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.
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.
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
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.
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.
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.