Government Contracts Legal Round-Up | 2024 Issue 1

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.


CMMC 2.0 and the Future of Cybersecurity Certification

  • The Department of Defense issued a significant proposed rule implementing CMMC 2.0; comments are due by February 26, 2024. 
  • In 2019, DoD first announced the CMMC program to move away from “self-attestation” of compliance with cybersecurity requirements applicable to the safeguarding of sensitive, unclassified information.
  • Following an initial 2020 version implemented in an interim rule (CMMC 1.0), DoD announced a streamlined CMMC 2.0 in November 2021. Industry submitted 750 comments.
  • Just before the end of 2023, DoD issued a proposed rule implementing CMMC 2.0, with requirements set to take effect over a three-year period.

Summary of Rule

  • The rule does not displace existing cybersecurity requirements for contractors, including in FAR 52.204-21 and DFARS 252.204-7012. Those clauses, when applicable, will continue to require contractors to meet certain cybersecurity requirements. The rule instead creates a certification regime whereby prime contractors and subcontractors may be subject to assessment by certified, independent third-party organizations and required to pass those assessments as a condition of contract award. In other words, self-assessment of cybersecurity compliance will no longer be sufficient for thousands of contractors doing business with DoD.
  • DoD Program Managers will select which of the three CMMC Levels are appropriate for inclusion in each solicitation: Level 1 aligns to the basic 15 security requirements in FAR 52.204-21; Level 2 aligns to the 110 requirements from NIST SP 800-171 rev 2; and Level 3 is defined as the additional requirements from NIST SP 800-172 intended to protect against advanced persistent threats.
  • While third-party assessments and certifications are a paradigm shift, the rule notes that contractors are already required to implement the primary substantive requirements (the -7012 clause requires compliance with NIST SP 800-171, and FAR 52.204-21 mandates implementation of 15 security requirements) and to perform at a minimum a self-assessment documenting compliance, which is submitted to DoD via the Supplier Performance Risk System (SPRS) (DFARS 252.204-7019 and -7020).
  • Notably, the rule does not mandate third-party assessments and certifications to achieve all three “Levels.” Level 1 can be achieved through an annual self-assessment with results entered in SPRS, and a limited number of solicitations will also designate Level 2 as satisfied through a self-assessment. However, the majority of Level 2 certifications will only be achieved through a third-party assessor issuing a certification, and all Level 3 certifications will require a third-party assessor (specifically, DCMA DIBCAC).

Risks and Why It Matters

  • Compliance is a prerequisite for doing business with DoD. The rule is clear that DoD does not “provide mitigations for assessment delays” that might prevent a contractor from obtaining the requisite certification prior to award of a contract. Prime contractors and subcontractors will need to be prepared to obtain certification for their systems well in advance of a competition. Even with a phased approach to implementation, it remains to be seen whether the CMMC ecosystem will provide adequate capacity to timely certify the many thousands of interested organizations within the Defense Industrial Base.
  • Ensuring that subcontractors who receive CUI obtain Level 2 certifications may present compliance challenges for prime contractors; however, the specific CMMC Level required for a subcontractor will depend on the type of unclassified information that the subcontractor receives. Thus, a subcontractor that only receives Federal Contract Information will only be required to achieve Level 1 certification.
  • This rule may widen enforcement and False Claims Act risk for contractors. For assessments at all three levels, a “senior official” from the prime contractor and any applicable subcontractor must annually affirm, and enter into SPRS, continuing compliance with the specified security requirements. Further, the DoD CMMC Program Management Office is responsible for investigating indications that a CMMC assessment is questionable, with consequences including revocation of CMMC certifications.
  • Significant industry interest and comments are expected; the previous rule triggered 750 comments from industry.

Bid Protest Updates

B.H. Aircraft Company, Inc. v. United States, No. 2022-1766 Fed. Cir. (January 2, 2024)

  • In a short per curiam opinion, the Federal Circuit affirmed the Court of Federal Claims’ rejection of a protester’s allegations of improper bundling but avoided addressing thorny issues of standing.
  • B.H. Aircraft requested that the Navy unbundle the replacement of an aircraft part from the repair of that part; the Navy refused, finding that not only was there not improper bundling, but B.H. Aircraft was not a qualified bidder for the replacement work in any event. B.H. Aircraft protested to the Court of Federal Claims.
  • The Court of Federal Claims decision contained a complex discussion of the protester’s standing, framed as an issue of subject matter jurisdiction that had to be addressed before the merits. Ultimately B.H. Aircraft’s complaint was dismissed for lack of standing on the ground that B.H. Aircraft was not a qualified bidder. Alternatively, the Court of Federal Claims concluded that the protester failed to state a claim upon which relief could be granted because B.H. Aircraft had not established a violation of the bundling regulation.
  • In affirming the decision, the Federal Circuit panel explained that, because the “interested party” requirement is no longer treated as a jurisdictional rule, it is no longer necessary to grapple with standing before rejecting a protester’s claim on the merits. The Federal Circuit thus did not reach the issue of bidder qualifications, but instead affirmed that the Court of Federal Claims correctly concluded that B.H. Aircraft’s complaint failed to state a claim on which relief could be granted.

B.H. Aircraft is a helpful demonstration of the practical impact of the new framework for dealing with interested party issues.

ConsortiEX, Inc., B-422078 (December 22, 2023)

  • GAO dismissed a protest challenging the award of a contract where the protester alleged that the PWS contained latent ambiguities regarding the level of effort necessary to perform the contract.
  • The protester presumably felt compelled to raise this objection given the significant price disparity between the awardee’s price ($1 million) and the protester’s price ($33.8 million). 
  • GAO stated that as a threshold matter for an ambiguity to exist, there must be “two or more reasonable interpretations of the terms or specifications.”
  • GAO distinguished between an ambiguity susceptible to two or more “reasonable interpretations” and generally “vague” solicitation language that is not susceptible to a “reasonable alternative interpretation.”
  • Here, because the protester could not establish that the PWS was anything other than vague (i.e., it was not susceptible to reasonable alternative interpretations), any protest challenging the vague solicitation terms was due prior to the deadline for proposal submission and thus untimely when filed post-award.

This decision highlights a protest tactic used where vastly different approaches suggest that offerors had different understandings of the solicitation. But for this allegation to be viable, the protester must identify an actual solicitation ambiguity—language susceptible to two or more reasonable interpretations. A poorly written or vague solicitation will not suffice to lay the foundation for a cognizable protest ground.

Small Business Update

Federal Performance Management Solutions, LLC v. United States (January 3, 2024)

  • The Court of Federal Claims denied FPMS’s protest arguing that it was arbitrary for the Small Business Administration (SBA) to deem the company large for violating rules related to joint ventures.
  • FPMS (a joint venture) entered into its first contract in 2018 under an SBA rule that allowed a JV to enter into three contracts in two years (the 3-in-2 Rule). In 2020, SBA changed its rules to permit JVs to enter into an unlimited number of contracts within a two-year period (the Two-Year Rule). 
  • In 2022, FPMS was awarded a new contract set aside for small businesses, but following a size protest, was deemed large because more than two years had passed since FPMS won its first contract. Following a loss at the SBA Office of Hearing and Appeals, FPMS appealed to the court. The court agreed that FPMS was large and thus ineligible for award. Contrary to the appellant’s arguments, switching from the 3-in-2 Rule to the Two-Year Rule did not impact the two-year limitation on JVs, and enforcing the Two-Year Rule in 2022 did not impermissibly apply the regulation retroactively. Moreover, amending the rules did not require the two-year clock to start anew.

This recent decision from the Court of Federal Claims reminds companies that under SBA rules, a mentor-protégé joint venture (JV) can only exist for two years, after which time a new JV must be created.

Government Contracts Legal Round-Up | 2023 Issue 22

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.

Federal Circuit Docket

During its December court week, the Federal Circuit held oral argument in three appeals presenting important government contract issues:

  • In BCC-UIProjects-ZAAZTC Team JV v. Secretary of the Army, the panel discussed jurisdictional issues that can arise under the Contract Disputes Act (CDA) when there are questions as to which individual or entity within a Joint Venture is authorized to file a claim on the JV’s behalf.
  • In Nauset Construction Corporation v. Secretary of the Army, the panel debated the jurisdictional implications when an agency fails to properly notify a contractor of its appeal rights under the CDA.
  • In Newimar S.A. v. United States, the argument focused on the responsibility implications when an awardee chosen to perform in a foreign country is arguably not in compliance with local law, as well as the importance of carefully preserving protest arguments in briefing at the Court of Federal Claims.

Shortly after argument, the Federal Circuit summarily rejected the Newimar appeal, without opinion, pursuant to Federal Circuit Rule 26. Contractors, agency contracting offices, and their counsel should keep an eye on the two remaining appeals. As always, recordings of these arguments are available online at the Federal Circuit’s webpage.

Supply Chain Resilience Council

On November 27, 2023, the Biden Administration hosted the first-ever meeting of the Supply Chain Resilience Council. The council—created to strengthen and monitor critical supply chains in response to inflation and pandemic-related disruptions—consists of over 25 members from the administration, including Lael Brainard (Assistant to the President and National Economic Advisor), Janet Yellen (Secretary of the Treasury), Pete Buttigieg (Secretary of Transportation), and other cabinet members, assistants, and key decision makers. The council announced 30 new actions to strengthen supply chains, monitor disruption indicators, and mitigate future issues as they arise. Some notable efforts include:

  • Using the Defense Production Act to authorize investment in critical medicines and medical countermeasures to mitigate drug and medical supply shortages;
  • Enhancing cross-governmental supply chain data-sharing capabilities;
  • Furthering public-private partnerships aimed at creating common understanding of supply chains to facilitate the flow of goods;
  • Investing in critical supply chains, including the domestic food and energy supply chains; and
  • Partnering with international allies to develop early warning systems and coordinate responses to future supply chain disruptions.

Government contractors will be vitally important to the administration’s understanding of domestic and international supply chain concerns. For more information on the council’s development of supply chain-related policies and programs, contractors can review the White House fact sheet highlighting some of the recent developments.

Protest Update

SecuriFense Inc., B-421818.2 et al. | October 23, 2023

  • GAO sustained a protest where the Defense Intelligence Agency (DIA) failed to evaluate quotations equally.
  • As part of oral presentations, vendors were instructed to address how staffing plan mitigation strategies would reduce the risk of negative schedule impacts if staffing fell below 75 percent.
  • Although the protester discussed how it would address various types of staffing shortages, it did not specifically address strategies for reducing the potential negative impacts on the training execution mission if staffing fell below 75 percent. Accordingly, DIA found it had reduced confidence in the protester’s quotation.
  • The awardee similarly discussed staffing risk mitigation techniques but stated it did “not expect staffing to fall below 75 percent” and thus did not address specific strategies in the event staffing fell below 75 percent. During the course of the protest, DIA defended its evaluation by reiterating that the awardee would never let staffing fall below this threshold.
  • GAO rejected the agency’s explanation and agreed that DIA unequally evaluated vendors. GAO explained that the agency’s position does not account for the solicitation’s specific request for mitigation strategies in the event staffing fell below 75 percent, and the solicitation was not limited to what vendors would do to prevent staffing from falling below 75 percent in the first place.
  • Given that neither the protester nor the awardee discussed mitigation strategies in the event staffing fell below 75 percent, GAO found that it was unreasonable for DIA to assign the protester but not the awardee a finding of deceased confidence.

It is a fundamental principle of federal procurement law that a contracting agency must treat all offerors equally and evaluate their proposals evenhandedly against the solicitation’s requirements and evaluation criteria. Similarly, GAO has recognized that an agency fails to treat offerors equally when it applies different levels of scrutiny when evaluating different proposals by reading some offerors’ proposals in an expansive manner and resolving doubt in favor of the offeror, while reading other offerors’ proposals narrowly and applying a more exacting standard.

Government Contracts Legal Round-Up | 2023 Issue 21

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.

Commercial Item Contracting Update

A recent DFARS amendment restricts DoD contracting officers’ ability to include non-commercial FAR and DFARS clauses in new solicitations for commercial products and services. The new rule also curtails the types of clauses that DoD prime contractors can flow down to subcontracts for commercial products and services. Previously, the DFARS vaguely permitted prime contractors to flow down additional clauses above and beyond the mandatory flow-downs. Under the amended rule, only mandatory flow-downs are permitted. Additional DFARS amendments are expected as part of a broader initiative to clarify the rules for commercial subcontracts, including a much-anticipated definition of the term “subcontract.”

Artificial Intelligence Update

Byte-Sized Steps – Navigating the Biden Executive Order on AI and Other Recent Developments in AI Regulation

President Biden signed a long-awaited executive order that builds upon the administration’s previously released, non-binding Blueprint for an AI Bill of Rights, and seeks to catalyze both agency action and congressional legislation on artificial intelligence in the coming months. The Federal AI Executive Order covers myriad concerns that have been raised relating to AI—from cybersecurity to anti-discrimination to competition. This executive order builds on state executive and international efforts to regulate AI. Jenner & Block has compared the key elements of major orders and a new international code of conduct to regulate AI to help companies, including government contractors, understand the risks and concerns they face in building or integrating AI tools into their consumer or enterprise-facing products and services.

EEO-1 Data Collection Update

The 2022 EEO-1 Data Collection Process is Finally Open

After multiple delays, the collection is open. The deadline for completion is December 5, 2023.

The Director of the US Securities and Exchange Commission’s Enforcement Division issued guidance in a recent speech concerning Chief Compliance Officer liability. The SEC has brought enforcement actions where compliance personnel participated in misconduct outside of their compliance jobs, where compliance personnel misled regulators, and where there was a wholesale failure to carry out compliance responsibilities, such as failing to conduct compliance reviews and failing to remediate quality control problems. Director Grewal noted it is “rare” for compliance officers to be targeted, but the speech serves as an important reminder for compliance professionals about the rigors of, and risks involved with, their professions.

Protest Decisions

Myriddian, LLC v. United States, No. 23-1113C | November 20, 2023

  • Court of Federal Claims Judge Bruggink issued an interesting decision upholding the evaluation of the awardee’s proposed key personnel where the underlying solicitation provided broad minimum education requirements and permitted flexible staffing approaches.
  • CMS issued a solicitation to procure coding services to improve Medicare and Medicaid claim processing systems. After resolving a previous protest and conducting a reevaluation of proposals, CMS awarded the contract to J29. Myriddian, a technically superior but higher-priced offeror, protested. Myriddian argued that CMS conducted an improper best value determination because, in part, the agency misevaluated the qualifications of two of J29’s proposed personnel.
  • Specifically, Myriddian contended that J29’s program director did not meet the solicitation’s minimum requirements because the individual had a bachelor’s degree in psychology, and the solicitation required the director to have a bachelor’s or master’s degree “in a field of study that can be reasonably interpreted to perform tasks related to this position.” Myriddian also argued that the agency unreasonably evaluated the risk posed by J29’s medical director, who was proposed as a part-time employee supported by an “assistant medical director” whose resume was not included in the proposal.
  • The Court rejected these arguments. First, it was “eminently reasonable” for the agency to find that someone with a “quasi-medical” degree would be able to successfully lead a project team as the program director. Second, the Court rejected Myriddian’s complaints regarding the medical director position and noted that the solicitation neither required a full-time medical director nor required the submission of an associate medical director’s resume.

Although agencies cannot disregard minimum requirements set forth in a solicitation, agencies are generally afforded discretion to assess the adequacy of an offeror’s proposal. Myrridian provides an important reminder that COFC will uphold agency decision-making where it is reasonably consistent with the solicitation’s terms, notwithstanding recent decisions sustaining LCAT mapping and minimum requirements-related protests.

Global Alliant, Inc., B-421859.1 et al. | November 7, 2023

  • GAO denied a protest challenging the issuance of a task order by the Department of Health and Human Services (HHS).
  • Notably, HHS requested that GAO dismiss the protest, claiming that the protester was not an interested party because one of its proposed key personnel left the company prior to task order award and the protester did not advise HHS of the departure.
  • HHS invoked GAO’s well-known rule—almost always applied by protesters to challenge the evaluation of an awardee—that a firm is required to advise an agency where it knows that its key personnel became unavailable after proposal submission but prior to award.
  • GAO rejected the argument, finding that the evidence did not support the agency’s contention of unavailability: the proposed key person was employed by the protester’s subcontractor up to and through the date of award and only departed days later.

GAO’s rejection of the agency’s “interested party” dismissal request turned on the fact that the protester’s key person was not actually unavailable, but a different result presumably could have manifested under alternative circumstances. Key personnel availability issues thus should remain top of mind for both awardees and protesters under GAO’s precedent.

Government Contracts Legal Round-Up | 2023 Issue 20

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.

Former CIO’s False Claims Act Suit: A Warning for Universities (And Beyond) over Controlled Unclassified Information Compliance, The Government Contractor (October 11, 2023)

Jenner & Block Partner David Robbins and Associate Moshe Broder highlight a recent decision by a Pennsylvania court to deny the government’s request to keep under seal a False Claims Act (FCA) qui tam suit against Pennsylvania State University. The authors provide background on the complaint, which alleges that Penn State failed to follow government contracting requirements to safeguard controlled unclassified information, or CUI. They observe: “As experienced FCA defense lawyers, we know well that complaints can exaggerate facts and the truth is not always as colorful. Nevertheless, this complaint highlights the complexity of compliance with difficult and highly technical cybersecurity requirements.”

GAO Releases Its Annual Bid Protest Statistics (October 30, 2023)

Our Government Contracts team breaks down the numbers in the Government Accountability Office’s (GAO) Bid Protest Annual Report to Congress for Fiscal Year 2023. As we explain, the report shows that the number of bid protests filed and GAO’s “effectiveness rate” increased this past fiscal year, but these statistics were largely inflated by hundreds of protests emanating from one procurement. We also stress that “in more than half of the cases GAO resolved in fiscal year 2023, the bid protest forum was an effective avenue for the protester to obtain at least some relief.”

Bid Protest Updates

Sierra7, Inc., B-421299.2 (October 11, 2023)

  • GAO denied in part and dismissed in part a protest where the protester was not an “interested party” to maintain its protest.
  • After the protester filed its initial protest, the agency revealed that an intervening offeror submitted a quotation that was rated equally under the non-price factors but lower in price. The agency sought dismissal because that intervening offeror was next in line for award of the task order.
  • To avoid dismissal, the protester alleged that the intervening offeror’s quotation should have been assigned a weakness because the agency determined that one price element was unbalanced.
  • GAO disagreed, noting that unbalanced pricing is ordinarily required only in connection with the award of negotiated contracts under FAR Part 15 unless the requirement is specifically stated in the solicitation. In this competition conducted under FAR Part 16, the solicitation did not require an assessment for unbalanced pricing; indeed, the RFQ expressly disclaimed the applicability of FAR Part 15 procedures. In any event, the agency’s conclusion that the unbalanced price element did not pose an “unacceptable risk” was broadly consistent with the requirements of FAR Part 15.

Interested party status can be a trap for the unwary. Protesters must carefully assess the competitive landscape, including whether intervening offerors stand in the way of reaching a decision on the merits.

Small Business Updates

Karthik Consulting, LLC v. United States, No. 23-944 (October 4, 2023)

  • Court of Federal Claims Judge Dietz issued an important opinion on the SBA 8(a) program’s eligibility requirements relevant to contractors who may graduate (or have graduated) from the program.
  • In December 2022, DHS issued a solicitation set aside for 8(a) vendors under the GSA Highly Adaptive Cybersecurity Services (HACS) Special Item Number (SIN) 54151 vehicle. The solicitation asked quoters to indicate their 8(a) status and noted that “quotes that are not submitted by 8(a) quoters under GSA HACS MAS SIN 54151 8(a) at the time of initial task order quote submission shall not be considered and will be further removed from the competition.”
  • Karthik, which was awarded a GSA HACS MAS SIN 54151 contract as an 8(a) firm but had since graduated from the program, submitted a quotation. Although identified as the intended awardee, based upon SBA guidance, DHS deemed Karthik ineligible for award.
  • Karthik protested, arguing that there was a safe harbor for companies that obtain their seat on a multiple award contract as an 8(a) awardee, and then graduate from or exit the 8(a) program during the base period of contract performance.
  • Judge Dietz disagreed, finding that there was no continued right to compete for and receive 8(a) task order awards where the task order awardee has graduated from the 8(a) program. Instead, he specifically noted the SBA was correct in asserting that FAR 19.804-6 does not provide a safe harbor for firms bidding on a multiple award contract that is not an exclusive 8(a) set aside.

It is not always easy for 8(a) participants to understand their eligibility to bid on a certain contract. Karthik Consulting is an important reminder to contractors that the interplay of relevant SBA regulations requires careful consideration, and that—where it is at all ambiguous—it is important to seek counsel before responding to solicitations containing these requirements.

FOIA Exemption Updates

Buzzfeed Inc. v. United States, No. 19-1977 (D.D.C. October 17, 2023), No. 19-1977 (D.D.C. October 17, 2023)

The DC District Court recently denied a motion for summary judgment challenging the agency’s use of FOIA Exemptions 4, 7(A), and 7(E) to withhold responsive documents. Buzzfeed sought documents related to the Los Angeles FBI field office and procuring services from several genetic genealogy testing companies, and when rebuffed, argued that the agency had failed to justify invoking the claimed FOIA exemptions.

  • The district court disagreed. The court explained that to withhold documents under FOIA Exemption 4, the information must be (1) commercial or financial, (2) obtained from a person, (3) privileged or confidential, and (4) it is reasonably foreseeable that disclosure would harm the interest protected by the exception.
  • The court found that the FBI’s Vaughn Index and declaration submitted to support the agency’s exemptions adequately demonstrated that the withheld documents, which included “confidential contractual and transactional documents and communications, including terms, conditions, privacy agreements, and procedural guidelines, and details relating to advancements for use of genetic genealogy services for law enforcement investigation purposes,” contained commercial information obtained from a person.
  • The court also held that the documents were “confidential” as defined by the Supreme Court in Food Marketing Institute v. Argus Leader Media because the information was both customarily and actually treated as private by the genetic genealogy companies and provided to the FBI under an assurance of privacy. The information provided to the FBI had not been publicly disclosed, and the companies had confidentiality policies that prohibited the disclosure of the information shared with the government. With respect to the second prong of the Argus standard, the court noted that the contractors had submitted proposals after being told that “the contractor services requested would remain confidential even if the service contract is not accepted.”
  • Finally, the court agreed that the agency had sufficiently explained how the disclosure of the information would foreseeably harm the interest protected where the FBI specified that disclosure would place the contractors at a competitive disadvantage by revealing pricing, financial, and proprietary genetic services information, especially where competitors were vying for the same contracts with the same potential customer.

This case serves as an important reminder that to shield confidential information from disclosure under FOIA Exemption 4, contractors should not only have in place confidentiality policies protecting the disclosure of information but must also be careful to indicate that information submitted to the agency—for example, in response to a solicitation—is shared with the expectation that the agency would keep it confidential.

Government Contractors Obtain Relief in More than Half of GAO Bid Protests; Annual Statistics Skewed by CIO-SP4 Protests

We break down the numbers in the Government Accountability Office’s (GAO) Bid Protest Annual Report to Congress for Fiscal Year 2023. As we explain, the report shows that the number of bid protests filed and GAO’s “effectiveness rate” increased this past fiscal year, but these statistics were largely inflated by hundreds of protests emanating from one procurement. We also stress that “in more than half of the cases GAO resolved in fiscal year 2023, the bid protest forum was an effective avenue for the protester to obtain at least some relief.” 

Read the full client alert

Government Contracts Legal Round-Up | 2023 Issue 19

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.

Bid Protest Cases

System Dynamics Int’l, Inc. v. United States, No. 23-431 (September 21, 2023).

  • Court of Federal Claims Judge Davis issued an important reminder to offerors of the importance of proposing—and clearly mapping to—key personnel who meet the solicitation’s minimum requirements.
  • SDI protested that the agency misevaluated awardee Strata-G’s proposal by assigning it a significant weakness, as opposed to a disqualifying deficiency, where it mapped 22 labor categories to key personnel with clearly deficient—or at least insufficiently ambiguous—educational backgrounds. For example, Strata-G proposed several employees with a “bachelor’s degree” instead of a “bachelor's of science,” and additionally proposed individuals with associate degrees instead of bachelor degrees.
  • In response, the agency and Strata-G contended that Strata-G’s proposal was appropriately assigned a significant weakness but not disqualified because it proposed several key personnel who exceeded the solicitation’s requirements, and—to the extent Strata-G failed to sufficiently address certain minimum educational requirements—it was within the agency’s discretion to assign it a significant weakness as opposed to a deficiency.
  • Judge Davis rejected the agency’s and Strata-G’s arguments, finding that Strata-G’s proposal, in 22 out of 28 labor categories, flaunted the solicitation’s requirements, a fact recognized by the agency’s evaluators who concluded that Strata-G’s labor mapping spreadsheet “did not fully meet the solicitation’s requirements.”
  • Applying the solicitation’s definition of a deficiency, consistent with FAR. 15.001, Judge Davis found Strata-G’s labor mapping constituted “a material failure of a proposal to meet a Government requirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable level.” Accordingly, the court granted SDI’s request for a permanent injunction, setting aside the award to Strata-G and ordering the agency to conduct a proper evaluation.

Generally, agencies have discretion to assess the adequacy of an offeror’s proposal with respect to a solicitation’s requirements; however, an agency cannot permit offerors to disregard minimum requirements set forth in a solicitation. System Dynamics International provides an important reminder to contractors to carefully map proposed key personnel and to not play fast and loose with minimum education and experience requirements.

Insight Technology Solutions, LLC, B-421764.2 (October 11, 2023)

  • GAO sustained a protest where the evaluation record contained a factual error overstating the relevancy of one of the awardee’s corporate experience references, an inaccurate finding that carried through to the selection decision.
  • GAO also agreed that the agency disparately evaluated corporate experience references by finding that the awardee’s proposed subcontractors demonstrated certain relevant experience, but not also reaching the same finding for the protester’s proposed subcontractors.
  • In finding prejudice, GAO found that it was unclear but for these errors whether the selection authority would have reached the same conclusion.

This protest illustrates some of the most common procurement errors that lead to GAO sustaining a protest. Although GAO will not reevaluate proposals, it will examine the record to determine whether the evaluation and source selection decision are reasonable, consistent with the solicitation, and not contrary to law. Here, the agency admitted that the evaluation record contained a “misstatement” and further demonstrated disparate treatment.

Guidehouse, Inc., B-421740, B-421740.2 (September 18, 2023)

  • GAO sustained a protest challenging the Department of Defense’s (DoD) award of a contract to Deloitte Touche, LLP for audit remediation and sustainment services where the agency failed to adequately consider a potential conflict of interest.
  • Specifically, the chair of the agency’s technical evaluation board (TEB) was a senior consultant at Deloitte through May 2020, and she was aware that Deloitte might submit a quotation under the solicitation. The agency therefore “initiated a limited investigation of the matter,” which GAO described as confined to whether she had a “disqualifying financial interest in Deloitte.” Based on DoD ethics attorneys’ conclusion that her financial holdings did not create a conflict, she was permitted to lead the TEB.
  • GAO took issue with this assessment. Primarily, GAO criticized the agency for declining to provide “any of the underlying contemporaneous documentation relating to its limited investigation.”
  • As GAO explained: “The problem with the lack of any underlying record is particularly acute where there is no evidence of any independent investigation of any conflict, or the appearance of a potential conflict, by either of the involved contracting officers.”
  • GAO sustained the protest because due to the sparse record produced, it was unable to determine whether, in fact, the TEB chair had a financial interest in Deloitte or whether any such interest would affect her ability to serve as the chair of the TEB. On the contrary, the limited record contained “potentially contradictory evidence on the question of the TEB chair’s financial interest in Deloitte.”

The FAR emphasizes that “Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none.” FAR 3.101-1. Consistent with this warning, GAO has found that the existence of an actual or apparent conflict of interest is sufficient to taint the procurement, particularly where, as was the case here, an agency fails to adequately investigate and resolve a question concerning whether an agency employee who actively and extensively engaged in procurement-related activities should have been recused from those activities.

Moreover, whenever a particular agency action is under protest, GAO needs a sufficient record to assess the reasonableness of the action. An agency’s efforts to limit document production can frustrate GAO’s mandate to fairly resolve bid protests and could preclude GAO’s ability to determine that an agency’s actions were reasonable, as was the case here.

Zolon PCS II, LLC, B-420745.2 et al. (September 20, 2023)

  • GAO denied a protest alleging that the awardee’s technical proposal was noncompliant with the solicitation.
  • The two awardees were credited with strengths for their approach to retention because they offered premium pay to employees holding security clearances, including by specifying within the technical proposal volume the percentage of premium pay offered to cleared employees. 
  • The protesters contended that this ran afoul of the solicitation’s prohibition on including “specific labor rates” or “other pricing information” within the technical proposal volume.
  • GAO disagreed, finding that the terms of the solicitation did not prohibit offerors from including in their technical proposals information on a specified percentage of premium pay to be added to the labor rate where the technical proposal did not include the actual labor rate. In other words, the percentage of premium pay was not “pricing information” but rather an “element of [the] recruiting and retention approach.”
  • GAO likewise rejected the notion that the solicitation was latently ambiguous, reasoning that nothing in the plain language of the solicitation barred offerors from including information in their technical proposals information about percentages for clearance premium pay.

While it may be generally true that solicitations restrict offerors from including pricing information in non-price proposal volumes, GAO will look to the terms of the solicitation itself in determining what information may be included in a technical proposal volume.

Jenner’s Take in Bloomberg Law: How a Government Shutdown Will Impact Federal Enforcement, the Courts, and Congressional Investigations

With the government’s annual funding package set to expire Sept. 30 and no spending compromise in sight, the federal government appears headed for an imminent shutdown. Any shutdown will send hundreds of thousands of government workers home and bring many functions of government to a halt, with wide-ranging impacts on individuals and businesses across the US. For those organizations and businesses that rely upon and interact with the federal government, it’s essential to understand the shutdown’s legal impact—on agencies that make regulations, on the Department of Justice’s ability to enforce the law, on congressional investigations, and on the federal court system.

In a Bloomberg Law article, our team assessed the impact of a federal government shutdown on congressional investigations, DOJ activity, FTC enforcement, and federal courts.

Read full article.

Here We Go Again – Working Through a Government Shutdown

By: Carla Weiss, David Robbins, Matthew Haws

The government shutdown clock strikes “zero hour” on September 30, and government contractors and federal fund recipients are once again left wondering what will happen. We have been writing these alerts and client updates for years now, and the government is no better at managing its budget. So here we go again.

Why is a shutdown relevant for government contractors? The government will not be able to award new contracts, issue modifications, or exercise options that are dependent on funding that has not been appropriated. Additionally, the government may not be able to administer existing contracts, including for example inspecting and accepting goods, or even making contract payments. Yet, defying all logic, a government shutdown generally does not allow the contractor to stop work unilaterally. Government contractors must continue performance and seek to mitigate the damage.

Jenner & Block’s “top ten” list of methods for mitigating the impacts of a shutdown:

  1. Know Your Funding Source: Take stock of your contract portfolio, including the type of contract and the funding profile. If your contract is fully funded under existing appropriations, you may not experience significant impacts from a government shutdown. If your contract is incrementally funded or may exceed a limitation of cost based on the delay, consider whether you will be working at risk during shutdown. Examine FAR 52.232-18 or -19, to understand your risks.
  2. Communicate: Communicate with your contracting officers for each current contract to determine what are considered essential operations and what activities should cease. Proactive and clear communication up front can avoid confusion and disagreement down the line regarding which party bears the risk for continued performance.
  3. Take Stock of Contract Administration Challenges: Who are your primary government points of contact? Will they be available? Do you have personnel that work at government sites? Communicate with your contracting officer about this issue and seek direction for how to proceed.
  4. Be Alert for Stop Work Related Issues: The government may proactively order contractors to stop work during a shutdown. Be on the alert for any stop-work notices from the government and comply with them. If the shutdown interferes with performance of an ongoing contract, and the shutdown is lengthy, consider whether a constructive stop-work claim may exist.
  5. Manage Payments Proactively: Recognize that your payments may be delayed and make sure you are preserving your right to recover under the Prompt Payment Act. Consider financing receivables if necessary.
  6. Segregate and Track Costs: Track additional costs that result from the shutdown. To improve your chance of recovery, you should document areas of disruption and other effects of the shutdown. Additionally, segregate costs incurred during the shutdown into its own billing code and have your schedule team put down a marker for the start of shutdown so they can demonstrate slippage during this window. Being organized throughout the shutdown will be helpful in putting together a request for equitable adjustment, among other relief.
  7. Employee Communication Matters: Have a plan to communicate with your employees. With the fiscal year ending on a Saturday, you may need to provide notice as to whether they should show up to work on Monday. Employees will want to know how the company is managing the shutdown.
  8. Don’t Forget Your Subcontractors: Analyze your subcontracts and provide direction. Remember, your subcontractors are just as anxious and unsure as you are.
  9. Adjust Pipeline Expectations: Be prepared for pending procurements to be delayed. If contracting personnel are furloughed, they are not available to participate in all the effort required to award new contracts. Nonetheless, contractors should stay on top of their proposal activities as things may move quickly once the shutdown ends.
  10. Remember What Doesn’t Change: Consider litigation, protest, or other procedural deadlines, as statutory deadlines which are not extended because of the shutdown.

Jenner & Block lawyers are ready to assist you with managing the impacts of a potential government shutdown.

Government Contracts Legal Round-Up | 2023 Issue 18

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.

Bid Protest Update

Piedmont Propulsion, Sys., LLC v. United States, No. 23-330C (August 21, 2023)

  • Court of Federal Claims Judge Somers issued an important decision regarding the standard of review applied when assessing the rationality of an agency’s decision to limit competition.
  • Here, the Court found that the United States Coast Guard failed to rationally justify its decision to restrict competition for overhaul and repair work to companies that were licensed by the Original Equipment Manufacturer (OEM).  
  • The government argued that the protester needed to show that the OEM license requirement was “so plainly unjustified as to lack a rational basis.” Replying on peculiar language from a Federal Circuit opinion, the government seemed to argue that the Coast Guard’s determination was entitled to even more deference than the Court would typically owe under the rational basis standard.   
  • Judge Somers rejected the government’s heightened standard of review, explaining that “[a]lthough the Court does not believe that applying the government’s preferred standard would lead to a different result in this case, the Court will not deviate from the normal rational basis standard based on a few words of a concluding sentence pulled from one Federal Circuit opinion—words the circuit has never quoted again.” 
  • Applying the proper standard of review to the record, Judge Somers then determined that the OEM license requirement lacked a rational basis and therefore constituted an undue restriction on competition. Contemporaneous exchanges in the record between the Coast Guard and the OEM indicated that the Coast Guard never really understood the license requirement it was imposing, nor why such a license was necessary to meet the agency’s needs.   

As a general rule, agencies have wide discretion to determine their own requirements. But OEM license requirements like the one at issue here inevitably create tension with CICA’s mandate for full and open competition. Decisions like Piedmont Propulsion are important reminders that the Court of Federal Claims will apply rational basis review with rigor—deference, but not blind deference—when an agency limits competition.

Claims Update

S. Texas Health Sys., Appellant, CBCA 6808 (August 23, 2023)

  • The CBCA recently issued a decision reminding contractors that the six-year statute of limitations for claims under the Contract Disputes Act (CDA) starts to run upon claim accrual, and settlement negotiations with the government does not toll the statute of limitations. 
  • South Texas Health Systems involved a long-running dispute between the contractor and the VA over medical claims. The claims at issue here, submitted February 3, 2020, involved episodes of care that occurred between November 2009 and January 2014. The VA argued that each claim accrued within 72 hours of each episode of care when the VA provided the contractor with the authorization decision that allegedly breached the contract, and therefore these claims were untimely. The CBCA agreed that the CDA’s statute of limitations barred all claims based on episodes of care that occurred on or before February 3, 2014, 6-years before the contractor submitted the complaint. 
  • The Board further rejected the contractor’s contention that even if claims accrued more than six years before claim submission, they were all preserved through equitable tolling because it had been continuously negotiating with the government to resolve the disputes informally. Notably, the Board affirmed the principle that settlement negotiations do not toll the statute of limitations. 

This case is an important reminder that contractors must be mindful both of when a claim accrues and triggers the statute of limitations and that the statute of limitations continues to run even during active settlement negotiations with the government.

Small Business Update

Since our last Roundup discussing a court decision requiring the SBA to immediately stop using the presumption of social disadvantage to administer the 8(a) program, the SBA has provided guidance for 8(a) program participants on how to proceed. Importantly, the SBA is now requiring all 8(a) participants whose program eligibility is based upon one or more individuals who relied upon the presumption of social disadvantage to establish their individual social disadvantage by completing a social disadvantage narrative. Current 8(a) participants are encouraged to submit their narratives as soon as possible; instructions on the mechanics for doing so is available here. However, 8(a) hopefuls will need to sit tight, as the SBA has temporarily suspended new 8(a) application submissions.

False Claims Act

Verizon Business Network Services resolved a False Claims Act investigation into its compliance with cybersecurity requirements by paying more than $4 million to the government. Interestingly, the press release detailed Verizon’s cooperation, noting “after learning of the issues, Verizon provided the government with a written self-disclosure, initiated an independent investigation and compliance review of the issues and provided the government with multiple detailed supplemental written disclosures. Verizon cooperated with the government’s investigation of the issues and took prompt and substantial remedial measures.”

Investigations and Enforcement

Jenner & Block co-chair David Robbins is quoted extensively by Law360 regarding the increasing risk of parallel civil and criminal enforcement actions against government contractors. 

The Department of Justice has been aggressively pursuing criminal prosecutions for sanctions violations. DOJ recently announced its first criminal resolution involving the sale and transport of Iranian oil in violation of US sanctions. The seized 980,000 barrels of Iranian oil are also now the subject of a civil forfeiture proceeding in the District of Columbia. Companies should be prepared that this is the start of what is likely to be a significant uptick in sanctions enforcement as part of this Justice Department initiative.