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
"Suspension and Debarment: FY 2022 By The Numbers," Law360 (October 5, 2022)
Partner David Robbins summarizes Fiscal Year 2022 suspension and debarment data from the System for Award Management in an article for Law360. The piece, published annually since 2016, explains the trends of agencies most actively suspending and debarring government contractors.
Key takeaways from this year’s article include:
- Overall suspensions and debarments increased by 20 actions year-over-year.
- Suspensions and debarments of individuals declined by 49.
- Twelve more firms—companies that have indicia of active participation in government contracting—were debarred in fiscal year 2022 as compared with 2021.
- The number of special entities—generally, corporate entities that do not have indicia of active participation in government contracting—increased by 58.
1. The Boeing Company v. United States, No. 17-1969C (September 21, 2022)
- Court of Federal Claims Judge Campbell-Smith issued the latest and much-anticipated decision in a high-profile Contract Disputes Act litigation by Boeing that challenges a controversial FAR cost accounting rule.
- Boeing’s claim challenges the validity of FAR 30.606(a)(3)(ii), which, in general, prohibits contractors from offsetting (a) the cost savings that the government stands to gain from one change in accounting practices against (b) the increased costs that the government will incur from another change in accounting practice. When a contractor makes multiple simultaneous changes to its cost accounting practices, this provision can result in the government receiving a windfall.
- Boeing pursued its challenge as a claim under the Contract Disputes Act in response to government claims of entitlement under specific Boeing contracts.
- In an earlier decision, the Court dismissed Boeing’s case as untimely, finding that Boeing should have objected to the FAR provision before ever entering into the contracts. The Federal Circuit reversed that decision, in part because the FAR provision at issue is not actually incorporated into the contracts.
- In the most recent decision, the Court has dismissed Boeing’s claim for lack of jurisdiction, concluding that the Court of Federal Claims lacks authority to invalidate a regulation.
This litigation is important not only because it could decide the fate of the controversial FAR cost accounting rule, but also for clarity as to the jurisdictional rules that apply when contractors challenge the validity of FAR provisions and other procurement regulations. The Federal Circuit will almost certainly have to weigh in at least once more before the procurement community has answers to these critical questions.
1. Async-Nu Microsystems, Inc., B-419614.5, B-419614.6 (September 30, 2022)
- GAO denied a protest challenging the Department of State’s issuance of a blanket purchase agreement for media communications and messaging support services.
- Among other objections, the protester argued that that the awardee’s hourly rates were unrealistically low and that the State Department failed to perform a price realism evaluation of the firms’ rates.
- In denying the protest, GAO confirmed that an agency is not permitted to conduct a price realism analysis unless the solicitation provides for such an assessment.
- Even though the solicitation did not expressly provide for a price realism evaluation, the protester pointed to language in the price evaluation methodology that provided: “The Government will evaluate all assumptions or exceptions and determine the risk associated with each offeror’s (whether CTA or Prime’s) quote.” The protester also highlighted that the technical experience evaluation factor mentioned consideration price risk in a given PWS task area.
- GAO rejected these arguments, because the language at issue neither expressly stated that the agency would review prices to determine whether they were so low that they reflected a lack of technical understanding, nor did the solicitation contemplate the rejection of a quotation for offering unrealistically low prices.
Price reasonableness concerns whether proposed prices are too high, and consideration of reasonableness is required in every procurement. Price realism, on the other hand, concerns whether proposed prices are too low, and a contracting agency is only permitted to evaluate for realism when the solicitation contemplates a realism review. Even if the solicitation does not expressly use the term “realism,” GAO will still conclude that a solicitation contemplates a price realism evaluation where (1) the solicitation expressly states that the agency will review prices to determine whether they are so low that they reflect a lack of technical understanding, and (2) the solicitation states that a quotation can be rejected for offering unrealistically low prices.
2. ASRC Federal Data Network Technologies, B-419519.4 (September 19, 2022) (Published September 26, 2022)
- GAO denied a protest alleging errors in an US Army Corps of Engineers award for integrated technical services in support of the agency’s High Performance Computing Modernization Program.
- One argument made by the protester was that the agency unreasonably evaluated the awardee’s proposal under the past performance factor by crediting the awardee for the performance record of two subcontractors that did not meet the solicitation’s definition for key subcontractors.
- GAO agreed, finding that the methodology the agency used to determine whether proposed key subcontractors met the solicitation’s definition for key subcontractors was unreasonable and contrary to the unambiguous terms of the solicitation.
- However, GAO nonetheless denied the protest, concluding that this error had no impact on the award decision. Specifically, the agency assigned the rating of outstanding to the awardee’s proposal under the technical capability factor, based on four significant strengths and four strengths, while assigning the rating of good to ASRC’s proposal under that factor based on one significant strength and three strengths. Because the agency determined the awardee offered the overall best value to the government based on the “identified strengths and significant strengths” in the technical approach and having a lower total evaluated price, GAO found that the error related to the past performance factor was immaterial.
Procurement errors happen, but the question for GAO is whether those errors made a difference in the competition. Disappointed offerors should take heed to ensure that their protest alleges competitively prejudicial errors.