Government Contracts Legal Round-Up | 2021 Issue 8

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Executive Orders

1. Executive Order on Increasing the Minimum Wage for Federal Contractors (Apr. 27, 2021)

  • President Biden is raising the minimum wage for workers under federal government contracts to $15.
  • Contractors should expect to see a $15 minimum wage in new contract solicitations and option modifications beginning on January 30, 2022.
  • The minimum wage will be adjusted automatically to reflect changes in the cost of living every year after 2022.
  • The order phases out the lower “tipped minimum wage” for federal contractors by 2024, meaning tipped employees working on federal contracts must be paid the same minimum wage as other government contract employees.
  • The order includes federal contract workers with disabilities and outfitters/guides operating on federal lands.
  • The executive order directs the Department of Labor to issue regulations by November 24, 2021 to implement the requirements of the order. Within 60 days of the Labor Secretary issuing such regulations, the FAR Council shall amend the FAR to provide for inclusion in Federal procurement solicitations, contracts, and contract-like instruments entered into on or after January 30, 2022, consistent with the effective date of such agency action. 
  • Agencies are “strongly encouraged” to implement the $15 minimum wage in contracts issued before the effective dates in the executive order.

As always, contractors should pay careful attention to the specific wage and hour requirements in their solicitations and contracts.

Protest Cases

1. AECOM Management Services, Inc., B-418828.4; B-418828.5; B-418828.6, Mar. 17, 2021 (published Apr. 30)

  • GAO sustained a protest where the awardee was provided with a significantly greater opportunity to enhance its proposal during FAR part 16 interchanges.
  • Specifically, the awardee was provided the opportunity to make significant revisions to its proposal, including to its small business utilization and program execution volumes and to its price volume by adding in missing pricing information, resulting in a price increase of approximately $20 million. In contrast, the protester was never advised of a “confidence decreaser” in its program execution approach or provided any opportunity to revise its proposal—and this “confidence decreaser” was a key factor in the award decision.
  • Even though the solicitation stated that discussions would not be conducted pursuant to FAR part 15, it also stated that offerors would be treated fairly. GAO disagreed with the agency’s conclusion that engaging in interchanges with at least two offerors, but permitting only one offeror to meaningfully revise its proposal, provided a fair exchange.

While FAR part 16 permits more streamlined procurement processes than part 15, agencies cannot disregard fundamental fairness when conducting interchanges/exchanges/discussions with offerors. When an agency conducts interchanges but a debriefing identifies a weakness that was never raised, this is a ripe area for protest.

2. Deloitte Consulting, LLP, B-419508; B-419508.2, Apr. 15, 2021 (published Apr. 27)

  • GAO sustained a protest challenging the award of a federal supply schedule (FSS) task order where the awardee’s quotation represented that the company would provide services exceeding the scope of the underlying FSS contract.
  • The RFQ sought specific knowledge and expertise to address cybersecurity and privacy-related threats to the agency’s IT systems, and required that specific services be performed to address such threats. The awardee’s quotation represented that particular labor categories would provide these skills, yet the identified FSS labor categories gave no indication of any such expertise.
  • The agency argued that the FSS labor categories at issue “are intended to cover a large variety of potential requirements” and “broad functional responsibilities,” and therefore the specific services should be considered within the scope of the awardee’s FSS labor categories.
  • GAO disagreed, finding such a broad reading of the labor categories neither reasonable nor permissible.

When preparing quotations in an FSS competition, make sure that your proposed services are within the scope of your existing FSS contract labor category descriptions. And, if you lose out in such a procurement, evaluate whether there is an angle to challenge the awardee on this basis.

Claims Cases

1. Appeal of Northrop Grumman Corporation, ASBCA No. 62189 (Apr. 14, 2021)

  • Northrop settled a shareholder’s class action lawsuit related to its acquisition of Orbital ATK. Northrop then sent a letter to its DCMA corporate administrative contracting officer stating that it believed the costs were allowable costs related to legal proceedings and that it planned to include them in its forward pricing rates and incurred costs submissions.
  • The CACO responded stating that the costs were unallowable corporate organization costs and should be excluded. The CACO letter did not advise that it was a contracting officer’s final decision, nor did it include the FAR’s statement of appeal rights.
  • Northrop appealed the CACO letter to the Armed Services Board of Contract Appeals, asserting it was a government claim related to these costs. The government moved to dismiss for failure to state a claim.
  • The ASBCA dismissed the appeal, finding that the CACO letter was not a COFD, which is required for a government claim. “The government’s June 20, 2019 letter was not a “demand” or “assertion” seeking either the payment of money the government alleged it was due, the interpretation of contract terms, or other relief arising under the contract as required by FAR 2.101.”

While certainly possible, it can be tricky to get resolution of cost issues or contract interpretation questions in advance of a monetary dispute. This case highlights the need for clear strategy and communications when attempting to do so.

2. Appeal of Sungjee Construction Co., ASBCA Nos. 62002, 62170 (Mar. 24, 2021)

  • Sungjee appealed a termination of its contract for default, asserting that the Army failed to issue base passes necessary to perform building repair work. In discovery, Sungjee sought documents from the Army regarding the base passes, but the Army had destroyed them under its standard record retention policy.
  • Sungjee sought sanctions for spoliation of evidence, including an adverse inference related to base access it was provided.
  • The ASBCA denied Sungjee’s motion, finding that the Army had neither violated a requirement to retain these records, nor destroyed them after being made aware litigation was reasonably foreseeable.
  • The ASBCA also noted that the adverse inference sought by Sungjee would be dispositive and, thus, requires a showing of bad faith and prejudice, which was not demonstrated. “In short, we cannot find that the government’s routine document destruction, as opposed to Sungjee’s apparent failure to create and keep contemporaneous records, is the cause of any difficulty Sungjee may be experiencing in meeting its burden of proof.”

This case demonstrates the importance of engaging early and comprehensively when projects are delayed: documenting the causes of delay, communicating with the government regarding any excusable delay, rebutting any default termination, and notifying the government when litigation is reasonably foreseeable. Doing so will allow a contractor to meet its burden of proof based on its own evidence and ensure government evidence is properly preserved.

Investigations and Enforcement

In U.S. ex rel. Rickey Howard v. Caddell Constr. Co., et al., the District Court for the Eastern District of California granted summary judgement in favor of the construction company defendants. The relator had argued that the construction company defendants knew their subcontractors were pass-through, or sham entities, and therefore violated the False Claims Act. Among other things, the court held that semi-annual small business subcontracting plan and bi-annual reports were not material to payment, and that defendants had disclosed enough detail about the subcontract relationships to put the government on notice about them. Small business subcontracting is a persistent source of False Claims Act risk. This case is helpful to demonstrate when small business subcontracting is not material and therefore less of a risk.


Biden Raises Minimum Wage for Federal Government Contract Workers to $15

Haws_Matthew_COLORBy: Matthew L. Haws

President Biden is raising the minimum wage for workers under federal government contracts to $15. In an executive order on April 27, 2021, Biden ordered that the Department of Labor develop rules to ensure that federal contract (and subcontract) employees are paid a minimum of $15 starting in 2022. Contractors should expect to see a $15 minimum wage in new contract solicitations and option modifications beginning on January 30, 2022.

This executive order provides that the minimum wage be adjusted automatically to reflect changes in the cost of living every year after 2022. It also eliminates some exceptions to the federal contract minimum wage. Specifically, it phases out the lower “tipped minimum wage” for federal contractors by 2024, meaning tipped employees working on federal contracts must be paid the same minimum wage as other government contract employees. And it includes federal contract workers with disabilities and outfitters/guides operating on federal lands.

The administration believes this executive order will affect hundreds of thousands of workers under federal contracts, including cleaning and maintenance workers, nursing assistants, and food service workers. It also notes that it will help many women and people of color.

For some government contractors, the new $15 minimum wage may alter the competitive landscape in positive ways—creating a common floor for wages underlying a proposal and allowing government contractors to attract and maintain talent due to higher wages than similar employers in the commercial space. (The White House fact sheet on the executive order is clear that one goal is to increase upward pressure on wages in the commercial space.) Of course, the federal contractor minimum wage is only one of the policies affecting wages paid under government contracts. Some government contractors may see little impact because their government contract employees already receive more than $15 per hour under existing requirements, such as the Service Contract Act, Davis Bacon Act, and related laws, which prescribe wage and benefit amounts for specific categories of workers in specific geographic areas. As always, contractors should pay careful attention to the specific wage and hour requirements in their solicitations and contracts.

Some additional details related to the executive order:

  • Biden’s $15 minimum wage executive order follows a 2014 Obama executive order that had raised the government contact minimum wage to $10.10. Biden had included a $15 federal minimum wage in his coronavirus relief bill, but it was removed based on parliamentary rules in the Senate.

  • The executive order recognizes and follows the typical regulatory process: it technically serves to direct the Department of Labor to engage in a rulemaking process by November 24, 2021, that will provide specific definitions and exclusions and, “to the extent practicable,” incorporate definitions, principles, and processes from existing wage laws. After that process, it directs the FAR Council and agencies themselves to undertake necessary steps to implement the DOL regulations. Contractors will want to keep an eye out for these regulations.

  • Agencies are “strongly encouraged” to implement the $15 minimum wage in contracts issued before the effective dates in the executive order.

  • The executive order includes within its scope “contract-like instruments” and specifically notes application to concession agreements, a common mechanism for providing services in federal facilities and properties, including national parks. Concession holders are among those most likely to be affected by this executive order. Grants are not included in the scope of the order.

Government Contracts Legal Round-Up | 2021 Issue 7

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update will offer brief summaries of key developments for government contracts legal, compliance, contracting, and business executives.

Regulatory Update

1. Notice of Request for Comments on Executive Order “America's Supply Chains,” (April 13, 2021)

  • On February 24, 2021, President Biden issued Executive Order 14017, “America’s Supply Chains,” which directs several federal agency actions to secure and strengthen America’s supply chains.
  • Under that Order, within 100 days, the Secretary of Defense must identify risks in the supply chain for strategic and critical materials and develop policy recommendations to address these risks.
  • DoD is seeking input by April 28, 2021 from both consumers and producers of strategic and critical materials on fifteen separate topics, including transparency, diversification, reclamation, global fair trade, environmental sustainability, workforce issues, and the full spectrum of risk to supply disruption.

Protest Cases

1. APR Staffing, B-419667 (March 30, 2021) (publicly released April 6)

  • GAO dismissed as a matter of contract administration a protest alleging errors in the agency’s evaluation of the protester’s prior performance under a blanket purchase agreement (BPA), on which the agency relied in deciding not to exercise options under the BPA.
  • GAO rejected the protester’s view that the agency’s evaluation of vendors’ performance constituted a “procurement process” that rendered those actions subject to GAO’s bid protest jurisdiction.

As a general rule, option provisions in a contract are exercisable at the discretion of the government. GAO will not question an agency’s exercise of an option under an existing contract unless the protester shows that the agency failed to follow applicable regulations or that the determination to exercise the option, rather than conduct a new procurement, was unreasonable.

2. SAGAM Securite Senegal, B-418583.2 (March 22, 2021) (publicly released April 7)

  • GAO dismissed as untimely a protest objecting to the agency’s cancellation of a solicitation where the protest was filed more than 10 calendar days after receipt of the agency’s email notice of cancellation.
  • The protester maintained that its director first received the contracting officer’s email within 10 days of filing its protest, because the individual was on leave when the email notifying the company of the cancellation was sent, and the director was unable to access emails without physically going into the company’s office.
  • GAO disagree that the company did not have constructive or actual knowledge of the notice of cancellation until the director accessed his email account 10 days prior to filing its protest. The fact that the director did not access his email because he was on leave did not toll the filing deadline imposed by GAO’s regulations.

For the purposes of GAO’s timeliness rules, the mechanical receipt of the email during a firm’s regular business hours constitutes notice to a party. The filing deadline imposed by GAO’s regulations is not tolled where the recipient’s email system generated an automatic response indicating that the recipient was on leave, and the agency was not required to respond or otherwise take action in response to receiving the out-of-office email notice.

3. Zolon Tech, Inc., B-419280.4 (March 18, 2021) (publicly released April 7)

  • GAO denied a protest alleging that a Library of Congress (LOC) procurement for agile development and system integration services was tainted by an unmitigated unequal access to information organizational conflict of interest (OCI).
  • The protester asserted that the awardee had an OCI by virtue of the company’s access to sensitive procurement-related information, including non-public information, based on the awardee’s level of access to two LOC systems and its president’s placement in the Office of the Chief Information Officer.
  • LOC explained that it conducted a thorough investigation of the allegations and found that no OCI existed. The agency pointed out that information in these two project management systems was available to both the protester and the awardee as incumbent contractors, and that the allegations did not show how information in these two systems gave the awardee any specific or unfair advantage regarding this procurement. LOC also confirmed that the two project management systems referenced by the protester do not contain proprietary or source-selection information, and the awardee’s president did not have access to sensitive procurement-related information either.

An unequal access to information OCI exists where a firm has access to non-public information as part of its performance of a government contract, and where that information may provide the firm with an unfair competitive advantage in a later competition for a government contract. GAO reviews the reasonableness of a contracting officer’s OCI investigation and, where an agency has given meaningful consideration to whether an OCI exists, GAO will not substitute its judgment for the agency’s, absent clear evidence that the agency’s conclusion was unreasonable.

Claims Cases

1. Appeal of Carothers Construction, ASBCA No. 62204 (February 11, 2021)

  • Carothers won a contract to build an elementary school at Maxwell Air Force Base in Alabama.
  • Carothers identified that the 2 ½ inch roofing system in the contract was available from only one manufacturer. Carothers identified an alternative 2-inch system that it believed was equivalent.
  • Carothers made five different submissions regarding the equivalence of the 2-inch system, but the government failed to engage in a substantive consideration and repeatedly denied Carother’s requests to use the alternative.
  • Carothers ultimately installed the 2 ½ inch system and submitted a claim for the difference in cost. Carothers asserted that FAR 52.236-5, Material and Workmanship entitled it to use the 2 inch system because it was equal in all important performance requirements.
  • The board sustained the appeal, finding that an item with only one source is, by definition, proprietary and that Carothers had proven the elements for a clam under FAR 52.236-5. The court held that the “general rule of strict compliance with the contract specifications does not apply simultaneously with the Material and Workmanship clause—it is one or the other.” 

The government is required to meaningfully engage with contractors on contract interpretation issues like those found in FAR 52.236-5. Contractors can take heart in this decision: understanding and diligently pursing your rights under the contract pays off. 

2. Appeal of SRM Group, CBCA Nos. 5194, 5938 (March 11, 2021)

  • SRM held a Department of Homeland Security contract for housing maintenance services at the Federal Law Enforcement Training Center in Georgia.
  • The government deleted two buildings from the contract scope and later sought to add them back. The parties couldn’t agree on the price for that addition, and SRM brought a claim for its asserted amount.
  • In support of its claim, SRM engaged multiple lawyers and cost consultants, ultimately submitting five different expert reports from two different experts, each finding a different amount of claimed costs. At trial, SRM did not provide any explanation regarding the different amounts.
  • The board denied SRM’s appeal, finding that it had failed to adequately support its quantum.

This case demonstrates the benefit of engaging experienced, detailed-oriented outside counsel to assist in developing and litigating claims. While damages need not be proven exactly, self-contradiction, imprecision, and errors can sink a claim.

Investigations and Enforcement 

In U.S. ex rel. Felten v. William Beaumont Hospital, the Sixth Circuit construed Section 3730(h) anti-retaliation provisions of the False Claims Act to apply after a purported whistleblower’s employment ends. While not all circuits have the same standard, False Claims Act defendants should be aware of this ruling and consider providing instruction not only to avoid retaliating against a whistleblower employee, but to avoid retaliating (including, but not limited to, impacting reputation so as to preclude future employment) against a whistleblower former employee as well.


Government Contracts Legal Round-Up | 2021 Issue 6

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update will offer brief summaries of key developments for government contracts legal, compliance, contracting, and business executives.

Regulatory Update

1. Class Deviation 2021-O0003: DFARS 252.239-7098 Prohibition on Contracting to Maintain or Establish a Computer Network Unless Such Network is Designed to Block Access to Certain Websites – Representation (Apr. 2, 2021)

  • This Class Deviation sets out a new representation for contracts to maintain or establish a computer network that are funded under the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) (the Act), or extensions to the Act.
  • For covered solicitations, by submission of an offer, the offeror represents “that it is not providing as part of its offer a proposal to maintain or establish a computer network unless such network is designed to block access to pornography websites.” 
  • Contracting officers will include the provision at 252.239-7098, in all solicitations, including solicitations for the acquisition of commercial items under FAR part 12.
  • Funding under the Act may be still used by law enforcement to carry out activities related to criminal investigations, national defense, and intelligence. 

Contractors anticipating submitting proposals that include maintaining or establishing a computer network will want to ensure compliance with this new “porn blocking” representation and evaluate any needed changes to supply chain representations.

2. Implementation of the Government Furnished Property Module (Mar. 24, 2021)

  • As of January 2021, and in accordance with DFARS subpart 245.102(5), contractors are required to report the loss of Government property in the GFP Module in lieu of the Defense Contract Management Agency (DCMA) Property Loss eTool. 
  • Training resources on how to use the GFP Module are available at the DoD Procurement Toolbox and live webinars are posted here.

Contractors should note increased oversight of Government property. DoD describes its GFP Module as “an important step” in addressing “DoD’s material weakness in better accounting for Government Property” in contractors’ possession. The tool supports DoD’s strategic plan for defense-wide procurement financial and audit improvements. Documentation and data for completed loss cases in the GFP Module will be saved, allowing greater insight into loss patterns.

3. Securing the Information and Communications Technology and Services Supply Chain: Licensing Procedures (Mar. 29, 2021)

  • On January 19, 2021, the Department of Commerce (the Department) published an interim final rulemaking, ‘‘Securing the Information and Communications Technology and Services Supply Chain,’’ which became effective on March 22, 2021. 
  • This rule allows the Secretary of Commerce, in accordance with Executive Order 13873, to prohibit certain information and communications technology and services transactions (ICTS Transactions) to address national security threats.
  • ICTS Transactions include provision of services. The term includes all transactions that occurred on or after January 19, 2021, by any person owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary. Providing services, such as software updates, to US persons may provide a foreign adversary an opportunity to engage in activities that may threaten US national security.
  • In its January 19 notice, the Department stated it would implement a licensing process by May 19th for entities seeking pre-approval before engaging in or continuing to engage in ICTS Transactions.
  • Because additional public input is needed and the Department no longer expects to meet its May 19 deadline, the Department seeks public input through April 28, 2021, on such a licensing or other preclearance process.

In this Advanced Notice of Proposed Rulemaking, the Department of Commerce seeks public input by April 28, 2021 on all aspects of a future ICTS licensing process, including potential models for creating a process that would provide entities seeking to engage in an ICTS Transaction greater certainty that the transaction will not be prohibited.

Protest Cases

1. TekSynap Corp., B-419464; B-419464.2 (Mar. 19, 2021)

  • GAO sustained a protest challenging the National Geospatial-Intelligence Agency’s (NGA) evaluation of proposals and decision not to hold discussions.
  • Specifically, GAO found the agency unreasonably assigned only a “slight weakness” to the awardee despite one of its key personnel failing to meet a mandatory qualification. In a cascading effect, this meant the management plan subfactor rating of “outstanding” was unreasonable, and the overall “outstanding” rating for the technical/management factor was unreasonable.
  • GAO also held that the assignment of a “moderate strength” rather than a “significant strength” to the protester’s proposal was unreasonable when the evaluators positively described numerous merits of the proposal in detail and used language associated with a significant strength.
  • Based upon these errors, GAO concluded that NGA’s decision not to enter into discussions with TekSynap—because the agency had determined the awardee’s proposal was technically superior—was necessarily unreasonable.

2. IAP World Services, Inc., B-418566.2 et al., Aug. 20, 2020 (published Mar. 24, 2021)

  • GAO denied a protest alleging that awardee Vectrus-J&J Facilities Support, LLC (VJFS) materially misrepresented its management structure by failing to disclose an imminent sale. One of VJFS’s joint venture members (J&J Maintenance) was subject to a stock purchase several weeks after it was awarded the contract.
  • As a general matter, an offeror’s material misrepresentation in its proposal can invalidate an agency’s evaluation, and serve as a basis to cancel any contract award.
  • Here, GAO agreed with the contracting agency (the Navy) that even if there had been a misrepresentation, it did not invalidate the agency’s evaluation. While the Navy cited VJFS’s experience and past performance in its best value determination, the stock purchase did not impact VJFS’s stated experience or past performance as J&J’s operations, management team, and resources remained the same.
  • Notably, GAO also explained that even assuming that VJFS had a duty to notify the agency about the potential future stock transaction and failed to do so, the protester was not prejudiced by any failure to notify.

Where an offeror’s proposal represents that it will perform a contract in a manner materially different from the offeror’s actual intent, an award based on such proposal cannot stand, since both the offeror’s representations, and the agency’s reliance on such, have an adverse impact on the integrity of the procurement process. But GAO will not sustain a protest alleging a misrepresentation unless the protester can demonstrate competitive prejudice from the awardee’s failure to notify the contracting agency of any changes to its proposal.

Claims Cases

1. Appeal of L3 Technologies, Inc., ASBCA Nos. 61811, 61813, 61814 (Mar. 1, 2021)

  • L3 appealed multiple contracting officer’s final decisions (COFDs) disallowing costs, including for “other direct costs” and overhead expenses.
  • The COFDs were based on DCAA incurred cost audits for 2011-2014, which employed cost sampling and then extrapolated the questioned cost amounts across the entirety of the sample pool.
  • During discovery, the contracting officer withdrew the COFDs, stating that the government would no longer challenge the costs. The government moved to dismiss the appeals.
  • L3 sought to continue the appeals over the government motion to dismiss, desiring a decision on the merits. L3 argued that the government had engaged in a pattern of asserting and then withdrawing such incurred cost disallowance claims.
  • The board dismissed the claims, holding that they were moot and not subject to any exception to the mootness doctrine.
  • Judge Clarke dissented, noting that “The majority decision subjects L3 (and other contractors) to the unfortunate chain of events discussed below until DCAA and DCMA resolve whatever their differences are.”

The painful pattern seen here is familiar to many government contractors: delayed DCAA audits result in rushed COFDs to avoid the statute of limitations. Contractors must then defend against a government claim, often seeking millions of dollars in previously paid amounts. Unfortunately, this decision gives contractor’s little hope of relief and highlights the need to pay close attention to all DCAA audits and disallowances.

2. Appeal of SRA International, Inc., CBCA Nos. 6563, 6564 (Mar. 19, 2021)

  • SRA appealed COFDs disallowing $29 million in costs on two State Department contracts following DCAA incurred costs audits.
  • After a structured negotiation process, SRA secured a complete withdrawal of the COFDs and dismissal of the government claims with prejudice.

Continuing the theme of government cost disallowance claims, this case demonstrates the benefit of engaging experienced outside counsel to assist in dealing with DCAA audits, disallowances, and any resulting COFDs or government claims.


Government Contracts Legal Round-Up | 2021 Issue 5

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update summarizes key developments for government contracts legal, compliance, contracting, and business executives.

Regulatory Activity

1. Withdrawal of Several FAR Cases on March 19, 2021

The change in administration has resulted in the review and withdrawal of several rules pending for years. Because of the passage of time, the FAR Council favors further consideration under new FAR cases, if at all. One FAR case (2018-002) was withdrawn as it was tied to a now-revoked executive action. The rules withdrawn include:

  • FAR Case 2011-001: Withdrawal of Organizational Conflicts of Interest 
  • FAR Case 2012-015: Withdrawal of Small Business Set Asides for Research and Development Contracts
  • FAR Case 2013-022: Withdrawal of Extension of Limitations on Contractor Employee Personal Conflicts of Interest 
  • FAR Case 2018-002: Withdrawal of Protecting Life in Global Health Assistance

2. Request for Comments on Semiconductor Manufacturing by US Department of Commerce

  • In response to President Biden’s Executive order on “America’s Supply Chains,” the Secretary of Commerce must submit a report within 100 days that: (1) identifies risks in the semiconductor manufacturing and advanced packaging supply chains; and (2) proposes policy recommendations to address these risks.
  • The FY 21 NDAA also includes a provision to incentivize the production of semiconductors for the US, and mandates several actions to secure the semiconductor-related supply chain.
  • This notice requests comments by April 5, 2021 to assist the Commerce Department in preparing its report to the White House.Publish

3. Department of Labor Plans to Rescind Two Rules Related to Independent Contractors and Joint Employers Finding They “Weaken” Protections to Workers Under the Fair Labor Standards Act

  • The first Notice of Proposed Rulemaking proposes the withdrawal of the Independent Contractor Final Rule issued on Jan. 7, 2021. This rule adopted a new “economic reality” test that narrowed or minimized other factors considered by courts traditionally, making it less likely a worker will be found an employee subject to FLSA protections. Independent contractors have no FLSA protections, but employees are eligible for the federal minimum wage and overtime.
  • The second Notice of Proposed Rulemaking seeks to rescind a current regulation on joint employer relationships under the Fair Labor Standards Act, effective March 16, 2020. On September 8, 2020, the US District Court for the Southern District of New York vacated portions of the Joint Employer Rule, stating that the rule was contrary to the FLSA and was “arbitrary and capricious” due to its failure to explain a shift from prior guidance or to consider the effect of the rule on workers.
  • The Department of Labor invites comments on both proposed rules by April 12, 2021.

Protest Cases

1. People, Technology and Processes, LLC, B-419385, B-419835.2 (Feb. 2, 2021) (published Mar. 15)

  • GAO found unobjectionable the General Services Administration’s (GSA) rejection of a late-submitted proposal.
  • The request for proposals (RFP) required that offers be submitted by October 13, 2020, via the agency’s online proposal submission portal, “GSA ASSIST.” The RFP warned that proposals received after the closing data and time would not be considered.
  • The protester had trouble with the online portal—it uploaded materials but was unable to click submit—so it emailed the proposal to the contracting officer instead.
  • Even though the protester had uploaded proposal materials prior to the deadline, GAO noted that the protester maintained the ability to revise its proposal by uploading new, modified attachments until the moment it pressed the “submit” button. Thus, GAO found that the uploaded materials were never under the government’s control.
  • GAO also found that the use of email to submit the proposal was not authorized by the RFP.

Late is late. It is an offeror’s responsibility to deliver its proposal to the government office designated in the solicitation by the time specified, and an agency is not required to consider a proposal where there is no evidence that the proposal was actually received.

2. HVF West, LLC v. United States, CAFC No. 2020-1414, 2020-1583 (Feb. 19, 2021)

  • The Court of Appeals for the Federal Circuit reversed a Court of Federal Claims decision, finding that the successful protester actually lacked standing to bring its COFC protest.
  • HVF protested the Defense Logistics Agency’s (DLA) award of a “sales contract” for the purchase and destruction of surplus Government military equipment. Given that DLA technically was selling the property to the contractor, DLA awarded the contract to the highest bidder, Lamb Depollution, Inc. HVF was fourth in line for the contract.
  • First at the agency-level, then at GAO, and eventually at COFC, HVF raised numerous “detailed allegations” to challenge the award to Lamb, and HVF also questioned the experience of the two intervening bidders. COFC sustained the protest, finding that HVF showed that DLA erred in finding Lamb satisfied all non-price criteria in the solicitation.
  • On appeal, the Federal Circuit found that HVF’s challenges to the intervening offerors were “based upon conjecture,” which was insufficient for HVF to establish that it had a substantial chance of winning the award such that it qualified as an interested party. More specifically, HVF alleged only that the intervening bidders “failed to meet the standards for a successful pre-award survey,” a conclusory statement deemed insufficient to question the eligibility of the intervening bidders.

To have standing to bring a bid protest, a losing bidder must be an interested party; that is, an actual or prospective bidder whose direct economic interest would be affected by the award of the contract or by failure to award the contract. The Federal Circuit clarified that “even when an agency assesses price-ranked bidders together for technical compliance to select the bid most advantageous to the Government, . . . the least favored price-ranked bidder has standing only upon mounting a credible challenge to the technical acceptability of the better price-ranked bidders in line and in front of the protesting party.”

3. Peraton, Inc., B-416916.11 (Feb. 8, 2021) (published Mar. 16)

  • Following a series of protests and corrective action over two years, GAO dismissed as untimely the protester’s new allegation that the RFP no longer reflected the agency’s requirements.
  • Under GAO’s timeliness rules, protests challenging the terms of a solicitation must be filed prior to the proposal due date unless no due date has been established, in which case the protester is required to raise any issues within ten days of when it knew or should have known about the defects in the solicitation. An agency’s alleged failure to amend a solicitation based on changed requirements is a challenge to the terms of the solicitation.
  • Here, on October 30, the agency set a deadline for proposal submission. While Peraton protested prior to the due date, the company knew about the issues it raised between April 27 and October 30, when no closing time had been established for this procurement. GAO thus concluded Peraton’s protest was untimely.
  • In a rare admonishment, GAO also noted that this procurement had been subject to six protests by Peraton, the incumbent contractor that had continued performance throughout, and “permitting a protester to, in effect, hold solicitation challenges in reserve until it becomes clear that they are unlikely to prevail in a competition is antithetical to the idea that allegations of solicitation improprieties should be resolved as early as possible in the procurement process.”

When challenging the terms of a solicitation—including an agency’s failure to amend a solicitation based on changed requirements—the key question for timeliness is whether the date for proposal submissions (or resubmissions) has been set. In situations where no due date has been established, the protest must be filed within ten days of when the basis for protest was known. Failure to protest on time will result in a dismissal.

4. Mission 1st Group, Inc., B-419522 (Mar. 15, 2021)

  • GAO denied a protest challenging the company’s elimination from the competition based on a “go/no-go” evaluation factor for ISO 9001:2015 certification.
  • Offerors were required to show that they possessed a current/valid certificate, and also that they had possessed one during the period two years prior to the deadline for submitting proposals (October 5, 2020). The protester provided a current certificate, issued on December 27, 2019, but did not submit its prior certification. Based on missing the RFP requirement, the agency said “no-go.”
  • GAO found this result unobjectionable, because there was nothing ambiguous about the terms of the RFP, and had the agency requested the company submit additional documentation, that would have amounted to discussions.

A good reminder that contractors must pay close attention to RFP documentation requirements, particularly on “go/no-go” factors, as failure to provide the necessary information will likely result in elimination from the competition.

Claims Cases

1. Creative Mgmt. Servs., LLC v. United States, US Court of Appeals for the Federal Circuit, Case No. 2020-1449 (Feb. 26, 2021)

  • Creative held a GSA contract to host the annual GovEnergy conference. Under the contract, it was to maintain a separate bank account with all proceeds from the conference and from which it could receive payment. When GSA cancelled the conference in 2012, GSA requested by letter that Creative return the entire amount in this account. Creative responded that it was entitled to keep any remaining funds and submitted a termination for convenience settlement. Eventually the government issued a final decision with a settlement amount and sought return of any difference remaining in the account.
  • Creative failed to appeal this Contracting Officer’s Final Decision (COFD) within 12 months, and the Court of Federal Claims found its appeal time barred by the Contract Disputes Act.
  • On appeal, Creative argued that the COFD was not proper as it did not state a sum certain.
  • The Federal Circuit upheld COFC’s dismissal, holding that a COFD need only be based on a claim stating a sum certain. Even then, the “sum certain” only needs to be “readily ascertainable to the party against whom the claim was made.” The court held that the government’s prior demand letters for the balance of the account constituted a sum certain despite containing different amounts and the word “approximately.” The court held the amount was readily ascertainable to Creative by simply checking the balance in the account.

This case is a reminder to pay close attention when dealing with any government demand for payment or any letter that identifies itself as a Contracting Officer’s Final Decision. Time limits under the Contract Disputes Act are a trap for the unwary. Creative gets credit for making creative technical arguments to attempt to avoid them, but it couldn’t get around its failure to timely appeal the COFD.

Investigations and Enforcement

O'Fallon Building Co. Settles Fraud Claims, USAO-SDIL, Department of Justice

R&W Builders, Inc., agreed to pay $400,000 to resolve allegations that it fraudulently obtained construction contracts reserved for 8(a) businesses. R&W had graduated from the 8(a) program, then stood up a new joint venture and, upon award of a new contract, stepped forward and managed the contracts using its own employees to perform nearly all the work in violation of 8(a) rules.

The International Rescue Committee (IRC) Agrees to Pay $6.9 Million To Settle Allegations That It Performed Procurement Fraud by Engaging in Collusive Behavior and Misconduct on Programs Funded by the United States Agency for International Development, USAO-DC, Department of Justice

International Rescue Committee agreed to pay $6.9 million to settle False Claims Act allegations related to USAID funds for humanitarian assistance for displaced persons in Syria. The allegations involved collusion and kickbacks for goods purchased by USAID funds.


5 Ways Gov't Contractors Can Manage Schedule Change Risk

Partner Matt Haws wrote “5 Ways Gov't Contractors Can Manage Schedule Change Risk” with Jonathan Rice and Sashi Mahtani of Breakwater Forensics LLC. It’s an important read for government contractors facing project delays or the threat of liquidated damages.

Matt also spoke with Tom Temin of Federal News Network about how these schedule management tips can help contractors deal with COVID-19 delays. To listen to or read about the interview, click here.


Government Contracts Legal Round-Up | 2021 Issue 4

Welcome to Jenner & Block’s Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update summarizes key developments for government contracts legal, compliance, contracting, and business executives.

Executive Actions

Executive Order on America’s Supply Chains (Feb. 24, 2021)

  • This order sets out a policy to ensure resilience in US supply chains through robust US manufacturing capacity and the availability and integrity of critical products and services.
  • Within 100 days, members of the National Security Council (NSC) and heads of agencies will identify supply chain risks in key areas, including:
    • Semiconductor manufacturing and advanced packaging supply chains;
    • Critical minerals and other identified strategic materials, including rare earth elements; and
    • Pharmaceuticals and active pharmaceutical ingredients.
  • Within one year, DoD, among other agencies, must report on respective industrial bases, including identifying:
    • Critical materials and gaps in any US manufacturing capabilities; and
    • Any contingencies that may disrupt, strain, compromise, or eliminate the supply chain.

This order addresses concerns regarding exclusive or dominant supply of needed goods and materials through nations that are, or are likely to become, unfriendly or unstable. Within one year, agencies must supply recommendations regarding sustainably reshoring and building redundancy into US supply chains, enlarging stockpiles, developing workforce capabilities, and expanding research and development. Contractors should expect future regulatory changes that may be “necessary to attract and retain investments in critical goods and materials and other essential goods and materials.”

Audits

Weapon Systems Cybersecurity: Guidance Would Help DoD Programs Better Communicate Requirements to Contractors (Mar. 4, 2021)

  • GAO concluded that DoD has struggled to ensure its weapons systems can withstand cyberattacks, although some improvements have been made since 2018. 
  • DoD programs are not always incorporating cybersecurity requirements into contract language. Some contracts had no cybersecurity requirements when they were awarded, with vague requirements added later.

As a result of GAO’s recommendation that DoD components do better at incorporating cybersecurity requirements into contracts, contractors should expect to see new guidance from the Army, Navy, and Marine Corps on “tailored weapons systems cybersecurity requirements, acceptance criteria, and verification processes.” 

Protest Cases

1. Spartan Medical, Inc., B-419503 (Feb. 26, 2021)

  • GAO dismissed a protester’s challenge to an Air Force other transaction agreement (OTA) procurement for COVID-19 testing supplies.
  • The protester waited until after its response was rejected to challenge both the agency’s use of its OTA authority and the agency’s basis for eliminating the firm from further consideration.

OTAs are not procurement contracts covered by the Competition in Contracting Act, and GAO generally does not review protests of the award or solicitations for the award of an OTA. The only exception is where an agency is exercising its OTA authority and the protester files a timely, pre-closing date protest alleging that the agency is improperly exercising that authority. Here, GAO dismissed Spartan’s protest because its objection to the use of OTA authority was filed too late and because its challenge to the rejection of its submission was outside of GAO’s jurisdiction.

2. Anduril Industries, Inc., B-419420 (Feb. 22, 2021)

  • GAO denied a protest arguing that an Air Force task order competition for “tactical edge node support” was outside the scope of the underlying indefinite-delivery, indefinite-quantity (IDIQ) contract, or otherwise unduly restrictive of competition.
  • The Air Force’s advanced battle management systems (ABMS) IDIQ contract covered several categories and pools of contractors, and while the protester held an ABMS IDIQ contract for certain categories, its ABMS contract did not cover the category in which the “tactical edge node support” was being procured—“secure processing.” Anduril argued the competition should be conducted in the “transmission of data” category or that it should be permitted to compete.
  • GAO concluded that the tactical edge node support requirement was logically connected with the broad scope of work described in the ABMS program’s “secure processing” category.
  • Jurisdictional note: Even though the task order was valued below GAO’s $25 million jurisdictional threshold for DoD task order competitions, GAO had jurisdiction over the assertion that it was outside the scope of the IDIQ category. GAO did not have jurisdiction to consider the protester’s second argument that the solicitation was unduly restrictive of competition.

In determining whether a proposed task order is outside the scope of the underlying contract, GAO examines whether it is materially different from the original contract, as reasonably interpreted. Where there is a logical connection between a broad scope of work in an IDIQ contract and the services to be procured under a subsequent task order, the task order is within the scope of the IDIQ contract.

3. Microgenics Corp., B-419470 (Feb. 2, 2021)

  • GAO dismissed a protest challenging an award made by the Administrative Office of the United States Courts (AOUSC) that was filed more than 10 days after the protester learned of its basis of protest.
  • AOUSC is a judicial branch agency not bound by the statutory requirement for a post-award debriefing that applies to executive branch agencies, and a debriefing mandated by internal agency policy guidance was not a “required debriefing” for purposes of GAO’s timeliness rules.
  • Thus, the debriefing exception did not apply, and the debriefing did not toll the protest filing deadline.

GAO’s strict rules for the timely submission of protests can be a trap for the unwary. In preparation for award notifications, offerors should ensure they understand the relevant deadlines in the event they are disappointed by the outcome and elect to protest.

Claims Cases

1. Appeal of BAE Systems Ordnance Systems, Inc., ASBCA Nos. 62416 (Feb. 10, 2021)

  • BAE Systems submitted three letters to the US Army related to environmental fines assessed on ammunition production facilities in Virginia. Each letter identified itself as a request for equitable adjustment (REA), referenced the DFARS REA clause, and contained the DFARS REA certification. None of the letters requested a Contracting Officer’s Final Decision (COFD) or contained the FAR claim certification language.
  • After failed negotiations, BAE Systems converted the REAs to certified claims through a document requesting a COFD and containing the FAR claim certification. The Army failed to issue a COFD by the date it identified, and BAE Systems appealed the deemed denial to the Armed Services Board of Contract Appeals (ASBCA).
  • The Army moved to dismiss the appeal for lack of jurisdiction, arguing that BAE Systems’ earlier letters were “claims” under the Federal Circuit’s 2019 decision in Hejran Hejrat and, thus, the contractor’s appeal was untimely.
  • The ASBCA acknowledged that the holding in Hejran Hejrat made this case a “closer call” than it would have been, but concluded the REAs did not cross the “Rubicon” into CDA claims. The Board focused on BAE’s lack of explicit or implicit request for a COFD and the lack of substantive change in the “posture between the parties” during the REA information exchanges.  

The government frequently attempts to argue jurisdictional and procedural bars to claims. In BAE Systems, the Army attempted to use case law that traditionally helped contractors as a weapon against them: arguing that a document intended by the contractor to be a REA should be treated as a claim and trigger the 90 day clock for appeal to the ASBCA. The Board rejected the argument, but the warning is clear: the government may insert ambiguous language in its contractual correspondence (e.g., "Contracting Officer’s Final Determination") and then attempt to use it in a jurisdictional argument. Remember to develop a clear strategy for pursuing REAs and converting them to claims, be careful in drafting each, and pay close attention to government correspondence in response.

2. Appeal of Central Diversified Contracting, LLC, ASBCA No. 62585 (Jan. 6, 2021)

  • Central Diversified Contracting, LLC received an Army Corps of Engineers contract to remove a floating fish collector from a reservoir in Oregon. The government had informed bidders the fish collector weighed 15,000 pounds, but it actually weighed 81,000 pounds. As a result, Central Diversified had to use a different crane and method of performance. 
  • The Army Corps and Central Diversified entered into a bilateral modification increasing the contract amount by $29,530, but Central Diversified later sought additional damages through contract claims.
  • The Army Corps argued that the modification’s release covered all additional effort resulting from the larger fish collector.
  • The ASBCA held that the modification’s description of its purpose as “mobilize a 400-ton crane to the site” was not all-inclusive, and Central Diversified was entitled to additional cost related to the larger fish collector.

This case is a reminder to pay close attention to the release language in any contract modification. Much like any good fish story, the government will often attempt to claim the release was bigger later on.

FCA Priorities

The annual Federal Bar Association's Qui Tam Conference, held last month (and featuring Jenner & Block Partner David Robbins in the "Defense Strategies" panel), saw an important keynote session from Sen. Chuck Grassley (a career-long champion of the False Claims Act) and Brian Boynton, acting Assistant Attorney General for the Civil Division. They outlined FCA enforcement priorities for 2021 and signaled future amendments to the FCA to counter efforts to, in Sen. Grassley's words, "undermine the law as written." Enforcement priorities include combatting COVID-19/stimulus-related fraud, cybersecurity-related fraud, and fraud related to opioids.