The Federal Circuit recently affirmed the Civilian Board of Contract Appeals’ (CBCA) decision denying a pandemic-related claim in Pernix Serka Joint Venture v. Secretary of State, CBCA No. 5683, 20-1 BCA ¶ 37,589. Pernix involved a firm-fixed-price construction contract in Sierra Leone that was impacted by an Ebola outbreak several months into the project. The Department of State (DOS) declined to provide direction or to issue a suspension of work order, and instead advised Pernix to make its own business decisions regarding performance and employee safety. Pernix chose to demobilize its workforce and, later, to remobilize with the addition of its own on-site medical facility and services. Pernix then submitted a claim for the increased medical, safety, and demobilization and remobilization costs. DOS granted an adjustment to the schedule for the Ebola-related delays under the contract’s excusable delay clause, but denied Pernix’s monetary claim. Continue Reading Federal Circuit Affirms Board Decision on Pandemic-Related Claim
In Ology Bioservices, Inc., ASBCA No. 62633 (May 20, 2021), the Armed Services Board of Contract Appeals (the Board) held that the Government could not assess a penalty on the contractor’s fiscal year (FY) 2013 compensation costs for being expressly unallowable when the Government delayed publishing the compensation cap for FY 2013 by more than three years.
Ology’s FY 2013 final indirect cost rate proposal included executive compensation costs totaling almost $3 million. At the time Ology submitted its claim, its FY 2013 CEO compensation was above the allowable compensation cap for FY 2012, but the Office of Federal Procurement Policy (OFPP) had not published the compensation cap for FY 2013. OFPP eventually set the FY 2013 cap in 2016. The contracting officer (CO) disallowed the costs above the FY 2012 cap, and also assessed a penalty on those costs as allegedly expressly unallowable. The contractor accepted the disallowance, but disputed the CO’s right to levy a penalty because no FY 2013 cap was in place at the time it submitted its final indirect cost rate proposal. The Government argued that the FY 2012 cap remained binding on the contractor’s FY 2013 costs and, as a result, it was entitled to a penalty for FY 2013 for costs above the FY 2012 cap.
The Board held that the Government could not apply the FY 2012 cap to the contractor’s FY 2013 costs, because the OFPP was required to revise the cap on an annual basis. The Allowable Cost and Payment clause, FAR 52.216-7, requires a contractor to submit its final indirect cost rate proposal within six months of the end of its FY and certify that its proposal does not include any expressly unallowable costs. Certification requires the contractor to know the compensation cap for that year. Although OFPP “eventually met the statutory directive” to establish a FY 2013 cap, the Board stated “it did so long after it would provide guidance to contractors, at least those who complied with their contracts by submitting timely indirect cost rate proposals.”
This decision serves as a check on the Government’s attempt to assess penalties for purportedly expressly unallowable costs. Importantly, a cost is not expressly unallowable unless it is just that: “specifically named and stated to be unallowable.” FAR 31.001. Moreover, the decision underscores the importance of adhering to administrative obligations and deadlines for both the contractor and the Government. The Board noted that if it allowed the FY 2012 cap to apply to the contractor’s 2013 claim, it would have the “odd effect of placing contractors who complied with their deadlines in a worse position than a contractor who waited” to submit their proposals. The Board recognized that contractors cannot be unduly penalized by the Government’s own delay.
On June 3, 2021, the district court judge in U.S. ex rel. Conyers v. Halliburton Co. et al., reversed on reconsideration a prior ruling that a kickback presumptively inflates a contract price under the False Claims Act (FCA). The court previously held that the government was entitled to a rebuttable presumption that kickbacks received by a former employee of the prime contractor, Kellogg Brown & Root (KBR), inflated the contract price under the False Claims Act. The judge revised that ruling, citing to a factual dispute over whether the kickback actually inflated the amount the government paid to reimburse KBR for its subcontract costs. The dispute centered on the falsity element of the FCA and whether KBR submitted, or caused to be submitted, a false claim for payment to the government. The revised decision is consistent with other FCA case law holding that falsity cannot be predicated on a presumption, and that the government must prove that kickbacks actually inflated the contract price. Continue Reading District Court Reverses Course on Whether Kickbacks Presumptively Inflated Government Costs Under the False Claims Act
This week’s episode covers a new White House National Security Study Memorandum on countering corruption, a DOD Instruction on Mandatory Disclosures, and a DOJ settlement involving small business subcontract reports, 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.
In its recent decision, CVE Appeal of First State Manufacturing, Inc., SBA No. CVE-184-A (2021), the Small Business Administration Office of Hearing and Appeals (OHA) denied an appeal of a decision by the Department of Veterans Affairs Center for Verification and Evaluation (CVE) to cancel First State Manufacturing, Inc.’s verification of service-disabled veteran-owned small business (SDVOSB) status. CVE issued its Notice of Verified Status Cancellation based on concerns of present responsibility related to a consent judgment entered into merely a month before to resolve a False Claims Act (FCA) lawsuit against First State that required First State to pay over $393,000. Prior to the FCA lawsuit, First State’s Vice President for Marketing/Contract Administration and Chief Executive Vice President/Chief Financial Officer were criminally charged, pled guilty, and were sentenced to prison terms for bribing an Amtrak official to win federal Government contracts. In the appeal before OHA, First State argued that CVE erred in cancelling its verified SDVOSB status for two reasons: (1) the FCA consent judgment was based upon an underlying FCA settlement agreement that did not admit liability or wrongdoing by First State; and (2) the Federal Railway Administration, which oversees Amtrak funding, determined that First State was “presently responsible,” and that the likelihood of future harm to the Government did not warrant suspension or debarment. First State further argued that as the Federal Railway Administration is the agency with the potential injury, its determination of present responsibility should have been given greater deference by CVE. Continue Reading False Claims Act Consent Judgment Prompts Termination of SDVOSB Status Even Without an Admission of Liability
Over the past few years, both the government and False Claims Act relators (whistleblowers) have targeted more types of defendants than they have ever previously. Against this backdrop, Congress passed two of the largest relief bills in modern history and thus even more companies find themselves involved with the federal government in a new way or for the first time This article examines the government’s enforcement of FCA against such new or non-traditional defendants and provides key takeaways.
This week’s episode covers a new Executive Order on Climate-Related Financial Risk, the final DFARS provision on contract closeout, a new SBA decision involving a mentor-protégé joint venture, and a FedRAMP update, and is hosted by partners Peter Eyre and Olivia Lynch. 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.
In this bullet point Olivia Lynch, Amy O’Sullivan, Michael Samuels, and Zachary Schroeder discuss a proposed Department of Defense rule requiring contracting officers to consider an offeror’s past performance as a first-tier subcontractor or individual partner of a joint venture under construction and/or architect-engineer services contracts.
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. In this episode, hosts Christian Curran and Olivia Lynch discuss a proposed DFARS rule for enhanced debriefings.
In this bullet point, Olivia Lynch, Amy O’Sullivan, Michael Samuels, and Zachary Schroeder address the SBA Office of Hearings and Appeals’ (OHA) recent decision in DSC-EMI Maintenance Solutions, LLC, SBA No. SIZ-6096. In the decision, OHA affirmed a size determination holding that a joint venture formed pursuant to SBA’s Mentor-Protégé Program was other-than-small because the joint venture agreement failed to contain all provisions required by the SBA’s joint venture regulation. As a result, the joint venture was ineligible for the exemption from affiliation under SBA’s joint venture affiliation rule.