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Filing a pre-award protest can be an effective tool to protect a contractor’s ability to compete for a contract. But a recent Court of Federal Claims decision counsels that while a pre-award must be filed early—typically prior to the date for submission of proposals—it cannot be filed too early.

In Goodwill Industries of South Florida, Inc. v. U.S., the U.S. Court of Federal Claims considered a pre-award protest filed by Goodwill Industries, a qualified nonprofit agency for disabled workers identified on the AbilityOne Program’s procurement list as a provider of hot-weather trousers and combat pants. Goodwill challenged the Defense Logistics Agency’s (“DLA”) intent to procure both items from sources other than Goodwill. For the hot-weather trousers, though DLA had not yet issued a solicitation, it had drafted an Individual Acquisition Plan (“IAP”) indicating an intent to award two indefinite delivery indefinite quantity (“IDIQ”) contracts based on a best value procurement. For the combat pants, DLA had issued a solicitation for the award of two IDIQ contracts, though DLA had placed the procurement “on hold” to make design changes. Goodwill argued that the AbilityOne Program required DLA to procure both items from Goodwill on a non-competitive basis, and sought an injunction preventing award to any other company.

The Court dismissed the protest as premature. Regarding the hot-weather trousers, the Court held that in the absence of a solicitation, DLA’s draft IAP was not a “final agency action,” and that Goodwill’s “anticipation of a future procurement violation is not sufficient to make a claim ripe in a bid protest before the court.” As to the combat pants, the Court explained that the “on hold” status of that solicitation rendered that aspect of Goodwill’s protest similarly unripe. The Court reasoned that while the procurement was “on hold” only while DLA was “waiting for specification changes to the purchase description and technical data,” indicating DLA’s intent to continue with a competitive best value procurement, the protest was still premature because the Court could not “rule out the possibility that the change in purchase description will match Goodwill’s production of the Army Combat Pants, nor can the Court rule out the chance that the description will be changed, and not match Goodwill’s production.” Accordingly, the Court dismissed both challenges as premature.

Given the complex considerations a company must weigh when determining whether a protest is premature, untimely, or “just right,” potential protesters should engage in close coordination with their protest counsel to identify the appropriate time to file.

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On November 18, 2021, President Biden signed an executive order, “Executive Order on Nondisplacement of Qualified Workers Under Service Contracts” requiring, in most instances, that federal Service contracts and solicitations for such contracts include a clause which mandates that the awardee (and its subcontractors) of a follow-on Service contract for “same or similar services,” must offer employment to “qualified workers” on the predecessor contract. In this context, a “Service contract” means any contract, contract-like instrument, or subcontract for services covered by the Service Contract Act of 1965 (41 U.S.C. §§ 6701–6707).

This executive order generally affords a right of first refusal to service employees, (as that term is defined under the Service Contract Act), working on a predecessor contract if those employees would otherwise lose their jobs as a result of the predecessor contract’s termination or expiration.  The executive order is intended to avoid the need for a carryover work force and “provides the Federal Government with the benefits of an experienced and well-trained work force that is familiar with the Federal Government’s personnel, facilities, and requirements.” The White House also released a fact sheet highlighting that the executive order advances the administration’s equity goals, as service contract workers are disproportionality women and workers of color. The executive order provides agencies with the ability to grant exceptions to this rule, pursuant to specific limitations, and empowers the Department of Labor with enforcement authority to prescribe sanctions and remedies, including debarment in instances of willful violations.

The executive order contemplates that the outgoing contractor must furnish the Contracting Officer a list of the names of all service employees working under this contract and its subcontracts during the last month of contract performance. The executive order also notes that “when an agency prepares a solicitation for a service contract that succeeds a contract for performance of the same or similar work, the agency shall consider whether performance of the work in the same locality or localities in which the contract is currently being performed is reasonably necessary to ensure economical and efficient provision of services.” If such a determination is made, the agency can include a requirement or preference in the solicitation for the successor contract that it be performed in the same locality or localities.

The executive order directs the Department of Labor to issue final regulations implementing the requirements of the order within 180 days and that following the issuance of such regulations, the FAR Council is directed to amend the Federal Acquisition Regulation accordingly. Although only solicitations issued after the FAR Council promulgates its final regulations will be required to include this clause, agencies are already “strongly encouraged, to the extent permitted by law” to amend existing solicitations to account for the new rule.

The executive order essentially reverts back to the rules that were in effect before the previous administration revoked them in late 2019. Critically, as noted in the fact sheet, although the original rule only applied to successor contracts that were performed at the “same location,” the executive order goes further in removing this requirement “to account for the flexible nature of service sector work in today’s economy.”

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On November 16, 2021, the U.S. Government Accountability Office (GAO) released its Annual Report on Bid Protests for Fiscal Year 2021. While GAO received slightly fewer protests in FY2021 than in the year prior, the overall protest “Effectiveness Rate”—meaning the percentage of cases in which the protester received relief, such as voluntary corrective action or a GAO sustain—remained relatively constant, at 48% (the rate has ranged from 44% to 51% in each of the past five years).

GAO’s Annual Report also provides a helpful summary of the most common grounds for sustained protests in the prior year. In FY2021, those grounds were as follows: (1) unreasonable technical evaluation; (2) flawed discussions; (3) unreasonable cost or price evaluation; and (4) unequal treatment. The inclusion of “flawed discussions” on the list is notable—it is the first time in recent history that discussions-based protest arguments have proven so successful. Though firm conclusions are difficult to draw based upon a single year’s data, this may indicate that GAO is taking a closer look—and holding agencies to a higher standard—at the propriety and fairness of discussions. Continue Reading GAO Releases Annual Bid Protest Report to Congress for FY 2021, Identifies New “Top Ground” for Sustains

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This week’s episode covers changes to its Cybersecurity Maturity Model Certification program, replacement of the FAR concept of “commercial item” with “commercial product’’ and “commercial service,” updates to the DOJ approach to corporate cooperation credit, developments about the Federal Contractor Vaccine Mandate, and a discussion of a bid protest decision relating to standing and IDIQ contracts, and is hosted by Peter Eyre and Monica Sterling. 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.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts 

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Crowell & Moring’s “Byte-Sized Q&A” podcast takes the complex world of government contracts cybersecurity and breaks it down into byte-sized pieces. In this episode, hosts Evan Wolff and Kate Growley talk through the fundamental changes that the DoD has announced will be made under “CMMC 2.0.”

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts 

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On November 4, 2021, the FAR Council issued a final rule replacing the FAR definition of “commercial item” with bifurcated definitions for “commercial product’’ and “commercial service.”  The rule implements Section 836 of the National Defense Authorization Act for fiscal year 2019, and is also consistent with recommendations from the Section 809 Panel to implement separate definitions that promote uniformity and reduce the acquisition workforce’s “confusion over how to identify eligible commercial products and services.”

Effective December 6, 2021, the new references to “commercial products,” “commercial services,” or both, will be populated throughout the FAR.  The rule does not create substantive changes to the previous definitions of commercial products and services, nor does it create any new solicitation provisions or contract clauses.  The FAR Council further noted that the definitions do not expand or shrink the universe of products or services the government may procure using FAR part 12, nor does it change the terms and conditions with which contractors must comply.  In responding to public comments, the FAR Council also confirmed that commercially available off-the-shelf (“COTS”) products remain a subset of commercial products, and do not include commercial services.

While the final rule is a positive step toward further streamlining commercial contracting, it remains to be seen whether these changes will result in the government’s more consistent use of commercial procurement procedures and issuance of commerciality determinations.

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In its recent decision Polansky v. Executive Health Resources Inc., No. 19-3810 (3d Cir. Oct. 28, 2021), the U.S. Court of Appeals for the Third Circuit became the most recent to weigh in on the circuit split regarding the Government’s authority to dismiss False Claims Act (“FCA”) qui tam actions pursuant to 31 U.S.C. § 3730(c)(2)(A). Siding with the Seventh Circuit’s recently-adopted approach, the Third Circuit held that Federal Rule of Civil Procedure 41(a) applies to government dismissals in FCA qui tam actions the same as it would in any other suit. In doing so, the Third Circuit cemented what is now a three-way split regarding the standard the Government must meet to exercise its dismissal authority, rejecting both the D.C. Circuit’s approach, that the Government’s dismissal power is unfettered, and the Ninth Circuit’s approach that the motion to dismiss must have a “rational relation” to a valid government purpose. In the same opinion, the Third Circuit also entered the fray on a second, related split, siding with the Sixth and Seventh Circuits in finding that the Government must intervene in FCA suits before moving to dismiss. In contrast, the D.C., Ninth, and Tenth Circuits do not require the Government to intervene before moving for dismissal of an FCA suit at any point in the litigation.

The qui tam action in Polansky accused Executive Health Inc. of systematically enabling its client hospitals to over-admit patients by certifying inpatient services that should have been provided on an outpatient basis and then billing those services to Medicare. The relator filed the complaint in 2012 under seal where it remained for two years until the Government declined to intervene. After the declination, the relator continued the suit until 2019 when the Government notified the parties that it intended to dismiss the action pursuant to its authority under § 3730(c). The United States District Court for the Eastern District of Pennsylvania granted the Government’s motion over the relator’s objection, and the relator subsequently appealed to the Third Circuit. Continue Reading Tipping the Scales: Third Circuit Weighs in on Circuit Split Regarding the Government’s Dismissal Authority Over False Claims Act Qui Tams

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The Department of Defense (DoD) recently announced significant changes to its Cybersecurity Maturity Model Certification (CMMC) program intended to simplify the requirements and ease the compliance burden on contractors.  Unlike its predecessor, the new CMMC 2.0 moves to three compliance levels rather than five; aligns the required security controls (known as practices) with National Institute of Standards and Technology (NIST) Special Publications (SP) 800-171 and 800-172; and eliminates entirely previously required maturity processes.  The changes also include a shift to self-assessments for all but contractors supporting the most sensitive programs, as well as the return of Plans of Action and Milestones (POAMs) to demonstrate compliance and achieve certification.

The new requirements are summarized below:

  • CMMC Level 1, Foundational – Contractors must implement the 17 controls from NIST SP 800-171 enumerated in FAR 52.204-21 and submit an annual self-assessment to the DoD through the Supplier Performance Risk System (SPRS).
  • CMMC Level 2, Advanced – Contractors must implement the 110 controls in NIST SP 800-171 and submit an annual self-assessment or, if required to handle (as yet undefined) critical national security information, a triennial independent assessment performed by a CMMC Third Party Assessment Organization (C3PAO).
  • CMMC Level 3, Expert – Contractors must implement the 110 controls in NIST SP 800-171 and a subset of controls from NIST SP 800-172 before undergoing a triennial government-led assessment.  The DoD, however, is still in the process of developing the requirements for this Level.

CMMC 2.0 will be implemented through the rulemaking process, which the DoD estimates could take anywhere from nine months to two years.  Thereafter, the DoD will begin to incorporate CMMC 2.0 requirements into contracts.  In the meantime, the DoD has suspended its CMMC pilot program and will not approve the inclusion of CMMC requirements in any forthcoming DoD solicitations.

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On October 22, 2021, the Court of Federal Claims (Court) unsealed a decision awarding contractor SecurityPoint Holdings, Inc. (SecurityPoint) over $100 million in damages for TSA’s infringement of SecurityPoint’s patent No. 6,888,460 (“the ‘460 patent”). The ‘460 patent concerns a system of trays that recycle through security screening checkpoints by use of movable carts, and was first filed with the U.S. Patent and Trademark Office on July 3, 2002 by SecurityPoint CEO Joseph Ambrefe. Ambrefe had offered the TSA a license to use the patent in exchange for the exclusive right to advertise on the trays, but TSA refused the offer.

On May 2, 2011, SecurityPoint filed suit under 28 U.S.C. § 1498(a), which provides patent owners an exclusive remedy for “reasonable and entire compensation” against the United States by action in the Court of Federal Claims when a patented invention is used or manufactured by or for the United States. SecurityPoint alleged that TSA had subsequently used carts, trays, and scanning devices at security checkpoints in a manner that infringed its ‘460 patent in over 400 airports throughout the United States. In support of its claims, SecurityPoint identified TSA internal documentation from 2006, which stated that the agency had “no single TSA standard bin return system,” whereas by 2009, an updated version of the same internal guide spelled out a process for bin return, utilizing “bin carts.” TSA eventually admitted that it had used the patented technology since 2008 in 10 airports, leaving the Court to decide damages. In one of the largest patent infringement awards of its kind, the unsealed decision determined that TSA owed SecurityPoint $103.6 million in royalties from 2008 through the date of the opinion, delay damages, and interest.

This case serves as a reminder to contractor-patent owners that recourse for money damages may be available under 28 U.S.C. § 1498(a) when the U.S. Government infringes, or authorizes another contractor to infringe, the patent owner’s patent.

 
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On November 4, 2021, the Occupational Safety and Health Administration (“OSHA”) released its much-anticipated COVID-19 Vaccination and Testing Emergency Temporary Standard (“ETS”) requiring employers with 100 or more employees to ensure that their employees are either vaccinated by January 4, 2022, or submit to weekly testing.  According to OSHA, employees who are unvaccinated face a “grave danger” from COVID-19, including the more contagious Delta variant.  The ETS notes that COVID-19 is highly transmissible—particularly in workplaces where multiple people interact throughout the day often for extended periods of time—and exposure to COVID-19 can result in death or illness, with some individuals experiencing long-term health complications.  OSHA has determined that vaccination is the most effective way to protect these employees.

The ETS will take effect immediately upon publication in the Federal Register, which is scheduled for November 5, 2021.  The ETS will apply in those states where OSHA is responsible for regulating workplace safety and health.  Per OSHA regulations, states that have their own OSHA-approved occupational safety and health plans will have 15 days to notify OSHA of the action they will take and 30 days to adopt the ETS or promulgate standards that OSHA considers at least as effective as its ETS.

The OSHA ETS is part of a sweeping policy of the Biden Administration to get more American workers vaccinated.  In addition to this ETS, the Centers for Medicare & Medicaid Services (“CMS”) released today a Vaccination Interim Final Rule (“IFR”) requiring workers at healthcare facilities participating in Medicare or Medicaid to be fully vaccinated.  Both the OSHA and CMS actions follow on the heels of Executive Order 14042 mandating that certain federal contractors and subcontractors require their covered employees to receive vaccinations against COVID-19, with limited exceptions for those who cannot be vaccinated for legally-protected reasons, and OSHA’s June 10, 2021 ETS directed toward protecting healthcare workers in particular from COVID-19.  Our previous alert on OSHA’s June 10, 2021 ETS is available here, and our alerts regarding Executive Order 14042 are available here.  OSHA excludes from coverage under the ETS those employers who are subject to the CMS rule or the Executive Order 14042 mandate.

Although the ETS is very detailed—490 pages in all—the key takeaways and deadlines for compliance are below. Continue Reading OSHA Publishes Vaccine Requirements for Employers with 100 or More Employees