The Procurement Playbook

The Procurement Playbook

Legal Insight for Government Contractors

Supreme Court: Implied Certification Theory Can Create Falsity under the False Claims Act…But Only Sometimes

Posted in False Claims Act

6071512063_8dc286774e_oLast week, the Supreme Court issued its much anticipated opinion in Universal Health Services, Inc. v. U.S. ex rel. Escobar.  As we discussed in a prior blog, the Universal Healthcare case presented two important questions regarding the scope and breadth of the False Claims Act (31 U.S.C. §§ 3729 et seq.) (the “FCA”): (1) whether the implied certification theory of liability is appropriate under the FCA; and (2) if so, whether the implied certification theory should be limited to statutes, regulations, and/or contract provisions that expressly condition payment upon compliance.

In a unanimous decision authored by Justice Thomas, the Court approved the implied certification theory of liability under the FCA, but held that its application should be limited.  Specifically, the Court explained that FCA liability may attach under the implied certification theory when the following two conditions are satisfied:

  1. The claim does not merely request payment, but also makes specific representations about the goods or services provided; and
  1. The failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.

The Court’s decision emphasized that the FCA is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”  To curb the expansive reach of the FCA, the Court turned its attention to the impact of the materiality requirement as it relates to the implied certification theory.  Explaining that a noncompliance with a statute, regulation, or contractual requirement “must be material to the Government’s payment decision to be actionable [under the FCA],” the Court cautioned that the materiality standard is “demanding.” Continue Reading

Dept. of Energy Proposes DEAR Amendment to Clarify the Nondisplacement of Qualified Workers Under Service Contracts Regulation

Posted in Legislative and Regulatory Developments

Recently, the Department of Energy (DOE) released a Federal Register notice proposing an amendment to the DOE Acquisition Regulation (DEAR) to clarify Federal Acquisition Regulation (FAR) Subpart 22.12, Nondisplacement of Qualified Workers Under Service Contracts.  The proposed amendment explains that FAR Subpart 22.12 shall apply to DOE’s management and operating (M&O) subcontracts.

FAR Subpart 22.12

FAR 22.1202(a) establishes that:

When a service contract succeeds a contract for performance of the same or similar services . . . at the same location, the successor contractor and its subcontractors are required to offer those service employees that are employed under the predecessor contract, and whose employment will be terminated as a result of the award of the successor contract, a right of first refusal of employment under the contract in positions for which they are qualified.

This means that a successor contractor may be limited to using existing service workers on the location and project until the right of first refusal has been extended and expired. Each express offer of employment under the rule is required to stay open for a minimum of 10 days.

Application to DOE M&O Subcontracts

The DEAR does not currently address the applicability of Executive Order 13495, as implemented by FAR Subpart 22.12, to subcontracts under DOE’s M&O contracts.  The proposed amendment provides that:

This proposed rule clarifies that FAR Subpart 22.12 applies to subcontracts under the Department’s management and operating contracts. A management and operating contract requires a contractor to operate, maintain, and support a Government-owned or -controlled research, development, special production, or testing establishment which is devoted to a major program(s) of the contracting agency.

A number of exemptions and exceptions apply to the proposed rule. For example, the proposed rule does not apply to contracts and subcontracts below the simplified acquisition threshold of $150,000 (41 U.S.C. 134) and it does not apply to contracts and subcontracts awarded pursuant to the Javits-Wagner-O’Day Act (which provides protections for employees who are blind or severely disabled). Additionally, the head of a contracting department or agency may exempt its department or agency from the requirements of the rule if it finds that the application of the requirements of the rule would not service the purposes of the rule or would impair the ability of the federal government to procure services on an economical and efficient basis.

ASBCA Confirms Violation of the Nonmanufacturer Rule is Grounds for Termination for Cause

Posted in Claims and Disputes, Small Business, Terminations

The nonmanufacturer rule is one of the more complicated small business rules.  Under 13 CFR § 121.406(b), a small business may qualify as a nonmanufacturer if it 1) does not exceed 500 employees; 2) is primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied; 3) takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and (4) will supply the end item of a small business manufacturer, processor or producer made in the United States.  Recently, in Third Coast Fresh Distribution, LLC, ASBCA No. 59696, the ASBCA determined that a contractor’s failure to comply with this requirement in an applicable contract was grounds for a termination for cause (i.e. default termination). Continue Reading

Proposed FY 2017 NDAA Seeks Study on Bid Protest Reform

Posted in Bid Protests, Legislative and Regulatory Developments

3414558363_4dfff32e1c_oThe National Defense Authorization Act (“NDAA”) is an annual bill that sets forth the policy and budget priorities for the Department of Defense for an upcoming fiscal year.  Striving to achieve bipartisan support, Congress’s task to reach an agreement on the NDAA is a daunting one.  Only after months of intense negotiations, meetings, and hearings are the thousands of pages of the NDAA ready for a vote in the House and Senate.  Last year, President Barack Obama vetoed the NDAA for Fiscal Year 2016.

On April 12, 2016, the House Armed Services Committee (“HASC”) Chairman, Representative Mac Thornberry (R-TX) kicked off this year’s process of developing the Fiscal Year 2017 NDAA (the “FY 17 NDAA”) when he introduced House Resolution 4904. Earlier this week, Rep. Thornberry, released his consolidated draft of the $610 billion FY 17 NDAA, dubbed the “Chairman’s Mark.”

Among the many initiatives and policies set forth in the 758-page bill, at least one provision of the FY 17 NDAA is likely to stand out to many federal government contractors.   Specifically, Section 831 provides that the Department of Defense must commission an “independent entity” to conduct a review of the bid protest process and submit a final report to the HASC detailing its findings before July 1, 2017. Continue Reading

Supreme Court Weighs the Viability of the “Implied Certification” Theory Under the False Claims Act

Posted in False Claims Act

6071512063_8dc286774e_oA powerful tool to combat fraud, waste, and abuse, the False Claims Act (31 U.S.C. §§ 3729 et seq.) (the “FCA”) imposes civil liability upon any individual or corporation who knowingly submits, or causes the submission of, a false or fraudulent claim to the United States.  As we discussed in a previous blog, the amount of damages recovered pursuant to the FCA suggests that the Government’s aggressive enforcement of the FCA is unlikely to subside any time soon.  In fact, recent figures reflect that the Government’s recovery of damages and settlements under the FCA has exceeded $17 billion since 2009.

Earlier this week, the U.S. Supreme Court heard oral argument in United Health Srvs., Inc. v. United States ex rel. Escobar, an FCA case. The United Health Services case presents two important questions for the Supreme Court concerning the scope of the FCA: (1) whether the implied certification theory of liability is appropriate under the FCA; and (2) if so, whether the implied certification theory should be limited to statutes, regulations, or contract provisions that expressly condition payment upon compliance. Continue Reading

GAO Proposes Significant Amendments to its Bid Protest Regulations

Posted in Bid Protests, Legislative and Regulatory Developments, Procurement Issues

Last Friday, the Government Accountability Office (GAO) released a Federal Register notice setting forth proposed amendments to the GAO Bid Protest Regulations (4 C.F.R. Part 21).   Below, we review the major proposed changes to the GAO Bid Protest Regulations you should know about:

Electronic Protest Docketing System

On January 17, 2014, Congress passed the Consolidated Appropriations Act for 2014 (codified at 31 U.S.C. 3555(c)), which included a provision requiring GAO to develop an electronic case filing system for bid protests.  The proposed amendments now provide the first glimpse into the much-anticipated electronic case filing system, called the Electronic Protest Docketing System (EPDS).

According to the proposed amendments, the EPDS will become an integral part of the bid protest process.  Specifically:

EPDS will be the sole means for filing a bid protest at GAO (with the exception of protests containing classified information) and will enable parties to a bid protest and GAO to file and receive documents.

While the proposed amendments offer little detail regarding the functionality and design of the EPDS, GAO promises to provide more detailed information about the system once the amended GAO Bid Protest Regulations are finalized.

Fee for Bid Protest Filings

Currently, filing a bid protest at GAO does not require the protester to pay a filing fee.  This practice will likely soon change.  In addition to requiring GAO to establish an electronic case filing system (i.e., the EPDS), the Consolidated Appropriations Act for 2014 also mandated GAO to collect filing fees to “support the establishment and operation of the electronic system.”

Although the proposed amendments are subject to change prior to finalization, GAO “anticipates the bid protest filing fee will be $350.”  The amount of the filing fee will be reviewed by GAO every two years to ensure that the filing fees collected are adequate to operate and maintain the EPDS.  However, there is little clarity at this point regarding exactly how filing fees will be assessed in situations such as supplemental protest filings, or a protest filed after the Government utilizes corrective action in response to an earlier-filed protest.

Timeliness for Protests

Our blog previously featured an analysis of the GAO’s problematic decision in Protect the Force, Inc.-Recons., B-411897.3.  In that case, GAO dismissed a post-award bid protest filed by Protect the Force as untimely.  As we observed in our blog, GAO’s decision in Protect the Force exposed an ambiguity in 4 C.F.R. § 21.2(a) regarding the timeliness of a protest challenging an error or impropriety in a solicitation amendment, where the Government amends the solicitation but does not provide offerors an opportunity to submit revised proposals in response to the amendment.

In response to GAO’s decision in Protect the Force, GAO’s proposed amendments will revise the GAO Bid Protest Regulations “to clarify the time for filing challenges to a solicitation where the basis of the protest becomes known when there is no solicitation closing date or when no further submissions in response to the solicitation are anticipated.”  In fact, the proposed amendments will revise 4 C.F.R. § 21.2(a)(1) to state:

(a)(1) . . . If no closing time has been established, or if no further submissions are anticipated, any alleged solicitation improprieties must be protested within 10 days of when the alleged impropriety was known or should have been known.

Although the proposed amendment to 4 C.F.R. § 21.2(a)(1) resolves a situational ambiguity in the GAO Bid Protest Regulations, it adds yet another layer to an already complex set of rules governing the timeliness of bid protests.


It has been almost 8 years since any significant changes were made to the GAO Bid Protest Regulations.  While the majority of the proposed amendments are tailored towards the introduction and implementation of the EPDS, there are also other amendments to the GAO Bid Protest Regulations that are important.  Of course, we will keep you posted as developments regarding the proposed amendments arise.

Modified image courtesy of Flickr (licensed) by Tom Magliery

GAO: Awardee of an IDIQ Contract is Not an “Interested Party” to Protest the Award of an IDIQ Contract to a Competitor

Posted in Bid Protests

720px-US-GovernmentAccountabilityOffice-Logo.svgFiscal Year 2016 marked the seventh straight year that the budget set aside for federal government contracts has decreased.  With fewer bidding opportunities, contractors of all sizes are utilizing aggressive tactics to maximize their chances of winning a federal government contract.  Such was the case in a recent Government Accountability Office (GAO) bid protest decision, Aegis Defense Services, LLC, B-412755, March 25, 2016.

In Aegis, the Department of State issued a Request for Proposals (RFP) that contemplated the award of multiple indefinite-delivery/indefinite-quantity (IDIQ) contracts for security guard and patrol services.  The Department of State awarded seven separate IDIQ contracts, including one to Aegis, and one to its competitor, Chenega-Patriot Group (CPG).

Aegis filed a bid protest at the GAO, contending that the CPG improperly misappropriated Aegis’s confidential, proprietary, and/or trade secret information to secure award of an IDIQ contract. Specifically, Aegis alleged that one of its former employees misappropriated Aegis’s information and used that information to aid CPG in the development of its proposal.  Accordingly, Aegis argued that the Department of State’s award of an IDIQ contract to CPG was improper because the agency failed to conduct an adequate investigation concerning a potential violation of the Procurement Integrity Act (41 U.S.C. 2101).  GAO dismissed Aegis’s protest, however, concluding that Aegis failed to demonstrate it was an “interested party.” Continue Reading

Government’s Duty of Good Faith and Fair Dealing Does Not Absolve Contractor of Costs of Complying with Kuwaiti Labor Laws

Posted in Claims and Disputes, Labor

Ali_al_Salem_WelcomeIn the recent ASBCA case Appeal of SupplyCore, Inc., ASBCA No. 58676, the government successfully defended against a claim for post-termination labor costs, where the contractor argued that the government had violated the duty of good faith and fair dealing with regard to the timing of the Army’s decision to not exercise a contract option.

In 2008, the Army had awarded SupplyCore a one year fixed price contract for warehouse management at Camp Ali Al Salem in Kuwait. The contract contained 4 one year options.  The options were to be extended on written notice to SupplyCore within 30 days, so long as the Army had provided a (nonbinding) written notice of intent to extend at least 60 days before the contract expired.  The contract also required SupplyCore to comply with local labor laws pursuant to DFARS 252.222-7002.  At the time the contract was entered in 2008, Kuwaiti labor laws required only a 15-day notice of termination of employment.  However, in 2010, that changed to a 90-day notice.

After initially extending the contract for the first three options, the Army gave notice of intent to exercise the fourth option 60 days prior to contract expiration.  Subsequent to the notice, the Army decided due to a reduction in activity at the base, it was more cost-effective to staff the warehouse with soldiers.  Consequently, 9 days after sending the intent to extend letter to SupplyCore, the Army informed SupplyCore that the contract would not be extended.

Supplycore then filed a claim for $145,634.80 from the Army for labor costs required to be paid for the 39 days after contract expiration that SupplyCore was responsible to pay under Kuwaiti labor laws (90-day notice of termination to employees, less 51-day notice provide by Army prior to end of contract).  When the Army denied the claim, SupplyCore filed its appeal, asserting in part breach of the duty of good faith for failing to give a 90-day notice.  On the Army’s Summary Judgment Motion, the Board found that the only reasonable assumption on the part of SupplyCore was that the contract was set to expire, and it was unreasonable to presume 90 days prior, or even 60 days prior with the written notice, that the contract would continue. Continue Reading

SBA Commissioned Study Prompts Expansion of Set-Aside Opportunities for Women-Owned Small Businesses

Posted in Small Business

15373751758_a9590e8703_oTimely given that last week was National Women in Construction Week, the United States Small Business Administration (SBA) recently published a notice in the Federal Register expanding the use of 113 new North American Industry Classification System (NAICS) Industry groups for women-owned business (WOSB) set-asides.  Such a determination was made following a study requested by the SBA which found that WOSBs are underrepresented and substantially underrepresented in such industry groups.

On March 3, 2016, the Small Business Administration (SBA) released the findings of a two-year study investigating the industries in which WOSBs are underrepresented in Federal contracting.  Under section 8(m) of the Small Business Act (15 U.S.C § 637), the SBA is responsible for administering the WOSB Program, the purpose of which is to ensure that WOSB’s have an equal opportunity to participate in Federal contracting.  The SBA’s administration of the WOSB Program also helps the Federal government attain its goal of awarding five percent of its prime contract dollars to WOSBs.

The SBA had commissioned at least one study since 2000 to identify the Federal contracting industries in which women are unrepresented.  However, in 2014, Congress amended the Small Business Act to require the SBA to submit an updated report to Congress on this issue by January 2, 2016, followed by an updated report every five years.  In response, the SBA requested the U.S. Commerce Department’s Office of the Chief Economist (OCE) conduct such a study, the purpose of which was to reevaluate the NAICS industry groups and identify in which groups WOSBs are underrepresented and substantially underrepresented in Federal contracting.  In conclusion, the OCE found that in 254 of the 304 industries WOSBs are “less likely” to win federal contracts, and in 109 of the 304 industries WOSBs have “significant[ly] lower odds” of wining federal contracts than otherwise similarly situated non-women owned businesses.  As a result of these findings, the SBA authorized the use of 113 new NAICS industry groups for WOSB and Economically Disadvantaged WOSB set-asides.  Effective March 3, 2016, contracting officers will be able to make set-aside awards to WOSBs in 92 designated NAICS industry groups where WOSBs are “substantially underrepresented,” and to EDWOSBs in 21 additional NAICS industry groups where WOSBs are “underrepresented.”

Image Courtesy of Flickr (licensed) by Scott Lewis

Risk Avoidance: The Importance of Marking Proprietary Information

Posted in Bid Protests, Procurement Issues

4758428372_7f02b5a75d_oOn Tuesday, the Court of Federal Claims sent another reminder of the importance of always marking proprietary information throughout the duration of contract performance and not just during the proposal phase.

In Dyncorp International, LLC v. United States, DynCorp protested the Air Force’s release of its proprietary indirect cost and profit data as part of a new solicitation for Dyncorp’s incumbent contract.  DynCorp had been the incumbent contractor on the Air Force’s War Reserve Materiel contract to manage and maintain stockpiles of war reserve materiel and other government equipment.  As part of the contract requirements, DynCorp was responsible for submitting  a life cycle management plan.  When DynCorp submitted its life cycle reports to the Air Force, it included DynCorp’s indirect rate and award fee data, but DynCorp did not mark the life cycle report as proprietary and not to be released.  When preparing the solicitation for the follow-on contract, the Air Force asked DynCorp for a current life cycle report and stated that it intended to use the new submission as part of the solicitation for the new contract.  As per prior practice, DynCorp sent a life cycle report with its indirect rates and award fee data and did not indicate that it objected to the life cycle report being released. Continue Reading