Photo of Stephen M. ByersPhoto of Adelicia R. CliffePhoto of Brian Tully McLaughlinPhoto of Payal Nanavati

The Department of Justice has announced a $14 million False Claims Act (FCA) settlement with Coloplast, a medical product manufacturer, after Coloplast self-disclosed violations of the Trade Agreements Act (TAA) and Price Reduction Clause (PRC) while under contract with the Department of Veterans Affairs (VA).  The TAA requires contractors to furnish end products that are U.S.-made or “substantially transformed” in designated countries.  Coloplast disclosed that it misapplied the substantial-transformation standard, causing Coloplast to report incorrect countries of origin for products and to improperly retain certain products on contract after manufacturing moved to non-designated countries.  Coloplast also disclosed that it overbilled the Government by failing to provide the VA with discounts pursuant to the terms of the PRC, which normally requires tracking discounts offered to designated commercial customers and offering corresponding downward price adjustments to VA customers. 

Continue Reading FCA Settlement Offers Reminder of the Importance of TAA and PRC Compliance
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This week’s episode covers the Procurement Collusion Strike Force’s new partnerships and focus areas, DOD OIG’s annual report identifying the DoD’s most serious management and performance challenges, and DOD’s Zero Trust Strategy that provides a roadmap for achieving the DoD’s target cyber defense goals by the end of fiscal year 2027, 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.

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On December 1, 2022, Department of Defense (DoD) Secretary Lloyd J. Austin III announced the establishment of the DoD Office of Strategic Capital (OSC).  The mission statement of the OSC is to build an “enduring technical advantage” for the United States by helping partner contractors with private investment to develop national security critical technologies, including those related to advanced materials, next-generation biotechnology, and quantum science.  OSC will coordinate with existing organizations such as the Defense Advanced Research Projects Agency (DARPA) and the Defense Innovation Unit (DIU), which promotes acceleration of the military use of commercial technologies.

The OSC intends to offer what it characterizes as “patient” extended-term capital to help contractors obtain financing between the early laboratory-testing and prototyping phases and the full-scale development of products that can be used by the DoD warfighter.  In addition to traditional vehicles like contracts and grants, this investment will likely take the form of loans and loan guarantees.

Continue Reading Department of Defense Establishes Office of Strategic Capital to Enhance Investment in National Security Critical Technology
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This week’s episode covers annual reports from GAO and the ASBCA, a proposed rule regarding disclosure of greenhouse gas emissions and climate-related financial risk, and new requirement to refer any suspected instances of human trafficking to suspension and debarment officials, 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.

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In a major and largely unprecedented development for federal contractors, the White House announced on November 10, 2022 that the FAR Council will publish early next week a proposed rule that would, if finalized, require many federal contractors receiving more than $7.5 million in annual federal contracts to inventory and publicly disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions on an annual basis.  Contractors deemed “major”—those that receive annual federal contracts in excess of $50 million—would be further required to disclose annually their Scope 3 GHG emissions and climate-related financial risk assessment process.  Beyond disclosures, and perhaps more significantly, major contractors would also be required to set emission-reduction targets to meet the goals of the Paris Agreement, and have those targets validated by the Science Based Targets Initiative (SBTi). This last element of the proposal is a notable departure—and escalation—from similar pending proposals from the U.S. Securities and Exchange Commission, which only propose to require GHG disclosures from regulated companies and funds, not substantive goals or changes.

Continue Reading Your Climate Disclosures or Your Contracts? Federal Contractors Face Unprecedented Proposed Rule for Mandatory Climate Disclosures
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On November 1, 2022, the Armed Services Board of Contract Appeals (ASBCA) published its FY 2022 Report of Transactions and Proceedings, which provides statistics regarding the adjudication of appeals between contractors and the Army, Navy, Air Force, Corps of Engineers, Central Intelligence Agency, National Aeronautics and Space Administration, Defense Logistics Agency, Defense Contract Management Agency, and other Defense agencies, Non-Appropriated Fund Instrumentalities, and the Washington Metropolitan Area Transit Authority.

According to this year’s report, contractors prevailed in 71% of the appeals decided on the merits, up from a steady 53% in both 2020 and 2021.  The Report also indicates that, as usual, the Board had a high success rate in resolving matters via alternative dispute resolution (ADR).  Of the cases that went through non-binding ADR, 97% were resolved successfully—including mediation, arbitration, and ADR of undocketed appeals.  The uptick in successful contractor appeals is encouraging, but these statistics also serve as a reminder that the Board’s ADR program remains an important tool to successfully resolve disputes at the ASBCA.

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On November 1, 2022, the U.S. Government Accountability Office (GAO) released its Annual Report on Bid Protests for Fiscal Year 2022.  While the number of protests GAO received dropped by 12% for the second year in a row, the overall protest “Effectiveness Rate”—meaning the percentage of cases in which the protester received some form of relief, such as voluntary corrective action by the agency or a GAO sustain—increased to 51%, tying Fiscal Year (FY) 2020 for the highest rate in 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 FY2022, those grounds were: (1) unreasonable technical evaluation; (2) flawed selection decision; and (3) flawed solicitation.  The inclusion of “flawed solicitation” on the list is notable—it has only made the list of “most successful grounds” one other time since GAO began tracking successful protest grounds.  This serves as a reminder that contractors should consider a pre-award protest as a potentially viable method of resolving solicitation flaws and ambiguities if other routes (such as the Q&A process) are unsuccessful or unavailable.    

The chart below shows the top sustain grounds by year.  As seen below, flawed technical evaluations continue to represent one of the most consistently successful grounds for sustains, meaning would-be protesters should consider whether they have a credible basis to make such arguments when weighing an award challenge. 

Continue Reading GAO’s 2022 Bid Protest Report to Congress for FY 2021 Shows Better than 50% Chance of Obtaining Relief
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On October 17, 2022, President Biden signed the End Human Trafficking in Government Contracts Act of 2022 (“the Act”) into law, amending the 2013 National Defense Authorization Act (“2013 NDAA”) to require U.S. government agency heads to refer any suspected instances of human trafficking to the agency’s suspension and debarment official (“SDO”) for consideration and disposition.

In March 2012, both the House of Representatives and the Senate introduced the End Trafficking in Government Contracting Act of 2012, which Congress eventually passed as part of the 2013 NDAA. The goal of this law was to strengthen anti-human trafficking compliance efforts in federal contracts. However, in recent years, the Government Accountability Office and the Department of Defense Inspector General have released reports finding that human trafficking still persisted among a number of U.S. government contractors. 

In addition to requiring agency heads to report suspected instances of human trafficking to SDOs, the Act also requires the director of the Office of Management and Budget to submit a report to Congress on implementation of the provisions within 90 days of the Act’s enactment.  

Given this heightened scrutiny, contractors should review the relevant rules, including the requirement to have an anti-human trafficking compliance plan for contracts exceeding $550,000.

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This special edition of the Fastest 5 Minutes podcast covers new rules issued last week by the Department of Defense that implement various requirements of recent National Defense Authorization Acts, including a new rule that imposes additional requirements for contractors to provide cost or pricing data to the government, and is hosted by Peter Eyre and Erin Rankin. 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.

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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 Defense Authorization Act (NDAA) relating to the submission of data other than certified cost or pricing data (e.g., in connection with pricing actions for commercial products or services, which are exempt from the requirement to disclose certified cost or pricing data).  The new rule prohibits contracting officers (COs) from relying only on historical prices paid by the Government to determine that the price of a contract or subcontract is “fair and reasonable,” and requires COs to consider other factors in addition to historical prices paid.  The rule also states that offerors must make a good faith effort to comply with a CO’s reasonable request to furnish data other than certified cost or pricing data, but this requirement may be waived by the head of contracting activity if he or she determines that it is “in the best interest of the Government” to make the award.  Finally, the rule requires the Government to include a note on contractors’ past performance evaluations in the Contractor Performance Assessment Reporting System (CPARS) if they have denied multiple Government requests for submission of data other than certified cost or pricing data in the preceding three-year period but still received an award.  The new rule raises questions regarding what it means for a request for other than certified cost or pricing data to be “reasonable,” and what a contractor must do to make a “good faith effort” to comply with the request (particularly if the contractor believes that the request is not reasonable).
  • Repeal of Preference for Fixed-Price Contracts – DoD issued a final rule repealing preferences for the use of fixed-price contracts.  Implementing section 817 of the FY 2022 NDAA, which repealed section 829 of the FY 2017 NDAA, the rule removes language from DFARS Part 216 (Types of Contracts) and Part 235 (Research and Development Contracting) that favored the use of fixed-price contracts, including fixed-price incentive contracts.  The new rule also removes a DoD requirement for approval by the head of the contracting activity before issuance of a cost-reimbursement contract greater than $25 million.  These changes give the DoD greater contracting flexibility, but time will tell whether it results in increased use of cost-reimbursement contracts.