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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

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Fixed-price contracts allow the government to purchase goods and services for set prices and allocate the cost risk of performance to the contractor—if the contractor offers to perform the work for too low of a price, then it may reap little profit, or even take a loss. Thus, the government’s primary concern in evaluating fixed-price proposals is the reasonableness of the offeror’s price—i.e., whether the fixed price is too high. See FAR 15.402(a) (requiring contracting officers to purchase supplies and services “at fair and reasonable prices”). The government may, at its discretion, also perform a price realism evaluation of a fixed-price proposal to assess whether the proposed price is too low—“whether an offeror’s low price reflected its understanding of the contract requirements or to avoid the risk of poor performance from a contractor that is forced to provide services at little or no profit.” Esegur-Empresa de Seguranca, SA, B-407947 et al., Apr. 26, 2013, 2013 CPD ¶ __; see also FAR 15.404-1(d)(3).

Previously, the Government Accountability Office (GAO) had held that even when an agency “reserves the right” to conduct a price realism evaluation of fixed-price proposals, the agency is not required to conduct such an analysis where “the RFP did not expressly state that the agency would” do so. Guident Techs., Inc., B-405112.3, June 4, 2012, 2012 CPD ¶ 166 at 13 n.9 (emphasis added). In limited circumstances, the GAO had imposed an obligation on agencies to perform price-realism evaluations for fixed-price proposals, but only where “[a] reasonable reading of the solicitation” was that the agency would conduct such an evaluation. Halfaker & Assocs., B-407919 et al., Apr. 10, 2013, 2013 CPD ¶ __ at 9 n.5; Waterfront Techs., Inc., B-401948.16 et al., June 24, 2011, 2011 CPD ¶ 123 at 15 n.16.
Continue Reading GAO Implies Presumption of Price Realism Evaluation in Fixed-Price Solicitation