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.

Supreme Court Update

• On June 1, 2023, the Supreme Court issued a unanimous opinion on U.S. ex rel. Schutte v. SuperValu Inc. On May 3, 2023, we noted that we would update our readers once the opinion was issued.
• Previously, the Seventh Circuit found that subjective intent is not relevant to False Claims Act scienter when the law says the defendant’s actions were objectively reasonable.
• The Supreme Court instead held that the False Claims Act's scienter element refers to a defendant’s knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed.

Regulatory Update

New FAR 52.204-27 Prohibits TikTok on Information Technology Used or Provided by Contractors under Contracts

• On June 2, 2023, the FAR Council issued an Interim Final Rule that prohibits the presence or use of TikTok on information technology used or provided by the contractor under a contract that includes the clause.
• The rule is effective immediately given “urgent and compelling reasons” as a “national security measure to protect Government information and information and communication technology systems.” It is being included in solicitations beginning on June 2, 2023 and must be added to existing solicitations through amendment. It will also be added to existing contracts as part of new orders or option exercises.
• The rule prohibits “[t]he Contractor…from having or using a covered application on any information technology owned or managed by the Government, or on any information technology used or provided by the Contractor under this contract, including equipment provided by the Contractor's employees….”
• Following the statutory language, “information technology” is defined based on an existing—and somewhat confusing when applied here—definition at 40 U.S.C. 11101(6): “any equipment or interconnected system or subsystem of equipment, used in the automatic acquisition, storage, analysis, evaluation, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information by the executive agency, if the equipment is used by the executive agency directly or is used by a contractor under a contract with the executive agency that requires the use—(i) of that equipment; or (ii) of that equipment to a significant extent in the performance of a service or the furnishing of a product;…, but (C) does not include any equipment acquired by a federal contractor incidental to a federal contract.” (Emphases added.)
• Comments can be submitted prior to August 1, 2023.

Federal Circuit Court Claims Decision

Dept. of Transportation v. Eagle Peak Rock & Paving, Inc., Fed. Cir. No. 2021-1837 (June 6, 2023)

• A divided Federal Circuit opinion provides a useful reminder of the standard of review applicable in Contract Disputes Act (CDA) appeals.
• A contracting officer terminated a contract for default based on concerns that the contractor was not making sufficient progress to complete performance on time.
• On appeal at the Civilian Board of Contract Appeals, the Board converted the default termination into a convenience termination. The government appealed to the Federal Circuit.
• The majority decision, authored by Judge Taranto and joined by Judge Schall, reversed and remanded the Board’s decision. The opinion focuses on the principle that the Board was required to review de novo the contracting officer’s default termination. The majority concluded that the Board was too focused on identifying flaws in the contracting officer’s rationale, rather than determining in the first instance whether the termination was warranted.
• Judge Newman, dissenting, argued that the Federal Circuit panel should have gone ahead and decided based on the record whether the default termination was justified, rather than remanding to the Board for further litigation.

This decision is a useful reminder of the de novo standard of review that applies to CDA appeals, as compared to more deferential standards of review (abuse of discretion, arbitrary and capricious, etc.) that apply to review of agency decisions in the bid protest and other contexts. These varying standards of review drive significant differences in how disputes are litigated and resolved. Another significant implication of de novo review of CDA claims is that a contractor’s decision to appeal a contracting officer’s decision can place at risk any partial victory the contracting officer may have provided in response to the contractor’s claim. That is: if a contracting officer grants a contractor partial recovery in response to its claim, the Board on appeal may well conclude that no recovery was warranted at all, depriving the contractor of even the partial win. All these factors are worth weighing as companies consider claims litigation.

Protest Cases

Kupono Government Services, LLC; Akima Systems Engineering, LLC, B-421392.9 et al. (June 5, 2023)

• GAO sustained a protest challenging the scope of the Department of Energy’s (DOE) corrective action taken in response to earlier protests.
• The proposed corrective action contemplated revisions to cost proposals only. The protesters argued that that their respective cost and technical proposals were inextricably intertwined, and therefore they should be permitted to revise both portions of their proposals.
• As an initial matter, GAO criticized DOE for failing to even articulate the flaws in the procurement process that warranted the corrective action. The agency’s declarations on this point offered no substantive details or explanations. Because GAO was unable to discern the concerns that led the agency to take corrective action, GAO was unable to assess whether the proposed corrective action was appropriate to remedy the unidentified concerns.
• The protesters also demonstrated that because the agency is soliciting for a cost-reimbursement type contract, their respective cost and technical proposals were inextricably intertwined. Citing a few examples, GAO agreed that changes to the protester’s respective cost proposals will necessarily impact their respective technical approaches.
• GAO therefore sustained the protest and recommended that the agency permit offerors the opportunity to revise any aspect of their proposals, or if the agency stuck with only allowing revisions to costs proposals, then offerors should be allowed to revise any aspect of their proposals impacted by changes to their costs proposals.

It is well established that agencies have broad discretion to take corrective action where the agency determines that such action is necessary to ensure a fair and impartial competition. An agency’s discretion when taking corrective action extends to a decision on the scope of proposal revisions, and there are circumstances where an agency may reasonably decide to limit the revisions offerors may make to their proposals. But as this rare sustain decision shows, an agency may not prohibit offerors from revising related areas of their proposals that are materially impacted by an agency’s corrective action.

Tyonek Engineering & Agile Mfg, LLC, B-421547; B-421547.2 (June 2, 2023)

• GAO sustained a protest challenging the agency’s price realism and reasonableness evaluations.
• GAO has consistently explained that price reasonableness concerns whether a price is unreasonably high, while price realism relates to whether a price is too low.
• Here, the protester’s price was more than four times the price of the lowest-priced awardee, and nearly three times the price of the highest-price awardee. The Air Force concluded that the proposed prices of both the protester and the awardees were simultaneously reasonable and realistic. The protester challenged this conclusion.
• GAO agreed with the protester that the agency’s evaluation was unreasonable, internally inconsistent, and did not explain the basis on which prices with a significant disparity could be considered both reasonable and realistic.
• Specifically, the agency relied on a government estimate, but the estimate stated that the final prices of three awardees still presented realism and reasonableness concerns. The agency also claimed that it relied on an analysis of other than certified pricing data, but the contemporaneous record failed to support this assertion.

When a substantial disparity in prices exist, and an agency has concluded that the low price is realistic and the high price is reasonable, GAO will scrutinize the record to ensure that the agency has adequately explained its conclusion.

Small Business Issues

NAICS Appeal Of: Laredo Technical Services, Inc., SBA No. NAICS-6216 (May 30, 2023)

• The Small Business Administration (SBA) Office of Hearings and Appeals (OHA) granted a challenge to a solicitation’s NAICS code.
• In government contracting, each contract is assigned a single NAICS code “which best describes the principal purpose of the product or service being acquired.” 13 C.F.R. § 121.402(b). For contracts set aside for small businesses, the assigned NAICS code will dictate the size standard for the procurement (i.e., either the number of employees or average annual receipts that a company must be under to be small for purposes of the particular contract).
• Here, the Department of Veterans Affairs solicitation required the contractor to provide radiology technologists to deliver “the full range of radiology imaging care for inpatient and outpatient VA patients.” The VA assigned NAICS code 561320, Temporary Help Services, with a corresponding size standard of $34 million average annual receipts.
• Laredo protested, arguing that the correct NAICS code was 621399, Offices of All Other Miscellaneous Health Practitioners, with a corresponding size standard of $10 million average annual receipts.
• OHA agreed with Laredo that the assigned NAICS code was incorrect because the contractor will not be supplying workers for “limited periods of time” and because the radiologists will be supervised by the contractor. However, OHA concluded that the appropriate NAICS code was 621512, Diagnostic Imaging Centers, with an associated size standard of $19 million average annual receipts. 

This decision is a good reminder that the assignment of the correct NAICS code can have significant implications on a competition. A wrong NAICS code can improperly exclude a company for being too large, or alternatively allow companies to bid when they should be excluded. For small businesses, it is crucial to carefully examine the assigned NAICS code to ensure that the right code is applied, and to challenge when it is not.

DoD OIG CUI Audit

The Department of Defense Office of the Inspector General released an audit report finding inconsistent implementation of DoD’s Controlled Unclassified Information (CUI) program.

As background, the CUI program was established in a 2010 Executive Order to standardize the way the Executive Branch handles and marks information that is not classified but is subject to safeguarding or dissemination controls required by law or policy. Previously, agencies used a wide variety of differing markings, such as For Official Use Only or Sensitive But Unclassified for such materials. Agencies similarly instituted inconsistent safeguarding policies, often leading to unclear or overly restrictive dissemination policies.

More than a decade later, implementation is inconsistent. Many agencies have only recently begun to implement a CUI program, others practice varying degrees of adherence to the CUI marking and dissemination requirements, and several DoD components that are also members of the intelligence community operate under an “exigent circumstance waiver” that permits the continued use of legacy FOUO markings in certain situations.

Relevant here, in 2020, DoD issued DoD Instruction (DoDI) 5200.48 establishing the DoD CUI program and providing guidance on its implementation. OIG’s audit assessed the extent to which DoD developed guidance, conducted training, and oversaw the implementation of DoD’s CUI program.

Notably, OIG conducted the audit at the direction of the Senate Armed Services Committee and in response to concerns that Executive Branch officials were improperly using “Limited Dissemination Control” CUI markings to restrict sharing CUI without a legitimate rationale or to impede lawful Congressional oversight.

The OIG’s audit assessed implementation of the CUI program at ten DoD components and three DoD contractors.

• Most significantly, OIG found that DoD components did not effectively oversee the implementation of DoDI 5200.48 to ensure that CUI documents and emails contained required markings and that personnel completed required training.
• For example, personnel at nine of ten DoD components did not consistently include required CUI markings on nearly half of all documents containing CUI.
• A more granular analysis confirms the disparities in implementation: some of the DoD components had correctly marked none of the documents within the sample population, while others correctly marked the vast majority.
• The state of training also differs across DoD. Although two DoD components were found to have no personnel lacking a current CUI training certificate, at eight DoD components, many personnel did not have a current CUI training certificate.

Contractor compliance was assessed more favorably. Of the 103 CUI documents assessed in the sample from three DoD contractors, only 3% did not include CUI headers and footers and only 1% did not include proper portion markings. However, the OIG found that DoD contracting officials did not consistently verify whether DoD contractors completed required CUI training. Overall, contractors had more uniformly implemented the CUI program as compared to DoD components.

Also relevant for contractors, OIG requested that DoD provide additional comments within 30 days describing their plans for developing a DFARS clause to require all DoD contractor personnel to complete DoD CUI training. (Separately, a FAR clause implementing the CUI program for civilian contractors has been under development for six years and was most recently reviewed by OIRA in August 2022.) Contractors should expect continued regulatory developments and attention impacting the implementation of the CUI program at DoD and all federal agencies.

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.

Notable Headlines

False Claims Act

It used to be rare for the Supreme Court to hear False Claims Act cases. It’s a lot less rare now. On April 18, the Supreme Court heard argument concerning two Seventh Circuit cases: U.S. ex rel. Schutte v. SuperValu, Inc. and U.S. ex rel. Thomas Proctor v. Safeway, Inc. The Seventh Circuit found that subjective intent is not relevant to False Claims Act scienter when the law says the defendant’s actions were objectively reasonable. Jenner & Block attorneys listened to the argument, and it appears likely that the Supreme Court will rule that subjective intent may be considered as part of the scienter analysis. We will follow this case closely and update our readers once the opinion issues.

Percipient.ai, Inc. v. United States, Fed. Cl. No. 23-00028 (January 9, 2023)

As covered in our last Round-Up, Court of Federal Claims Judge Bruggink initially denied motions to dismiss novel and high profile bid protest claims raised by Percipient.ai, which challenge the National Geospatial-Intelligence Agency’s compliance with FASA during the course of administering an IDIQ held by CACI. The government and CACI moved for reconsideration of Judge Bruggink’s Order, arguing that the Court incorrectly analyzed whether the FASA task order protest bar applied. In an unpublished order, the Court vacated its prior decision, reinstated the motions to dismiss, and directed the parties to submit additional briefing and argument. Either way the Court decides, the outcome promises to carry significant implications across the procurement community.

Lockheed Martin Aeronautics Co. v. Secretary of The Air Force, Fed. Cir. No. 22-1035 (April 25, 2023)

In a much-anticipated decision, the Federal Circuit unanimously affirmed the ASBCA’s opinion that the Air Force’s unilateral contract definitization was not an immediately appealable contracting officer final decision on a government claim. The opinion, authored by Judge Reyna, provides clarifying precedent as to the procedures that apply to unilateral definitization, which in most if not all cases will require a contractor claim to initiate the Contract Disputes Act process.

Protest Cases

Rotair Aerospace Corporation, B-421381, B-421381.2 (April 19, 2023) (Published April 26, 2023)

• GAO dismissed a protest as untimely where, following the submission of an objection letter that constituted an agency-level protest, the protester failed to file its GAO protest within 10 days of the adverse agency action.
• The protester challenged the Defense Logistics Agency’s (DLA) award of a sole source contract to the original equipment manufacturer for helicopter weapon system spare parts, alleging that it was capable of producing the parts. Rather than resolve the protest on the merits, GAO held that the protest was untimely.
• Specifically, the protester had submitted a “formal objection” letter to the presolicitation notice raising the same issues and seeking relief. After receiving no response from DLA, and after the solicitation had been issued, the protester followed up with the agency regarding the concerns raised in its formal objection letter. DLA responded the next day and advised the protester that any concerns with the source approval process should be directed to the Army. The protester filed its protest with GAO more than 10 days later.
• Applying its strict timeliness rules, GAO found that the follow-up email to DLA satisfied all the requirements to constitute an agency-level protest: it expressed dissatisfaction with an agency decision and requested corrective action and relief. Moreover, the follow-up email reincorporated all the objections set forth in the initial formal objection letter, and thus must be construed as a challenge to the final solicitation.
• GAO further held that DLA’s response pointing the protester to the Army constituted adverse agency action because it was prejudicial to the protester’s position. Indeed, even though DLA did not directly address the protester’s complaints, DLA informed the protester that it would be unable to compete under the solicitation unless it became an approved source through Army channels. Because the protester did not file within 10 days of this adverse agency action, its protest was dismissed.

Contractors need to understand GAO’s strict timeliness rules to avoid the potential traps for the unwary. Relevant here, where a protest first has been filed with a contracting activity, any subsequent protest to GAO must be filed within 10 calendar days of actual or constructive knowledge of initial adverse agency action. 4 C.F.R. § 21.2(a)(3). Importantly, GAO does not require that correspondence to an agency be formally designated as a protest; rather, so long that the communication satisfies the requirements for an agency-level protest, it will be considered as such. (Disclosure: Jenner & Block represented the intervenor in this protest.)

Peraton, Inc., B-421038.6 et al., April 12, 2023 (Publicly Released April 25, 2023)

• GAO denied a protest asserting, among other allegations, that CACI NSS LLC gained an unfair competitive advantage based on its employment of three former government officials.
• The $5.7 billion “EITaas” Air Force procurement at issue encompassed information technology services, end user devices, enterprise service desk, and organizational change management.
• Peraton (and two other disappointed offerors) had protested previously; the Air Force took corrective action to investigate; and the agency ultimately concluded that CACI’s employment of the officials did not create an unfair competitive advantage, leading Peraton to file another protest.
• To assess whether the contracting officer’s determination was reasonable, GAO analyzed the contracting officer’s findings for each of the three individuals.
• For the first individual, GAO noted that he “had no role in CACI’s oral presentation or quotation, did not have communications or interactions with anyone about the quotation, did not participate in responses to interchange notices, and did not communicate within CACI regarding the interchange notices.” With respect to the second individual, GAO highlighted that the “facts do not establish” that he “had access to any non-public, competitively useful information.” And as for the third individual, he also only had access to “generic, high level, and . . . irrelevant” information that was not competitively useful.
• For these reasons, GAO found the contracting officer’s determination unobjectionable – there was no evidence that CACI benefited from an unfair competitive advantage.
• The responsibility for determining whether an appearance of impropriety exists, and whether an offeror should be allowed to continue to compete, is a matter for the contracting agency. GAO will not disturb the contracting agency’s determination in this regard unless it is shown to be unreasonable, which was not the case here.

Contracting agencies must avoid even the appearance of impropriety in government procurements. In this connection, a firm competing for a contracting opportunity could gain an unfair advantage through its hiring of a former government official, which can result in disqualification of the firm from the competition. GAO has made clear that the assessment of whether an unfair competitive advantage has been created by a firm’s hiring of a former government official is based on a variety of factors, including an assessment of whether the government employee had access to non-public proprietary or source selection sensitive information that was competitively useful. To warrant disqualification, the investigative record must reflect “hard facts” establishing the person’s access to non-public information which could form a basis for competitively improving its proposal, thus providing an unfair competitive advantage over offerors without such information.

SH Synergy, LLC and VCH Partners, LLC, v. United States, Fed. Cl. Nos. 22-cv-1466, 22-cv-1468 (consolidated) (April 21, 2023) (Published April 28, 2023)

• Following a pre-award protest, the Court of Federal Claims considered the solicitation for the General Service Administration’s (GSA) $60 to $100 billion small business set-aside government-wide acquisition contract for information technology services known as the “Polaris Program” and found it violated Small Business Administration (SBA) regulations in several ways. The decision addressed the legality of three solicitations under the Polaris Program, each targeting a small business category pool.
• First, consistent with the mentor-protégé regulations, the court found it permissible that GSA permitted a mentor belonging to multiple mentor-protégé joint ventures (JV) to submit only one proposal for a specific solicitation pool. The court was unpersuaded by the plaintiffs’ argument that this unreasonably limited competition, instead finding such a restriction was required by SBA’s regulations.
• Second, the court held that GSA did not violate SBA regulations or treat offerors unequally by requiring the protégé or mentor-protégé JV to submit an individually performed Relevant Experience Project while at the same time a prime offeror was permitted to rely upon projects performed by its first-tier subcontractors. The court noted that the difference in treatment was the result of competing SBA regulations covering mentor-protégé joint ventures and small businesses.
• Third, the court found that GSA violated SBA regulations by applying the same evaluation criteria to projects submitted by protégé firms and other offerors alike. Specifically, GSA intended to use the same evaluation criteria to assess every Relevant Experience Project submitted for consideration, including that of the protégé. This violated SBA’s regulation that “[a] procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.”
• Finally, the Court held that GSA improperly excluded price as an evaluation factor. While generally competitions require price evaluations, Congress carved out a narrow exception for “certain indefinite delivery, indefinite quantity multiple-award contracts . . . . for services acquired on an hourly rate basis” that will “feature individually competed task or delivery orders based on hourly rates.” 41 U.S.C. § 3306(c)(3). Here, the court found that GSA’s interpretation that fixed-price, cost-reimbursement, and incentive contract types qualified as “based on hourly rates” was so broad that it rendered the phrase entirely meaningless. Thus, the court required GSA to amend the solicitation either to clearly feature time-and-materials and labor-hour task orders or to change the evaluation methodology to include price.

As agencies continue to procure goods and services through large-scale government-wide acquisition contracts, winning a coveted spot on the contract is the crucial first step to accessing further work. Contractors should carefully review all solicitation terms and push back where appropriate.

Claims Cases

Crystal Clear Maint., CBCA 7547 (April 13, 2023) 

• Crystal Clear Maintenance (CCM) appealed the GSA’s claim for costs to repair damages allegedly caused by CCM’s negligent performance of its maintenance contract. GSA had sent two letters to CCM demanding repayment for the costs, the first on July 6, 2021, and the second on October 13, 2022. The July 2021 letter stated that “the total cost of damage continues to be assessed, but is currently a minimum of $173,978.19.” The October 2022 letter asserted that the total cost of repairs was $741,797.50. 
• CCM appealed GSA’s claim on October 21, 2022. GSA moved to dismiss because CCM had failed to appeal the contracting officer’s decision within ninety days of receiving the July 2021 decision.
• The CBCA denied GSA’s motion to dismiss because GSA’s July letter to CCM failed to satisfy the sum certain requirement, i.e., the requirement that claim must demand payment in an amount that is readily ascertainable. The CBCA noted that the inclusion of the qualifying language, “a minimum of,” and GSA’s assertion that the total cost was “continu[ing] to be assessed” meant that GSA had neither put CCM on notice of the exact amount sought, nor provided a way for CCM to ascertain that amount until GSA sent the second letter in October 2022. Thus, CCM’s time to appeal did not begin to run until October 13, 2022, when it received the second letter specifying the exact amount of the government’s claim.  CCM’s appeal, filed within 90-days of that second letter, was therefore timely.

This decision affirms that the sum certain requirement applies to government claims as well as to contractor claims. When considering whether the Contract Disputes Act’s 90-day appeal clock is triggered, contractors should keep in mind that the amount demanded in a government claim must be readily ascertainable before the claim must be appealed.

$21.8 Million False Claims Act Settlement Over Allegedly Double-Charging for Parts

• On April 24, 2023, the Department of Justice issued a press release announcing that L3 Technologies, Inc. agreed to pay $21.8 million in order to settle allegations that it violated the False Claims Act by knowingly submitting and causing the submission of false claims to the Department of Defense.
• The allegations stemmed from contract proposals submitted by L3 Technologies from 2008–2011. The government alleged that these proposals included the cost of certain items, such as nuts and bolts, twice. As a result, the government alleged that L3 Technologies knowingly double-charged for these parts. The settlement resolved the government’s allegations, and there was no determination of liability.
• Relatedly, the government also settled a lawsuit filed by L3 Technologies for breach of contract claims. L3 Technologies alleged that in an effort to prevent the company from double-charging, the government improperly prohibited them from charging certain other costs. The settlement was for approximately $8 million.

The L3 Technologies settlement signals, and the Department of Justice press release confirms, that the government is committed to pursuing allegations that a contractor knowingly overcharged for their products. When announcing the settlement, the Head of the Justice Department’s Civil Division stated that “government contractors must ensure that they provide the goods or services that they promised at the proper price.”

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.

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

Future Implications of Low Dollar False Claims Act Recoveries for FY2022, Jenner & Block (February 9, 2023)

The DOJ has released its summary of False Claims Act recoveries for Fiscal Year 2022. We believe these statistics—combined with other trends—mean more civil fraud enforcement is on the horizon. Specifically, we anticipate:

• More attention to civil fraud matters 
• More DOJ lawyers focused on civil fraud/FCA matters 
• More investigative resources focused on civil fraud/FCA matters 

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:

• Treat inbound requests from Offices of Inspectors General (e.g., subpoenas and informal requests for information) as preludes to civil FCA cases.
• Treat your hotline reporters well.
• Double down on compliance matrices and recordkeeping.

Claims Cases

Beechcraft Defense Co., LLC et al., ASBCA No. 61743 et al. (February 3, 2023)

• The ASBCA issued a decision illustrating several statute of limitations and other procedural issues that can arise when navigating DCAA audits and DCMA assertions of CAS non-compliance.
• The case involved DCAA audit findings of CAS non-compliance issued more than a decade ago in 2011, and the decision describes the years-long back-and-forth among the contractors, DCAA, and DCMA to navigate the accounting issues, including contractor submission of cost impact statements in 2015 and execution of a tolling agreement in 2017. In 2018, DCMA eventually issued a contracting officer final decision asserting entitlement to payment, which were timely appealed to ASBCA.
• The contractors sought summary judgment and argued that the government claims were barred by the statute of limitations, claiming that the claims accrued with the DCAA audit reports issued in 2011. The government contended that its claims did not accrue until the contractors submitted cost impact statements in 2015.
• After working through the issues, the board concluded that the record contained insufficient undisputed evidence to conclude that the statute of limitations began running in 2011, and therefore denied summary judgment.

This decision is further confirmation that the procedural rules governing government claims under the Contract Disputes Act, particularly for disputes over indirect cost rates, are far from intuitive, and the analysis can be extremely fact sensitive. While the goal is of course to resolve these disputes without litigation, contracting professionals and counsel working in this area should keep track of the evolving legal standards and be prepared for fact-intensive litigation.

Protest Cases

AttainX, Inc., B-421216; B-421216.2 (January 23, 2023) (published February 9, 2023)

• GAO sustained a bid protest on multiple grounds, including that the agency’s evaluation of the experience of the awardee was inconsistent with small business regulations.
• The awardee, MiamiTSPi, LLC, is an 8(a) small business joint venture comprised of Miami Technology Solutions, LLC (MTS), the managing member and 8(a) small business, and Technology Solutions Provider, Inc. (TSPi), the minority member. As part of the solicitation’s similar experience factor, MiamiTSPi submitted experience examples related to work managed by TSPi and a different joint venture between the two companies.
• Under the small business regulations, when evaluating a small business joint venture for award of a contract, a procuring activity must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously.
• The protester argued that the agency failed to reasonably evaluate the risk of MiamiTSPi’s quotation because it never considered the fact that the company’s experience examples were not performed by either the joint venture or the managing member.
• Here, GAO sustained the protest, finding that because the evaluation was based on a consideration of only one joint venture member’s experience, the agency failed to properly evaluate MiamiTSPi’s quotation in accordance with small business regulations.

Small business joint ventures must carefully adhere to all small business regulations when submitting quotations to the government—experience and past performance requirements included.

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.

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.

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.

Protest Cases

1. AttainX, Inc., B-420313 (January 31, 2022) (Published February 1, 2022)

• GAO denied a protest where a protester timely submitted a quotation that was not considered by the agency because of email delivery issues.
• In this procurement, the protester submitted its quotation by email to the contract specialist shortly before the deadline for quotation submission but received an error delivery message. The protester made several attempts to contact the contract specialist, each time receiving an error message.
• After the agency had awarded the task order to another vendor, a subsequently appointed contract specialist informed the protester that its proposal had been quarantined and was never viewed. The protester alleged that the agency improperly failed to consider its quotation.
• GAO denied the protest. Although the protester timely submitted its quotation to the designated email address, the email was quarantined in the agency’s email server in a manner that made it inaccessible and thus the contracting personnel were unaware of the quotation.
• GAO analogized to an agency misplacing a timely submitted quotation; in such cases, relief is available only where there is evidence of a deliberate intent to prevent selection of the firm or a systemic agency failure to receive and safeguard quotations. Here, the record lacked evidence of other vendors experiencing similar problems or broader systemic agency issues.
• Notably, the agency had removed FAR 52.212-1(f) from the solicitation, which provides for the “government control exception” to consideration of late proposals.

While GAO described the situation as “unfortunate” and did not fault either party, the result was disappointing for the vendor who had complied with the solicitation’s instructions. While an unusual case, this decision serves as a cautionary tale for leaving ample time to submit proposals prior to the announced deadline, and where appropriate, confirming receipt.

2. CGS-SPP Security Joint Venture v. United States, No. 21-2049C (January 19, 2022) (Published February 3, 2022)

• In this second-bite protest, the Court of Federal Claims (CoFC) disagreed with GAO’s prior holding and sustained a protest on the basis that the solicitation contained a latent defect regarding the email address to which proposals were required to be submitted.
• Here, the solicitation required proposal submission by email and identified a specific office within the Department of State for proposal submission, but it did not designate any specific contracting personnel to receive proposals. The solicitation identified two contracting officers, as well as a contract specialist to respond to questions and comments and provided email addresses for a contracting officer and the contract specialist.
• The plaintiff emailed its proposal to the two contracting officers identified in the solicitation, as well as an additional agency contracting officer. However, while the plaintiff addressed its proposal to the contract specialist, it did not include the contract specialist in the email submission. The contracting officers who received the proposal did not open the protester’s email or forward it to the contract specialist. Consequently, plaintiff’s proposal was never considered for award.
• After awarding the contract to the incumbent contractor, plaintiff initially filed a protest at GAO, which dismissed the protest as untimely on the basis that the solicitation contained a patent ambiguity regarding the appropriate addressee for submission of proposals.
• The CoFC disagreed, finding that the solicitation was ambiguous and susceptible to two reasonable interpretations. Further, the court held that the ambiguity was latent, not apparent on the face of the proposal, and created by State not informing potential offerors that proposals would only be considered if sent to one particular individual—the contract specialist—despite any direct textual support in the solicitation for this requirement. The court also held that the plaintiff complied with the most reasonable interpretation of the solicitation by sending its proposal to the two contracting officers identified in the RFP.

Contractors should remain vigilant about potential ambiguities in solicitations, generally, and specifically with respect to threshold matters like proposal submission instructions. Here, the CoFC reached a different conclusion than GAO regarding a latent ambiguity in what it described as a “close call.” As a general matter, however, in situations where a solicitation ambiguity is evident on its face, it will be considered patent and the potential offeror must seek clarification prior to award or risk waiving its objection.

Claims Cases

1. Aspen Consulting, LLC v. Secretary of the Army, CAFC 2021-1381 (February 9, 2022)

• Contractor appealed final decision of the Armed Services Board of Contract Appeals (ASBCA) denying an appeal based on the government's failure to deposit payment in the correct bank account.
• FAR 52.232-33 provides that “[t]he Government shall make payment to the Contractor using the [Electronic Funds Transfer] EFT information contained in the Central Contractor Registration (CCR) database. In the event that the EFT information changes, the Contractor shall be responsible for providing the updated information to the CCR database.”
• The ASBCA held that the government had not breached the contract because the fault rested with the contractor for failing to properly update its information in the Central Contractor Registration (CCR) database; the United States Court of Appeals for the Federal Circuit (CAFC) disagreed.
• Specifically, CAFC “conclude[d] that the government’s breach was material because the FAR clause serves an important purpose for both parties: it protects the government and the contractors who do business with it.”
• CAFC remanded the case for further proceedings on the potential affirmative defense of payment, which may be available where the funds actually benefited the party claiming breach.

This case serves as a reminder that the Boards and Courts will hold parties to a government contract to strict adherence with the terms. When a dispute arises with the government, contractors should examine closely whether the government has satisfied its requirements under the contract. Here, the contractor benefited from application of that concept.

False Claims Act

This was a busy period for False Claims Act updates:

• The Department of Justice announced $5.6 billion in fraud and False Claims Act recoveries in 2021, with a notable increase in recoveries from defense/government contracting suits to just shy of $100 million. Press release available here: https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year
• The First Circuit announced its standard for False Claims Act dismissals, a broadly deferential standard to the Government’s dismissal authority. Decision available here: http://media.ca1.uscourts.gov/pdf.opinions/20-1066P-01A.pdf
  • To recap, the current circuit split on FCA dismissals is:
    • First and DC Circuits: government has broad dismissal authority
    • Third and Seventh Circuits: Voluntary dismissal authority in the Federal Rule of Civil Procedure 41(a)
    • Ninth and Tenth Circuits: Dismissal must serve a valid government purpose and there must be a rational relationship between dismissal and that purpose
• The Eleventh Circuit held that non-intervened qui tam cases may be subject to the Excessive Fines Clause, while finding the case before the Eleventh Circuit did not violate the clause. Decision available here: https://media.ca11.uscourts.gov/opinions/pub/files/202010276.pdf

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.

Regulatory Developments

1. Class Deviation 2021-O0009: Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (October 1, 2021)

• DOD issued Class Deviation 2021-O0009 mandating the use of a DFARS provision, DFARS 252.223-7999
• The DFARs clause contains substantively identical language to the FAR clause issued on September 30, 2021. In other words, the clause directs contractors to “comply with” the September 24 Task Force guidance, which we discuss here.
• The clause includes a flowdown requirement: contractors must include the clause in services subcontracts that are above the SAT and are performed in the United States. 
• The DOD deviation memorandum calls on COs to use a bilateral modification when modifying existing contracts, task orders, or delivery orders in accordance with the deviation.

2. Class Deviation 2021-03: From the Federal Acquisition Regulation Regarding Implementation of Executive Order 14042, Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors. (September 30, 2021)

• The CAAC memorandum attaches a FAR deviation clause that mirrors the clause issued by the FAR Council on September 30, 2021. Accordingly, the clause directs contractors to “comply with” the September 24 Task Force guidance and to flow down the clause. 
• The memorandum states that civilian agencies can adopt the FAR clause issued on September 30, 2021 without making any changes.
• If an agency intends to use clause text different from that of the FAR clause, the agency must consult with the CAAC Chair.
• The memorandum further adopts the encouragement of the FAR Council memorandum that agencies include the clause in: contracts that have been or will be awarded before November 14, 2021 (or solicitations issued before October 15, 2021); contracts below the SAT; and products manufacturing contracts and subcontracts.

3. FAR Case 2020-007: Accelerated Payments Applicable to Contracts with Certain Small Business Concerns, Proposed Rule (September 29, 2021)

• The policy at FAR 32.009-1 has been expanded to address accelerated payments to small business contractors. 
• A goal of payment within 15 days after receipt of a proper invoice is added, and prime contractors are prohibited from requesting any further consideration from the subcontractor in exchange for the accelerated payments.
• These requirements will be incorporated into FAR clause 52.232-40, Providing Accelerated Payments to Small Business Subcontractors, which will be added to the list of clauses applicable to commercial items under FAR clause 52.215-5.

Protest Cases

1. Qwest Government Services, Inc. d/b/a CenturyLink QGS, B-420095 (October 6, 2021)

• GAO dismissed a protest where the procuring entity was not a federal agency and therefore the procurement was outside of GAO’s jurisdiction.
• Qwest protested the issuance of a task order by AgFirst-Farm Credit Bank off of a General Services Administration multiple-award contract.
• Even though the solicitation contained language that cited the FAR’s bid protest provisions, GAO explained that AgFirst is borrower-owned financial institution—not a wholly owned government corporation as the protester contended—and therefore outside of GAO’s protest jurisdiction.

GAO’s bid protest jurisdiction is limited to procurements conducted by federal agencies. The Federal Property and Administrative Services Act of 1949 defines a federal agency as “an executive agency or an establishment in the legislative or judicial branch of the Government (except the Senate, the House of Representatives, and the Architect of the Capitol, and any activities under the direction of the Architect of the Capitol).” 40 U.S.C. § 102(5). GAO will dismiss a protest of a procurement conducted by an entity that does not fall under this definition.

2. Coast to Coast Computer Products, Inc., B-419833.2 (September 28, 2021)

• GAO denied a protest challenging the Air Force’s use of a lowest-price, technically acceptable (LPTA) award methodology.
• The DFARS lists eight criteria that must be satisfied before an entity of the Department of Defense can procure goods or services on an LPTA basis. DFARS 2.15.101-2-70. The DFARS also requires that DOD contracting officers “avoid, to the maximum extent practicable,” using LPTA procedures for procurements that are predominantly for the acquisition of certain items or services including, “[i]nformation technology services.”
• Here, the contracting officer had prepared a determinations and findings memorandum (D&F) detailing how all of the DFARS criteria were satisfied.
• Although the protester objected to numerous findings in the D&F, GAO found the protester’s objections constituted mere disagreement with the contracting officer’s findings, but did not establish that the D&F was unreasonable. GAO walked through several findings as illustrative examples.
• GAO also held that the DFARS does not prohibit the use of LPTA award criteria for information technology products (as compared to services), which the Air Force was procuring under the solicitation.

A contracting agency has discretion to determine its needs and the best method to accommodate them, but the determination must still be reasonable. GAO will deny a protest challenging a DOD entity’s use of an LPTA award methodology if the agency’s explanations and determinations that the award criteria were authorized under DFARS are reasonable and can withstand logical scrutiny.

False Claims Act

The Department of Justice (DOJ) announced last week a new Civil Cyber-Fraud initiative which will use the False Claims Act (FCA) to enforce government contract cybersecurity requirements. The initiative will be led by the Fraud Section of the DOJ Civil Division’s Commercial Litigation Branch. DOJ believes it can bring its experience and resources from its civil fraud enforcement, procurement, and cybersecurity focused attorneys to make this a successful initiative.

In remarks coinciding with the launch of this initiative, Deputy Attorney General Lisa Monaco emphasized that DOJ will seek to impose “very hefty fines” on contractors or grant recipients who fail to comply with their obligations under cybersecurity standards. For example, while contractors are required to “rapidly report” (defined as reporting within 72 hours) “cyber incidents” to the Department of Defense under Defense Federal Acquisition Regulation Supplement 252.204-7012, Monaco suggested that contractors are falling short in meeting those reporting requirements. In particular, she stated that “[f]or too long, companies have chosen silence under the mistaken belief that it is less risky to hide a breach than to bring it forward and to report it. Well that changes today.”

By: David B. Robbins, Hon. Jeri K. Somers (Ret.), and Noah B. Bleicher

It can be challenging in the best of times for government contractors to “see over the horizon” and plan for future risks to their business. As this fiscal year ends, COVID-19 impacts, and budgetary changes make that exercise even harder. Jenner & Block’s former government officials have come together to offer their views to help our clients’ strategic planning and goal setting efforts. The observations are from former senior government contracts leaders, including a former Civilian Board of Contract Appeals Chief Judge, a former Government Accountability Office (GAO) senior bid protest official, and a former Air Force Deputy General Counsel (acting), Suspending and Debarring Official, and co-chair of the Department of Defense Procurement Fraud Working Group.

Procurement Fraud Trends with David Robbins

We are seeing a surge in False Claims Act and other procurement fraud investigations. Part of this is because the pandemic caused delays in investigations and that logjam is clearing now. Another part is the enhanced coordination among government procurement fraud investigators and enforcement officials created by the CARES Act and related oversight structure. The risk for contractors and awardees is at a high water mark. The risk extends beyond contractors to investors and private equity sponsors. We are also seeing more coordination between the US Department of Justice Civil and Criminal Divisions on investigations and prosecutions. Defending this requires cooperation among former prosecutors, former government agency lawyers, and others.

Claims and Appeals Trends with Hon. Jeri Somers (Ret.)

We see several major government contracting trends that initially gained significant prominence in 2020 continuing in 2021. First, President Biden’s “Executive Order on a Sustainable Public Health Supply Chain,” directs federal agencies to use the Defense Production Act to ramp up production and acquisition of anything and everything needed to combat the COVID-19 pandemic. Second, contractors should expect the Biden administration to continue to prioritize spending on US infrastructure. While contractors will benefit from the massive infusion of funding for infrastructure projects, such as the new emphasis on the development of clean energy technologies, we also see an increase in the traditional infrastructure projects in construction, transit, and telecommunication. cybersecurity and IT initiatives will also lead to more contracting opportunities. With this increased spending, we predict that we will see an increase in claims arising from such contracts.

Bid Protest Trends with Noah Bleicher

A contracting agency’s disparate treatment of competing offerors has historically been a popular basis for GAO to sustain a bid protest. But GAO’s recent adoption of the Federal Circuit’s “substantively indistinguishable” standard necessary to establish an unequal evaluation could make it more difficult for protesters to win these types of arguments. While GAO has represented publicly that the new standard does not reflect a material change in how it resolves these allegations, to date, GAO has sustained only three protests alleging disparate treatment and denied 20 under the standard, suggesting a harder path ahead for protesters. As GAO continues to issue decisions applying this standard, contractors will gain insight as to whether unequal treatment allegations remain a fruitful basis to winning a protest, or whether the pendulum truly has swung in the other direction.

Jenner & Block is equipped with some of the industry’s leading lawyers, including officials from three main government contract arenas. If you have any questions about these trends or are in need of counsel, you can reach out to David B. Robbins, Hon. Jeri Somers (Ret.), or Noah B. Bleicher.

Learn more about our Former Goverment Officials here.