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.

Commercial Item Contracting Update

A recent DFARS amendment restricts DoD contracting officers’ ability to include non-commercial FAR and DFARS clauses in new solicitations for commercial products and services. The new rule also curtails the types of clauses that DoD prime contractors can flow down to subcontracts for commercial products and services. Previously, the DFARS vaguely permitted prime contractors to flow down additional clauses above and beyond the mandatory flow-downs. Under the amended rule, only mandatory flow-downs are permitted. Additional DFARS amendments are expected as part of a broader initiative to clarify the rules for commercial subcontracts, including a much-anticipated definition of the term “subcontract.”

Artificial Intelligence Update

Byte-Sized Steps – Navigating the Biden Executive Order on AI and Other Recent Developments in AI Regulation

President Biden signed a long-awaited executive order that builds upon the administration’s previously released, non-binding Blueprint for an AI Bill of Rights, and seeks to catalyze both agency action and congressional legislation on artificial intelligence in the coming months. The Federal AI Executive Order covers myriad concerns that have been raised relating to AI—from cybersecurity to anti-discrimination to competition. This executive order builds on state executive and international efforts to regulate AI. Jenner & Block has compared the key elements of major orders and a new international code of conduct to regulate AI to help companies, including government contractors, understand the risks and concerns they face in building or integrating AI tools into their consumer or enterprise-facing products and services.

EEO-1 Data Collection Update

The 2022 EEO-1 Data Collection Process is Finally Open

After multiple delays, the collection is open. The deadline for completion is December 5, 2023.

The Director of the US Securities and Exchange Commission’s Enforcement Division issued guidance in a recent speech concerning Chief Compliance Officer liability. The SEC has brought enforcement actions where compliance personnel participated in misconduct outside of their compliance jobs, where compliance personnel misled regulators, and where there was a wholesale failure to carry out compliance responsibilities, such as failing to conduct compliance reviews and failing to remediate quality control problems. Director Grewal noted it is “rare” for compliance officers to be targeted, but the speech serves as an important reminder for compliance professionals about the rigors of, and risks involved with, their professions.

Protest Decisions

Myriddian, LLC v. United States, No. 23-1113C | November 20, 2023

• Court of Federal Claims Judge Bruggink issued an interesting decision upholding the evaluation of the awardee’s proposed key personnel where the underlying solicitation provided broad minimum education requirements and permitted flexible staffing approaches.
• CMS issued a solicitation to procure coding services to improve Medicare and Medicaid claim processing systems. After resolving a previous protest and conducting a reevaluation of proposals, CMS awarded the contract to J29. Myriddian, a technically superior but higher-priced offeror, protested. Myriddian argued that CMS conducted an improper best value determination because, in part, the agency misevaluated the qualifications of two of J29’s proposed personnel.
• Specifically, Myriddian contended that J29’s program director did not meet the solicitation’s minimum requirements because the individual had a bachelor’s degree in psychology, and the solicitation required the director to have a bachelor’s or master’s degree “in a field of study that can be reasonably interpreted to perform tasks related to this position.” Myriddian also argued that the agency unreasonably evaluated the risk posed by J29’s medical director, who was proposed as a part-time employee supported by an “assistant medical director” whose resume was not included in the proposal.
• The Court rejected these arguments. First, it was “eminently reasonable” for the agency to find that someone with a “quasi-medical” degree would be able to successfully lead a project team as the program director. Second, the Court rejected Myriddian’s complaints regarding the medical director position and noted that the solicitation neither required a full-time medical director nor required the submission of an associate medical director’s resume.

Although agencies cannot disregard minimum requirements set forth in a solicitation, agencies are generally afforded discretion to assess the adequacy of an offeror’s proposal. Myrridian provides an important reminder that COFC will uphold agency decision-making where it is reasonably consistent with the solicitation’s terms, notwithstanding recent decisions sustaining LCAT mapping and minimum requirements-related protests.

Global Alliant, Inc., B-421859.1 et al. | November 7, 2023

• GAO denied a protest challenging the issuance of a task order by the Department of Health and Human Services (HHS).
• Notably, HHS requested that GAO dismiss the protest, claiming that the protester was not an interested party because one of its proposed key personnel left the company prior to task order award and the protester did not advise HHS of the departure.
• HHS invoked GAO’s well-known rule—almost always applied by protesters to challenge the evaluation of an awardee—that a firm is required to advise an agency where it knows that its key personnel became unavailable after proposal submission but prior to award.
• GAO rejected the argument, finding that the evidence did not support the agency’s contention of unavailability: the proposed key person was employed by the protester’s subcontractor up to and through the date of award and only departed days later.

GAO’s rejection of the agency’s “interested party” dismissal request turned on the fact that the protester’s key person was not actually unavailable, but a different result presumably could have manifested under alternative circumstances. Key personnel availability issues thus should remain top of mind for both awardees and protesters under GAO’s precedent.

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.

We break 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.” 

Read the full client alert

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 Cases

System Dynamics Int’l, Inc. v. United States, No. 23-431 (September 21, 2023).

• Court of Federal Claims Judge Davis issued an important reminder to offerors of the importance of proposing—and clearly mapping to—key personnel who meet the solicitation’s minimum requirements.
• SDI protested that the agency misevaluated awardee Strata-G’s proposal by assigning it a significant weakness, as opposed to a disqualifying deficiency, where it mapped 22 labor categories to key personnel with clearly deficient—or at least insufficiently ambiguous—educational backgrounds. For example, Strata-G proposed several employees with a “bachelor’s degree” instead of a “bachelor's of science,” and additionally proposed individuals with associate degrees instead of bachelor degrees.
• In response, the agency and Strata-G contended that Strata-G’s proposal was appropriately assigned a significant weakness but not disqualified because it proposed several key personnel who exceeded the solicitation’s requirements, and—to the extent Strata-G failed to sufficiently address certain minimum educational requirements—it was within the agency’s discretion to assign it a significant weakness as opposed to a deficiency.
• Judge Davis rejected the agency’s and Strata-G’s arguments, finding that Strata-G’s proposal, in 22 out of 28 labor categories, flaunted the solicitation’s requirements, a fact recognized by the agency’s evaluators who concluded that Strata-G’s labor mapping spreadsheet “did not fully meet the solicitation’s requirements.”
• Applying the solicitation’s definition of a deficiency, consistent with FAR. 15.001, Judge Davis found Strata-G’s labor mapping constituted “a material failure of a proposal to meet a Government requirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable level.” Accordingly, the court granted SDI’s request for a permanent injunction, setting aside the award to Strata-G and ordering the agency to conduct a proper evaluation.

Generally, agencies have discretion to assess the adequacy of an offeror’s proposal with respect to a solicitation’s requirements; however, an agency cannot permit offerors to disregard minimum requirements set forth in a solicitation. System Dynamics International provides an important reminder to contractors to carefully map proposed key personnel and to not play fast and loose with minimum education and experience requirements.

Insight Technology Solutions, LLC, B-421764.2 (October 11, 2023)

• GAO sustained a protest where the evaluation record contained a factual error overstating the relevancy of one of the awardee’s corporate experience references, an inaccurate finding that carried through to the selection decision.
• GAO also agreed that the agency disparately evaluated corporate experience references by finding that the awardee’s proposed subcontractors demonstrated certain relevant experience, but not also reaching the same finding for the protester’s proposed subcontractors.
• In finding prejudice, GAO found that it was unclear but for these errors whether the selection authority would have reached the same conclusion.

This protest illustrates some of the most common procurement errors that lead to GAO sustaining a protest. Although GAO will not reevaluate proposals, it will examine the record to determine whether the evaluation and source selection decision are reasonable, consistent with the solicitation, and not contrary to law. Here, the agency admitted that the evaluation record contained a “misstatement” and further demonstrated disparate treatment.

Guidehouse, Inc., B-421740, B-421740.2 (September 18, 2023)

• GAO sustained a protest challenging the Department of Defense’s (DoD) award of a contract to Deloitte Touche, LLP for audit remediation and sustainment services where the agency failed to adequately consider a potential conflict of interest.
• Specifically, the chair of the agency’s technical evaluation board (TEB) was a senior consultant at Deloitte through May 2020, and she was aware that Deloitte might submit a quotation under the solicitation. The agency therefore “initiated a limited investigation of the matter,” which GAO described as confined to whether she had a “disqualifying financial interest in Deloitte.” Based on DoD ethics attorneys’ conclusion that her financial holdings did not create a conflict, she was permitted to lead the TEB.
• GAO took issue with this assessment. Primarily, GAO criticized the agency for declining to provide “any of the underlying contemporaneous documentation relating to its limited investigation.”
• As GAO explained: “The problem with the lack of any underlying record is particularly acute where there is no evidence of any independent investigation of any conflict, or the appearance of a potential conflict, by either of the involved contracting officers.”
• GAO sustained the protest because due to the sparse record produced, it was unable to determine whether, in fact, the TEB chair had a financial interest in Deloitte or whether any such interest would affect her ability to serve as the chair of the TEB. On the contrary, the limited record contained “potentially contradictory evidence on the question of the TEB chair’s financial interest in Deloitte.”

The FAR emphasizes that “Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none.” FAR 3.101-1. Consistent with this warning, GAO has found that the existence of an actual or apparent conflict of interest is sufficient to taint the procurement, particularly where, as was the case here, an agency fails to adequately investigate and resolve a question concerning whether an agency employee who actively and extensively engaged in procurement-related activities should have been recused from those activities.

Moreover, whenever a particular agency action is under protest, GAO needs a sufficient record to assess the reasonableness of the action. An agency’s efforts to limit document production can frustrate GAO’s mandate to fairly resolve bid protests and could preclude GAO’s ability to determine that an agency’s actions were reasonable, as was the case here.

Zolon PCS II, LLC, B-420745.2 et al. (September 20, 2023)

• GAO denied a protest alleging that the awardee’s technical proposal was noncompliant with the solicitation.
• The two awardees were credited with strengths for their approach to retention because they offered premium pay to employees holding security clearances, including by specifying within the technical proposal volume the percentage of premium pay offered to cleared employees. 
• The protesters contended that this ran afoul of the solicitation’s prohibition on including “specific labor rates” or “other pricing information” within the technical proposal volume.
• GAO disagreed, finding that the terms of the solicitation did not prohibit offerors from including in their technical proposals information on a specified percentage of premium pay to be added to the labor rate where the technical proposal did not include the actual labor rate. In other words, the percentage of premium pay was not “pricing information” but rather an “element of [the] recruiting and retention approach.”
• GAO likewise rejected the notion that the solicitation was latently ambiguous, reasoning that nothing in the plain language of the solicitation barred offerors from including information in their technical proposals information about percentages for clearance premium pay.

While it may be generally true that solicitations restrict offerors from including pricing information in non-price proposal volumes, GAO will look to the terms of the solicitation itself in determining what information may be included in a technical proposal volume.

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.

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 Updates

The Federal Circuit took the second major step towards correcting the jurisdictional framework that applies to Contract Disputes Act (CDA) litigation in ECC International Constructors, LLC v. Secretary of the Army, holding that the requirement for contractors to state a sum certain in a CDA claim is not a jurisdictional rule. The Federal Circuit explained that Congress did not clearly state that a claim submitted under the CDA must include a sum certain in order for the board or a court to exercise jurisdiction, and Supreme Court precedent further supports that the sum-certain requirement fits comfortably within the class of mandatory, nonjurisdictional claim-processing rules that concern the elements of a claim.

Stay tuned for more detailed analysis from Special Counsel Nathan Castellano in the next issue of The Nash & Cibinic Report.

PAE Applied Technologies LLC, ASBCA No. 63233 (August 24, 2023)

• The ASBCA denied the Navy’s motion to dismiss in a decision addressing what constitutes a government claim under the Contract Disputes Act.
• Specifically, the ASBCA determined that a Navy demand letter—in which the Navy sought repayment of COVID-19-related costs previously paid to the contractor—could constitute a final decision and government claim under the CDA. Accordingly, the ASBCA determined it had jurisdiction over the contractor’s appeal.
• The Navy’s demand letter asked the contractor to reimburse the Navy $4,302,782.8 plus the applicable indirect rates plus a 2% fee. The Navy wrote that the payments to the contractor were unallowable “non-productive” COVID-19 costs. In addition, the Navy placed a 30-day payment deadline, after which the Navy stated it would calculate interest on the amount owed.
• The ASBCA looked to the “totality of the previous correspondence between the parties” to determine whether a final decision, and thus a government claim under the CDA, existed.
• Using this test, the ASBCA determined that the demand letter sufficiently stated the amount the Navy was seeking to recoup and Navy’s basis for seeking recoupment. The board concluded it did not matter that the demand letter was not formally labeled as a final decision. The board also determined that the sum certain requirement was met regardless of whether the correct applicable indirect rates and fee were applied; the sum certain was the amount the government previously paid the contractor.

The boards will look to substance over form when determining whether a final decision and claim by the government has been issued. Contractors receiving requests for monetary payments from their government customer should take care to not miss any appeal deadlines.

Protest Decisions

Raytheon Intelligence & Space, Electronic Warfare Self Protect Systems, B-421672.1; B 421672.2 (August 17, 2023)

• GAO upheld the exclusion of Raytheon from a competition for electronic-warfare self-protection decoys where the contracting officer determined that Raytheon gained an unfair competitive advantage by hiring a former government employee.
• The contracting officer’s investigation found that the former government employee served as a technology advisor for a predecessor phase of the program and provided input on draft documents for the current acquisition.
• GAO rejected all the protester’s arguments, including that the former government employee’s access to information was limited. GAO noted that the contracting officer conducted a thorough investigation that documented the scope of the employee’s responsibilities and the relevance of his work on the predecessor program to the current procurement.
• Similarly, despite the protester’s contention that the former government employee provided only limited input into preparing Raytheon’s proposal, GAO found that there were “hard facts” (and not mere speculation) based on the official’s access to proprietary information and involvement in prior government work. Under such circumstances, there is a rebuttable presumption that judgments involved in preparing a proposal may be shaped—consciously or subconsciously—by knowledge of restricted information.
• Finally, GAO found unobjectionable the contracting officer’s decision to place little weight in the post-government employment opinion letter for the former government employee. Although the letter imposed no restriction relating to participation in the procurement, the opinion letter was based solely on information volunteered by the employee to the Navy lawyers, and the employee did not identify any role on this program.

The FAR prohibits conflicts of interest in the government’s procurements, directing agencies to strictly avoid even the appearance of a conflict of interest in relationships between the government and contractors. Accordingly, where an offeror chooses to hire a former government official who has had recent access to competitively useful information and uses that official to help prepare the offeror’s proposal, the proposal may be properly disqualified based on the appearance of an unfair competitive advantage.

Small Business Updates

A recent decision from the Small Business Administration (SBA) Office of Hearing and Appeals (OHA) serves as a good reminder that OHA is a stickler for its service rules. In this matter, VSBC Appeal Of: Better Metal, LLC, the appellant appealed the denial of its application for certification as a Veteran-Owned Small Business to OHA, but served a copy of its appeal to the wrong SBA email address. Despite the appellant’s arguments that this was an unknowing and inadvertent typographical error with no prejudicial effect on the SBA, OHA nonetheless dismissed the appeal as noncompliant. For companies filing at OHA, it is critical to ensure that all service requirements have been met—or suffer dismissal.

8(a) Applications/Eligibility 

In the wake of a court decision preventing the government from using a “rebuttable presumption of social disadvantage in administering” the 8(a) program, GSA has issued guidance on how to administer the program. 8(a) program participants and prospective participants should review the guidance here.

Investigations and Enforcement

Joint Commerce, Treasury and Justice Announcement Regarding Disclosing Export Control Violations

The Departments of Commerce, Treasury and Justice recently released a note describing the voluntary self-disclosure policies applying to US sanctions, export controls, and other national security laws, and highlighting recent changes. This helpful guide contains timelines and summary guidance that government contractors and recipients of federal funds are well advised to review and, if necessary, use to update existing company policies and procedures.

COVID-19 Relief Fraud Enforcement Results Announced

DOJ recently announced the results of its COVID-19 fraud enforcement efforts. The results include criminal charges against 371 defendants for offenses relating to over $836 million in alleged COVID-19 fraud. DOJ also highlighted its seizure of “over $1.4 billion in COVID-19 relief funds” and charged “over 3,000 defendants with crimes in federal districts across the country.” The DOJ press release may be found here.

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

Oak Grove Techs., LLC v. United States, No. 23-1124C Fed. Cl. (August 7, 2023)

• Addressing an interesting issue of bid protest procedure, Court of Federal Claims Judge Solomson analyzed whether it is appropriate to impose restrictions on parties who intervene as of right under Court of Federal Claims Rule 24.
• In the latest round of a long-running protest saga, Oak Grove filed a bid protest challenging its exclusion from the competitive range, and F3EA moved to intervene. Oak Grove consented to the intervention in part, but only for the purpose of protecting confidential information and responding to Oak Grove’s claims that directly involved F3EA.
• After surveying the case law, Judge Solomson granted F3EA’s motion to intervene without restriction, explaining that “[w]hile it is true that a district court may place conditions on the terms of a permissive intervention, we do not believe that a court may impose conditions that effectively rewrite the rule[.]”
• Judge Solomson did, however, limit the total pages of briefing that the United States and Intervenor can file in support of their positions.

While intervention is often not disputed in bid protests, litigation over these procedural issues can raise novel issues, which must usually be briefed and decided very quickly. In the event of a dispute, the intervenor will typically seek to intervene as a matter of right and, alternatively, to intervene permissively. As demonstrated in Oak Grove, one practical difference between the two types of intervention is that a permissive intervenor’s participation in the proceedings may be relatively limited in some cases. Even a rightful party, however, may find itself with limited briefing space.

Client Alert

Key Questions Answered about the New US Outbound Investment Regime Targeting China (August 15, 2023)

Our team guides clients through the nuances of President Biden’s executive order that would regulate, for the first time, US outbound investments in key technologies in China that are critical to national security. The requirements would apply to investments in semiconductors and microelectronics, quantum information technologies, and artificial intelligence. By answering 12 questions, the authors clarify how the outbound investment regime will develop and function.

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

AccelGov, LLC v. United States, Nos. 23-693C, 23-720C Fed. Cl. (July 20, 2023)

• Court of Federal Claims Judge Solomson issued the latest in a growing line of cases that explore when an agency’s proposed corrective action moots an ongoing bid protest.
• Two protesters filed post-award challenges to the agency’s evaluation and award on various grounds; after the protesters filed opening briefs, the government attempted to have the protests dismissed as moot, claiming that the government’s proposed corrective action effectively provided the plaintiffs with complete relief. The protesters objected, concerned with the lack of explanation provided and the possibility that corrective action may be used to justify the initial award decision.
• Judge Solomson explained that “the government lacks carte balance to end cases unilaterally – whether via a voluntary remand or dismissal for mootness – simply by calling a mulligan….” He ultimately denied the government’s motion, without prejudice, for failure to provide sufficient detail of the proposed corrective action to establish that the plaintiffs’ claims were moot.

This case reveals yet another significant difference between bid protest practice at the GAO and Court of Federal Claims. GAO routinely dismisses protests as academic any time an agency files a statement of intent to take corrective action, so long as the corrective action will result in a new award decision. At the court, whether the agency seeks remand or dismissal, at least some judges will scrutinize the request and take protester objections seriously.

Special Counsel Nathan Castellano discussed similar corrective action issues in an article published in The Nash & Cibinic Report, which is cited in the AccelGov opinion.

KPMG LLP v. United States, No. 22-866 Fed. Cl. (July 3, 2023)

• In another decision distinguishing the court from GAO regarding key personnel availability, Judge Smith held that it was arbitrary and capricious for the agency to follow GAO’s recommendation to disqualify KPMG from the re-evaluation on the basis that its key person was unavailable.
• In September 2021, KPMG named Mr. H as one of its proposed key personnel. On January 11, 2022, Mr. H announced his intent to resign, and KPMG notified the agency of the planned resignation on January 18, 2022. KPMG was selected for award on January 27, 2022, and Mr. H officially left KPMG the next day.
• Following the award to KPMG, a disappointed offeror protested before GAO that the agency had misevaluated KPMG’s proposal regarding Mr. H’s availability. GAO sustained the protest, finding that it was unreasonable for the agency to base its evaluation on a key person that KPMG had no realistic expectation of performing the contract. The agency followed GAO’s recommendation and re-evaluated proposals to find that KPMG’s proposal to be technically unacceptable for not meeting the solicitation’s key personnel requirements.
• In contrast to GAO, the court found that at the time of proposal submission, KPMG had a reasonable belief that Mr. H would be available to perform the contract. The court further noted that even after Mr. H notified KPMG of his intent to resign, KPMG continued trying to convince Mr. H to stay. Thus, contrary to GAO’s finding, Mr. H’s resignation was not “definitive” until Mr. H actually left after the contract was awarded.
• Under the court’s rule, “key personnel are unavailable when they are, in fact, no longer working with their employer.” Notably, in rejecting GAO’s approach, the court emphasized the public policy implication that the agency only disqualified KPMG because it had voluntarily notified the agency of Mr. H’s planned resignation; allowing disqualification based on this preemptive disclosure would only “encourage contractors to ‘hide the ball’ regarding its key personnel.”

This case highlights the different approaches GAO and the court take when key personnel become unavailable after proposal submission. Contractors should be aware that their response to unavailable key personnel may be subject to differing standards and outcomes depending on the protest forum.

B&B Medical Services, Inc., B-414471.7 et al. (July 24, 2023)

• GAO denied a protest alleging that the awardee misrepresented the availability (and qualifications) of key personnel.
• Although the solicitation did not require offerors to submit names or information regarding key personnel, the awardee’s proposal included spreadsheets listing “key personnel” as well as copies of licenses for those personnel. Based on these spreadsheets, the protester argued that a significant percentage of the “key personnel” identified in the awardee’s proposal were unavailable at the time of the proposal, later became unavailable, or were unable to perform the contract because of expired licenses.
• In order to establish that an offeror engaged in a bait and switch, a protester must show “(1) that the awardee either knowingly or negligently represented that it would rely on specific personnel that it did not have a reasonable basis to expect to furnish during contract performance, (2) that the misrepresentation was relied on by the agency, and (3) that the agency’s reliance on the misrepresentation had a material effect on the evaluation results.”
• On the first element, GAO found that the protester’s proposal lacked any discussion of how it intended to rely on the key personnel and made no mention of them other than including their names in spreadsheets. GAO thus distinguished this case from others where key personnel were held up as important parts of a technical or management approach.
• GAO similarly found that the agency did not rely upon the awardee’s key personnel; the only non-price evaluation factors were wholly unrelated. Indeed, in evaluating the awardee’s experience, the evaluators gave no indication that they even read the awardee’s list of proposed key personnel.

As we have covered previously, allegations of misrepresenting key personnel availability and qualifications remain an area ripe for protest. But the terms of the solicitation, the precise nature of the proposal representations, and the evaluation record generally are critical factors in determining the strength of the argument.

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.

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.

Federal Circuit Cases

Percipient.ai, Inc. v. United States, Fed. Cir. No. 2023-1970

• We have been covering the Percipient.ai protest, which has sparked significant litigation over the scope of Court of Federal Claims (COFC) bid protest jurisdiction.
• The protest argues that the National Geospatial-Intelligence Agency (NGA) failed to satisfy its obligations under the Federal Acquisition Streamlining Act (FASA) when deciding to develop software under a task order vehicle rather than acquire an existing commercial solution.
• COFC initially found that the protest was timely and justiciable, but later reversed course and dismissed the protest as precluded under the FASA task order protest bar.
• Percipient.ai sought expedited appeal proceedings at the Federal Circuit; the Court permitted Percipient.ai to expedite its own briefing and assured the case would be scheduled for argument relatively soon after briefing is complete, but the Court declined to accelerate the deadline for response briefs.
• Percipient.ai filed its opening brief, arguing that the protest is not barred by FASA, but rather seeks to hold the agency accountable to FASA.
• Based on their responses in opposition to the motion for expedited briefing, the government and intervenor appear poised to defend COFC’s holding and raise alternative arguments for dismissing the protest (i.e., re-raise the standing and timeliness challenges that COFC previously rejected).

The Percipient.ai protest raises important and interesting substantive questions about the scope of an agency’s obligations under FASA. These issues go to the heart of how agencies can use the now-ubiquitous “umbrella contract” vehicles like IDIQs, GWACs, and MACs. But the posture of the protest may mean that procedural issues like jurisdiction, Blue & Gold, and “interested party” status prevent the Court of Federal Claims from ever reaching the substantive issues. Either way, there is a lot for contractors, procuring agencies, and their counsel to learn from this litigation as it works its way through the Federal Circuit.

FOIA Exemption 4 Cases

Flyers Rts. Educ. Fund, Inc. v. Fed. Aviation Admin., No. 21-5257 D.C. Cir. (June 30, 2023)

• In 2020, following the conclusion of the FAA’s 20-month review of Boeing 737 MAX planes after a decision to ground them in 2018 in light of two deadly plane crashes, Flyers Rights filed a FOIA request seeking documents the FAA relied upon to determine whether to authorize the planes to reenter service.
• While the FAA identified responsive documents, it withheld or redacted most documents under FOIA Exemption 4, which protects trade secrets and privileged or confidential commercial or financial information.
• Flyers Rights challenged the agency’s use of FOIA Exemption 4, but the district court sustained the FAA’s application of the exemption. The DC Circuit affirmed the district court’s decision on appeal.
• The DC Circuit elaborated on a question left open by the Supreme Court’s decision in Food Marketing Institute v. Argus Leader Media on whether information is confidential—and therefore protected under FOIA Exemption 4—only if “the party receiving it provides some assurance that it will remain secret.” Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356, 2363 (2019). 
• Relying on this uncertainty in Argus Leader, Flyers Rights argued that while Exemption 4 does not always require an assurance of secrecy, it cannot apply where an agency explicitly represents before disclosure that the information would be released. 
• But the DC Circuit rejected Flyers Right’s factual predicate that the various statements made by the FAA and Boeing that the investigation would be conducted with “transparency” were in fact explicit commitments to release information, and thus held that Exemption 4 properly applied.

This decision serves as a reminder that it is yet unsettled what role the dicta regarding the assurance of secrecy in Argus Leader plays in whether confidential information qualifies for protection under Exemption 4. Contractors providing information to the government should consider requesting confirmation from the agency that its confidential information will be kept confidential. At a minimum, contractors should be wary of express statements by the agency that the contractor’s information will be subject to disclosure.

Protest Cases

Leidos Inc.; Booz Allen Hamilton Inc., B-421524 et al. (June 20, 2023)

• GAO denied a protest challenging the agency’s failure to conduct a price realism evaluation because the terms of the solicitation did not require the agency to conduct such an assessment.
• In this cmpetition valued in excess of $1 billion, the Department of Treasury issued a solicitation to establish a blanket purchase agreement for IT and cloud solutions.
• One protester alleged that the solicitation required a price realism evaluation and that the awardee’s proposal—which was more than $140 million less than the protester’s—contained risk that was unaccounted for by the agency.
• GAO disagreed, finding that the solicitation’s language was permissive, not mandatory. GAO focused on the lack of an express price realism evaluation criterion, as well as the overall structure of the solicitation, to conclude that the agency reserved the right to conduct a price realism evaluation but did not commit itself to doing so.

In a fixed price environment, procuring agencies do not necessarily have to conduct a price realism evaluation because the risk of loss is on the contractor rather than on the government, but may include such a provision when the agency is concerned that its requirements may not be fully understood by offerors. Where, as here, a solicitation merely reserves the agency’s right to conduct a price realism evaluation, such an assessment remains at the agency’s discretion.

BOF GA Lenox Park, LLC, B-421522 (June 20, 2023)

• GAO sustained a protest where an agency unreasonably evaluated the awardee’s proposal as complying with material terms of the solicitation.
• On behalf of the Drug Enforcement Agency, the General Services Administration (GSA) issued a request for lease proposals (RLP) for the provision of commercial office space in the Atlanta, Georgia area. The RLP contained certain public transportation requirements, including that a subway, light rail, or bus rapid transit stop shall be located within the immediate vicinity of the building offered.
• The protest alleged that the awardee should have been evaluated as technically unacceptable because its proposed property did not meet a material RLP requirement for proximity to public transportation options, including, as relevant here, a “bus rapid transit stop.” Instead, the awardee was only located within the vicinity of traditional, standard bus lines. In response, GSA argued that “bus rapid transit” did not refer to any specific type of bus transit system, and the protester’s definition was too restrictive.
• GAO agreed with the protester, finding that the RLP included a specific term, which was provided at the direction of a GSA lease alert and regularly used in all GSA leases, intended to require proximity to a particular type of transit service. GSA therefore improperly evaluated the awardee’s proposal on this basis.
• GAO also found prejudice because the protester stated that it considered purchasing the property offered subsequently by the awardee but “had discounted it because of the lack of proximity to rapid transit required by the RLP.” This was sufficient for showing a reasonable possibility of prejudice.

This decision reinforces that GAO will scrutinize solicitations when deciding protest grounds challenging the waiver or relaxation of requirements. To win such protests, however, it is critical for protesters to identify how the waiver or relaxation affected their substantial chance of receiving the award.