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 Cases

Aries Construction Corp. v. United States, No.22-166C (February 21, 2023) 

• Court of Federal Claims Judge Schwartz issued an opinion discussing the relationship between the Contract Disputes Act (CDA) claim submission requirement and contractor claims for breach of the duty of good faith and fair dealing.
• A long line of Federal Circuit precedent requires contractors to submit their claims relating to a contract dispute to the contracting officer for decision before raising those claims at a Board of Contract Appeals or the Court of Federal Claims.
• Here, the plaintiff submitted claims seeking equitable adjustment based on a constructive change theory. The contracting officer denied the claims. The plaintiff appealed to the court and, in addition to alleging breach of contract, also alleged breach of the implied duty of good faith and fair dealing. The government moved to dismiss the implied contract theory on the basis that it was never presented to the contracting officer.
• Providing a useful summary of the relevant legal principles, Judge Schwartz denied the government’s motion, finding that the plaintiff's CDA claim put the contracting officer on notice of the relevant facts and legal basis that could support a breach of implied contract claim.

While the Federal Circuit has strictly construed and enforced the requirement for CDA claim submission, it has also made clear that the legal theories raised on appeal will not necessarily be stated verbatim in the claim. It is critical for contractors and their counsel to be careful and deliberate when crafting a claim, and to also understand how the language of the claim may impact future appeals litigation. That is particularly true when it comes to alleged breaches of the implied duty of good faith and fair dealing.

Protest Cases

TRAX Int’l Corp., B-420361.6 (March 9, 2023)

• GAO dismissed a protest alleging Procurement Integrity Act (PIA) violations because the dispute only involved private parties with no government involvement.
• TRAX and a company named Oasis Systems entered into a teaming agreement to compete for the Department of the Army’s Aberdeen Test Support Services (ATSS) procurement, and “TRAX’s specific, highly confidential and proprietary win strategies and themes” were shared with Oasis. A few months later, Oasis withdrew from the teaming agreement and later was acquired by Engineering Research and Consulting, Inc. (ERC).
• Subsequently, the Army awarded the ATSS contract to ERC, prompting TRAX to raise PIA concerns. The Army investigated and concluded that no PIA violation had occurred, which led TRAX to protest at GAO.
• GAO agreed with the Army that TRAX’s concerns were encompassed by the PIA’s “savings provisions,” which make clear that the PIA does not “restrict a contractor from disclosing its own bid or proposal information or the recipient from receiving that information.” 41 U.S.C. § 2107(2). GAO saw no relevance that TRAX had only shared the information with Oasis—not ERC. 
• In dismissing the protest, GAO explained that the dispute as to the possible misuse of TRAX’s proprietary information, which did not involve any government action, was a dispute between private parties that was not for GAO’s consideration. 

The PIA generally prohibits a federal government official from “knowingly disclos[ing] contractor bid or proposal information or source selection information before the award of a federal agency procurement contract to which the information relates,” as well as prohibits anyone from knowingly obtaining such information. But the PIA also includes a “savings provision” under which there is no PIA violation where a contractor discloses its own bid or proposal information to a third party. GAO routinely explains that even if the voluntarily provided information is subsequently misused or not properly safeguarded, that still does not constitute a PIA violation, but rather is a dispute between private parties—not subject to GAO’s review.

General Dynamics Information Technology, Inc., B-421290; B-421290.2 (March 1, 2023) (Published March 10, 2023)

• GAO sustained a bid protest where the agency unreasonably evaluated the awardee’s proposal under the past performance and technical evaluation factors.
• The RFQ required the agency to consider offerors’ prior work in two regards: under the past performance factor and the capability and experience element of the technical factor. The protester alleged that the awardee lacked relevant experiences that were similar in size and scope to the instant procurement, and because the awardee proposed the same references for both evaluation factors, the evaluation was doubly unreasonable.
• GAO agreed, finding that the agency did not reasonably explain why the awardee’s past performance and experience references were relevant either in dollar value or the number of full-time employees, or how the scope of the work performed was relevant to the instant requirements. GAO also found that the assignment of a strength to the awardee’s proposal for offering 10 years of experience was unreasonable when the proposal’s cited two experience references did not cover 10 years of performance.

For disappointed offerors, publicly available information and competitive intelligence can provide avenues for challenging an awardee’s past performance. Offerors should be vigilant in keeping tabs on the competitive landscape.

Investigations and Enforcement

Inflation Adjustments for False Claims Act Penalties

The latest CPI-adjusted FCA penalties range is out. Penalties assessed after January 30, 2023, where the underlying violations occurred in November 2015 or later, will range from $13,508 to $27,018.

President Biden’s Sweeping Pandemic Anti-Fraud Proposal: Going After Systemic Fraud, Taking on Identity Theft, Helping Victims (March 2, 2023)

Earlier this month, the Biden Administration proposed to address “a historic degree of outright fraud” regarding emergency pandemic era benefits, including:

• Devoting significant resources to investigate and prosecute pandemic-era fraud cases, including tripling the COVID-19 Fraud Strike Force teams;
• Proposing to increase the statute of limitations for pandemic fraud to 10 years;
• Proposing to increase opportunities for executive agencies to recover up to $1 million in claims using the Program Fraud Civil Remedies Act instead of the $150,000 limit in place now; and
• Investing heavily in fraud prevention and addressing identity theft that facilitated benefits fraud.

U.S. ex rel. Morsell et al. v. NortonLifeLock Inc.

The long-running False Claims Act case United States ex rel. Morsell v. NortonLifeLock, Inc. came to an end with a lengthy ruling that the company violated the False Claims Act, but awarding just a fraction of the damages and penalties sought by the government. This case both serves to remind government contractors of the risks inherent in GSA contracting, and to remind the government that it bears the burden of proving damages. The contractor, which used an underqualified consultant to prepare Commercial Sales Practices submissions, failed to disclose discounts given to its basis of award customer as well as details about a rebate program. But the government’s arguments about damages failed to impress the court, which found no evidence it could use to determine how much additional discounts the government would have negotiated had the government been fully informed.

The Department of Justice (DOJ) has released its summary of False Claims Act (FCA) recoveries for Fiscal Year 2022. At $2.2 billion, financial recoveries were significantly lower than the $5.7 billion collected the year before. DOJ’s press release noted that the overall number of settlements and judgements increased to 351, the second highest total on record. As usual, healthcare recoveries dominated, but the government contracting industry continued to represent a small but significant component of the caseload and overall recoveries.

What do these statistics mean for future FCA enforcement risks? We believe the statistics, combined with other trends, mean more civil fraud enforcement is on the horizon. Specifically, we anticipate:

1. More attention to civil fraud matters: We do not believe that last year’s lower recoveries will significantly impact DOJ’s resolution demands in individual cases this year. But the statistics will likely motivate DOJ to increase the pace that pending False Claims Act cases move through the system because more cases increase opportunities for recoveries. And increased oversight pressure from the new Congress may contribute additional motivation. As a result, contractors should expect to see more FCA investigations opened, more Civil Investigative Demands issued, and potentially more pressure to respond. There will be ample opportunities for DOJ as significant numbers of new qui tam cases have been filed in recent years.
2. More DOJ lawyers focused on civil fraud/FCA matters: A non-trivial number of DOJ civil lawyers at Main Justice and in the US Attorneys’ offices have spent time detailed to other components recently. This has reduced the time that those lawyers could dedicate to FCA cases. In recent months, it appears as if more attention is being paid to civil fraud matters again.
3. More investigative resources focused on civil fraud/FCA matters: As travel budgets for agents return to pre-pandemic norms, and pressures caused by other pressing investigative focus areas fade, it appears that investigative resources are again available for civil fraud matters. Additional agents and analysts will also increase case throughput.

In light of what we believe will be an environment of increased enforcement, companies in industries facing FCA risk (e.g., healthcare and government contracting) are well advised to do the following:

1. Treat inbound requests from Offices of Inspectors General (e.g., subpoenas and informal requests for information) as preludes to civil FCA cases. Companies sometimes provide requested information to investigators without seeking advice of outside counsel or considering ways to mitigate FCA risk in early communications. It is a best practice to involve skilled counsel at an early stage to help avoid escalation to a full-blown, resource-intensive FCA matter.
2. Treat your hotline reporters well. Company personnel generally do not set out to become qui tam plaintiffs. Sometimes, those who feel like the company has not “listened” to their concern or responded appropriately take the next step and file a complaint. Taking hotline reports (and informal reports through HR or supervisors) seriously, and responding to the reporter with the results of an internal review, can help avoid escalation to qui tam filing.
3. Double down on compliance matrices and recordkeeping. If companies have not created or recently updated their compliance matrices or processes, or have less than robust government contract/government grant file systems, this is a great time to focus on those areas. Showing company efforts towards training and compliance, as well as maintaining robust contract documentation, can help build defenses to future FCA allegations. Stated differently, contemporaneous documentation of good faith compliance efforts can help reduce FCA risk by rebutting scienter allegations or otherwise demonstrating government knowledge or a lack of materiality.

Jenner & Block lawyers stand ready to assist with these issues.

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.

FOIA

Citizens for Responsibility and Ethics in Washington v. United States, No. 21-5276 (D.C. Cir. January 31, 2023) 

• The DC Circuit clarified what information an agency may properly withhold under FOIA’s Exemption 4, which protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” This case arose from the Bureau of Prisons’ decision to withhold the names of the contractors who supplied pentobarbital, a drug used for lethal injections in death penalties, and certain contract terms such as the quantities purchased under FOIA’s Exemption 4. The lower court had sustained the Government’s withholdings.
• The DC Circuit reversed and remanded the case.
  • First, the DC Circuit held that a government contractor’s business name is not “commercial information” protected under Exemption 4. The Court explained that Exemption 4 only protects information that is commercial “in and of itself,” i.e., information that serves a commercial function or is of a commercial nature. The DC Circuit rejected the Government’s argument that the names of its government contractors were “commercial” because disclosure may cause commercial repercussions from public hostility to the companies supplying the drug used in lethal injections. Such downstream commercial impacts were insufficient to show that information was commercial “in and of itself.”
  • Second, the Court held that the Government had failed to demonstrate that certain key contract terms were “confidential” under Exemption 4. Information is “confidential” if it is customarily and actually treated as private by the owner. The Government had argued that the withheld terms were confidential because they were potentially identifying information, and identifying information was treated as confidential by the contractors. The DC Circuit held that the Government was accordingly required to demonstrate that the withheld contract terms were in fact identifying information satisfying Exemption 4’s requirement for confidentiality.

Contractors should be aware that FOIA’s Exemption 4 may not protect against the release of information that can identify the contractor’s participation in a particular program, even if such identifying information may result in downstream commercial impacts.

Protests

AT&T Corp., B-421195, B-421195.2, January 17, 2023 (Publicly Released January 30, 2023)

• GAO sustained AT&T’s protest challenging the issuance of a US Secret Service task order for communications services to Lumen Technologies Government Solutions where the selection authority (SSA) disagreed with the underlying evaluation record without sufficient explanation.
• The agency’s technical evaluation team (TET) assigned AT&T’s higher-rated, higher-priced proposal a total of 42 strengths across the various evaluation factors.
• However, in selecting Lumen for task order award, the SSA listed only nine “benefits” of AT&T’s proposal, entirely disregarding 33 of the strengths that the TET had assigned to AT&T’s proposal, while also identifying four new strengths in Lumen’s proposal.
• GAO sustained the protest because the SSA failed to adequately document why they removed a significant number of AT&T’s strengths, and resultant downgrade in the number of benefits represented by AT&T’s proposal. In reaching this conclusion, GAO emphasized that changes made by the SSA to the TET’s evaluation record must be adequately documented.
• GAO also rejected the SSA’s post-protest explanations as inconsistent with the contemporaneous record, which offered no insight into the SSA’s decision to reject the AT&T strengths. Instead, the agency was effectively seeking to justify a widescale reevaluation of AT&T’s proposal entirely on the basis of post-protest explanations, and without adequate support and documentation within the contemporaneous record.

Although source selection officials may reasonably disagree with the ratings and recommendations of lower-level evaluators, they are nonetheless bound by the fundamental requirement that their independent judgments be reasonable, consistent with the provisions of the solicitation, and adequately documented in the contemporaneous record. Where an agency fails to adequately document the basis of its evaluation and best-value tradeoff, it runs the risk that GAO will be unable to determine whether the agency's evaluation was reasonable and sustain the protest.

CACI, Inc.-Federal, B-421224 et al., (January 23, 2023) (Published January 30, 2023)

• GAO denied a protest challenging the Agency’s determination that the protester’s use of a former government employee to prepare its proposal created an actual or apparent unfair competitive advantage.
• CACI, the protester here, hired a former government employee who was the Army’s source selection advisory council (SSAC) chairperson for the predecessor procurement and who also received briefings on the incumbent contractor’s performance that included cost and rate information.
• After retiring, this government official began providing consulting services to CACI via an agreement with a third-party consulting firm, including assistance in preparing its proposal for the present procurement. Following a thorough investigation during which CACI was afforded the opportunity to respond to the Government’s findings, the Army determined that CACI gained an unfair competitive advantage and was ineligible to compete.
• CACI protested this decision, but GAO denied the protest on all grounds, agreeing that the former government official had broad access to non-public competitively useful information, that he participated in CACI’s proposal preparation efforts, and that CACI failed to rebut the presumption of disclosure flowing from these facts.
• GAO noted that specific evidence showed that the government official participated in an analysis of the incumbent contractor’s pricing and specifically requested and received detailed information regarding that pricing. In light of this evidence, the contracting officer found the former government official’s credibility to be questionable because he submitted a declaration in response to the protest attesting that he accessed no such information.
• The Army also found the former official’s claim that he was a “hands-off leader” technical manager to not be credible; multiple government employees contradicted that assertion and explained that he was intimately involved.

GAO has explained that despite certain procedural differences, the standard for an agency’s consideration of unfair competitive advantage under FAR subpart 3.1 is “virtually indistinguishable” from the unfair competitive advantage arising from unequal access to information under FAR subpart 9.5. Here, where an offeror chooses to hire a former government official with recent access to non-public competitively useful information, and uses that official to prepare its proposal, there is a rebuttable presumption of prejudice.

SBIR Program

PublicRelay, B-421154 (January 17, 2023)

• In a rare decision discussing agency obligations with respect to the SBIR program, GAO denied a protest arguing that an agency was required to negotiate in good faith to award a Phase III contract to the protester rather than making award under a competitive solicitation.
• The protester argued that an SBA solicitation for media monitoring, daily briefing, and analytics would amount to an SBIR Phase III award for technology that the protester had previously developed under SBIR Phase I and Phase II efforts for the NSF. Therefore, the protester argued, SBA was required to enter good faith negotiations with the protester for a Phase III award rather than competing the requirement.
• After exchanging information with the protester, the SBA disagreed and concluded that the solicited effort would not constitute a Phase III effort because: (a) SBA was not aware of the prior SBIR effort at the time SBA drafted the requirement, (b) SBA did not require the technology that the protester developed, (c) SBA’s requirement predated the protester’s early SBIR contracts, and (d) SBA created the requirement without use of the protester’s concepts, findings, ideas, or research results. SBA added that just because the protester would propose to use its SBIR-developed technology to meet the SBA’s requirements does not mean SBA’s requirements are for a Phase III contract.
• During the protest, SBA submitted to GAO a statement from the Director of SBA’s Office of Innovation and Technology, the office that administers the SBIR program and issues the SBIR Policy Directive. The statement is partially excerpted in the decision and explains, in essence, that because SBA “did not solicit the specific SBIR-developed technology that [PublicRelay] has described in its proposal for a Phase II award from NSF,” the SBA solicitation did not qualify as Phase III work.
• After analyzing the SBIR Policy Directive, GAO concluded that, “although SBA may have been able to pursue an SBIR Phase III award with PublicRelay, the agency was not otherwise required to do so.” While GAO agreed with the protester that the reasons initially put forward by the agency were not necessarily dispositive, GAO explained that “where the agency is not specifically pursuing the production of technology developed under a prior SBIR Phase I or Phase II award, the agency has the discretion to fund such efforts only if it elects to do so,” and for that reason GAO denied the protest.

The SBIR program and the various obligations set forth in the SBIR Directives are rarely addressed in litigation, so decisions like this that reveal both SBA and GAO interpretations of the Directives can be quite significant. Although rarely litigated, disputes often arise among SBIR contractors, large businesses, the SBA, and procuring agencies about the circumstances under which an agency must (or may) procure a technology directly from an SBIR contractor or otherwise afford certain rights to an SBIR contractor. For better or worse, this GAO decision will likely play an important role going forward in the resolution of those disputes. For contracting personnel and counsel working in or around the SBIR program, the decision warrants careful attention.

Investigations and Enforcement

DOJ Announces Changes to Corporate Enforcement Policy

On January 17, 2023, Assistant Attorney General (AAG) Kenneth Polite, Jr., delivered a speech announcing several important revisions to the Department of Justice (DOJ) Criminal Division’s Corporate Enforcement Policy (CEP). These changes, which will apply to current and future corporate defendants in cases involving the Criminal Division—including all cases brought under the Foreign Corrupt Practices Act (FCPA)—include:

1. Preserving the possibility of securing a declination of prosecution for companies even when aggravating circumstances may exist;
2. Increasing the maximum potential fine reduction to 75% off the bottom of the applicable sentencing guidelines range in cases that warrant a criminal resolution but where the company voluntarily self-discloses the misconduct, fully cooperates, and effectively remediates; and
3. Increasing the maximum potential fine reduction to 50% off the bottom of the applicable sentencing guidelines range for companies that do not voluntarily self-disclose, but still fully cooperate and effectively remediate.

These policy modifications follow a September 2022 memorandum from Deputy Attorney General (DAG) Lisa Monaco announcing revisions to DOJ’s corporate criminal enforcement policies. As we wrote at the time, that memorandum reflected the Department’s stated goal of bringing more prosecutions of individuals responsible for corporate wrongdoing—and thus building an incentive structure that encourages companies to self-report more misconduct and cooperate more comprehensively and expeditiously with the government’s investigation.

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.

Legislative Update

The Biden Administration’s Fall 2022 Regulatory Agenda was issued earlier this month. These items provide advanced warning of impending regulatory changes as well as an opportunity to become involved in the rulemaking process, when relevant. Among the changes of note:

• Assessing Contractor Implementation of Cybersecurity Requirements (DFARS Case 2019-D041): DoD is amending an interim rule to implement the CMMC framework 2.0 in order to protect against the theft of intellectual property and sensitive information from the Defense Industrial Base (DIB) sector.
• Prohibition on Procurement of Foreign-Made Unmanned Aircraft Systems: DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 848 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 to prohibit the procurement of foreign-made unmanned aircraft systems by the Department of Defense.
• Limitations on Communications Systems Lacking Certain Resiliency Features (DFARS Case 2020-D023): DoD is proposing to amend the DFARS to implement section 168 of the NDAA for FY 2020. Section 168 limits availability of funds for the procurement of a current or future DoD communications program of record, unless certain conditions are met.
• Undefinitized Contract Actions (DFARS Case 2021-D003): DoD is proposing to amend the DFARS to implement recommendations from DoD IG Report 2020-084, dated May 11, 2020, regarding undefinitized contract actions. The rule would specify that failure to meet the qualifying proposal date in the definitization schedule could result in the government withholding a percentage of all subsequent financing requests.
• Restriction on Certain Metal Products (DFARS Case 2021-D015): DoD is proposing to amend the DFARS to implement section 844 of the NDAA for FY2021. Section 844 revises the 10 U.S.C. 2533c prohibition on procuring covered material melted or produced in any covered nation to procuring covered material mined, refined, separated, melted in any covered nation. It also amends the exceptions to the prohibition by removing the term tungsten and substituting covered material.
• Modifications to Printed Circuit Board Acquisition Restrictions (DFARS Case 2022-D011): DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement to implement section 851 of the NDAA for FY2022 (Pub. L. 117-81) which amends 10 U.S.C. 2533d, including the effective date of the statute, and section 841 of the FY2021 NDAA (Pub. L. 116-283), which prohibits acquiring a covered printed circuit board from a covered country, unless a waiver is obtained.
• DFARS Buy American Act Requirements (DFARS Case 2022-D019): DoD is proposing to amend the DFARS to implement the requirements of Executive Order 14005, Ensuring the Future Is Made in All of America by All of America’s Workers. Changes to the Federal Acquisition Regulation (FAR) are being made via RIN 9000-AO22 (FAR Case 2021-008, Amendments to the FAR Buy American Act Requirements). This rule proposes conforming changes to the DFARS.
• Employment Transparency Regarding Individuals Who Perform Work in the People's Republic of China (DFARS Case 2022-D010): DoD is finalizing an interim rule that amended the DFARS to implement section 855 of the NDAA for FY2022 (Pub. L. 117-81). Section 855 prohibits the award of a covered contract to, or renewal of a covered contract with, a covered entity unless such covered entity has submitted each required disclosure such covered entity is required to submit. For FY2023 and FY2024, it requires each covered entity that is a party to one or more covered contracts in the fiscal year to disclose if the entity employs one or more individuals who perform work in the People’s Republic of China on any such contract.
• NIST SP 800-171 DoD Assessment Requirements (DFARS Case 2022-D017): This rule was split from RIN 0750-AK81. DoD is finalizing an interim rule (see RIN 0750-AK81, interim rule for DFARS Case 2019-D041) to implement the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171 DoD Assessment Methodology in order to protect against the theft of intellectual property and sensitive information from the DIB sector. This methodology enables DoD to assess contractor implementation of the cybersecurity requirements in NIST SP 800-171, Protecting Controlled Unclassified Information (CUI) In Nonfederal Systems and Organizations.
• Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects: DoD proposes to revise its rule on Transactions Other Than Contracts, Grants, or Cooperative Agreements for Prototype Projects in order to reflect changes in 10 U.S.C. 4022 and its predecessor authorities. Other Transactions (OTs) for prototype projects are legally binding agreements that serve as alternatives to traditional government procurement contracts and provide authority for broad flexibility in terms of the award process and the terms and conditions for the project. The proposed changes broaden use and revise procedures including: provide authority for follow-on production OTs and contracts; special circumstances for award of Ots to small businesses, nontraditional defense contractors, nonprofit research institutions, and consortia; add approval requirements for large dollar Ots; provide authority to supply prototypes and production items as Government furnished items; and apply procurement ethics requirements to section 4022.
• Cybersecurity Maturity Model Certification (CMMC) Program: DoD is proposing to implement the Cybersecurity Maturity Model Certification (CMMC) Framework, to help assess a DIB contractor’s compliance with and implementation of cybersecurity requirements to safeguard Federal Contract Information (FCI) and CUI transiting non-federal systems and mitigate the threats posed by Advanced Persistent Threats—adversaries with sophisticated levels of expertise and significant resources.
• National Industrial Security Program Operating Manual (NISPOM); Second Amendment: Based on public comments, DoD is proposing additional amendments to a rule last published on December 21, 2020. This amendment addresses comments received on requests for guidance and the cost to implement Security Executive Agent Directive (SEAD) 3, as well as to provide clarification on safeguarding procedures for the protection and reproduction of classified information. It also includes DoD’s response to public comments received regarding controlled unclassified information, National Interest Determination requirements for cleared contractors operating under a Special Security Agreement for Foreign Ownership, Control or Influence, and eligibility determinations for personnel security clearance processes and requirements, among others.

Investigations and Enforcement

The Supreme Court will (again) weigh in on the False Claims Act after granting cert to address whether the False Claims Act can be knowingly violated if the underlying conduct is “objectively reasonable.” The two consolidated Seventh Circuit cases are United States ex rel. Schutte v. SuperValu Inc., and United States ex rel. Proctor v. Safeway, Inc.

Protest Cases

SLS Federal Services, LLC v. United States, No. 22-1215 (Fed. Cl. January 10, 2023)

• In a case before the Court of Federal Claims (COFC), Judge Bruggink found an agency abused its discretion by refusing to engage in discussions in a DoD procurement valued above $100 million, subject to DFARS 215.306.
• Judge Bruggink concluded that DFARS 215.306 creates a presumption in favor of opening discussions for DoD procurements valued above $100 million; discussions are not mandatory under the regulation, but where the regulation applies, the agency must provide a rational basis for not engaging in discussions.
• Judge Solomson previously reached the same conclusion in Oak Grove v. United States, 155 Fed. Cl. 84 (2021) and IAP Worldwide Services, Inc. v. United States, 159 Fed. Cl. 265 (2022).

In most circumstances, agencies enjoy broad discretion when deciding whether to engage in discussion or make award based on initial proposals. GAO is particularly deferential to agency decisions to make award without discussions. DFARS 215.306, however, changes the analysis for DoD procurements valued above $100 million. Judge Solomson’s decisions in Oak Grove and IAP, and now Judge Bruggink’s decision in SLS, confirm that at least some COFC judges will scrutinize DoD’s decision to make award without discussions where the DFARS 215.306 applies. This is yet another area where protest practice before the Court of Federal Claims differs from practice at the GAO.

Arcticom, LLC, B-421256; B-421256.2 (December 28, 2022) (Published January 18, 2023)

• GAO denied a bid protest arguing, in part, that the agency should have evaluated past performance references from its affiliated entities.
• The protester submitted three past performance references, two of which were from affiliated entities. The agency concluded these references were not relevant both because the RFP did not contemplate the evaluation of affiliated companies’ past performance and because the proposal did not explain precisely how these firms would be involved in contract performance. The protester challenged this conclusion, arguing that its proposal made clear that these affiliated companies would provide technical and administrative support and thus were required to be considered.
• GAO agreed with the agency, explaining that while agencies may consider such experience where the proposal demonstrates that the resources of the parent or affiliated company will affect contract performance, an agency is under no general obligation to do so when the solicitation is silent on the issue.

When submitting past performance references, offerors must carefully adhere to the solicitation guidelines for what references will be considered by the agency. In cases where a contractor wants to submit a proposal but cannot satisfy the stated relevancy requirements, any dispute over the terms of the solicitation (including filing a protest) must occur prior to proposal submission.

Claims Cases

Secretary of Defense v. Raytheon Co. et al., No. 2021-2304 (January 3, 2023)

• In this long-running saga related to 2007/2008 incurred costs, the US Court of Appeals for the Federal Circuit reversed the ASBCA’s decision in favor of Raytheon.
• The ASBCA had found Raytheon’s policies for tracking unallowable lobbying and corporate organization costs to be reasonable and had denied the government’s claim. But the Federal Circuit disagreed.
• First, the Federal Circuit held that Raytheon’s established policy where employees in its government relations department tracked the amount of time spent on unallowable activities only during the “scheduled working day” (i.e., 8 a.m. to 5 p.m.) did not accurately reflect the proportion of time spent on unallowable lobbying, much of which was before- and after-hours. The court concluded the salary paid these employees was for all efforts regardless of the time of day performed. Thus, these hours should have been tracked and excluded as unallowable costs under FAR 31.205-22.
• Second, the Federal Circuit determined that Raytheon’s bright-line corporate-development policies were inconsistent with the FAR and resulted in Raytheon charging the government for unallowable costs. The FAR disallows costs associated with “planning . . . mergers and acquisitions.” FAR 31.205-27(a)(1). Because Raytheon only reported time after the submission of an indicative offer or the decision to go to market with offering materials—Raytheon’s bright-line rules—the court held Raytheon charged the government for time spent planning these corporate transactions. The Federal Circuit’s rationale was that a decision on submitting an offer or to go to market cannot be made unless at least some planning for that offer or the offering materials has occurred, and that planning time should have been unallowable. Furthermore, the court was unpersuaded that these costs were economic planning costs allowable under FAR 31.205-12.
• The matter was remanded back to the ASBCA for a determination of the quantum Raytheon owes to the government.

The Federal Circuit’s decision dramatically alters prevailing interpretations of FAR 31.205-22, 31.205-12, and 31.205-27, and companies relying upon the ASBCA’s prior guidance may find themselves with policies that no longer accurately reflect the line between allowable and unallowable costs. Contractors should carefully scrutinize their policies pertaining to lobbying and corporate organizations to ensure they are consistent with the Federal Circuit’s ruling.

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

The Supreme Court declined to take on cases that would have resolved a frequent question about the application of FRCP 9(b) to pleading False Claims Act cases. Many had hoped that the Supreme Court would have resolved the matter of how detailed relators’ evidence needed to be when bringing FCA cases, but the Supreme Court once again declined to take up the issue.

Protest Cases

1. eSimplicity, Inc. v. United States, No. 22-543C (Fed. Cl. October 13, 2022)

• Court of Federal Claims Judge Schwartz found that an agency improperly rejected a proposal under the “late is late” rule.
• The government rejected eSimplicity’s proposal as late, but the real issue was a file size restriction to the agency’s email system. eSimplicity’s proposal submission arrived at the agency’s email system before the deadline, but did not make it through to the contracting office.
• Rather than accepting the agency’s reason, eSimplicity successfully characterized the issue as one of unstated evaluation criteria.
• Judge Schwartz agreed. While agencies often specify file size limits, the solicitation here did not, nor did it contain any other provision that could reasonably encompass such a restriction.
• By rejecting eSimplicity’s proposal because it failed against unannounced file size limits, Judge Schwartz concluded that the agency failed against the mandate at FAR 5.304(d) that: “All factors … that will affect contract award … shall be stated in the solicitation.”
• Judge Schwartz then provided a detailed interpretation of the FAR provisions that underly the “late is late” rule, notably disagreeing with GAO’s longstanding approach, further deepening the divide between GAO and Court of Federal Claims judges on this issue.

The “late is late” rule for enforcing proposal submission deadlines is one of the most notoriously strict rules in government contracting. In almost all cases, when an agency rejects a proposal as late, there is little for a contractor to do other than move on to the next business opportunity. But, as this case confirms, saying “late is late” is not a silver bullet for the government in every circumstance. Particularly when it comes to proposals submitted by email, the Court of Federal Claims has proven more willing than GAO to scrutinize the government. Moving forward, for any contractor considering such a challenge, eSimplicity is required reading.

2. TekSynap Corporation; Candor Solutions, LLC, B-420856 et al., (October 2022) (Published October 26, 2022)

• GAO denied a protest alleging that the agency unreasonably evaluated the key personnel qualifications of both the awardee and the protester.
• The protester raised several challenges to the evaluation made by the Department of Justice in connection with a contract for IT support services.
• Under the key personnel resume evaluation factor, TekSynap claimed that the awardee should have been rated unacceptable because its proposed program manager, who possessed a bachelor’s degree in economics, did not meet the solicitation’s requirement for a degree in business, among other fields of study listed in the solicitation. GAO found no basis to disturb the contracting officer’s conclusion that a degree in economics was encompassed within the broader category of “business.”
• Further, GAO found that the protester had not explained how it was prejudiced by the agency’s alleged waiver of the key personnel education requirement, such as by explaining what it would have done differently had it been provided an opportunity to propose a different program manager with a degree in economics.
• Finally, GAO rejected arguments that the agency misevaluated the years of experience possessed by the protester’s proposed program manager. GAO found that the program manager’s resume did not support the experience claimed because it did not describe specific program management duties and the dates during which those duties were performed.

The evaluation of quotations is a matter within the discretion of the procuring agency. GAO does not independently evaluate quotations or proposals; rather, it reviews the agency’s evaluation to ensure that it is consistent with the terms of the solicitation and applicable statutes and regulations. Even where an agency allegedly waives or relaxes a material solicitation requirement (including with respect to key personnel), a protester must demonstrate that but for the agency’s improper actions, it would have submitted a different approach to improve its chances of award.

3. Guidehouse LLP; Jacobs Tech., Inc., B-420860.1 (October 13, 2022)

• GAO sustained a protest where the Air Force misevaluated proposals under FAR 52.222-46. This solicitation provision requires an agency to compare an offeror’s proposed professional compensation to the compensation paid to incumbent professional employees.
• GAO sustained the protest because the Air Force unreasonably concluded both that 1) it did not have sufficient data to compare the proposed professional compensation rates to incumbent rates, 2) but nevertheless went forward with a comparison of incumbent rates to proposed rates and concluded that BAE’s proposed rates were acceptable. GAO found that this evaluation method produced a misleading result because the Air Force was not comparing rates from matching labor categories—a point the Air Force contemporaneously recognized but disregarded.
• GAO further rejected the Air Force’s argument that it had satisfied FAR 52.222-46 because it had compared the proposed professional compensation rates to the agency’s own developed market rates during the cost realism evaluation. GAO held that as this part of the agency’s analysis was to determine cost realism, not to compare the proposed rates to incumbent compensation, the Air Force did not in fact conduct the evaluation required for FAR 52.222-46.

In recompetitions, FAR provision 52.222-46 requires the agency to conduct a two-part evaluation of how proposed compensation compares to incumbent compensation and the realism of the proposed compensation. GAO will sustain a protest where a contracting agency’s evaluation of professional compensation does not comply with the regulation or produces a misleading result, such as where offerors’ rates are not compared on a common basis.

Claims Cases

1. The Heirs of Bahawouddin, Son of Neyaz Mohammad, CBCA No. 7135, 2022 WL 15800262 (October 26, 2022)

• In this case, the Civilian Board of Contract Appeals (CBCA) denied the Government’s motion to dismiss a claim brought under the Contract Disputes Act (CDA), and in the process provided two important reminders for contractors regarding CDA jurisdiction.
• There, in a somewhat unusual posture, the CDA claim was brought—not by the original contractor, “The Heirs of Bahawouddin, Son of Neyaz Mohammad” who had entered into a 10-year residential lease with the Department of State (DOS) in Kabul, Afghanistan—but instead, by the “Heirs acting through Mohammad Tariq, Power of Attorney.” 
• Specifically, Tariq alleged through a certified claim that DOS owed $500K in property damages and unpaid rent and additionally sought “[p]ayment of rent in the amount of $10,000 per month from March 1, 2017, until paid.” The Government moved to dismiss for lack of subject-matter jurisdiction on three bases; the CBCA rejected all three. We discuss two of them.
• First, DOS argued that the Appellant was not in privity with the Government, as the appeal improperly was brought by the Heirs’ attorney in his personal capacity. The CBCA rejected this argument and explained that although Mr. Baha (the Heirs’ attorney) was indeed not in privity with the Government, “the contracting officer read too narrowly the claim submitted,” and the claim was in fact brought on behalf of the Heirs.
• Second, the Government maintained that because the Appellant sought “$10,000 per month from March 1, 2017, until paid” it had not sought a sum certain as required under the CDA. The CBCA rejected this argument as well and reiterated that despite the inclusion of the “until paid” language “the sum certain was ascertainable at the time the claim was submitted—the monthly rent of $10,000 per month multiplied by the number of months since DOS had ceased rent payments plus $500,000 for the alleged damage to the property.”

This case serves as a reminder that the minutiae of claim submission can and does generate fact-intensive procedural litigation before the Boards. It can sometimes be tricky to determine which entity is in privity with the government and which individual is authorized to certify and pursue a claim or REA against the government. In those cases, be prepared with evidence to support the viability of the claim. While it is the contractor’s obligation to state a sum certain, in some cases that might still require the government to do some multiplication in order to calculate the total amount at issue.

2. Appeal of Ace Electronics Defense Systems, ASBCA No. 63224 (October 5, 2022)

• Ace Electronics Defense Systems, LLC (Ace) requested compensation due to increased costs it experienced performing a firm-fixed price contract with the Navy. Ace incurred $113,993.46 in additional costs due to the vendor’s increased pricing.
• Ace argued that it was entitled to additional payment because Ace encountered higher prices from its vendor due to the COVID-19 pandemic. However, Ace did not identify any clause of the contract that would shift the risk of such costs to the government.
• Ace attempted to rely on FAR 16.203, which would provide for upward or downward revision of the price upon the occurrence of specified contingencies, which is used when there is serious doubt concerning the stability of market or labor conditions. Ace also attempted to prevail upon a constructive change argument, and argued that the government’s failure to recognize the changed environment in which the contract was to be performed constituted a breach of the contract’s duty of good faith and fair dealing.
• The ASBCA dismissed Ace’s claim. The Board noted that: (1) Ace’s contract and delivery order did not contain a price adjustment clause, and Ace’s request would require the Board to rewrite the contract; (2) the government did not order additional work to be performed such that a constructive change occurred, and (3) the government did not undermine any specific promise or destroy Ace’s reasonable expectations, which would be a violation of the duty of good faith and fair dealing.

This is the latest in a growing line of decisions confirming that contractors face significant challenges when trying to recover from COVID-19-related impacts. The ASBCA will not rewrite a contract to include a price adjustment mechanism that the contracting parties did not intend; it will scrutinize the facts of each case to determine whether the legal elements of a constructive change are actually satisfied.

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.

Claims Cases

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.

Protest Cases

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.

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.

COVID-19 Fraud Recovery Bills

The President signed the COVID-19 EIDL Fraud Statute of Limitations Act of 2002, and PPP and Bank Fraud Enforcement Harmonization Act of 2022. Each Act establishes a 10-year statute of limitation for fraud by borrowers who took advantage of these programs during the pandemic.

In United States v. Allergan, Inc. --- F.4th --- , 2022 WL 3652967, The Ninth Circuit held that the False Claims Act’s Public Disclosure Bar has a broad reach—broad enough to cover patent prosecutions by the US Patent and Trademark Office, which qualify as a type of federal “hearing.” The Ninth Circuit reasoned that the information used by relator was publicly disclosed, and large portions of the information were even available on public websites maintained by the government.

In United States v. Honeywell International, Inc., --- F.4th ---, 2022 WL 3723020, the DC Circuit ruled that a dollar-for-dollar (pro tanto) approach to settlement offsets applies to False Claims Act cases. The DC Circuit rejected the proportionate share approach sought by the government.

Fat Leonard Rides Again

Leonard Francis (a.k.a. “Fat Leonard,”), mastermind of a significant Navy procurement fraud scandal relating to Navy ship husbanding services, cut off his GPS monitoring ankle bracelet, and is on the loose. News reports say neighbors witnessed moving trucks coming and going from Mr. Francis’ home in the days before his escape.

Defense Procurement Policy

1. Department of Defense Source Selection Procedures (Aug. 20, 2022)

• DoD updated its source selection procedures guide, previously issued in April 2016, implementing numerous changes likely to impact acquisition planning, solicitation, and evaluation.
• Of note, the updated procedures now recognize the regulatory requirement that for “acquisitions with an estimated value of $100 million or more, Contracting Officers should conduct discussions.” This requirement has resulted in significant protest litigation relating to the extent to which Contracting Officers must document and justify a decision to forego discussions.
• DoD also introduced a brief “Appendix E” dedicated to intellectual property issues. DoD emphasizes that “DoD cannot force contractors to agree to sell the IP that DoD may desire,” while also asserting that “source selection evaluation factors may allow proposals to be evaluated for the impact of proposed restrictions on the Government’s ability to use or disclose IP deliverables such as technical data and computer software.”

DoD updates to its Source Selection Procedures can provide insight into DoD’s policy response to pressing procurement challenges. DoD discretion to make award without discussions in large procurements and DoD’s ability to implement its IP strategy in competitive procurements are two significant policy issues that DoD has been grappling with in recent years. Contractors and their counsel should expect continued litigation and policy developments on both fronts.

Vaccine Mandate Cases

1. Georgia v. Biden, et. al., No. 21-14269 (11th Cir. Aug. 26, 2022)

• In a split decision, the Eleventh Circuit revived the COVID-19 vaccine requirement for many government contractors by significantly narrowing a nationwide injunction that had been issued by the district court in December 2021 to only the immediate plaintiffs in the case. While striking down the district court’s nationwide injunction for being overly broad and signaling a strong wariness towards nationwide injunctions overall, the Eleventh Circuit nonetheless affirmed the substance of the preliminary injunction.
• Echoing decisions from its sister circuits enjoining the vaccine mandate, the Court explained that the Federal Property and Administrative Services Act, or Procurement Act, does not grant the President the authority to issue directions of the type found in the vaccine mandate, but rather vests such power in Congress. The Eleventh Circuit specifically rejected the DC Circuit’s expansive reading of the Procurement Act that previously upheld the President’s “particularly direct and broad-ranging authority over those larger administrative and management issues that involve the Government as a whole.” See AFL-CIO v. Kahn, 618 F.2d 784 (D.C. Cir. 1979) (en banc).

The Eleventh Circuit’s decision complicates the vaccine mandate landscape for government contractors by lifting the nationwide injunction that had previously been in place in favor of a patchwork quilt of narrow injunctions issued by several different courts across several different jurisdictions, even while making clear that the Court believes the vaccine mandate exceeded the President’s authority. The decision’s rejection of the DC Circuit’s expansive interpretation of the President’s authority under the Procurement Act also calls into question other executive orders that are not backed by a statutory provision. Contractors should expect continued litigation and development on both fronts. Partners Matthew Haws and Ishan Bhabha and Associate Sati Harutyunyan recently published a Client Alert and Law360 Article exploring the Eleventh Circuit’s decision in greater detail and discussing considerations for government contractors. Matthew Haws was also interviewed on Federal News Network regarding the aftermath of this decision and by Law360 regarding the broader implications of this decision for the Procurement Act.

Protest Cases

1. Selex ES, Inc., B-420799 (Sept. 6, 2022) (Published Sept. 8, 2022)

• GAO sustained a pre-award protest alleging a solicitation ambiguity regarding when certain requirements must be met in order for proposals to be found technically acceptable.
• The Department of the Air Force issued a solicitation for development of a portable tactical air navigation system, which included a requirement to perform a successful flight check and meet certain readiness levels.
• After issuance of the solicitation, the protester requested clarity as to whether these requirements had to be met at the time of proposal submission or after award. The Air Force declined to amend the solicitation, and Selex protested.
• GAO found that the Solicitation contained obvious conflicting information that created an ambiguity as to when the flight check and readiness level requirements were due. This affected the protester’s ability to prepare a proposal that could respond to the agency’s actual needs. GAO thus sustained the protest and directed the Air Force to clarify its requirements.

When reviewing solicitations, contractors must consider whether there are ambiguities that hinder the ability to compete intelligently and on an equal basis. Any such protest must be filed prior to the time of proposal submission—challenging the terms of the solicitation after award is too late.

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

Last week, Senators Warren and Lujan requested that the Department of Justice use the Department’s debarment authority to exclude companies under investigation or that had been convicted/found liable. Such an approach would turn suspension and debarment practice on its head and remove buying agencies (e.g., the customer) from the exclusion process and cause exclusions to be collateral consequences of Justice Department actions. This assumes of course that Justice could clear ISDC coordination and receive lead agency in the first place.

Source material can be found here.

FOIA Exemption 4

1. Siefe v. U.S. FDA, No. 20-4072 (2d Cir. August 5, 2022)

• The Second Circuit Court of Appeals issued a significant decision discussing the interplay between FOIA Exemption 4, the Supreme Court’s 2019 decision in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 915 (2019) and the FOIA Improvement Act of 2016 (FIA).
• The Second Circuit affirmed the district court’s decision, which found that federal agencies had appropriately withheld certain information from public release pursuant to FOIA Exemption 4, which protects confidential commercial information.
• After the Supreme Court held in Argus Leader that the plain language of FOIA Exemption 4 does not require a showing of competitive harm for information to be deemed “confidential,” district courts have been divided over whether the FIA (which did not apply to the FOIA request in Argus Leader) effectively codifies the requirement that agencies must find a likelihood of competitive harm before withholding information under FOIA Exemption 4.
• The Second Circuit held that the FIA does require an agency to determine whether release of information otherwise protected by Exemption 4 would harm the submitter, arguably re-imposing a competitive harm standard similar to what the Supreme Court rejected in Argus Leader.

This is the latest of a dense line of decisions interpreting FOIA Exemption 4 in light of Argus Leader and the FIA. Special Counsel Nathaniel Castellano recently published a Briefing Paper discussing these issues in detail. In short, the procedural and substantive standards applicable to FOIA Exemption 4 are currently volatile and require careful, case-by-case consideration. As shown by this decision, even though the Supreme Court in Argus Leader seemed to reject competitive harm as a relevant consideration under Exemption 4, courts may still require a showing of competitive harm based on the FIA.

Bid Protests

1. Hydraulics International, Inc. v. United States, No. 22-364 (Fed. Cl. August 8, 2022)

• Court of Federal Claims (COFC) Judge Holte issued a significant decision confirming that the COFC can and will exercise jurisdiction over post-award OTA protests.
• Consistent with prior decisions from the COFC and district courts, Judge Holte explained that the question of whether an OTA protest falls within COFC jurisdiction turns on whether the Other Transaction is sufficiently “in connection with a procurement or a proposed procurement.”
• While individual judges have approached this fact-based analysis differently, in this case the COFC found that the OTA award was in connection with a procurement or proposed procurement because there was evidence that the agency may issue a follow-on procurement contract for production. Notably, this is a common feature in solicitations for Other Transactions involving prototypes.
• Consistent with prior OTA protest disputes, the Department of Justice zealously disputed COFC jurisdiction, arguing that Congress intended to insulate Other Transaction awards from COFC protest review. Judge Holte provided detailed analysis rejecting each of the government’s jurisdictional arguments, emphasizing that the statutory OTA provisions are silent with respect to protest jurisdiction.
• Having found jurisdiction, the Court rejected the protest on the merits.

This is the latest in a series of COFC and district court opinions analyzing when and where judicial review of OTA protests may occur. While each decision is unique in its jurisdictional analysis, so far, they share the common theme of accepting the premise that COFC can review certain OTA protests. However, whether an OTA protest can be heard at COFC or district court will, under current precedent, require a case-specific and fact-intensive inquiry. Any company considering a bid protest relating to an OTA solicitation or award should proceed carefully.

2. ISHPI Information Technologies, Inc., B-420718.2, B-420718.3, July 29, 2022 (Publicly issued August 9, 2022)

• GAO sustained a protest alleging that the awardee’s proposed Federal Supply Schedule (FSS) labor categories did not meet the solicitation’s minimum qualifications.
• The solicitation, which sought to establish a Blanket Purchase Agreement with FSS holders, identified three labor categories and required all contractor personnel to meet the minimum educational and experience requirements identified for those positions. Vendors were required to map quoted FSS labor categories to the solicitation’s minimum qualifications for each labor category.
• After filing an initial protest and gaining access to the awardee’s proposal, the protester timely filed a supplemental protest, which GAO sustained, arguing that the awardee’s quotation failed to identify FSS labor categories that mapped to the solicitation’s required minimum qualifications and that several quoted labor categories lacked the required education and experience.
• GAO rejected the Agency’s argument that the awardee had implicitly promised to provide personnel meeting the minimum requirements, explaining that when a solicitation requires quoted FSS labor categories to meet minimum requirements, a quotation “must include some kind of affirmative representation or showing that the personnel offered will meet the solicitation’s specified experience and education requirements.”
• Because the awardee’s quoted FSS labor categories fell “far below” the solicitation’s required qualifications, its quotation was technically unacceptable and could not properly form the basis of award.

GAO decisions in this area continue to evolve but the stakes are high because of the potential for a quotation being found unacceptable. Where a solicitation requires quoted labor categories to meet certain experience or education qualifications, GAO has clarified that the vendor must affirmatively demonstrate its capability to meet the requirements. GAO previously explained that a solicitation may be unduly restrictive of competition where labor categories must “align precisely” with minimum requirements, but where a solicitation requires 12 years of experience and a proposed FSS labor category provides for a minimum of 10 years, the vendor can expressly or implicitly propose to provide personnel with more than 10 years’ experience. Notably, the awardee’s quotation here had not affirmatively demonstrated that several labor categories met the minimum requirements, several labor categories fell “far below” the required qualifications, and the awardee’s FSS catalog did not describe the qualifications as “minimums.”

Claims Cases

1. Textron Aviation Defense v. United States, No. 20-1903C (Fed. Cl. August 12, 2022)

• Judge Solomson issued an important decision concerning the statute of limitation (SOL) under the Contract Disputes Act (CDA).
• In 2014, Textron acquired pension assets and liabilities associated with three employee pension plans relating to a bankrupt company, where two of the employee pension plans had been terminated in 2012.
• In 2018, Textron submitted a payment demand seeking to recover the Government’s share of the adjustment amount for all three pension plans pursuant to CAS 413. The Contracting Officer rejected the request for payment. Textron submitted a certified claim, which the contracting officer denied in September 2020 on the basis that the pension adjustment claim was barred by the CDA SOL. Textron then appealed to COFC, and Judge Solomson granted the government’s motion to dismiss the case, agreeing that the claim was barred by the CDA SOL.
• Judge Solomson held that Textron was not required to submit a pre-claim payment demand before submitting its claim and that Textron’s claim (or its predecessor’s) accrued no later than February 2013. Because Textron did not file a certified claim until April 2020, its claim was barred by the CDA SOL.
• Judge Solomson rejected the argument that Textron’s CAS 413 payment demand was a “routine request” akin to a voucher or invoice that could not form the basis of a claim before the government disputed the demand. After sorting through the complex caselaw governing the distinction between routine and nonroutine requests for payment—which Judge Solomson described as a “sticky wicket of epic proportions”—the Court concluded that the request for payment was not required by any FAR provision or otherwise and emerged from the unusual circumstances of bankruptcy, and could not be routine in nature.

This decision provides important guidance for contractors when navigating the CDA claims process. Contractors must be diligent in ensuring that they meet each of the CDA’s prerequisites and seek recovery as soon as is practicable—to steer clear of any statute of limitation concerns. This case underscores the traps awaiting contractors when attempting to recover under the CDA, and why experienced counsel can be invaluable when trying to unpack, as Judge Solomson put it, the CDA’s “jurisdictional minefield of the first order.”

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. CACI, Inc.-Fed., B-420441 et al. (April 7, 2022) (Published April 13, 2022) 

• GAO sustained the protest where the Department of Homeland Security, Transportation Security Administration (TSA), reduced the corporate experience evaluation criterion to pass/fail instead of engaging in the solicitation’s required qualitative evaluation and tradeoff of corporate experience.
• The solicitation provided that an initial aspect of the corporate experience evaluation would be conducted on a pass/fail basis during the first phase of evaluation, but the solicitation also included corporate experience as a critical element to the agency’s best-value tradeoff in the second phase of the evaluation.
• GAO rejected TSA’s position that it could reasonably evaluate corporate experience only on a binary pass/fail basis, finding that the plain language of the solicitation required a qualitative evaluation and tradeoff of offerors’ experience.
• Accordingly, while the Source Selection Authority summarily compared the satisfactory ratings assigned to both the protester and the awardee, GAO held that this comparison failed to constitute the requisite qualitative comparison of corporate experience.

Challenges to an agency following the terms of the solicitation remain a very common ground of protest. Where, as here, the parties disagree about the interpretation of a solicitation provision or the manner in which the agency was to evaluate proposals, GAO will resolve the matter by reading the solicitation as a whole and in a manner that gives effect to all of its provisions.

Claims Cases

1. CSI Aviation, Inc. v. DHS, CAFC No. 2021-1630 (April 14, 2022)

• The United States Court of Appeals for the Federal Circuit reversed a decision issued by the Civilian Board of Contract Appeals (CBCA or Board), which had denied an appeal filed by CSI Aviation, Inc. (CSI), an air charter company.
• CSI sought to recover $40.2 million under its General Services Administration federal supply schedule (GSA FSS) contract after the US Immigration and Customs Enforcement canceled 45 flights less than two weeks in advance.
• CSI argued that the terms and conditions (T&C) (which included the cancellation policy) were incorporated by reference in the GSA FSS contract, but the CBCA held it was not.
• On appeal, the Federal Circuit reiterated that a document is incorporated when it is cited in “express" and “clear” language. In this case, it found that "[t]he offer’s pricing policy contains a ‘terms and conditions’ provision that expressly states, ‘CSI terms and conditions … will apply to all operations and are included for reference,’’ and , "[t]rue to its word, a copy of the CSI terms and conditions, dated November 2008, is included as part of the offer."
• Specifically, CAFC rejected the Board’s argument that CSI’s use of different language to incorporate different documents meant this document wasn’t incorporated: “[o]ur circuit … does not require 'magic words' of reference or of incorporation.'"

While often presented to commercial companies as a simple way to sell to the government, GSA schedule contracts actually involve complicated submissions to, and negotiations with, the government. It is important to be careful in these negotiations and clearly address any company-specific terms of sale and their relationship to standard government contract terms. Experienced counsel can help avoid costly litigation down the road as a result of unclear contract language.

Investigations and Enforcement

Jenner & Block lawyers David Robbins and Sati Harutyunyan analyzed the recently issued and long-awaited Interagency Suspension and Debarment Committee Report to Congress for FY2020.

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

Defense Federal Acquisition Regulation Supplement (DFARS) Rules

1. Class Deviation 2021-O0004 - DFARS 252.225-7987 Requirements for Contractor Personnel Performing in the US Southern Command Area of Responsibility (Feb. 22, 2021)

• The new deviation is to be used in lieu of the clause DFARS 252.225-7040, Contractor Personnel Supporting US Armed Forces Deployed Outside the United States, in solicitations and contracts that require performance in US Southern Command (USSOUTHCOM). 
• Designed to implement the President’s March 13, 2020, “Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak,” this new class deviation adds the following requirements for contracts supporting USSOUTHCOM, as follows:
• Recertification of medical fitness for medical suitability screening;
• Requirements for Synchronized Predeployment and Operational Tracker data for contractor personnel support and tracking; and 
• Personnel recovery requirements.

Contractors operating in the USSOUTHCOM area of responsibility should note this new class deviation, which rescinds and supersedes class deviation 2014-O0016. It includes new medical and tracking requirements in response to COVID-19 outbreak, in addition to continued operational requirements.

DoD Implements New Contracting Certification Program for DoD Acquisition Professionals

1. Restructuring of the Certification Program for the Contracting Functional Area (Feb. 18, 2021)

• The Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)), has released a plan for a new certification program for its workforce as part of its phased implementation of a Back-to-Basics (BtB) talent management framework.
• A Contracting Certification Taskforce has designed a new Contracting Professional Certification Program for DoD’s Contracting Functional Area.
• Effective October 1, 2021, DoD will be adopting a single level of certification with foundational training and an examination designed to verify competency.
• The certification is based on the American National Standards Institute / National Contract Management Association (ANSI / NCMA ASD 1-2019) accredited Contract Management Standard.
• A “significant undertaking,” the deployment of the new certification program and credentials is designed to enable “an improved talent development approach for a professional, capable, and mission-focused contracting workforce.”

Training DoD’s acquisition workforce has long been a key issue. This new Contracting Competency model is designed to comply with section 861 of the Fiscal Year 2020 National Defense Authorization Act (Public Law 116-92). That provision requires DoD contracting professionals to earn a professional certification based on standards developed by a third-party accredited program.

DoD Audits 

1. Audit of Contracts for DoD Information Technology Products and Services Procured by DoD Components in Response to the Coronavirus Disease–2019 Pandemic (DODIG-2021-050) (Feb. 12, 2021)

• DoD’s Office of Inspector General concluded that DoD has complied with the CARES Act and other Federal and DoD requirements in procuring approximately $81.5 million in information technology products and services in response to the COVID-19 pandemic at reasonable prices and at a reduced risk of cybersecurity vulnerabilities.
• Contractors should note that DoD will continue to focus on compliance with the CARES Act and cybersecurity to reduce waste, fraud, and abuse, and mitigate cyber vulnerabilities, each of which could potentially jeopardize the DoD’s missions, information, and assets.

2. Audit of Cybersecurity Requirements for Weapon Systems in the Operations and Support Phase of the Department of Defense Acquisition Life Cycle (DODIG-2021-051) (Feb. 10, 2021)

• The objective of this audit was to determine whether DoD Components took action to update cybersecurity requirements for weapon systems in the Operations and Support (O&S) phase of the acquisition life cycle, based on publicly acknowledged or known cybersecurity threats and intelligence-based cybersecurity threats.
• For the five DoD weapon systems assessed, DoD IG concluded that program officials followed the Risk Management Framework requirements and updated cybersecurity requirements to account for additional countermeasures implemented or needed to protect the weapon systems from the identified threats.
• Contractors should be prepared for cybersecurity requirements to evolve during an O&S phase of a program if threats are identified.

Protest Cases

1. Coventry Healthcare Workers’ Compensation, Inc., B-417237.5 (Jan. 29, 2021)

• GAO denied a protest asserting that a price-technical tradeoff was flawed because the agency failed to assign a monetary value to savings that purportedly would be realized from the protester’s technical solution.
• GAO rejected the argument because nothing in the solicitation’s evaluation scheme contemplated that the agency would “monetize” any aspect of an offeror’s technical approach.

An agency is not required to take into account monetary savings that could be realized during performance unless the solicitation contemplates an analysis or consideration of the potential cost savings associated with an offeror’s technical approach.

2. FreeAlliance.com, LLC; Radus Software LLC/Radus CTA; Mobomo, LLC, B-419201.3 et al. (Jan. 19, 2021)

• GAO sustained a protest where the evaluation record did not explain why the strengths and weaknesses assigned to each quotation merited a particular adjectival rating. Apart from a recitation of the definition for the adjectival ratings, the record did not explain the agency’s basis for assigning the ratings.
• GAO was unable to conclude that the agency’s evaluation was administered on an even-handed basis because quotations with the same strengths were assigned different ratings without any explanation.

GAO will sustain a protest where the evaluation record is insufficient to conclude that differences in evaluation ratings assigned to quotations stemmed from differences between the quotations.

3. DynCorp International, LLC v. United States, No. 20-cv-1293 C (Feb. 16, 2021)

• COFC dismissed a protest on the basis that it was “connected to the issuance of the task order” and did not fit into the jurisdictional exception for task orders that exceed the scope of the IDIQ contract.
• The protest alleged that an Army task order was improperly awarded to CACI, Inc. because, following CACI’s conversion from Inc. to LLC, CACI, Inc. no longer held a GISS IDIQ contract.
• Because DynCorp could not show that the statement of work described in the task order Performance Work Statement (PWS) was beyond the PWS for CACI’s GISS IDIQ contract, the scope exception did not apply.
• In addition, the Court explained that the protest would have been denied on the merits, because the conversion from CACI, Inc. to CACI, LLC was completed in accordance with the FAR, with full government awareness, and did not affect the Army’s award to CACI in any way.

This decision highlights two important issues for contractors. First, protesting a task order at COFC is only available in the narrowest of circumstances, and GAO is generally a contractor’s only recourse. Second, when a contractor takes any action that affects the company’s corporate identity, it is vital to engage the federal customer and follow appropriate practices to ensure that any awards made are to the correct entity.

Claims Cases

1. Appeals of Harry Pepper and Associates, ASBCA Nos. 62038-42 

• Harry Pepper and Associates encountered numerous changes while performing a $36.5 million contract to restore and reinforce a rocket booster support tower at NASA’s Stennis Space Center.
• Pepper submitted 12 claims asserting a variety of changes, including to the contract performance method and welding procedures, and alleging defective design by the government.
• In addition, Pepper argued in the alternative that the contract had been constructively changed by pervasive out-of-scope work, increased performance time, different equipment requirements, and increased labor demands.
• The Armed Services Board of Contract Appeals (ASBCA) held there was no cardinal change because, despite a great number of alterations made in the work, the changes were not out of character with the work contemplated in the contract and were foreseeable by the contractor.

As contract changes begin to balloon on a contract, it is tempting to assume the cumulative effect will equal a cardinal change. But this case is a reminder that cardinal change is very difficult to demonstrate through voluminous changes to the work or significant increase in performance time. Courts and Boards are loath to find the government in breach and will seek to redress changes—no matter how voluminous—under the contact’s changes clause. Thus, as changes mount and performance time increases, it is especially important to engage in developing comprehensive requests for equitable adjustment to ensure you can fully capture cost and schedule impact.

2. Appeal of SkyQuest Aviation, LLC, ASBCA No. 62586 

• SkyQuest received an Air Force contract to provide test pilots and flight engineers. During performance, the Air Force asserted that the pilots must have specific Air Force certification paperwork. SkyQuest responded to a cure notice disputing that the certification paperwork was required by the contract. The Air Force terminated SkyQuest for default.
• SkyQuest filed a pro se complaint at the ASBCA seeking $429,000 in payment, revocation of the default termination, and adjustment of its CPAR rating.
• SkyQuest did not obtain a contracting officer’s final decision on any of these items prior to its appeal, and the Air Force asserted the Board lacked jurisdiction to hear SkyQuest’s appeal.
• The ASBCA held that, although it did not have CDA jurisdiction over the monetary claim or the CPAR adjustment, the termination for default was a government claim for which a contracting officer’s final decision was not necessary. In addition, because SkyQuest disputed the termination only based on compliance with the contract terms, it was not required to obtain a COFD to proceed.

Challenging government claims, including termination for default or claims for liquidated damages, implicates nuanced procedural questions. The Maropakis case required that affirmative defenses must be the subject of a COFD. SkyQuest Aviation reflects evolution of the Maropakis line of cases in recent years to clarify that submission to the contracting officer is not required where the defense is merely that the government has not met its burden of proof for an element of its claim.

3. Appeals of San Point Services, LLC, ASBCA Nos. 61819, 61820 

In another example of government contracting and surety industries colliding, the ASBCA quashed a government subpoena seeking information relating to a payment bond claim filed by a subcontractor. In a rather odd case, NASA sought to defend against an ASBCA claim by arguing that a separate payment bond case, filed by a subcontractor, contained admissions concerning fraud. NASA served a subpoena duces tecum on the surety, which successfully moved to quash based on undue burden. The Navy’s arguments that the contractor had been less than forthcoming were not compelling—in the eyes of the ASBCA—to justify placing the burden of a subpoena on the surety.

There are a number of ongoing lawsuits and/or investigations alleging that sureties owe the government certain duties to prevent fraud (see, e.g., U.S. ex rel. Scollick v. Narula), but here the ASBCA limited the government’s reach into the surety business while upholding the ASBCA’s periodically announced practice of not letting the government’s blanket assertion of fraud divest the Board of jurisdiction over an appeal.

Investigations and Enforcement

There have been a number of cases dealing with recovery of attorney’s fees in False Claims Act cases lately:

• Beware the parallel proceeding. Where civil settlement funds were seized by the government investigating a separate criminal matter, the court denied motions by the plaintiff’s lawyers to release a third of those funds to satisfy the contingent fee earned by those attorneys on the civil case. U.S. ex rel. Glasser v. Boykin Contracting, Inc. (Civil Action No.: 3:14-cv-00224-JMC, D.S.C. Columbia Division)
• And a court refused to permit double dipping by qui tam plaintiffs, shaming a relator for not removing from its fee requests amounts for unsuccessful claims and failing to account for prior recoveries. U.S. and State of New York ex re. Nichols v. Computer Sciences Corp. and City of New York (S.D.N.Y)

And the District Court for the Northern District of Illinois reminding qui tam plaintiffs that fraud must be pled with particularity, dismissing the complaint in U.S. ex rel. Noreen Lanahan v. County of Cook for failure to plead relevant details about alleged false statements and certifications, such as who made them, when they were made, and how much money was involved.

The Eleventh Circuit affirmed a district court’s rejection of a False Claims Act retaliation claim in Hickman v. Spirit of Athens, holding to the standard that an objectively reasonable belief that the individual was attempting to prevent a violation of the False Claims Act was necessary to support a retaliation claim. A sincere belief is not enough—that belief must be objectively reasonable.

Suspension / Debarment Summary

The World Bank released its debarment/sanctions results. The Bank debarred 267 companies and individuals, which was a substantial increase over prior years. The Bank also announced, that beginning in 2021, it would state the reason for debarments / sanctions in the future. By comparison, the US suspension / debarment system is less transparent, and does not release the causes for suspensions and debarments in the annual Interagency Suspension and Debarment Committee Report to Congress (which is a trailing publication, the most current edition published in early 2021 only covered Fiscal Year 2019 activities).