On December 19, 2022, DoD issued a DFARS proposed rule that seeks to (1) implement the data-rights portions of the May 2, 2019 Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive (SBIR/STTR Policy Directive), and (2) impose significant changes to technical data and computer software marking requirements. The SBIR/STTR portion of the proposed rule follows DoD’s advance notice of proposed rulemaking issued on August 31, 2020 (see 85 FR 53758) and incorporates the eight written public comments that DoD received. The proposed changes to marking requirements go beyond the SBIR/STTR Policy Directive and respond to the Federal Circuit’s decision in The Boeing Co. v. Secretary of the Air Force, 983 F.3d 1321 (Fed. Cir. 2020).
Contractors May Mark Unlimited Rights Technical Data So Long as the Government’s Rights Are Not Impermissibly Restricted: A Study in Contrasts
The Boeing Company (Boeing) and the U.S. Air Force have settled their long-standing data rights marking dispute two years after the U.S. Court of Appeals for the Federal Circuit held that contractors may include restrictive markings on unlimited rights technical data as long as those markings do not restrict the Government’s rights. A copy of the settlement agreement is attached to the Armed Services Board of Contract Appeals’ order of dismissal.
Under the settlement agreement, the Air Force agreed to accept noncommercial unlimited rights technical data with the following legend, which puts third parties on notice of Boeing’s “continuing ownership of such deliverables”:
Although the settlement is limited to this particular dispute, the Air Force’s acceptance of the legend to preserve the company’s rights vis-à-vis unauthorized third parties without compromising the Government’s unlimited rights suggests that a carefully drafted legend like the one included in the settlement agreement may be an acceptable marking for other contractors with similar concerns under their contracts with the Air Force (and even other agencies). The key is to ensure that the marking does not impermissibly restrict the Government’s rights in the data, as further illustrated by the ASBCA’s November 29, 2022 decision in FlightSafety International, ASBCA No. 62659.
Contractors Take Note: DoD Issues Two Final Contract Cost and Pricing Rules
On October 28, 2022, the Department of Defense (DoD) amended the Defense Federal Acquisition Regulation Supplement (DFARS) by issuing two final rules related to contract cost and pricing. Specifically:
- Requiring Data Other Than Certified Cost or Pricing Data – DoD issued a final rule to implement a section of the Fiscal Year (FY) 2020 National
Too Late: Government’s Failure to Timely Audit Did Not Extend the Contractor’s Document Retention Obligations
In Doubleshot, Inc., ASBCA No. 61691 (July 19, 2022), the Armed Services Board of Contract Appeals (“ASBCA”) granted the contractor’s motion for partial summary judgment, denying the Government’s claim for unallowable costs to the extent that it was based on missing or unsigned employee time cards. The ASBCA held that the contractor was not required to maintain time card records to support the allowability of labor charges beyond the retention period specified in the contractor’s cost-plus-fixed-fee contracts (including applicable time extensions).
The contracts incorporated both the Audit and Records – Negotiation clause (FAR 52.215-2) and the Allowable Cost and Payment clause (FAR 52.216-7), which grant the Government the right to examine the contractor’s records reflecting all claimed costs and reduce payments for amounts that are unallowable. Following the contractor’s delayed submission of two final indirect cost rate proposals, the Defense Contract Audit Agency (“DCAA”) did not begin auditing the proposals until eight months after the contractual obligation to maintain records had expired. DCAA then questioned the contractor’s labor costs for which there was no time card support, even though the contractor was able to demonstrate that it paid its employees. The Government’s claim and the contractor’s appeal followed.
When is the Price of a Fixed-Price Contract Not Fixed?
In Tolliver Group, Inc. v. United States (Aug. 17, 2022), the Court of Federal Claims (“COFC”) granted the contractor’s request for summary judgment, awarding $195,890 in legal fees the contractor incurred to successfully defend against a False Claims Act suit brought by a whistleblower. The court held that the cost principles in Federal Acquisition Regulation (“FAR”) Subpart 31.2 applied to the contractor’s fixed-price task order, and the contractor’s legal fees were allowable and payable under the contract. This is the second time that the COFC addressed the contractor’s entitlement to legal fees, having previously held that the contractor could recover a portion of them under the Spearin doctrine (which we reported on here). The Federal Circuit later vacated that award on jurisdictional grounds (reported on here) and remanded the case to the COFC.
Continue Reading When is the Price of a Fixed-Price Contract Not Fixed?
Just the (Same) Facts, Ma’am: ASBCA has Jurisdiction to Hear Contractor’s Different Theories of Recovery Based on the Same Set of Operative Facts
In ECC Int’l, LLC, ASBCA No. 60167 (Jan. 25, 2022), the Armed Services Board of Contract Appeals (“Board”) held that it had jurisdiction to hear a contractor’s alternate theories of recovery that arose from the same operative facts and sought the same relief requested in its claim. The contractor initially filed a certified claim for
President Biden’s Executive Order Mandates Project Labor Agreements for All “Large-Scale” Federal Construction Projects
On February 4, 2022, President Biden signed an Executive Order on Use of Project Labor Agreements for Federal Construction Projects (the “Order”) for federal construction projects valued at $35 million or more. The Order instructs federal agencies to require “every contractor or subcontractor engaged in construction” on projects valued at $35 million or more to “agree, for that project, to negotiate or become a party to” a Project Labor Agreement (“PLA”) with “one or more appropriate labor organizations.”
Federal agencies are authorized to grant exceptions to this PLA requirement under certain defined circumstances. The Order supersedes an executive order issued by then-President Obama in 2009, which had encouraged, but not mandated, the use of PLAs on construction projects valued at more than $25 million. The Order is characterized as a measure that will “promote economy and efficiency in Federal procurement” and advance “small business interests” and represents a noteworthy shift in United States federal labor policy, underscoring President Biden’s commitment to fulfilling his campaign promise to be the most labor-friendly President in history.
The Order applies to all “large-scale construction projects,” defined as a “Federal construction project within the United States for which the total estimated cost of the construction contract to the federal government is $35 million or more.” The Federal Acquisition Regulatory Council (“FAR Council”), in consultation with the President’s Council of Economic Advisers, may adjust this threshold based on inflation. “Construction” is defined to mean “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property.” It appears that the Order does not apply to federally funded projects under the control of state and/or local governments.
To Be, or Not to Be: The ASBCA Holds that a Cost is Not “Incurred” Without a Legal Obligation to Pay
In its recent decision, Cellular Materials International, Inc., ASBCA No. 61408 (Dec. 27, 2021), the Armed Services Board of Contract Appeals (“ASBCA”) observed that whether a cost has been “incurred” for purposes of claiming allowable costs under FAR 52.216-7 is a fact-intensive inquiry.
Pursuant to its Government contract requirements, Cellular Materials International, Inc. (“CMI”)
Federal Circuit Vacates COFC Decision Entitling Contractor to Damages for Breach of Implied Warranty Because the Contractor Did Not Present the Claim to the CO
In Tolliver Group, Inc. v. United States, No. 2020-2341, 2021 WL 5872256 (Fed. Cir. Dec. 13, 2021), the Federal Circuit vacated and remanded the Court of Federal Claims’ (“COFC”) decision holding that the contractor was entitled to an equitable adjustment for damages caused by the Government’s breach of the implied warranty that satisfactory contract
DoD Agrees To Improve How It Approaches Intellectual Property Under Government Contracts
In Section 839 of the Fiscal Year 2021 National Defense Authorization Act, Congress directed the Government Accountability Office (“GAO”) to prepare a report evaluating the implementation of Department of Defense (“DoD”) Instruction 5010.44 relating to Intellectual Property Acquisition and Licensing, including but not limited to, DoD’s establishment of a cadre of intellectual property (“IP”) experts