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.
False Claims Act
It used to be rare for the Supreme Court to hear False Claims Act cases. It’s a lot less rare now. On April 18, the Supreme Court heard argument concerning two Seventh Circuit cases: U.S. ex rel. Schutte v. SuperValu, Inc. and U.S. ex rel. Thomas Proctor v. Safeway, Inc. The Seventh Circuit found that subjective intent is not relevant to False Claims Act scienter when the law says the defendant’s actions were objectively reasonable. Jenner & Block attorneys listened to the argument, and it appears likely that the Supreme Court will rule that subjective intent may be considered as part of the scienter analysis. We will follow this case closely and update our readers once the opinion issues.
Percipient.ai, Inc. v. United States, Fed. Cl. No. 23-00028 (January 9, 2023)
As covered in our last Round-Up, Court of Federal Claims Judge Bruggink initially denied motions to dismiss novel and high profile bid protest claims raised by Percipient.ai, which challenge the National Geospatial-Intelligence Agency’s compliance with FASA during the course of administering an IDIQ held by CACI. The government and CACI moved for reconsideration of Judge Bruggink’s Order, arguing that the Court incorrectly analyzed whether the FASA task order protest bar applied. In an unpublished order, the Court vacated its prior decision, reinstated the motions to dismiss, and directed the parties to submit additional briefing and argument. Either way the Court decides, the outcome promises to carry significant implications across the procurement community.
Lockheed Martin Aeronautics Co. v. Secretary of The Air Force, Fed. Cir. No. 22-1035 (April 25, 2023)
In a much-anticipated decision, the Federal Circuit unanimously affirmed the ASBCA’s opinion that the Air Force’s unilateral contract definitization was not an immediately appealable contracting officer final decision on a government claim. The opinion, authored by Judge Reyna, provides clarifying precedent as to the procedures that apply to unilateral definitization, which in most if not all cases will require a contractor claim to initiate the Contract Disputes Act process.
Rotair Aerospace Corporation, B-421381, B-421381.2 (April 19, 2023) (Published April 26, 2023)
- GAO dismissed a protest as untimely where, following the submission of an objection letter that constituted an agency-level protest, the protester failed to file its GAO protest within 10 days of the adverse agency action.
- The protester challenged the Defense Logistics Agency’s (DLA) award of a sole source contract to the original equipment manufacturer for helicopter weapon system spare parts, alleging that it was capable of producing the parts. Rather than resolve the protest on the merits, GAO held that the protest was untimely.
- Specifically, the protester had submitted a “formal objection” letter to the presolicitation notice raising the same issues and seeking relief. After receiving no response from DLA, and after the solicitation had been issued, the protester followed up with the agency regarding the concerns raised in its formal objection letter. DLA responded the next day and advised the protester that any concerns with the source approval process should be directed to the Army. The protester filed its protest with GAO more than 10 days later.
- Applying its strict timeliness rules, GAO found that the follow-up email to DLA satisfied all the requirements to constitute an agency-level protest: it expressed dissatisfaction with an agency decision and requested corrective action and relief. Moreover, the follow-up email reincorporated all the objections set forth in the initial formal objection letter, and thus must be construed as a challenge to the final solicitation.
- GAO further held that DLA’s response pointing the protester to the Army constituted adverse agency action because it was prejudicial to the protester’s position. Indeed, even though DLA did not directly address the protester’s complaints, DLA informed the protester that it would be unable to compete under the solicitation unless it became an approved source through Army channels. Because the protester did not file within 10 days of this adverse agency action, its protest was dismissed.
Contractors need to understand GAO’s strict timeliness rules to avoid the potential traps for the unwary. Relevant here, where a protest first has been filed with a contracting activity, any subsequent protest to GAO must be filed within 10 calendar days of actual or constructive knowledge of initial adverse agency action. 4 C.F.R. § 21.2(a)(3). Importantly, GAO does not require that correspondence to an agency be formally designated as a protest; rather, so long that the communication satisfies the requirements for an agency-level protest, it will be considered as such. (Disclosure: Jenner & Block represented the intervenor in this protest.)
Peraton, Inc., B-421038.6 et al., April 12, 2023 (Publicly Released April 25, 2023)
- GAO denied a protest asserting, among other allegations, that CACI NSS LLC gained an unfair competitive advantage based on its employment of three former government officials.
- The $5.7 billion “EITaas” Air Force procurement at issue encompassed information technology services, end user devices, enterprise service desk, and organizational change management.
- Peraton (and two other disappointed offerors) had protested previously; the Air Force took corrective action to investigate; and the agency ultimately concluded that CACI’s employment of the officials did not create an unfair competitive advantage, leading Peraton to file another protest.
- To assess whether the contracting officer’s determination was reasonable, GAO analyzed the contracting officer’s findings for each of the three individuals.
- For the first individual, GAO noted that he “had no role in CACI’s oral presentation or quotation, did not have communications or interactions with anyone about the quotation, did not participate in responses to interchange notices, and did not communicate within CACI regarding the interchange notices.” With respect to the second individual, GAO highlighted that the “facts do not establish” that he “had access to any non-public, competitively useful information.” And as for the third individual, he also only had access to “generic, high level, and . . . irrelevant” information that was not competitively useful.
- For these reasons, GAO found the contracting officer’s determination unobjectionable – there was no evidence that CACI benefited from an unfair competitive advantage.
- The responsibility for determining whether an appearance of impropriety exists, and whether an offeror should be allowed to continue to compete, is a matter for the contracting agency. GAO will not disturb the contracting agency’s determination in this regard unless it is shown to be unreasonable, which was not the case here.
Contracting agencies must avoid even the appearance of impropriety in government procurements. In this connection, a firm competing for a contracting opportunity could gain an unfair advantage through its hiring of a former government official, which can result in disqualification of the firm from the competition. GAO has made clear that the assessment of whether an unfair competitive advantage has been created by a firm’s hiring of a former government official is based on a variety of factors, including an assessment of whether the government employee had access to non-public proprietary or source selection sensitive information that was competitively useful. To warrant disqualification, the investigative record must reflect “hard facts” establishing the person’s access to non-public information which could form a basis for competitively improving its proposal, thus providing an unfair competitive advantage over offerors without such information.
SH Synergy, LLC and VCH Partners, LLC, v. United States, Fed. Cl. Nos. 22-cv-1466, 22-cv-1468 (consolidated) (April 21, 2023) (Published April 28, 2023)
- Following a pre-award protest, the Court of Federal Claims considered the solicitation for the General Service Administration’s (GSA) $60 to $100 billion small business set-aside government-wide acquisition contract for information technology services known as the “Polaris Program” and found it violated Small Business Administration (SBA) regulations in several ways. The decision addressed the legality of three solicitations under the Polaris Program, each targeting a small business category pool.
- First, consistent with the mentor-protégé regulations, the court found it permissible that GSA permitted a mentor belonging to multiple mentor-protégé joint ventures (JV) to submit only one proposal for a specific solicitation pool. The court was unpersuaded by the plaintiffs’ argument that this unreasonably limited competition, instead finding such a restriction was required by SBA’s regulations.
- Second, the court held that GSA did not violate SBA regulations or treat offerors unequally by requiring the protégé or mentor-protégé JV to submit an individually performed Relevant Experience Project while at the same time a prime offeror was permitted to rely upon projects performed by its first-tier subcontractors. The court noted that the difference in treatment was the result of competing SBA regulations covering mentor-protégé joint ventures and small businesses.
- Third, the court found that GSA violated SBA regulations by applying the same evaluation criteria to projects submitted by protégé firms and other offerors alike. Specifically, GSA intended to use the same evaluation criteria to assess every Relevant Experience Project submitted for consideration, including that of the protégé. This violated SBA’s regulation that “[a] procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.”
- Finally, the Court held that GSA improperly excluded price as an evaluation factor. While generally competitions require price evaluations, Congress carved out a narrow exception for “certain indefinite delivery, indefinite quantity multiple-award contracts . . . . for services acquired on an hourly rate basis” that will “feature individually competed task or delivery orders based on hourly rates.” 41 U.S.C. § 3306(c)(3). Here, the court found that GSA’s interpretation that fixed-price, cost-reimbursement, and incentive contract types qualified as “based on hourly rates” was so broad that it rendered the phrase entirely meaningless. Thus, the court required GSA to amend the solicitation either to clearly feature time-and-materials and labor-hour task orders or to change the evaluation methodology to include price.
As agencies continue to procure goods and services through large-scale government-wide acquisition contracts, winning a coveted spot on the contract is the crucial first step to accessing further work. Contractors should carefully review all solicitation terms and push back where appropriate.
Crystal Clear Maint., CBCA 7547 (April 13, 2023)
- Crystal Clear Maintenance (CCM) appealed the GSA’s claim for costs to repair damages allegedly caused by CCM’s negligent performance of its maintenance contract. GSA had sent two letters to CCM demanding repayment for the costs, the first on July 6, 2021, and the second on October 13, 2022. The July 2021 letter stated that “the total cost of damage continues to be assessed, but is currently a minimum of $173,978.19.” The October 2022 letter asserted that the total cost of repairs was $741,797.50.
- CCM appealed GSA’s claim on October 21, 2022. GSA moved to dismiss because CCM had failed to appeal the contracting officer’s decision within ninety days of receiving the July 2021 decision.
- The CBCA denied GSA’s motion to dismiss because GSA’s July letter to CCM failed to satisfy the sum certain requirement, i.e., the requirement that claim must demand payment in an amount that is readily ascertainable. The CBCA noted that the inclusion of the qualifying language, “a minimum of,” and GSA’s assertion that the total cost was “continu[ing] to be assessed” meant that GSA had neither put CCM on notice of the exact amount sought, nor provided a way for CCM to ascertain that amount until GSA sent the second letter in October 2022. Thus, CCM’s time to appeal did not begin to run until October 13, 2022, when it received the second letter specifying the exact amount of the government’s claim. CCM’s appeal, filed within 90-days of that second letter, was therefore timely.
This decision affirms that the sum certain requirement applies to government claims as well as to contractor claims. When considering whether the Contract Disputes Act’s 90-day appeal clock is triggered, contractors should keep in mind that the amount demanded in a government claim must be readily ascertainable before the claim must be appealed.
$21.8 Million False Claims Act Settlement Over Allegedly Double-Charging for Parts
- On April 24, 2023, the Department of Justice issued a press release announcing that L3 Technologies, Inc. agreed to pay $21.8 million in order to settle allegations that it violated the False Claims Act by knowingly submitting and causing the submission of false claims to the Department of Defense.
- The allegations stemmed from contract proposals submitted by L3 Technologies from 2008–2011. The government alleged that these proposals included the cost of certain items, such as nuts and bolts, twice. As a result, the government alleged that L3 Technologies knowingly double-charged for these parts. The settlement resolved the government’s allegations, and there was no determination of liability.
- Relatedly, the government also settled a lawsuit filed by L3 Technologies for breach of contract claims. L3 Technologies alleged that in an effort to prevent the company from double-charging, the government improperly prohibited them from charging certain other costs. The settlement was for approximately $8 million.
The L3 Technologies settlement signals, and the Department of Justice press release confirms, that the government is committed to pursuing allegations that a contractor knowingly overcharged for their products. When announcing the settlement, the Head of the Justice Department’s Civil Division stated that “government contractors must ensure that they provide the goods or services that they promised at the proper price.”