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Government Contracts Legal Round-Up | 2023 Issue 20

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.

Former CIO’s False Claims Act Suit: A Warning for Universities (And Beyond) over Controlled Unclassified Information Compliance, The Government Contractor (October 11, 2023)

Jenner & Block Partner David Robbins and Associate Moshe Broder highlight a recent decision by a Pennsylvania court to deny the government’s request to keep under seal a False Claims Act (FCA) qui tam suit against Pennsylvania State University. The authors provide background on the complaint, which alleges that Penn State failed to follow government contracting requirements to safeguard controlled unclassified information, or CUI. They observe: “As experienced FCA defense lawyers, we know well that complaints can exaggerate facts and the truth is not always as colorful. Nevertheless, this complaint highlights the complexity of compliance with difficult and highly technical cybersecurity requirements.”

GAO Releases Its Annual Bid Protest Statistics (October 30, 2023)

Our Government Contracts team breaks down the numbers in the Government Accountability Office’s (GAO) Bid Protest Annual Report to Congress for Fiscal Year 2023. As we explain, the report shows that the number of bid protests filed and GAO’s “effectiveness rate” increased this past fiscal year, but these statistics were largely inflated by hundreds of protests emanating from one procurement. We also stress that “in more than half of the cases GAO resolved in fiscal year 2023, the bid protest forum was an effective avenue for the protester to obtain at least some relief.”

Bid Protest Updates

Sierra7, Inc., B-421299.2 (October 11, 2023)

  • GAO denied in part and dismissed in part a protest where the protester was not an “interested party” to maintain its protest.
  • After the protester filed its initial protest, the agency revealed that an intervening offeror submitted a quotation that was rated equally under the non-price factors but lower in price. The agency sought dismissal because that intervening offeror was next in line for award of the task order.
  • To avoid dismissal, the protester alleged that the intervening offeror’s quotation should have been assigned a weakness because the agency determined that one price element was unbalanced.
  • GAO disagreed, noting that unbalanced pricing is ordinarily required only in connection with the award of negotiated contracts under FAR Part 15 unless the requirement is specifically stated in the solicitation. In this competition conducted under FAR Part 16, the solicitation did not require an assessment for unbalanced pricing; indeed, the RFQ expressly disclaimed the applicability of FAR Part 15 procedures. In any event, the agency’s conclusion that the unbalanced price element did not pose an “unacceptable risk” was broadly consistent with the requirements of FAR Part 15.

Interested party status can be a trap for the unwary. Protesters must carefully assess the competitive landscape, including whether intervening offerors stand in the way of reaching a decision on the merits.

Small Business Updates

Karthik Consulting, LLC v. United States, No. 23-944 (October 4, 2023)

  • Court of Federal Claims Judge Dietz issued an important opinion on the SBA 8(a) program’s eligibility requirements relevant to contractors who may graduate (or have graduated) from the program.
  • In December 2022, DHS issued a solicitation set aside for 8(a) vendors under the GSA Highly Adaptive Cybersecurity Services (HACS) Special Item Number (SIN) 54151 vehicle. The solicitation asked quoters to indicate their 8(a) status and noted that “quotes that are not submitted by 8(a) quoters under GSA HACS MAS SIN 54151 8(a) at the time of initial task order quote submission shall not be considered and will be further removed from the competition.”
  • Karthik, which was awarded a GSA HACS MAS SIN 54151 contract as an 8(a) firm but had since graduated from the program, submitted a quotation. Although identified as the intended awardee, based upon SBA guidance, DHS deemed Karthik ineligible for award.
  • Karthik protested, arguing that there was a safe harbor for companies that obtain their seat on a multiple award contract as an 8(a) awardee, and then graduate from or exit the 8(a) program during the base period of contract performance.
  • Judge Dietz disagreed, finding that there was no continued right to compete for and receive 8(a) task order awards where the task order awardee has graduated from the 8(a) program. Instead, he specifically noted the SBA was correct in asserting that FAR 19.804-6 does not provide a safe harbor for firms bidding on a multiple award contract that is not an exclusive 8(a) set aside.

It is not always easy for 8(a) participants to understand their eligibility to bid on a certain contract. Karthik Consulting is an important reminder to contractors that the interplay of relevant SBA regulations requires careful consideration, and that—where it is at all ambiguous—it is important to seek counsel before responding to solicitations containing these requirements.

FOIA Exemption Updates

Buzzfeed Inc. v. United States, No. 19-1977 (D.D.C. October 17, 2023), No. 19-1977 (D.D.C. October 17, 2023)

The DC District Court recently denied a motion for summary judgment challenging the agency’s use of FOIA Exemptions 4, 7(A), and 7(E) to withhold responsive documents. Buzzfeed sought documents related to the Los Angeles FBI field office and procuring services from several genetic genealogy testing companies, and when rebuffed, argued that the agency had failed to justify invoking the claimed FOIA exemptions.

  • The district court disagreed. The court explained that to withhold documents under FOIA Exemption 4, the information must be (1) commercial or financial, (2) obtained from a person, (3) privileged or confidential, and (4) it is reasonably foreseeable that disclosure would harm the interest protected by the exception.
  • The court found that the FBI’s Vaughn Index and declaration submitted to support the agency’s exemptions adequately demonstrated that the withheld documents, which included “confidential contractual and transactional documents and communications, including terms, conditions, privacy agreements, and procedural guidelines, and details relating to advancements for use of genetic genealogy services for law enforcement investigation purposes,” contained commercial information obtained from a person.
  • The court also held that the documents were “confidential” as defined by the Supreme Court in Food Marketing Institute v. Argus Leader Media because the information was both customarily and actually treated as private by the genetic genealogy companies and provided to the FBI under an assurance of privacy. The information provided to the FBI had not been publicly disclosed, and the companies had confidentiality policies that prohibited the disclosure of the information shared with the government. With respect to the second prong of the Argus standard, the court noted that the contractors had submitted proposals after being told that “the contractor services requested would remain confidential even if the service contract is not accepted.”
  • Finally, the court agreed that the agency had sufficiently explained how the disclosure of the information would foreseeably harm the interest protected where the FBI specified that disclosure would place the contractors at a competitive disadvantage by revealing pricing, financial, and proprietary genetic services information, especially where competitors were vying for the same contracts with the same potential customer.

This case serves as an important reminder that to shield confidential information from disclosure under FOIA Exemption 4, contractors should not only have in place confidentiality policies protecting the disclosure of information but must also be careful to indicate that information submitted to the agency—for example, in response to a solicitation—is shared with the expectation that the agency would keep it confidential.

Government Contracts Legal Round-Up | 2023 Issue 18

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.

Bid Protest Update

Piedmont Propulsion, Sys., LLC v. United States, No. 23-330C (August 21, 2023)

  • Court of Federal Claims Judge Somers issued an important decision regarding the standard of review applied when assessing the rationality of an agency’s decision to limit competition.
  • Here, the Court found that the United States Coast Guard failed to rationally justify its decision to restrict competition for overhaul and repair work to companies that were licensed by the Original Equipment Manufacturer (OEM).  
  • The government argued that the protester needed to show that the OEM license requirement was “so plainly unjustified as to lack a rational basis.” Replying on peculiar language from a Federal Circuit opinion, the government seemed to argue that the Coast Guard’s determination was entitled to even more deference than the Court would typically owe under the rational basis standard.   
  • Judge Somers rejected the government’s heightened standard of review, explaining that “[a]lthough the Court does not believe that applying the government’s preferred standard would lead to a different result in this case, the Court will not deviate from the normal rational basis standard based on a few words of a concluding sentence pulled from one Federal Circuit opinion—words the circuit has never quoted again.” 
  • Applying the proper standard of review to the record, Judge Somers then determined that the OEM license requirement lacked a rational basis and therefore constituted an undue restriction on competition. Contemporaneous exchanges in the record between the Coast Guard and the OEM indicated that the Coast Guard never really understood the license requirement it was imposing, nor why such a license was necessary to meet the agency’s needs.   

As a general rule, agencies have wide discretion to determine their own requirements. But OEM license requirements like the one at issue here inevitably create tension with CICA’s mandate for full and open competition. Decisions like Piedmont Propulsion are important reminders that the Court of Federal Claims will apply rational basis review with rigor—deference, but not blind deference—when an agency limits competition.

Claims Update

S. Texas Health Sys., Appellant, CBCA 6808 (August 23, 2023)

  • The CBCA recently issued a decision reminding contractors that the six-year statute of limitations for claims under the Contract Disputes Act (CDA) starts to run upon claim accrual, and settlement negotiations with the government does not toll the statute of limitations. 
  • South Texas Health Systems involved a long-running dispute between the contractor and the VA over medical claims. The claims at issue here, submitted February 3, 2020, involved episodes of care that occurred between November 2009 and January 2014. The VA argued that each claim accrued within 72 hours of each episode of care when the VA provided the contractor with the authorization decision that allegedly breached the contract, and therefore these claims were untimely. The CBCA agreed that the CDA’s statute of limitations barred all claims based on episodes of care that occurred on or before February 3, 2014, 6-years before the contractor submitted the complaint. 
  • The Board further rejected the contractor’s contention that even if claims accrued more than six years before claim submission, they were all preserved through equitable tolling because it had been continuously negotiating with the government to resolve the disputes informally. Notably, the Board affirmed the principle that settlement negotiations do not toll the statute of limitations. 

This case is an important reminder that contractors must be mindful both of when a claim accrues and triggers the statute of limitations and that the statute of limitations continues to run even during active settlement negotiations with the government.

Small Business Update

Since our last Roundup discussing a court decision requiring the SBA to immediately stop using the presumption of social disadvantage to administer the 8(a) program, the SBA has provided guidance for 8(a) program participants on how to proceed. Importantly, the SBA is now requiring all 8(a) participants whose program eligibility is based upon one or more individuals who relied upon the presumption of social disadvantage to establish their individual social disadvantage by completing a social disadvantage narrative. Current 8(a) participants are encouraged to submit their narratives as soon as possible; instructions on the mechanics for doing so is available here. However, 8(a) hopefuls will need to sit tight, as the SBA has temporarily suspended new 8(a) application submissions.

False Claims Act

Verizon Business Network Services resolved a False Claims Act investigation into its compliance with cybersecurity requirements by paying more than $4 million to the government. Interestingly, the press release detailed Verizon’s cooperation, noting “after learning of the issues, Verizon provided the government with a written self-disclosure, initiated an independent investigation and compliance review of the issues and provided the government with multiple detailed supplemental written disclosures. Verizon cooperated with the government’s investigation of the issues and took prompt and substantial remedial measures.”

Investigations and Enforcement

Jenner & Block co-chair David Robbins is quoted extensively by Law360 regarding the increasing risk of parallel civil and criminal enforcement actions against government contractors. 

The Department of Justice has been aggressively pursuing criminal prosecutions for sanctions violations. DOJ recently announced its first criminal resolution involving the sale and transport of Iranian oil in violation of US sanctions. The seized 980,000 barrels of Iranian oil are also now the subject of a civil forfeiture proceeding in the District of Columbia. Companies should be prepared that this is the start of what is likely to be a significant uptick in sanctions enforcement as part of this Justice Department initiative.

Government Contracts Legal Round-Up | 2023 Issue 14

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.

Cybersecurity Update

  • Four years after first being announced, on July 24, 2023, the Office of Information and Regulatory Affairs (OIRA) formally received the Cybersecurity Maturity Model Certification (CMMC) Program proposed rule from DoD.
  • Industry should expect to see the publication of a rule later this fall.
  • While contractors will likely have another opportunity to provide comments, this is the clearest indication to date that the CMMC program is continuing to move forward towards widespread implementation.

Protest Cases

RTD Middleburg Heights, LLC, B-421477, B-421477.2, May 31, 2023 (Published July 13, 2023)

  • GAO sustained a protest challenging the GSA’s award of a lease but the protester was afforded no relief other than the costs of proposal preparation and litigating the protest.
  • In this procurement GSA sought to lease office space in Ohio, with award to be made on a lowest-priced, technically-acceptable basis. The Solicitation required GSA to add certain costs to proposed gross present value costs, including the cost of relocating furniture and telecommunications and other move-related costs.
  • GSA awarded the lease to a company proposing new construction on the land next to the property provided by Middleburg, the incumbent vendor.
  • GAO sustained Middleburg’s protest alleging that the agency’s price analysis was flawed because it excluded relocation and replication costs as required by the solicitation. Moreover, the agency conceded that it used the wrong rates in a supplemental cost-benefit analysis when assessing the awardee’s rates and determining that it offered the lowest price.

Although the protester here was able to demonstrate that it was competitively prejudiced by the agency’s several evaluation errors, the awarded lease did not contain a standard termination for convenience clause, and in the absence of such a clause, GAO ordinarily does not recommend termination of an awarded lease even where it sustains a protest. Accordingly, the protester’s relief was limited to reimbursement of its proposal preparation costs and costs of litigating the protest. This is a good reminder that companies should be savvy about the type of potential relief available when pursuing a protest.

Claims Cases

Bear Mountainside Realty, LLC v. United States, No. 23-457, Fed. Cl. (July 7, 2023)

Court of Federal Claims Judge Hertling issued a useful and interesting decision applying the rules for supplementing the administrative record in a bid protest. The protester sought to supplement the record with documents obtained through a FOIA request, and further sought discovery from the agencies involved, including depositions of certain agency officials.

  • Judge Hertling questioned the protester’s “global approach” to the FOIA documents, seeking supplementation with all documents received through the FOIA request rather than providing document-specific argument as to why each document warranted supplementation. He noted that the government failed to object to the protester’s global approach, and—had it done so—the court may have denied the supplementation motion in full. Because the government waived that argument, the court permitted the protester to present arguments as to specific documents.
  • Ultimately, the court admitted some but not all of the FOIA documents. Judge Hertling, however, denied the requests for additional discovery and depositions, explaining that the protester failed to establish an inference of bad faith or that the information sought was necessary for effective judicial review.

The contents of the administrative record often dictate the outcome of a bid protest. The substantive and procedural rules for completing and supplementing the record are major points of distinction between protests litigated at the GAO and the Court of Federal Claims. This opinion provides a good primer on the fundamentals that all protest counsel should master.

False Claims Act Update

  • In recent years, there has been an increase in False Claims Act cases based on violations of customs laws and regulations. In Island Industries Inc. v. Sigma Corp., the Ninth Circuit is set to decide whether federal courts have subject matter jurisdiction over customs fraud cases within the context of a False Claims Act qui tam.
  • While the defendant argues that the Court of International Trade should have exclusive jurisdiction, the government argues that customs fraud cases can come under the False Claims Act. In late February, the parties submitted supplemental briefing on this issue. We will keep you updated on the impact of this ruling on government contractors.

Government Contracts Legal Round-Up | 2023 Issue 12

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

The Supreme Court again weighed in on the False Claims Act in U.S. ex rel. Polansky v. Executive Health Resources, Inc., deciding that the government retains broad dismissal authority for False Claims Act actions, even if the government declines to intervene.

Protest Update

Aspire Therapy Services & Consultants, Inc. v. United States, Fed. Cl. No. 23-253 (June 13, 2023) 

  • An agency eliminated Aspire from a competition based on a proposal spreadsheet error that created a discrepancy within the proposal documents.
  • Court of Federal Claims Judge Davis found that the FAR clarification process could have been used to fix the specific error at issue, and that it was an abuse of discretion for the agency to eliminate the proposal without seeking clarification.  
  • Judge Davis ordered the agency to restore the protester back to the competition and permit clarification of the error.  

It is notoriously difficult for a protester to win an argument that an agency should have permitted clarifications or engaged in discussions, particularly at the Government Accountability Office, leading to the impression that such decisions are effectively non-reviewable. In recent years, however, several Court of Federal Claims judges have shown a willingness to scrutinize agency decisions to forego discussions, particularly for DoD procurements valued above $100 million where the DFARS describes discussions as the expected course. Through the Aspire decision, Judge Davis confirmed that the court will meaningfully review an agency’s decision to eliminate a proposal based on minor errors, rather than engaging in the clarification process. The evidence that while agencies certainly have broad discretion when it comes to discussions and clarifications, that discretion is not immune from review.

Claims Cases

Amatea-Grimberg JV, ASBCA Nos. 60426 et. al. 

  • The Armed Services Board of Contract Appeals held that a design-build contractor on a Navy laboratory project was not entitled to reimbursement for differing site conditions because the contractor failed to show that on-site conditions differed from what the government represented in contract documents. 
  • The contractor sought compensation under a Type 1 differing site condition theory, which is premised on the government misrepresenting conditions at the site and the contractor reasonably relying upon the misrepresentation to its detriment.
  • In this case, the soil was too weak to support construction and the contractor incurred almost $200,000 in additional costs to remediate site damage after heavy rains turned the site into a “muddy mess.”   
  • The ASBCA rejected the contractor’s arguments, concluding that the Navy had in the RFP’s boring logs sufficiently explained soil conditions. On this point, the Board underscored that the Navy’s borings were not a Navy guarantee the entire project site would consist of the subsurface conditions in each boring sample. Rather, the borings were a baseline for a reasonable contractor to operate from.  
  • Indeed, the contractor’s own contractually required geotechnical expert report warned of exactly the kinds of problems encountered at the site: soft or unsuitable soil in places that would need to be identified, removed, and replaced.  
  • Finally, the ASBCA concluded that even where the soil was weaker than what the boring logs reflected, the weakness was caused by weather conditions or by the contractor’s own work. The Board found compelling daily reports reflecting ample rain, poor jobsite maintenance, and local flooding caused by water main breaks that the contractor was responsible for maintaining. 

The decision reminds construction contractors that to recover for a Type 1 differing site conditions, they must identify clear evidence that the encountered physical conditions were not foreseeable based on representations in the contract and related documents.  

Government Contracts Legal Round-Up | 2023 Issue 11

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.


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.

Government Contracts Legal Round-Up | 2023 Issue 8

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.”

Government Contracts Legal Round-Up | 2023 Issue 5

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.

Government Contracts Legal Round-Up | 2023 Issue 4

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.

Future Implications of Low Dollar False Claims Act Recoveries for FY2022

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.