Government Contracts Legal Round-Up | 2022 Issue 14

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.

Proposed Rule

1. Proposed Nondisplacement Rule (July 15, 2022)

The Biden Administration just issued a proposal to reinstitute the nondisplacement rule, which provides that contractors and subcontractors performing on covered Federal service contracts must in good faith offer to rehire employees supporting the predecessor contract.

  • Under the proposed rule, at least 10 business days before contract expiration, departing contractors must provide the incoming contractor a list of all service employees working on the contract during the last month of performance. The incoming contractor must then give incumbent employees express bona fide offers for employment in positions for which they are qualified. Employees must be given at least 10 business days to accept the offer.
  • There are key differences between the proposed rule and the version of the rule that existed under the Obama Administration, including that the new rule applies to contractors performing work at a different location than the predecessor contractor.

Comments on this proposed rulemaking are due August 15, 2022.

Claims Cases

1. Zafer Construction Co. v. United States, Fed. Cir. No. 21-1547 (July 18, 2022)

  • In a highly anticipated decision, the Federal Circuit discussed the distinctions between claims and Requests for Equitable Adjustment (REA) in Contract Disputes Act (CDA) litigation.
  • The unanimous opinion (authored by Judge Hughes and joined by Judges Newman and Reyna) confirms that a contractor submission qualifies as a claim under the CDA—even when styled as an REA—if it satisfies the definition of “claim”, is properly certified, and sufficiently requests a contracting officer’s decision.
  • The opinion acknowledges that this flexible standard may result in some confusion as to when exactly a claim has been submitted, and “might create room for gamesmanship,” but concludes that “the Government has tools to address this challenge.”

Contractors attempting to submit REAs should pay careful attention to this decision to understand whether their submission may be deemed a formal claim.

Protest Cases

1. ZeroAvia, Inc. v. United States, Fed. Cl. No. 21-1991 (July 11, 2022)

  • Court of Federal Claims (COFC) Judge Dietz dismissed a bid protest complaint for lack of standing based on an apparent failure to plead sufficiently detailed allegations of procurement error and prejudice.
  • While it is common for the COFC to dismiss bid protests based on procedural issues (e.g., timeliness and standing) after the case is fully briefed, it is relatively rare for the court to dismiss a bid protest complaint for lack of sufficiently detailed allegations.
  • The opinion explains that rather than reaching the merits, the COFC found that the plaintiff “has not provided sufficient factual support for its alleged procurement errors to establish that it has standing to bring its protest,” noting that the plaintiff “bears the burden to establish that it has standing as part of its complaint.”

This case is a reminder that threshold pleading standards do apply to bid protest complaints filed at the COFC, and failure to provide sufficiently detailed allegations in a complaint may in some cases warrant dismissal.

2. Quality Technology, Inc., B-420576.3 (June 30, 2022)

  • The agency initially selected QuTech for award, resulting in a GAO protest from disappointed offerors, including Sparksoft. The agency took corrective action and then selected Sparksoft for award.
  • QuTech protested the award to Sparksoft, raising a novel argument that “the agency’s consideration of the arguments presented in Sparksoft’s protest challenging the initial award to QuTech constitute discussions, which the agency conducted unequally with only Sparksoft.”
  • GAO dismissed this novel argument as legally insufficient, emphasizing that there was no evidence “that the agency communicated with Sparksoft about the firm’s proposal—or that the agency permitted Sparksoft to modify its proposal,” and GAO was not aware of any legal authority to support “the contention that the submission of a protest amounts to discussions with the agency.”

The arguments presented in this protest reflect the frustration that follows when a company receives a contract award, only to have the agency take corrective action in response to a protest and change its award decision in favor of the protester. GAO decisions typically treat two award decisions as standing alone and do not second guess the agency’s decision to take corrective action or to select a new awardee. The protester here raised a novel discussions argument in attempt to turn the tables once more, but GAO would not take the bait.


The Government Contracts Legal Round-Up | Episode 25

In the latest episode of the Government Contracts Legal Round-Up, Partner David B. Robbins discusses two US Supreme Court cases that government contractors should be aware of. Mr. Robbins also outlines key takeaways for recent claims and bid protest cases related to defenses contracting, software licensing disputes, procurements that require performance in foreign countries, and cybersecurity requirements.

 


Here We Go Again – Nondisplacement Rule Back in Effect for Contractors

By: Aime JH Joo and David B. Robbins

The Biden Administration just issued a proposal to reinstitute the nondisplacement rule, which requires services contracts that succeed contracts for the same or similar services—as well as solicitations for such contracts—to include a clause offering qualified service employees under the predecessor contract a right of first refusal of employment.  

At least 10 business days before contract expiration, departing contractors must provide the incoming contractor a list of all service employees working on the contract during the last month of performance. The incoming contractor must then give incumbent employees express bona fide offers for employment in positions for which they are qualified. Employees must be given at least 10 business days to accept the offer.

Contractors will be familiar with this rule, which existed during the Obama Administration—albeit with a few differences—and was canceled during the Trump Administration. Contractors should keep in mind the following to help ensure compliance: 

  • Unlike its Obama-era predecessor, the new rule applies to contractors performing work at a different location than the predecessor contractor.

  • The departing contractor is responsible for providing the contracting officer a list of the names of all service employees employed under the contract and subcontracts within the last month of contract performance. The departing contractor must also provide written notice to service employees of their possible right of first refusal for employment under the successor contract.

  • The incoming contractor cannot fill any openings for positions subject to the Service Contract Act before first making good faith offers of employment to incumbent employees, although the offer need not be for the same position as the employee had previously held. The incoming contractor also retains the right to determine the number of employees necessary for efficient performance and can hire more or fewer employees than the previous contractor.

  • The incoming contractor is not required to offer a right of first refusal to an employee where, based on reliable evidence of past performance, the contractor or its subcontractors reasonably believe that there would be just cause to discharge that employee.

Jenner & Block government contracts attorneys stand ready to assist with any questions about the reimposition of this rule.


Government Contracts Legal Round-Up | 2022 Issue 13

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.

Investigations and Enforcement

Does the DOJ Have the Ability to Dismiss Declined Qui Tams?

The Government’s ability to dismiss qui tam cases is subject to multiple standards, from an “unfettered right” to only after intervention and on terms the court seems proper, and other stops in between. The Supreme Court granted cert in United States, ex rel. Polansky v. Executive Health Resources, Inc., to resolve this circuit split in a case which will be watched carefully by the Government, realtors’ counsel, and defense counsel alike.

Supreme Court Cases

1. Biden v. Texas, No. 21-954 (June 30, 2022)

  • The Supreme Court provided further analysis describing the options available to agencies on remand.
  • This is an important and developing issue of administrative law that often arises in bid protests, particularly at the Court of Federal Claims (COFC), where procurement decisions are frequently remanded back to agencies to either provide further explanation for a prior decision or issue a new decision altogether.
  • Biden v. Texas builds on the Supreme Court’s 2020 decision in Department of Homeland Security v. Regents of University of California, and confirms that when an agency decides to issue a new decision on remand, as opposed to simply providing further explanation for its initial decision, the agency has discretion to provide new justifications for its actions.

The mechanics and procedural rules that apply to agencies on remand is an increasingly prominent issue in COFC bid protests, particularly those involving corrective action. This is an area where protest practice is often driven by precedents outside the COFC, and even outside the Federal Circuit. Protest counsel should keep an eye on developments in this area of administrative law.

Claims Cases

1. Raytheon Co. v. United States, No. 19-883C (June 30, 2022)

  • In a much-anticipated decision from a long-running data rights dispute between Raytheon and the Army, COFC Judge Kaplan held that Raytheon’s vendor list did not constitute “technical data” covered by the standard DFARS noncommercial Rights in Technical Data clause, 252.227-7013.
  • This dispute stemmed from the Army’s attempt to require Raytheon to regularly submit its vendor lists relating to Raytheon’s contract to provide engineering services in support of the Patriot weapons system.
  • When Raytheon provided the list, it included proprietary legends restricting the Army’s ability to release the data to third parties—that is, to potential competitors.
  • The Army disputed Raytheon’s proprietary markings, contending the vendor lists qualified as “technical data.” that the Army had broader rights to use and distribute than Raytheon’s proprietary markings would allow.
  • After analyzing the text and regulatory history of the DFARS data rights clause, the court disagreed with the government’s position, granting relief in favor of Raytheon.

This case is an important contribution to the longstanding and ongoing discussion between DoD agencies and defense contractors regarding the need to balance (a) contractors’ investments in proprietary business methods and (b) DoD’s needs to maintain access to competitively priced maintenance and support services for major weapons systems. This decision is a justified win for contractors, but the discussion is far from over.

2. CiyaSoft Corp., ASBCA No. 59913 (June 1, 2022)

  • This ASBCA decision follows from a significant 2018 ASBCA opinion finding that the Army was bound by and breached a commercial software license that CiyaSoft incorporated into its contract to sell the Army translation software.
  • After finding for CiyaSoft on entitlement, the Board remanded the matter to the parties to negotiate quantum.
  • Ciyasoft returned to the Board after negotiations broke down; according to CiyaSoft, the government was continuing to dispute issues that CiyaSoft considered resolved in the entitlement decision. CiyaSoft and the Army could not agree as to (a) whether the license terms restricted the Army to 20 unique single users or permitted more than 20 individual users as long as no more than 20 copies of the software were deployed at once, and (b) whether CiyaSoft failed to mitigate its damages.
  • The Board found a genuine dispute of material fact relating to whether the license permits more than 20 single users, denying CiyaSoft’s motion for summary judgment on that issue, and disagreed with the government’s theory that CiyaSoft had a duty to mitigate damages before contract performance began.

This is the latest in an important and growing line of decisions from the ASBCA, COFC, and Federal Circuit relating to the resolution of software licensing disputes with the federal government, which can raise incredibly complex issues of sovereign immunity, jurisdiction, entitlement, and quantum. Companies and counsel working in this space should pay careful attention to the CiyaSoft litigation.

Protest Cases

1. AGMA Security Service, Inc. v. United States, No. 20-926C (June 26, 2022)

  • Judge Horn issued a decision carefully walking through the elements of a small business bid protester’s claim for attorney fees under the Equal Access to Justice Act (EAJA); the decision provides a helpful summary of this unfortunately complex area of law.
  • After analyzing legal entitlement and examining the evidence presented as to the attorney hours worked litigating the underlying bid protest and EAJA request, the court granted recovery of nearly $33,000 in fees and expenses.

While EAJA does provide a vehicle for small business protesters to recover some amount of legal fees, this decision, like many before it, confirms that EAJA litigation is remarkably complex, with significant litigation risk for the small business seeking recovery. Accordingly, the best practice is often to reach a negotiated settlement of attorney fees to avoid this additional round (if not rounds) of contentious litigation.

2. Castellano Cobra UTE MACC LEY 18-1982, B-420429.4 (June 17, 2022)

  • This protest arises from a Navy task order award to acquire base improvements in Rota, Spain.
  • Typical of procurements requiring performance in foreign countries, the solicitation required offerors to comply with various aspects of local Spanish law.
  • When the Navy made award to a US-based company, Castellano filed a protest at GAO arguing that the awardee did not have a mandatory Certificate of Classification from the Spanish government and had not properly organized its joint venture under Spanish law.
  • The Navy took corrective action, which Castellano challenged as unreasonably narrow for failure to broadly review whether the initial awardee complied with Spanish law.
  • GAO dismissed the protest as premature on the basis that the corrective action is still ongoing; however, GAO also agreed with the agency that the general solicitation requirement to comply with Spanish law is an issue of contract administration that GAO will not consider.

Special Counsel Nathaniel Castellano predicts that Castellano Cobra (no relation) will be one of the best-named GAO bid protest decisions of the decade. It also serves as a reminder of the complex issues that arise in procurements that require performance in foreign countries, which are often subject to local labor laws and other unique requirements of the host country.

3. American Fuel Cell & Coated Fabrics Company, B-420551, B-420551.2 (June 2, 2022) (Published June 13, 2022)

  • GAO denied a protest alleging that the awardee failed to comply with the requirements in DFARS 252.204-7019/7020 to perform and post in the Supplier Performance Risk Assessment (SPRS) a current NIST SP 800-171 DoD assessment.
  • During discussions, the government assigned a deficiency to an offeror for having no records in SPRS. The offeror ultimately posted a score in SPRS and received an award.
  • The protester argued that the awardee’s proposal should have been rejected for failing to demonstrate compliance with these cyber requirements. GAO agreed that that the documentation did not show that the awardee was compliant because there was no indication that the company had performed a basic assessment or posted the summary level score into SPRS, as required by the clauses.
  • GAO denied the protest, however, because the protester could not demonstrate prejudice in this multiple-award procurement given its significantly higher price and limited confidence past performance rating.

Compliance with new and evolving cybersecurity requirements continues to be an increasingly important compliance and bid protest risk area. While this protest was denied due to lack of competitive prejudice, we expect protesters to continue to raise similar grounds.

4. Chicago American Manufacturing LLC, B-420533, B-420533.2 (May 23, 2022) (Published July 5, 2022)

  • GAO sustained the protest where a firm quoted a product under its Federal Supply Schedule (FSS) contract that did not meet the solicitation’s requirement.
  • The solicitation sought new furniture in several buildings in South Korea, and included specifications and requirements for all solicited items, including a metal bunkbed that must accommodate a 38”x80” mattress.
  • The awardee’s FSS catalog, however, included a bed that was only 78 inches long, or two inches short, of the solicitation’s requirements. While the awardee’s quotation specified the correct dimensions, GAO found that this was inconsistent with the FSS contract whose terms are contractually binding and not subject to alteration.

It is well established that an agency may not use FSS procedures to purchase items not listed on a vendor’s GSA schedule. Thus, as a precondition for receiving an order, all items quoted and ordered must be on a vendor’s FSS contract.


Government Contracts Legal Round-Up | 2022 Issue 12

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.

Claims/Appeals

1. Zafer Constr. Co. v. United States, Fed. Cir. No. 21-1547 (Argued April 2022)

  • The Federal Circuit is poised to issue a significant decision distinguishing between claims and requests for equitable adjustment (REAs) for purpose of establishing jurisdiction under the Contract Disputes Act (CDA).
  • The Court of Federal Claims (COFC) dismissed the claim for lack of jurisdiction after finding that the contractor’s submission, styled as an REA, did not qualify as a claim under the CDA.
  • On appeal, the contractor argues that its submission satisfies all of the requirements for a valid, certified claim, and that the COFC decision must be reversed for the same reasons that the Federal Circuit recently reversed the ASBCA in a similar case, Hejran Hejrat Co. Ltd. v. US Army Corps of Engineers, 930 F.3d 1354 (Fed. Cir. 2019).
  • During oral argument, Federal Circuit judges Newman, Reyna, and Hughes appeared skeptical of the government’s position and the COFC’s holding. The argument revealed some uncertainty, however, as to how to distinguish claims from REAs based on existing Federal Circuit precedent.

While it is important that proper claims are not rejected for lack of jurisdiction based on procedural formalities, it is also important that contractors are able to submit REAs that do not constitute claims triggering the CDA dispute process. Contractors and their counsel should keep an eye on this appeal to understand how (if at all) the Federal Circuit draws the line between claims and REAs.

COFC Protest Decisions

1. Connected Global Solutions, LLC v. United States, COFC No. 22-292C (June 21, 2022)

  • This is the latest decision in a long-running, high-profile protest that has already generated significant litigation before GAO and COFC.
  • In a rare procedural ruling, the court previously granted limited discovery from the awardee relating to an alleged proposal misrepresentation.
  • In this decision, the court considers whether to supplement the administrative record with various documents relevant to the alleged proposal misrepresentation, including the discovery responses.
  • The opinion provides a helpful explanation of the interplay between record supplementation, judicial notice, and the Federal Rules of Evidence.

Contractors and protest counsel should watch this litigation carefully to understand the court’s evolving approach to alleged proposal misrepresentations, discovery in bid protests, and record supplementation.

GAO Protest Decisions

1. Insight Technology Solutions, Inc., B-410534 (May 27, 2022)

  • The protester challenged a solicitation requirement that offerors demonstrate capability maturity model integration (CMMI) level 3 certification at the time of proposal submission.
  • GAO rejected the protester’s challenge to the agency requirement for CMMI level 3 certification, deferring to the agency’s determination of its own requirements.
  • GAO sustained the protest, however, finding that the agency could not support the requirement for CMMI level 3 certification at the time of proposal submission.

Solicitations typically impose compliance obligations and certification requirements. GAO will generally defer to an agency’s assessment of its requirements in this respect. GAO will, however, scrutinize the timing of those requirements, particularly where an agency demands that offerors demonstrate a certain certification or capability before performance begins. This line of precedent will be increasingly important as agencies seek to incorporate evolving cyber and information security qualifications into the procurement process.

2. Sabre Systems, Inc., B-420090.3, (June 1, 2022) (Published June 14, 2022)

  • GAO sustained a protest because the contracting agency failed to evaluate the awardee’s total compensation plan in accordance with FAR 52.222-46 (Evaluation of Compensation for Professional Employees).
  • FAR 52.222-46 contemplates evaluation of an offeror’s compensation for “professional employees, as defined in 29 CFR 541.” In this procurement, the agency determined that only a small subset of four labor categories should be considered “professional employees” as defined in 29 C.F.R. part 541. The agency reasoned that part 541 included various categories of employees, and so the agency excluded from its professional compensation analysis those employees whose duties more closely matched other categories of employees defined in part 541.
  • GAO rejected this interpretation, holding instead that the plain language of FAR 52.222-46 unambiguously requires the agency to evaluate the compensation of a proposed employee that meets the definition of “professional employees” regardless of whether that employee also meets another part 541 labor category definition. GAO found that a portion of the employees the agency excluded from its analysis of professional compensation qualified as professional employees, and GAO sustained the protest on this basis.

The purpose of evaluating proposed compensation for professional employees is to assess each offeror’s ability to provide uninterrupted, high-quality work, considering the realism of the proposed professional compensation and its impact upon recruiting and retention. GAO will sustain a protest where an agency fails to reasonably evaluate offerors’ proposed total compensation plans in accordance with FAR provision 52.222-46, for example by unreasonably excluding from the agency’s analysis certain proposed employees who meet the definition of a professional employee as defined in subpart D of part 541.

3. The Ulysses Group, LLC, B-420566 (June 7, 2022) (Published June 8, 2022)

  • GAO denied the protest challenging the Air Force’s decision to reject a late-submitted proposal where the offeror made multiple unsuccessful efforts to submit its proposal prior to the announced deadline.
  • The solicitation required offerors to submit proposal volumes through a designated online DoD portal by the stated deadline, cautioning offerors not to wait until the last minute and that no exceptions would be made to the submission deadline.
  • Beginning two days prior to the deadline for proposal submission, the company could not successfully upload its proposal to the portal. The company repeatedly sought the assistance of the portal help desk, to no avail. Prior to the deadline, the company submitted a copy of its technical volume to the help desk and discussed these issues with the contracting officer.
  • The Air Force rejected the proposal because it was not submitted in accordance with the solicitation’s requirements. GAO denied the protest, upholding the Air Force’s decision.

Offerors are well advised to submit proposals early and leave time for unexpected technical hiccups. Otherwise, and at least at GAO, hardline principles relating to the time and manner of proposal submission may prevent a contractor from obtaining relief, even if the technical issue is seemingly caused by failures in the very government system required under the solicitation.


The Government Contracts Legal Round-Up | Episode 24

In the latest episode of the Government Contracts Legal Round-Up, Partner David B. Robbins discusses three bid protest cases: IAP Worldwide Services, Inc. v. United States, AT&T Mobility LLC, and Sehlke Consulting, LLC. Mr. Robbins outlines key takeaways for each case, noting that the IAP Worldwide Services matter may prove to be among the most significant Court of Federal Claims bid protest opinions of 2022.




Government Contracts Legal Round-Up | 2022 Issue 11

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.

Protest Cases

1. IAP Worldwide Services, Inc. v. United States, No. 21-1570 (Fed. Cl. May 25, 2022)

  • In what may prove among the most significant Court of Federal Claims bid protest opinions of 2022, Judge Solomson provides a thorough explanation of the various remedies available at the Court.
  • In a prior decision as part of the same protest, the court found that the Army failed to comply with a DoD FAR Supplement (DFARS) provision requiring that DoD “should” open discussions before awarding contracts valued above $100 million. Although the court found that the protester established prejudicial error on this point, the court could not determine the appropriate nature of relief, if any.
  • After supplemental briefing, the court concluded that even though the protester could not demonstrate the irreparable harm necessary for a permanent injunction, it was nevertheless appropriate to remand the procurement back to the Army to comply with the DFARS provision in the first instance, whether by further explaining its initial decision to forego discussions, or preparing a new decision.

This opinion repays careful study. Protest practitioners should be careful to understand the various remedies available at COFC and craft their pleadings accordingly.

2. AT&T Mobility LLC, B-420494 (May 10, 2022) (Published May 23, 2022)

  • GAO sustained a protest alleging errors in the evaluation of both non-price and price factors, as well as the source selection decision.
  • First, GAO found that under the non-price factors, the agency assessed the proposals primarily on an acceptable/unacceptable basis without performing the kind of qualitative analysis required by the amended solicitation. Specifically, the solicitation contained provisions requiring offerors to provide, and the agency to assess, detailed narrative descriptions for many of the requirements. Instead of assessing these narrative descriptions, the agency improperly evaluated offerors on the basis of the pass/fail matrix that had been removed as a stand-alone evaluation factor.
  • Next, GAO determined that the source selection decision was flawed because it converted the procurement methodology from best value to lowest-priced, technically acceptable. Here, the agency did not conduct a price/technical tradeoff because the selection authority did not see any discriminators in the protester’s proposal “worth considering for a trade-off in value over price.” However, GAO found that the record did not show that there was any qualitative discussion of the underlying merits of the proposals and why they should have been considered technically equivalent, and instead the selection authority unreasonably relied upon adjectival ratings.
  • Finally, GAO held that the price evaluation was flawed because, contrary to the solicitation’s express terms, the agency excluded pricing for the transition portion of the base year and pricing for the optional CLINs from the price calculations used in the source selection decision. While as a standalone matter this may not have been prejudicial because the protester was still higher priced, GAO nonetheless sustained because it could not conclude with any certainty that, had the agency evaluated proposals consistent with the terms of the solicitation and performed a proper tradeoff analysis, that the selection authority would have made the same selection decision.

Agencies cannot establish one evaluation scheme yet follow another. Where debriefing materials indicate that the agency did not follow its own requirements, this can be a ripe avenue for protest.

3. Sehlke Consulting, LLC, B-420494 (May 18, 2022) (Published May 25, 2022)

  • GAO sustained a protest arguing the awardee’s proposal was unacceptable due to the subsequent unavailability of a proposed key person.
  • The solicitation, issued by the Department of Defense, National Reconnaissance Office (NRO), required offerors to provide resumes and letters of commitment for four specific key personnel positions, including a senior financial consultant.
  • In selecting KPMG for award, the selection decision identified that “specifically KPMG’s exceptional response to [the] most important management factor Key Personnel” warranted the associated cost premium.
  • The protester alleged that the agency should have evaluated the awardee's proposal as technically unacceptable when, prior to completing its evaluation of proposals and making its award decision, KPMG advised the agency that its proposed senior financial consultant had submitted a formal notice of resignation, thus putting the agency on notice that one of the company’s proposed key personnel was unavailable to perform the contract as proposed.
  • In response, NRO claimed that their evaluation was reasonable because despite the individual’s pending departure and despite the agency’s knowledge of the pending departure, the individual technically remained an employee of KPMG’s subcontractor on the date the agency executed the source selection decision.
  • GAO was not persuaded, finding that the agency could not ignore the pending departure of the key person. Unlike other cases, where a proposed key person’s unavailability was not sufficiently definite, here the fact that the senior financial consultant unambiguously resigned to take a position with a different firm made it clear that the individual was unavailable. GAO therefore determined that it was unreasonable for the agency to base its evaluation on the awardee’s offer of a senior financial consultant it had no realistic expectation would perform on the follow-on contract.

When assessing allegations regarding the unavailability of key personnel, GAO performs a fact-specific inquiry to determine whether the individual was actually unavailable and whether the agency had this knowledge prior to its award decision. GAO continues to maintain its position that when a key person becomes unavailable, agencies must either reevaluate proposals without reliance on this candidate for a required key person position, or open discussions and solicit revised proposals from all offerors.


Government Contracts Legal Round-Up | 2022 Issue 10

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.

Protest Cases

1. Sekri, Inc. v. United States, No. 21-1936 (Fed. Cir. May 13, 2022)

  • This appeal asked the Federal Circuit to decide how traditional timeliness and standing rules apply to bid protests brought by mandatory source suppliers that operate under the Javits-Wagner-O’Day (JWOD) Act, which is intended to prioritize federal procurement from the blind and severely disabled.
  • The protester filed suit at the Court of Federal Claims arguing that the Defense Logistics Agency (DLA) had improperly issued a competitive solicitation for certain supplies that should have been purchased directly from SEKRI as a mandatory source pursuant to the JWOD Act.
  • The Court of Federal Claims found that it was bound to apply the Federal Circuit’s existing framework for assessing bid protest timeliness and standing and dismissed the case because SEKRI did not submit a proposal under the DLA solicitation and did not file a formal protest before the proposal submission deadline.
  • The Federal Circuit reversed, treating the case as one of first impression and holding that, based on the unique nature of the JWOD Act and mandatory source procurements, the traditional bid protest timeliness and standing rules do not bar SEKRI’s protest in this case.

This case confirms that the Federal Circuit is willing to recognize that certain government contracts cases arise in unique contexts that can warrant a departure from the traditional rules. Contractors should not assume that this holding will be interpreted to relax the otherwise strictly enforced timeliness and standing rules that apply to protests arising outside the JWOD Act. The opinion, however, is a valuable reminder of the Federal Circuit’s unique position to shape procurement law, and the potential power of a persuasive appeal.

2. BES Federal Solutions JV, LLC, B-420550 et al. (May 11, 2022) (Published May 18, 2022) 

  • GAO denied the protest where the Department of the Air Force concluded that the protester’s proposal was unacceptable under the technical (staffing plan) evaluation factor.
  • Under the mission essential plan (MEP) subfactor, the solicitation provided that offerors were required to explain how they would continue performing during a crisis, including handling employees exposed to COVID-19 and a return-to-work policy.
  • The Air Force found BES’s approach unacceptable because it did not specifically address a quarantine policy or a procedure for notifying the contracting officer’s representative regarding positive COVID-19 test results.
  • GAO rejected the protester’s argument that the Air Force’s evaluation imposed an unstated evaluation criterion. GAO explained, for example, that the Solicitation’s requirement to provide a COVID-19 testing policy reasonably encompassed an unstated requirement of where such testing would be performed.

Agencies may properly evaluate a proposal based on considerations not expressly stated in the RFP where those considerations are reasonably and logically encompassed within the stated evaluation criteria, and where there is a clear nexus between the stated and unstated criteria.

3. DCR Services & Construction, Inc., B-420179.2,B-420179.3 (April 28, 2022) (Published May 6, 2022)

  • GAO denied in part and dismissed in part a protest challenging the National Park Service’s non-selection of DCR’s quotation for the establishment of a blanket purchase agreement (BPA) for contaminated site cleanup services.
  • First, GAO denied DCR’s protest alleging flaws in its own evaluation.
  • Next, GAO dismissed DCR’s protest challenging the evaluation of the awardee’s proposal and the best-value determination, finding that DCR was not an interested party to raise these challenges.
  • GAO explained that even if DCR’s protest concerning the agency’s evaluation of the awardee’s quotation (and its treatment in the best-value determination) was sustained, DCR would not be in line to receive a BPA. The record reflects there were two other vendors that did not receive BPAs, yet the agency found their quotations to be a better value than DCR’s.

Where there is an intervening offeror who would be in line for the award if a protester’s challenge to the award were sustained, the intervening offeror has a greater interest in the procurement than the protester, and GAO generally considers the protester’s interest too remote to qualify as an interested party. Protesters should be mindful of the competitive landscape when filing protests, as they may be required to challenge not only the awardee’s evaluation, but the evaluation of other disappointed offerors.

Claims Cases

The Armed Services Board of Contract Appeals (ASBCA) issued a decision that cites an article published by Nathaniel Castellano for the observation that the Contract Disputes Act (CDA) contains traps for the unwary, despite being intended to create a fair and efficient mechanism for resolution of government contract claims. Nathaniel’s article argues that, based on a recent line of Supreme Court precedent, the CDA’s procedural requirements for claim submission, certification, and timely appeal do not qualify as jurisdictional prerequisites for maintaining CDA litigation.

Freedom of Information Act (FOIA) Exemption 4

1. Synopsis, Inc. v. Dept. of Labor, No. 20-16414, 20-16416, 2022 WL 1501094 (9th Cir. May 12, 2022)

  • The Department of Labor (DOL) declined to release certain materials in response to a FOIA request; the requester filed suit in district court challenging DOL’s decision to withhold; the district court held in favor of the requester, directing DOL to release the disputed materials.
  • After the district court issued its order directing DOL to release the materials, Synopsis attempted to intervene in the same case, claiming that the materials qualified as its confidential commercial information that must be withheld under FOIA Exemption 4. The district court denied the motion to intervene as untimely.
  • Synopsis separately filed an independent “Reverse-FOIA” action against DOL, asking the district court to enjoin DOL from releasing the same materials, again invoking Exemption 4. The district court rejected the Reverse-FOIA argument on the basis the court had already ordered DOL to release the materials.
  • Synopsis appealed. The Ninth Circuit affirmed in an unpublished decision, finding that the district court did not abuse its discretion in denying the motion to intervene, and agreeing with the district court that, under Supreme Court precedent, once the district court ordered DOL to release the materials Synopsis could no longer sue to enjoin the release of those same materials.

This decision emphasizes how important it is for companies to be vigilant when trying to protect confidential information that has been submitted to the US Government. As soon as an agency provides notice that confidential information has been requested under FOIA, the company should promptly respond with legal and factual support explaining why any proprietary or confidential commercial information must be withheld. In the event a requester files suit to obtain the materials, or the agency indicates it will release sensitive information, the company should act quickly to intervene and support the agency, or file suit to enjoin the agency, as appropriate. For those interested in learning more about FOIA Exemption 4, Nathaniel Castellano recently published a Briefing Paper discussing the latest litigation developments and best practices.

Investigations and Enforcement

The Department of Justice announced an inflation adjustment to civil False Claims Act penalties, increasing the range of penalties to $12,537 to $25,076 per claim.


The Government Contracts Legal Round-Up | Episode 23

In the latest episode of the Government Contracts Legal Round-Up, Partner David Robbins, co-chair of Jenner & Block’s Government Contracts Practice, discusses important developments facing government contractors and grant recipients. Mr. Robbins explains the Department of Defense’s final rule regarding commercial item determinations and a proposed FAR amendment regarding greenhouse gas emissions. He also discusses recent protest and claims cases.

 


Government Contracts Legal Round-Up | 2022 Issue 9

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.

Protest Cases

1. VERSA Integrated Solutions, Inc., B-420530 (April 13, 2022)

  • GAO denied a protest challenging the Food and Drug Administration’s (FDA) decision not to consider a proposal that was not timely received by the agency in a manner consistent with the solicitation.
  • While the proposal was received in the government’s electronic server before the submission deadline, the proposal submission email was quarantined by the server and did not reach the contracting officials before the deadline.
  • In presenting its case, VERSA emphasized that it submitted its proposal prior to the deadline and maintained that the government was in control of its proposal following that submission. The protester relied on standard FAR provisions that allow the government to consider a late proposal where there is no risk of delay to the procurement and the proposal is under government control before the proposal submission deadline.
  • But GAO strictly interprets the FAR’s “government control” exception, routinely holding that it does not apply to proposal submitted electronically. VERSA specifically asked GAO to reconsider this line of decisions—i.e., declining to apply the exception in circumstances similar to those here.
  • GAO declined the invitation to revisit is interpretation of the government control exception and denied the protest.

As always, offerors should leave plenty of time to submit proposals well in advance of the deadline and anticipate that electronic submissions may encounter challenges that delay submission. In the event an agency does reject an electronic proposal submission as late, recognize that GAO and the Court of Federal Claims (COFC) analyze these issues differently, and COFC may provide the more favorable forum for protest. Specifically, several COFC judges have found that an electronic proposal submission that reaches a government server before the proposal submission deadline does qualify for the “government control” exceptions stated in FAR 52.212-1 and 52.215-1.

2. Rice Solutions, LLC, B-420475 (April 25, 2022)

  • GAO sustained a protest because the agency unfairly engaged in discussions with only the awardee.
  • The Department of Health and Human Services, Indian Health Service (IHS), received three proposals in response to IHS’s solicitation for certified registered nurse anesthetist (CRNA) services in South Dakota. Protester Rice’s proposal was rated as unacceptable.
  • Despite not establishing any competitive range, IHS thereafter engaged in discussions with the awardee—the only offeror initially rated as acceptable.
  • GAO faulted the agency for not conducting discussions with Rice. In doing so, GAO rejected the agency’s position that an initial rating of technically unacceptable automatically excluded Rice from the competitive range, had one been established by the agency.
  • GAO also rejected the agency’s contention that it established “a de facto competitive range of one” because nothing in the record supported this contention.
  • Thus, GAO ruled that because no competitive range had been established, the agency was required to conduct discussions with all offerors. Indeed, GAO emphasized that such discussions could have resulted in Rice submitting a revised final proposal that was found to be technically acceptable.

Although an agency has broad discretion in establishing a competitive range and is not required to memorialize its competitive range determination expressly in a formal document, the agency is required to provide sufficient information to adequately support its rationale. GAO will sustain a protest where the record is devoid of any documentation or support for the agency’s contention that a competitive range had been established before entering into discussions with only one offeror. Moreover, once an agency chooses to conduct discussions, it must do so with all offerors in the competitive range. FAR 15.306(d)(1).

3. NOVA Dine, LLC, B-420454, B-420454.2 (April 15, 2022)

  • GAO rejected a protester’s contention that it was misled during discussions to raise its proposed labor rates.
  • Over multiple rounds of discussions, the Defense Information Systems Agency (DISA) advised NOVA that 73 proposed labor rates appeared to be “unrealistically low,” and DISA asked NOVA to “review and provide revised rates, or provide rationale for the proposed rates.”
  • In the end, NOVA increased its rates, resulting in an increase of nearly $50 million to the offeror’s total cost/price.
  • NOVA argued that it was misled during discussions because the company’s total cost/price was higher than other offerors and because DISA compared rates to salary data taken from a more expensive geographic location (even though the contract would be performed around the world).
  • GAO denied this ground of protest, finding that DISA did not coerce NOVA into raising its direct labor rates; rather, NOVA made an independent business judgment about how to respond to the agency’s discussion concerns.
  • GAO also rejected the protester’s challenges to DISA’s evaluation under the past performance and management approach evaluation factors.

GAO generally will not find an agency’s discussions objectionable when an agency advises an offeror that certain rates appear low and provides the offeror the option of either raising the rates or justifying the rates. An offeror’s decision to raise rates—rather than justify—is typically viewed by GAO as a business judgment of the offeror. As GAO concluded here, “Ultimately, it was the offeror’s responsibility to recognize where it disagreed with the agency’s cost realism conclusions and explain why its own salary calculations were correct.”

Claims Cases

1. GSC Construction, Inc. v. Secretary Of The Army, Fed. Cir. 21-1803 (May 2, 2022)

  • The United States Court of Appeals for the Federal Circuit (CAFC) affirmed the Armed Services Board of Contract Appeals (ASBCA or Board) decision holding that the United States Army Corps of Engineers (the Army) properly had terminated the contractor’s construction contract for default.
  • GSC Construction, Inc. (GSC) contracted with the Army to build two warehouses, but then fell behind after disputing responsibility to remove soil for foundation work and failing to meet design requirements. Interestingly, the latter issue related to DOD’s Unified Facilities Criteria (UFC) Minimum Antiterrorism Standards. The contract required compliance only with an earlier, less stringent version but GSC mistakenly submitted its design under the more recent, more stringent version, with which it then failed to comply. The Army itself didn’t identify the error and evaluated the design under the wrong standard.
  • Ultimately the Army terminated for default, and GSC filed an appeal with the ASBCA—arguing that the disputes concerning the soil and the design standard provided ground for an excusable delay, and seeking both damages and that the termination be converted to one for convenience.
  • The Board denied the appeal and the Federal Circuit affirmed the ASBCA’s decision, agreeing that the contract assigned site preparation and design responsibility to GSC. The Army’s failure to identify GSC’s design standard mistake did not shift risk related to design to the government.
  • In addition, the Federal Circuit rejected the argument that the Army had forfeited its right to enforce the contract by providing GSC with an extensiPublishon: “Given the Army’s repeated reservation of its rights during construction, we fail to see how the Board erred in holding that there was no forfeiture [and] GSC’s argument is thus unpersuasive.”

Termination for default is a serious threat in government contracting. Working with experienced counsel when encountering project delays or design disapproval can help avoid more costly litigation in the future, including by developing effective recovery plans and fully protecting rights under the contract.