Crowell & Moring government contracts attorneys provide bi-weekly summaries of hot government contracts issues in our podcast, “The Fastest Five Minutes,” co-hosted by partners Peter Eyre and David Robbins, and featuring guest hosts from across the Firm.
This format arose from client requests for non-written materials to help them stay up-to-date on the latest issues affecting our profession. The most recent podcast, available here, streams on the firm website, iTunes, SoundCloud, and PodBean, and allows our clients and friends in the industry a variety of platforms to access this material easily.
For those who might wish to see what a podcast “looks like” before deciding whether to tune in, here is a transcription of our September 16, 2016 episode.
|Robbins:||Welcome to the Fastest Five Minutes, presented by Crowell & Moring. I am your co-host, David Robbins, joined by co-host Peter Eyre, bringing you a biweekly summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.|
|Eyre:||We start this podcast with counterfeit parts news. On August 30, DoD issued a final rule that amends DFARS 231.205-71 that’s the cognizant and most important counterfeit parts clause and it implements a section of the NDAA for 2016 to amend the allowability of costs of actual or suspect counterfeit electronic parts and the cost of rework or corrective action due to the use or inclusion of those parts. Previously the costs were allowable only if it involved government-furnished property. Effective August 30 of this year, costs are allowable if they were properly obtained under the new added DFARS clause, the contractor learned of the problem through inspection, testing, authentication or other means, AND the contractor provided timely notice to the CO and GIDEP within 60 days of becoming aware of the issue. This is a notable development, we think, in the ongoing evolution and focus on counterfeit electronic parts. David over to you.|
|Robbins:||Thank you. The National Institute of Standards and Technology published its third version of the Special Publication 800-63-3 for digital authentication. This version of the publication provides technical guidelines for federal agencies implementing digital authentication. It also covers remote authentication of users (such as employees, contractors, or private individuals) interacting with government IT systems over open networks. Unlike previous versions, this newer version is split into four documents: The first, digital authentication guidelines. The second, enrollment and identity proofing. Third, authentication and lifecycle management, and forth, federation and assertion. These documents define the technical requirements for each of four levels of assurance.|
|Eyre:||Our next item involves something that should be of interest to those involved in M&A activity and the timing of those activities. So, let us tell you a little bit about it.
Five days after making its award decision, the National Nuclear Security Administration, or NNSA, which is part of the Department of Energy (DOE) rescinded the award of a contract for the management and operation of the Nevada National Security Site or NNSS to an entity known as Nevada Site Science Support and Technologies. We’ll refer to them as NVS3T. That entity, NVS3T had represented itself to be a wholly owned subsidiary of Lockheed Martin in its proposal. Ten days before the award, Lockheed Martin and Leidos completed a corporate transaction that, among other things, sold NVS3T to Leidos Innovations Corporation. However, according to what was reported publicly, no notice of this change in ownership was provided to the cognizant Contracting Officer. Because the change in ownership impacted the government’s evaluation, NNSS rescinded the award, continued the procurement, and announced its intention to reconsider all offers previously received in response to the RFP.
|Robbins:||Signaling Department of Defense’s continued focus on commercial item procurement process enhancements, even while FAR cases are pending, the Department of Defense did not wait for FAR Case 2016-D006 regarding price reasonableness determinations to go final before issuing guidance to improve the consistency and timeliness of commercial purchases. Instead, on September 2, DPAP announced that, to assist contracting officers in making commercial item determinations, the Defense Contract Management Agency has established six Commercial Item Centers of Excellence. These centers, aligned to various contractor markets, will be staffed with “a cadre of engineers and price/cost analysts” to advise procuring contracting officers in their determinations of commerciality. The guidance directs PCOs to follow prior commercial item determinations, and if the PCO wishes to deviate from those determinations, the Centers and the contracting officer’s chain of command should be engaged to assist with this determination. The guidance also emphasizes DoD’s policy that it is the prime contractor’s responsibility to determine whether a particular subcontracted supply or service meets the definition of a commercial item.|
|Eyre:||And in the ongoing saga of National Air Cargo versus United States, the Court of Federal Claims denied National Air Cargo’s post-award, renewed bid protest following the Agency’s corrective action. If you remember this case, which made news during the first round of protests, the cognizant agency, TRANSCOM, initially awarded 5 shipping-related contracts after saying it had planned to award “approximately four.” National Air Cargo was an initial awardee, and United was not. United subsequently filed an agency-level protest and was included in the contract. National protested United’s award first to GAO and then to COFC, arguing that an additional award would harm National’s economic interests, among other things. TRANSCOM took corrective action, and reaffirmed the awards – to all six awardees including National and United. National protested again. National’s protest was denied. But what’s interesting here is that the COFC, through Judge Lettow, has held that COFC has jurisdiction to decide cases like these where adding significant competition to the task order pool could demonstrate competitive injury. But we note, that this is an area where GAO and COFC view the issue differently, at least to date.|
|Robbins:||It’ll be interesting to watch unfold going forward.
Moving on to ENCORE III news. In CACI, Inc.-Federal, GAO sustained two pre-award challenges to the cost/price evaluation scheme in the Defense Information Security Agency’s $17.5B ENCORE III IDIQ solicitation. GAO held, first, that the solicitation did not provide an adequate basis to compare the relative cost of competing proposals because, despite anticipating roughly half of the ENCORE III task orders to be cost-reimbursable, the RFP did not require offerors to propose any cost-reimbursable labor rates and, second, that a provision that would eliminate any offeror with a total price more than 50 percent below a “trimmed average total proposed price” of other offerors was “entirely arbitrary in selection and application.” Those are GAO’s words. Because, the record did not reflect that such a price difference would pose any inherently high performance risk.
This has been the Fastest Five Minutes, brought to you by Crowell & Moring. See you again in 2 weeks. If you have any questions about these items, Peter can be reached at 202-624-2807 and I can reached at 202-624-2627.