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The following is an installment in Crowell & Moring’s 2023 Bid Protest Sustain of the Month Series.  All through 2023, Crowell’s Government Contracts Practice will keep you up to date with a summary of the most notable bid protest sustain decision each month.  Below, Crowell Partner Cherie Owen discusses GAO’s decision sustaining the protest of BC Site Services, LLC, (BCSS) in which GAO found that an agency’s exchanges with offerors – even though not labeled as such – constituted discussions.

Continue Reading March 2023 Bid Protest Sustain of the Month
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Federal contractors must be registered on to be eligible for award of federal contracts.  Failure to do so can have significant consequences, as the recent U.S. Court of Federal Claims (CFC) decision in Myriddian, LLC v. United States, No. 23-443 makes clear. 

In Myriddian, the Centers for Medicare & Medicaid Services (CMS) awarded a five-year, $11 million contract to Cloud Harbor Economics, LLC (Cloud) for coding support services.  Myriddian, an unsuccessful offeror, protested at the CFC, arguing Cloud was ineligible for award under FAR 52.204-7, which provides that an offeror must “be registered in SAM when submitting an offer or quotation, and shall continue to be registered until time of award.”  Although Cloud was registered in SAM at the time of proposal submission and at the time of contract award, Cloud’s registration had lapsed for three weeks during the proposal evaluation period.  The CFC sustained the protest, holding that FAR 52.204-7 unambiguously requires a contractor to maintain its SAM registration throughout the entire proposal and evaluation process, and that an agency lacks the authority to waive that requirement.  Because Cloud failed to “continue to be registered until time of award,” the CFC found Cloud ineligible for award and enjoined CMS from proceeding with the contract.  

Myriddian comes on the heels of the CFC’s recent decision in Thalle/Nicholson Joint Venture v. United States, No. 22-755, upholding an agency’s elimination of a joint venture from competition where each of the joint venture members was individually registered in SAM at the time of proposal submission, but the joint venture itself was not.  These cases stand as cautionary tales reminding offerors to ensure active SAM registration at all times throughout the proposal process and not to wait until the last minute—especially given processing delays that contractors continue to experience with SAM registrations.

  • Key takeaway #1 – Register and renew/update early. Although we generally are seeing smoother registration processing recently, issues and delays remain. We advise clients to begin new registrations—and updates and renewals to existing registrations—as early as possible to get ahead of potential delays (e.g., with entity validation).
  • Key takeaway #2 – When in doubt, reach out. Our team is experienced in navigating SAM registration issues and can provide support at every juncture. Please do not hesitate to reach out.
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This week’s episode covers the proposed Secure Software Self-Attestation Common Form issued by CISA, OFCCP’s issuance of a modified version of its initial proposed revisions to the Scheduling Letter and Itemized Listing, and a Civilian Board of Contract Appeals decision about jurisdiction and timeliness, and is hosted by Peter Eyre and Yuan Zhou. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. | PodBean | SoundCloudApple Podcasts

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Good news for potential protesters at the Court of Federal Claims (CFC).  On May 10, 2023, in CACI, Inc.-Federal v. United States, No. 2022-1488, the United States Court of Appeals for the Federal Circuit issued a sweeping decision holding questions of protester standing and prejudice are merits issues that do not implicate the CFC’s jurisdiction.  In so doing, the Federal Circuit declared decades of prior jurisprudence holding the opposite “no longer good law.” (For a more in-depth discussion of CACI, you can listen to Crowell’s latest All Things Protest podcast.)

Continue Reading The Federal Circuit Reconsiders the Impact of Standing and Prejudice on the Court of Federal Claims’ Bid Protest Jurisdiction
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On May 12, 2023, the Department of Treasury and the Internal Revenue Service (IRS) released Notice 2023-38 (Notice), stating that they intend to propose regulations to address the requirements taxpayers must satisfy when claiming domestic content bonus credit amounts provided by the Inflation Reduction Act under Internal Revenue Code (IRC) Sections 45, 45Y, 48, and 48E.

Sections 45 and 45Y provide tax credits for the production of clean energy. Under the statute, taxpayers claiming a clean energy production credit under IRC Sections 45 or 45Y may increase the amount of that credit by ten percent for any qualified facility incorporating domestic steel, iron, and manufactured products as components of the facility. Specifically, the statute requires that all steel and iron products be produced in the United States, as well as an “adjusted percentage” of manufactured products incorporated as components of the qualified facility.

Sections 48 and 48E provide tax credits equal to a percentage of a company’s investment in clean energy producing projects. A Taxpayer may receive a bonus credit amount of either 2 or 10 percent if the domestic content requirements are satisfied. To receive the 10 percent bonus credit, the project must meet additional qualifying requirements beyond the domestic content requirements.

Consistent with the statute, the Notice borrows from pre-existing regulations applicable to infrastructure projects funded by the Federal Transit Administration (FTA).  Similar to the FTA’s approach, structural steel and iron components of a qualified facility will count towards the domestic content bonus credit if all manufacturing processes for the steel and iron, from melting forward, occur in the United States.  A manufactured product incorporated as a component of a qualifying facility will count as domestic if it is manufactured in the United States from U.S.-origin components; components qualify as having U.S. origin if they are manufactured in the U.S. irrespective of the origin of any subcomponents.  Products that are primarily made of steel and/or iron but which do not serve a structural function are considered manufactured products and therefore need only satisfy the less onerous requirements applicable to such products.  To assist taxpayers in distinguishing between steel/iron and manufactured products, the Notice includes a representative list of common project components that it categorizes as steel/iron or a manufactured product.  For example, for terrestrial wind facilities, the tower and rebar for any windmill will constitute steel and iron, whereas the turbine itself will constitute a manufactured product component, meaning items such as the nacelle, blades, and rotor hubs will constitute components of the manufactured product that must be domestically produced.     

The Notice and the existing FTA rules have some important differences.  First, while the FTA rules generally apply to “end products,” the Notice applies to “components” of any qualified facility, which the IRS defines as any article, material, or supply that is directly incorporated into a qualified facility.  Second, because the IRS only requires an “adjusted percentage” of manufactured products be of U.S. origin to qualify for the domestic content bonus credit, Treasury and the IRS propose to permit taxpayers to also count U.S.-origin components of manufactured products towards that adjusted percentage, even where the manufactured product itself does not qualify as domestic.  However, in calculating the cost of those components, taxpayers will only be permitted to claim direct material and labor costs, whereas the FTA rules also include allocable overhead.  By statute, the “adjusted percentage” of manufactured products that a qualified facility must incorporate to claim the credit is currently set at 40 percent of all manufactured products (20 percent for offshore wind facilities), with a phased increase to 55 percent for projects beginning in 2027 (2028 for offshore wind facilities).  For retrofitted facilities, the taxpayer may exclude any used property that remains incorporated into the project.

The forthcoming proposed regulations are expected to apply to tax years ending after May 12, 2023. Taxpayers may rely on the rules for the domestic content bonus credit requirements for any qualified facility, energy project, or energy storage technology if the construction of such facility begins before the date that is 90 days after the date of publication of the forthcoming proposed regulations in the Federal Register.

Taxpayers will be able to submit comments to Treasury and the IRS on the forthcoming proposed regulations for 60 days after publication. Please contact us if you have questions regarding the domestic content requirements or are interested in submitting comments to Treasury and the IRS.

Key Takeaway

The Treasury and IRS’s proposed guidance on the domestic content requirements under IRC Sections 45, 45Y, 48, and 48E generally track the Federal Transit Administration Buy America requirements, which represent a long-standing regime applicable to mass transportation infrastructure projects, with some important distinctions for the clean energy industry to consider when planning new projects.

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Crowell & Moring’s “All Things Protest” podcast keeps you up to date on major trends in bid protest litigation, key developments in high-profile cases, and best practices in state and federal procurement. | PodBean | SoundCloud | Apple Podcasts 

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Concerns about the federal debt limit have simmered since the Government reached the limit in January, but things are coming to a boil with the Treasury Department’s confirming that, as early as June 1, “extraordinary measures” may be insufficient to prevent the U.S. from defaulting on its obligations. A default would be unprecedented, creating uncertainty about how the Administration will proceed. It is important, therefore, that contractors understand the circumstances and be prepared to respond effectively to a range of scenarios.

What is the Federal Debt Limit?

The federal debt limit is the maximum amount of money that Congress, by statute, permits the Treasury to borrow.  When Treasury reached this borrowing limit in January 2023, it began taking “extraordinary measures” to keep paying the federal government’s bills, but those extraordinary measures can only temporarily stave off default.  Once the federal government’s cash on hand is no longer sufficient to pay its bills despite those extraordinary measures, the U.S. could begin defaulting on its payment obligations. 

Continue Reading Debt Limit Default
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On May 11, 2023, the Supreme Court issued two opinions limiting the reach of the federal fraud statutes and eliminating often-used theories from the government’s arsenal.

In Ciminelli v. US, 598 U. S. __ (2023), the Supreme Court decided that the “right to control” theory—long used by prosecutors in the Second Circuit—can no longer be used to support wire fraud convictions.  The Court overturned the conviction of Louis Ciminelli, a participant in a scheme to rig bids for New York state-funded projects, known as the “Buffalo Billion” initiative. As part of the scheme, requests for proposals were strategically drafted to give preferential treatment to Ciminelli’s company. At trial, the government argued that Ciminelli and his co-defendants were guilty of wire fraud under the right-to-control theory because they deprived the entity responsible for awarding the state-funded projects of certain information necessary to make an informed decision about the bid awards. The Second Circuit affirmed the conviction and the government’s use of the right-to-control theory.

Writing on behalf of a unanimous court, Justice Clarence Thomas held that the wire fraud statue only reaches traditional property interests and the right to valuable economic information needed to make discretionary economic decisions—known as the “right to control”—is not a traditional property interest. The right-to-control theory, therefore, “cannot form the basis for a conviction under the federal fraud statutes.”

Continue Reading In Control: Supreme Court Reigns-In Second Circuit Fraud Theories
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This week’s episode covers the proposed Secure Software Self-Attestation Common Form issued by CISA, OFCCP’s issuance of a modified version of its initial proposed revisions to the Scheduling Letter and Itemized Listing, and a Civilian Board of Contract Appeals decision about jurisdiction and timeliness, and is hosted by Peter Eyre and Yuan Zhou. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. | PodBean | SoundCloudApple Podcasts

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On May 10, 2023, the National Institute of Standards and Technology (NIST) released a draft of NIST Special Publication (SP) 800-171 Revision 3, containing new and revised cybersecurity controls that, when finalized, will be required for federal contractors handling Controlled Unclassified Information (CUI).

NIST proposed five key changes to NIST SP 800-171:

  1. New controls and control familiesLike Revision 2, NIST SP 800-171 Revision 3 contains 110 total security controls.  However, in Revision 3, NIST deleted or consolidated older controls to make way for 26 new controls, including 3 new control families.
  2. Introduction of organization-defined parameters (ODP). NIST introduced ODP in select security controls, increasing flexibility by allowing federal agencies to specify values for designated parameters as needed.  For example, Control 3.5.12, “Authenticator Management,” now allows agencies to define the authenticator refreshment time period or, if the agency prefers, require refreshment when an agency-defined event occurs.
  3. Increased specificity for security requirements. Revision 3 incorporates nuanced security requirements for the majority of its controls.  For example, to comply with Revision 3’s Control 3.1.4, “Separation of Duties,” contractors will need to demonstrate that they:
    a. identify the duties of individuals requiring separation; and
    b. define system access authorizations to support separation of duties.
  4. Updated tailoring criteria. NIST reduced the number of non-federal organization (NFO) controls from Revision 2, as industry feedback revealed that many NFO controls (e.g. AC-1, “Policies and Procedures”) were not being implemented or assessed.  
  5. A prototype CUI overlay. NIST provided a draft CUI overlay spreadsheet along with Revision 3.  The overlay describes how each control and control item in the NIST SP 800-53 moderate baseline—essentially, NIST SP 800-171’s parent standard—is tailored to protect CUI in NIST SP 800-171.

NIST is soliciting comments on Revision 3 through July 14, 2023.  Any interested parties may email their comments to