The U.S. Court of Appeals for the Federal Circuit has confirmed that the Court of Federal Claims (COFC) has jurisdiction to decide whether contractors may offset cost impacts from multiple, simultaneous cost accounting changes when some changes increase costs to the Government, and other changes decrease costs to the Government.Continue Reading Third Time’s A Charm? Federal Circuit Once Again Sends CAS Dispute Back to the Court of Federal Claims
Taking Care of Business (Systems): DoD Proposes to Change the Definition of a Business System Deficiency
The Department of Defense (DoD) recently announced that it seeks public comments on a proposed change to the contractor business systems regime. The proposed rule would amend the Defense Federal Acquisition Regulation Supplement (DFARS) by replacing the phrase “significant deficiency” with the new defined term “material weakness,” to mean “a deficiency or combination of deficiencies in the internal control over information in contractor business systems, such that there is a reasonable possibility that a material misstatement of such information will not be prevented, or detected and corrected, on a timely basis.” In addition, the term would provide that a “reasonable possibility exists when the likelihood of an event occurring is— (1) Probable; or (2) More than remote but less than likely.” Continue Reading Taking Care of Business (Systems): DoD Proposes to Change the Definition of a Business System Deficiency
False Claims Act Settlement Illustrates Value of Disclosure and Cooperation
A recently-announced False Claims Act (FCA) settlement illustrates how government contractors and other FCA defendants can take advantage of a Department of Justice (DOJ) policy that rewards voluntary self-disclosure to, and subsequent cooperation with, the government.Continue Reading False Claims Act Settlement Illustrates Value of Disclosure and Cooperation
OMB Final Rule Rewrites the Uniform Guidance for Grants, Cooperative Agreements, and Other Federal Financial Assistance
On April 22, 2024, the Office of Management and Budget (OMB) issued a Final Rule significantly revising the Uniform Guidance for grants, cooperative agreements, and other federal financial assistance. The Final Rule (titled “OMB Guidance for Federal Financial Assistance”), and OMB’s accompanying memorandum to agencies and reference guide, state that the revisions aim to streamline and clarify the grant rules and improve management, transparency, and oversight of federal financial assistance. Agencies must implement the Final Rule by October 1, 2024; however, agencies may apply it to federal awards as early as June 21, 2024.Continue Reading OMB Final Rule Rewrites the Uniform Guidance for Grants, Cooperative Agreements, and Other Federal Financial Assistance
Start the Clock: Government’s Indirect Cost Rate Claim Accrued upon Submission of Indirect Cost Rate Proposal
In Strategic Technology Institute, Inc. v. Sec’y of Def., 91 F.4th 1140 (Fed. Cir. 2024), the Federal Circuit affirmed a decision by the Armed Services Board of Contract Appeals (ASBCA), which held that the government’s 2018 claim was not time-barred by the Contract Dispute Act’s (CDA) six-year statute of limitations. The ASBCA found that the government’s claim did not begin to accrue until 2014, the date the government received the contractor’s indirect cost rate proposals for fiscal year (FY) 2008 and FY 2009. Continue Reading Start the Clock: Government’s Indirect Cost Rate Claim Accrued upon Submission of Indirect Cost Rate Proposal
Does Government Disclosure of a Company’s Trade Secrets Amount to an Unlawful Taking Under the Fifth Amendment?
In Vanda Pharmaceuticals, Inc. v. United States, No. 23-629C (Fed. Cl. 2024), 2024 WL 201890, the Court of Federal Claims (COFC) addressed whether government disclosure of a company’s trade secrets and commercial information could create a viable claim for a taking under the Fifth Amendment or for breach of an implied-in-fact contract. The company, Vanda Pharmaceuticals (Vanda), claimed that the government’s disclosure of its confidential trade secrets—including its trademarked drugs’ dissolution rates—to competitors seeking U.S. Food and Drug Administration (FDA) approval of generic drug alternatives was an unlawful regulatory taking that diminished the value of Vanda’s brand name drugs and infringed upon Vanda’s right to exclude generics from the market. The government moved to dismiss Vanda’s claims for lack of subject matter jurisdiction and for failure to state a claim. The COFC denied the government’s motion in part, holding as a matter of first impression that Vanda adequately stated a takings claim based on the government’s disclosures but failed to state a claim for breach of an implied-in-fact contract. The COFC also held that Vanda’s claims involving one generic drug manufacturer were outside the Tucker Act’s six-year statute of limitations and were time barred. Continue Reading Does Government Disclosure of a Company’s Trade Secrets Amount to an Unlawful Taking Under the Fifth Amendment?
Who CARES? The ASBCA Might.
In Aviation Training Consulting, LLC, ASBCA No. 63634 (Jan. 11, 2024), the Armed Services Board of Contract Appeals (ASBCA) confirmed that a contractor’s properly asserted claim for relief under Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is a claim under the Contract Disputes Act (CDA) and denied the Air Force’s motion to dismiss for lack of jurisdiction.Continue Reading Who CARES? The ASBCA Might.
The FY 2024 National Defense Authorization Act: Key Provisions Government Contractors Should Know
The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2024, signed into law on December 22, 2023, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that impose a new conflict of interest regime for government contractors with a connection to China, impose new restrictions and requirements, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2024 NDAA also includes the Federal Data Center Enhancement Act, the American Security Drone Act, and the Intelligence Authorization Act for FY 2024.Continue Reading The FY 2024 National Defense Authorization Act: Key Provisions Government Contractors Should Know
If At First You Don’t Succeed: Contractor Successfully Challenges Disallowed IR&D and Compensation Costs
In Voxtel, Inc., ASBCA No. 60129 (March 9, 2023), the Armed Services Board of Contract Appeals (ASBCA) issued a decision that presents a primer on the resolution of indirect cost rate disputes. The ASBCA granted the contractor’s appeal in part, finding that its claimed executive compensation and independent research and development (IR&D) costs were allowable, but that certain rental costs related to the “fit-up” of a leased facility were unallowable.
The Defense Contract Audit Agency (DCAA) performed “adequacy” and “nomenclature” reviews of Voxtel’s indirect cost rate proposals (or incurred cost proposals, “ICPs”) for fiscal years 2007 to 2009, but did not conduct audits. The Contracting Officer (CO) then issued a final decision unilaterally setting indirect rates and finding that the ICPs included unallowable executive compensation, IR&D, and rental costs. The contractor appealed. Continue Reading If At First You Don’t Succeed: Contractor Successfully Challenges Disallowed IR&D and Compensation Costs
Third Time’s A Charm: Government Must Reimburse Triple Canopy for Afghan Taxes
In Triple Canopy, Inc., ASBCA Nos. 61415, et al. (March 23, 2023), the Armed Services Board of Contract Appeals (ASBCA) resolved a long-running dispute in favor of the contractor over reimbursement of fees imposed by the Afghan government on large security firms operating in the country. The ASBCA found the fees were akin to after-imposed taxes, reimbursable by the U.S. government, and not penalties for illegal conduct.
Triple Canopy had six fixed-price contracts with the U.S. Department of Defense (DoD) to provide private security services to military bases in Afghanistan. These contracts, awarded between March 2009 and September 2010, required Triple Canopy to comply with local laws. The contracts also included FAR 52.229-6, Taxes-Foreign Fixed Price Contracts, which states that the contract price shall be increased by the amount of any after-imposed tax the contractor is required to pay. In March 2011, the Afghan government issued a directive limiting the number of employees of any private security company to 500, imposing a fee for each employee over the cap. Triple Canopy was assessed a fee in March 2011, with the right to appeal, and that same month, the DoD issued a memo to the Afghan government requesting that Triple Canopy be exempted from the 500-employee limit. Triple Canopy appealed the assessment, which the Afghan government reduced, and Triple Canopy paid the reduced amount in July 2011. Triple Canopy submitted claims to the Contracting Officer (CO) for reimbursement of the fees, and then appealed to the ASBCA on the basis of the CO’s deemed denials. The ASBCA initially found Triple Canopy’s claims were barred by the Contract Dispute Act’s six-year statute of limitations and denied the appeals, which the Federal Circuit reversed and remanded in Triple Canopy, Inc. v. Sec’y of Air Force, 14 F.4th 1332 (Fed. Cir. 2021). Continue Reading Third Time’s A Charm: Government Must Reimburse Triple Canopy for Afghan Taxes