationships or circumstances, a contractor may be unable, or potentially unable, to render impartial advice or assistance to the government, the contractor’s objectivity in performing the contract work is or might be impaired, and/or the contractor would have an unfair competitive advantage.” FAR 2.101. There are three general categories of OCIs: biased ground rules; impaired objectivity; and, unequal access to information. If not adequately mitigated or, when necessary, avoided, an actual or potential OCI can result in a vendor’s disqualification.      

Many contractors have been surprised to learn that a growing number of states have adopted OCI rules that follow these FAR principles. Some states, such as Maryland, Virginia, Minnesota, and Illinois have codified OCI rules in their respective state administrative or procurement codes. In other states OCI rules have been adopted at the agency-level. For instance the California, Tennessee and Washington Departments of Transportation have adopted OCI rules. Some states, such as California, have also adopted OCI rules via standard state contract provisions. 

Even where there is no specific state OCI rule or standard contract clause,  state contractors are not necessarily off the OCI hook. For instance, where federal grant money is used at the state level, such as in healthcare and education procurements, federal regulations sometimes require that the state grantee consider OCI issues before making award.   Moreover, many state procurement codes have rules that mirror the general federal procurement requirements regarding competition and fair and equitable treatment. Thus, for instance, a disappointed bidder could argue in the context of a post-award state protest that an awardee with an unequal access OCI has an unfair competitive advantage that runs afoul of the general state requirements for competition. 

In short, OCIs are not simply a federal procurement matter. State contractors must also beware.     

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In MCR Federal, LLC, B-401954.2 (Aug. 17, 2010), GAO denied protester's challenge to the agency's decision, in the context of taking corrective action, to waive organizational conflicts of interest for two offerors. The agency - CIA - concluded that executing a waiver was in the government's best interest, because the pool of qualified contractors was so small that preclusion of an offeror (due to OCIs) would limit competition.

In denying the protest, GAO noted that "[w]here a procurement decision - such as whether an OCI should be waived - is committed by statute or regulation to the discretion of agency officials, our Office will not make an independent determination of the matter." GAO found that the agency complied with FAR 9.503, including approval by the agency head's designee and a written determination setting forth (i) the extent of the conflict and (ii) explanation for why application of the OCI rules would not be in the government's interests in the particular procurement. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Richard Arnholt and Christopher Gagne.

Contractors, regardless of size and no matter how "indispensable" they think they are to their Government customers, should be prepared for a possible up tick in suspension and debarment (S/D) activity in the next year. Congress has taken an increased interest in S/D, requiring in the FY 2009 DoD Authorization Act that the Interagency Committee on Debarment and Suspension submit an annual report to Congress on each agency's "activities and accomplishments in the Government wide debarment system." And the House Committee on Oversight and Government Reform recently took three agencies to task for the slow pace and low number of S/D actions (the Department of Homeland Security has had only ten debarment cases in four years).

In addition, an attorney from the Army Procurement Fraud Branch stated publicly at a recent ABA conference that no company is "too big to fail," echoing the sentiment of the Commission on Wartime Contracting during a hearing a few weeks ago. The Commission rejected a suggestion by Special Inspector General for Iraq Reconstruction that the Government's dependence on a small number of large prime contractors in Iraq and Afghanistan is a legitimate consideration that might counsel against debarment in some cases for practical reasons. As Commissioner Dov Zackheim put it:

"Well, let me just point out that too-big-to-fail practically wrecked this economy of ours, and I think if we worry about too big to fail, particularly as there are more than one contractor always bidding, we worry about too big to fail, we're going to fail anyway."

The Commissioners made it abundantly clear that they wanted to see more suspensions and debarments all around, including for "willful bad performance." And they want to see primes suspended or debarred for the malfeasance of their subs.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On May 19, 2010, DoD issued an interim rule implementing Section 8116 of the FY2010 Defense Appropriations Act. This rule, which does not apply to commercial items, prohibits use of appropriated funds for contracts, task/delivery orders, or bilateral modifications in excess of $1 million, unless the contractor agrees not to enforce, or enter into, agreements with employees or independent contractors that require arbitration of certain civil rights claims or numerous tort actions arising out of or relating to sexual assault or harassment.

In addition, as of June 17, 2010, no appropriated funds may be expended unless the contractor certifies that it requires each covered subcontractor to agree not to enter into, and not to take any action to enforce, an agreement requiring arbitration of the claims discussed above, with respect to any employee or independent contractor performing work related to such subcontract.

This rule does not affect the enforcement of other aspects of an agreement that are not related to arbitration of civil rights claims or tort actions relating to sexual assault or harassment. This rule allows the Secretary of Defense to waive applicability to a particular contract or subcontract, if determined necessary to avoid harm to national security.

DoD has provided examples to help contractors determine applicability of the rules:

• A new order that exceeds $1 million using funds appropriated or otherwise made available by the FY10 DoD Appropriations Act, placed against an indefinite-delivery/indefinite-quantity contract for an applicable item or service, is covered by this restriction, regardless of whether the basic indefinite-delivery/indefinite-quantity contract was covered.

• A bilateral modification adding new work that uses funds appropriated or otherwise made available by the FY10 DoD Appropriations Act in excess of $1 million is covered.

• A contract valued at $1.5 million awarded today, and only $10,000 in funds appropriated or otherwise made available by the FY10 DoD Appropriations Act will be obligated, with the remaining balance being FY11 funding, is not covered, because the total value of funds appropriated or otherwise made available by the FY10 DoD Appropriations Act is less than $1 million.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Thursday, May 20, from 2:00 pm - 3:00 pm ET, please join Tom Humphrey, John McCarthy, and Peter Eyre from Crowell & Moring's Government Contracts Group for an in-depth discussion of the proposed rules, how these rules might impact strategic business decisions, and the implications for bid protests at GAO and the Court of Federal Claims.

The Department of Defense has issued proposed rules (.pdf) regarding organizational conflicts of interest (“OCI”), which would apply to all DoD procurements. Even for non-DoD contractors, these proposed rules merit careful attention because it is likely that the revisions to the FAR OCI provisions (which are currently underway) will closely resemble the proposed DoD rules. The proposed rules generally track decades of GAO and Court of Federal Claims decisions interpreting FAR 9.5. But there are some new elements as well. For instance, if implemented, these new rules would require many contractors to submit extensive disclosures - e.g., "any other work performed on contracts, subcontracts, grants, cooperative agreements, or other transactions within the past five years that is associated with the offer it plans to submit" - to allow agencies to analyze actual and potential OCIs. In addition, the proposed rules, implementing a specific mandate from the Weapons System Acquisition Reform Act of 2009, would prohibit (subject to a few limited exceptions) a contractor performing systems engineering and technical assistance functions for a major acquisition program from participating as a contractor or major subcontractor in the development or construction of a weapon system under such program.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On April 22, 2010, DoD issued proposed rules (.pdf) that would implement section 207 of the Weapons Systems Acquisition Reform Act of 2009 ("WSARA"), which requires DoD to provide “uniform guidance and tighten” existing regulations governing organizational conflicts of interest (“OCI”). We have previously published a detailed description and analysis of these proposed rules. Although the proposed rules would apply to DoD procurements only, non-DoD contractors should pay close attention, because it is widely expected that the FAR OCI rules, which are currently under review, will track these DOD rules.

DoD is requesting comments by June 21, 2010 for consideration in the formulation of final rules. As contractors review the proposed rules and think about filing comments, here are a few areas that might benefit from industry comment:

• Instead of being located in Part 9 (relating to contractor qualifications, responsibility, and eligibility), where the current FAR OCI rules can be found, these new rules would be located in Part 3 fo the DFARS (relating to improper business practices and other integrity issues). What is the significance, if any, of the new location of the proposed OCI rules?
• The proposed rules regarding unfair access to non-public information OCIs provide that “not all competitive advantage is unfair,” and – to that end – the rules incorporate the long-standing principle that incumbent contractors (or an offeror that has performed similar requirements in the past) may have a competitive edge over others, but that advantage by itself does not constitute an unfair competitive advantage. The proposed rules do not offer much guidance about what is a permissible "natural advantage of incumbency." At what point does that advantage become unfair (and, therefore, impermissible)?
• Under the proposed rules, if a contracting officer determines that performance of the contemplated work has the potential to create an OCI, the CO must insert a solicitation provision, which includes broad disclosure and certification requirements, including an obligation on the offeror to disclose “all relevant information regarding any organizational conflicts of interest." Further, the offeror must describe “any other work performed on contracts, subcontracts, grants, cooperative agreements, or other transactions within the past five years that is associated with the offer it plans to submit.” What is meant by "all relevant information?" How broadly should an offeror construe "associated with the offer"? Is five years an appropriate length of time?
• The proposed rules, implementing a specific WSARA mandate, provide that a contract for the performance of systems engineering and technical assistance for a major acquisition program must prohibit the contractor, or any affiliate of the contractor, from participating as a contractor or major subcontractor in the development or construction of a weapon system under such program. The proposed rules expressly recognize that an exception is appropriate for highly qualified contractors with domain experience and expertise if the conflict can be adequately resolved. How will DoD implement this exception? What standards will be used? How far in advance will an exception be granted? What does it mean to "adequately resolve" a conflict?

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

On Thursday, May 6, from 2:00 pm - 3:30 pm ET, please join Angela Styles, Shauna Alonge, Amy O'Sullivan and Peter Eyre from Crowell & Moring's Government Contracts Group for an in-depth discussion of the final rule amending the FAR to implement the Federal Awardee Performance and Integrity Information System, known as FAPIIS.

As discussed in a previous blog post, on March 23, 2010, the FAR Councils issued a final rule amending the FAR to implement FAPIIS. The stated purpose of the rule, with an effective date of April 22, 2010, is to enhance the government's ability to evaluate for responsibility determinations the ethics and performance of prospective contractors competing for federal contracts and grants. But, most significantly for industry, many contractors will have to submit certified disclosures pertaining to certain criminal, civil, and administrative proceedings and settlements at the federal and state level. Unfortunately, even though these requirements are being rolled out right now, there are many unanswered questions. For instance, what are "administrative proceedings" – does the term include tax assessments, environmental citations, workers' compensation claims, and government claims for contract refunds? Must confidential settlement agreements be reported? What about deferred prosecution agreements? How should contractors respond to a question in CCR if the question is not consistent with the rule? Aside from the challenges relating to interpreting the rule and responding accurately in CCR, there are many other unknowns. How will the government use this vast amount of information? Will it have an impact on bid protests? Will this information be publicly available via FOIA or otherwise? It is essential that contractors are attuned to these traps because of the potential civil and criminal ramifications that exist for the unwary.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

The Multiple Award Schedule (“MAS”) Advisory Panel presented a series of recommendations (.pdf) to the new GSA Administrator on March 10, 2010 related to the structure, use and pricing of the GSA MAS Program.  The Panel’s charge was to focus on the “most favored customer” and price reduction provisions in Federal Supply Schedule (“FSS) contracts (also known as GSA Schedule contracts). The MAS Panel’s recommendations focus on improving vendors’ pricing to the government through increased competition and transparency.

Many of the recommendations focus specifically on the delivery of Services and Solutions (a combination of services and product). For Services contracts, the Panel recommended:

• Eliminate the Price Reduction Clause and require competition at the task and delivery order level;
• Ensure GSA policy is clear that the government’s pricing objective is to pursue the lowest overall cost alternative at the time of contract formation;
• Disclose within the government GSA’s determination that offered prices are fair and reasonable, to enable ordering agencies to better evaluate vendor quotes;
• Explore the use of cost-type contracts.

To what extent the Panel’s recommendations will be implemented by GSA is uncertain. Certainly, competition at the task and delivery order level will be achieved, because, independent of the Panel’s recommendations, Section 863 of the National Defense Authorization Act of 2009 (.pdf) requires such competition – for both defense and civilian agency acquisitions above the simplified acquisition threshold and using multiple award contracts.  The proposal for disclosure within the government of vendors’ pricing information submitted to GSA, for the purpose of enabling ordering agencies to better evaluate quotes for individual orders, should be carefully watched, because the wider the dispersal of this highly-proprietary information, the greater the chance of inadvertent disclosure to competitors. 

Stay tuned for a discussion of the Panel’s recommendations specific to Solutions in Part II of this blog.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Subcontractors seeking a piece of the Federal construction spending (pdf) boom beware: you can find yourself with no easy options to collect from a nonpaying prime, if the prime contract -- the one you thought was a construction contract -- is actually a "commercial items" contract, and the prime contractor did not get a payment bond.

The current wave of Federal construction spending, coinciding as it does with a drop in private construction spending (pdf) attracts many contractors new to, or at least inexperienced with, Federal contracting.  Many try subcontracting at first, instead of prime contracts, thinking that through subcontracts, they avoid some of the requirements, traps, and risks inherent in doing business with the Federal Government.

But one of the persistent risks for a subcontractor -- a prime that does not pay its bills -- can loom even larger for the unwary subcontractor working on Federal construction projects.  Under the Miller Act and the FAR, in most construction contracts the Government requires the prime contractor to obtain a payment bond, or other protections for subcontractors and suppliers.  The payment bond is supposed to protect subcontractors and suppliers by providing a means of collecting, if the prime refuses to pay.  The Government generally accomplishes this by including a standard clause, e.g. FAR 52.228-15, in the prime contract, requiring the prime to obtain a bond (or take other measures) to protect subcontractors.

However, if the prime contract is designated by the Government as a "commercial items" contract, agencies have taken the position that they are not required to include FAR 52.228-15 -- or any other protections for subcontractors -- in the prime contract.

Well, one may think, so what?  A construction contract is a construction contract, not a commercial items contract.  If I have a construction contract, the rules for construction contracting apply, and so do the Miller Act and and standard clause FAR 52.228-15.

Not necessarily.  The distinction between "construction" and "commercial items" contracts can be as fine as frog's hair -- a matter of hair-splitting over definitional details.

The FAR defines "commercial item" to include "services of a type offered and sole competitively in substantial quantities in the commercial marketplace."  Might this definition include projects that one normally thinks of as "construction"?   Don't bet that an agency has not tried to fit the "construction" square peg into the "commercial items"  round hole.

Indeed, the Federal Government's chief procurement policy-maker, the Office of Federal Procurement Policy, thought the line was fuzzy enough to confuse agencies.  OFPP encouraged agencies not to overuse commercial items contracting practices for construction work.  In 2003, OFPP issued a memorandum (pdf) warning agency officials that the commercial items rules (FAR Part 12)

"should rarely, if ever, be used for new construction acquisitions or non-routine alteration and repair services." 

Instead, OFPP said, officials should use the rules for construction contracting (FAR Part 36) in those situations.

This is not a new problem, but with the significant increase in Federal spending on construction, there are signs it continues to confuse and surprise unsuspecting subcontractors on Federal construction projects.  In the next post, I will look at the implications for subcontractors suffering under a nonpaying prime. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Monday, I discussed conflicts between military construction and green building certification.  Green building certification was originally created for commercial office buildings, which can create some odd applications in military construction.  While we have have already discussed energy efficiency, bicycle racks and HVAC systems, there is one component of military construction that conflicts directly with many green building components:  anti-terrorism.  

I never imagined someone had completed a study of these conflicts:

"The LEED®-DoD Antiterrorism Standards Tool addresses the security implications of strategies used to achieve each LEED credit with regard to their inter-relationship (i.e., potential conflicts and synergies), from the Department of Defense (DoD) perspective. Information is presented within a color-coded matrix based on the U.S. Green Building Council's Leadership in Energy and Environmental Design Green Building Rating System (LEED-NC Version 2.1) cross-referenced with the applicable standards in Unified Facilities Criteria (UFC) 4-010-01, DoD Minimum Antiterrorism Standards for Buildings. As such, critical areas are easily identified, prompting the project team to work collaboratively, using a 'whole building' approach, to develop successful, efficient solutions for a high performance, secure building."

For a government contracts attorney focused on green building legal and regulatory developments, the Standards Tool is a remarkable discovery.  My eye was immediately drawn to the "conflicting requirements" in the Standards Tool.  According to the Standards Tool, the following LEED credits are in direct conflict with Anti-terrorism Standards: 

•    SS-2 Development Density
•    SS-5.2 Reduced Site Disturbance, Development Footprint
•    SS-6.1 Stormwater Management, Rate and Quantity

In future posts, I will be exploring the conflicts between these LEED credits and the Anti-terrorism Standards Tool.  Have any of you worked with a building trying to comply with both LEED certification and the Department of Defense Anti-Terrorism Standards? 

Related Links:

LEED DoD Antiterrorism Standards Tool (WBDG)

Conflicts Arise Between Military Construction and Green Building (GBLU)

• Email This
• Print
• Comments
• Trackbacks
• Share Link