The Procurement Playbook

The Procurement Playbook

Legal Insight for Government Contractors

GAO’s Refusal to Apply the Christian Doctrine to Solicitations May Reflect a Split with the U.S. Court of Federal Claims

Posted in Bid Protests, Procurement Issues

720px-US-GovernmentAccountabilityOffice-Logo.svgIn 1963, the U.S. Court of Claims established a rule known as the “Christian Doctrine,” which provides that certain mandatory contract clauses are incorporated, by law, into an otherwise validly awarded contract, even if the contracting agency accidentally omits that clause from the solicitation.  Over the past 60 years, the “Christian Doctrine,” has been used to imply various mandatory, but omitted, contract clauses into federal contracts.  However, in a protest decision published last week, NCS/EML JV, LLC, B-412277, et al., the Government Accountability Office (GAO) held that while the Christian Doctrine can be used to imply a mandatory clause into a contract, it cannot be used to imply a mandatory clause into a solicitation.  This decision may reflect a split between GAO and the U.S. Court of Federal Claims (COFC) on the application of the Christian Doctrine.  Had this protest been filed at COFC rather than GAO, it might have been sustained.

In this case, the protestor, NCS/EML JV, argued that the Navy’s award of contract for maintenance center equipment services to Pegasus Support Services (Pegasus) was improper because Pegasus’ proposal violated the requirements of FAR clause 52.219-14, Limitations on Subcontracting (which, for services contracts, requires the prime contractor to self-perform at least 50 percent of the cost of the contract).  Because the RFP at issue was a small business set-aside, FAR 52.219-14 should have been included in the RFP.  However, for some reason, the RFP did not incorporate FAR 52.219-14.  NCS/EML JV argued that even though the RFP omitted FAR 52.219-14, the clause was incorporated into the RFP by operation of law, pursuant to the Christian Doctrine.  GAO rejected this argument:

This assertion is without merit. The “Christian Doctrine” provides only for incorporation by law of certain mandatory contract clauses into otherwise validly awarded government contracts; it does not stand for the proposition that provisions are similarly incorporated, by law, into solicitations.

As a result, because FAR 52.219-14 was not incorporated into the RFP, by reference or by law, GAO dismissed the protest argument.  GAO further noted that, to the extent NCS/EML JV was claiming that the RFP should have included FAR 52.219-14, that protest ground was untimely because it was not filed by the deadline for proposals.

While GAO’s decision in NCS/EML JV, LLC appears to be consistent with its prior opinions refusing to apply the Christian Doctrine to solicitations, the decision may conflict with COFC’s ruling in a similar bid protest 10 years ago.   Continue Reading

Bid Protest Sustains at GAO Hit a 20-Year High in the First Quarter of Fiscal Year 2016

Posted in Bid Protests

Recently, the U.S. Government Accountability Office (“GAO”) released its annual bid protest report for Fiscal Year (FY) 2015, which reflected a slight decrease in the protest “sustain” rate, and a slight increase in the protest “effectiveness” rate, from FY 2014 to FY 2015.  While the statistics in GAO’s annual report are certainly interesting, what is far more interesting is GAO’s record setting first quarter of FY 2016.  In the first quarter of FY 2016 (Oct. 2015 – Dec. 2015), GAO issued more opinions sustaining bid protests than in any prior quarter since 1993.

GAO Protests sustained Chart by quarter

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SBA Overturns Past Precedent – Minority Shareholder Deemed Affiliated Despite Quorum Requirement

Posted in Small Business

SBAlogoIn a size appeal decision released this past week, the United States Small Business Administration Office of Hearing and Appeals (“SBA-OHA”) took the rare step of overturning its past precedent in the process of affirming a finding of affiliation.  In Size Appeal of Tenax Aerospace, LLC, SBA No. SIZ-5701 (2015), the SBA Area Office concluded that Tenax Aerospace was affiliated with a number of entities on the basis of the identity of interest rule (through both common investments and family relationships), 13 C.F.R. 121.103(f).  In addition, SBA concluded that Tenax Aerospace was affiliated with Tri-Jet, LLC, because of its minority ownership interest in that company.  Tri-Jet had three owners, one of which was Tenax Aerospace, all of whom owned 33% of the company.  Even though Tenax Aerospace only held a minority interest in Tri-Jet, SBA concluded that, pursuant to 13 C.F.R. 121.103(c)(2), Tenax Aerospace and Tri-Jet were affiliated based on the presumption that “when a concern is owned by multiple owners with equal minority interests, all of those owners are presumed to control the concern.”  Based on these findings of affiliation, Tenax Aerospace was declared “not an eligible small business.”

On appeal to SBA-OHA, Tenax Aerospace argued that it was not affiliated with Tri-Jet, because even though Tenax Aerospace owned a 33% of Tri-Jet, it was merely a passive investor and did not actively manage Tri-Jet.  SBA-OHA rejected this argument, noting that SBA-OHA’s case law “does not require a minority owner to have managerial responsibilities for the presumption of control to apply….  Rather, managerial duties prevent the owner from rebutting the presumption.”

Tenax Aerospace also argued it did not control Tri-Jet because, under Tri-Jet’s operating agreement, Tenax Aerospace could not prevent a quorum of the owners (except in cases of extraordinary actions), and therefore could not control Tri-Jet from taking actions favored by a majority of the other owners.  In support of this argument, Tenax Aerospace cited the Size of Appeal of Mark Dunning Industries, Inc., SBA No. SIZ-5488 (2013), wherein SBA-OHA held that a quorum requirement in a company’s operating agreement “rebuts the presumption” that a person with a minority ownership interest in the company has the power to control the company, because that minority owner cannot prevent a quorum.   Continue Reading

Department of Justice Reports on Another Busy Year of False Claims Act Activity

Posted in False Claims Act

3286566742_c673e4845d_bIn Fiscal Year (“FY”) 2015, the Department of Justice (“DOJ”) raked in $3.6 billion in settlements and judgments from civil actions filed under the False Claims Act (“FCA”).  This marks the fourth consecutive year that the United States’ recovery under the FCA exceeded $3.5 billion.   This trend suggests that aggressive enforcement of the FCA is here to stay.

As a refresher, Congress enacted the FCA to combat rampant fraud during the Civil War.  Since then, the FCA has become the federal government’s most power tool to detect and prevent fraud, waste, and abuse.  In accordance with 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.  The FCA also sets forth “qui tam” provisions, which permit private citizens (referred to as “relators”) to initiate a lawsuit under the FCA on behalf of the United States as a “whistleblower” (31 U.S.C. § 3730(b)).  Under these provisions, a relator is entitled to recover a proportional share of any FCA damages obtained by the United States.

The United States’ $3.6 billion recovery in FY 2015 marks the lowest amount of FCA damages claimed by the United States since FY 2011.  This figure also indicates a steep drop from the United States’ record-breaking year in FY 2014, in which the DOJ recovered approximately $5.8 billion in FCA damages.  While many factors may have contributed to the decline in FCA recovery, it is noteworthy that the number of new civil actions initiated under the FCA (both non-qui tam and qui tam actions) in FY 2015 dropped to its lowest point since FY 2010. Continue Reading

Court of Federal Claims Applies Laches Doctrine to Deny Post-Award Bid Protest

Posted in Bid Protests

11552628565_22d22839ba_bA recent Court of Federal Claims (“COFC” or “Court”) decision denied a post-award bid protest applying the rarely successful equitable defense of laches.  In addition to finding the protest failed on the merits, COFC found that the disappointed bidder unreasonably delayed in bringing the protest by waiting more than eight months after exhausting its agency appeals and that the awardee and the Government suffered prejudice as a result of the delay.

In National Telecommuting Institute, Inc. v. United States, 123 Fed. Cl. 595 (2015), COFC denied a post-award bid protest challenging the award of a U.S. Department of Agriculture help desk services contract to Peckham Vocational Industries, Inc. (“Peckham”).[1]  The procurement was issued under the AbilityOne Program, a program established by the Javits-Wagner-O’Day Act (41 U.S.C. § 8501–8506), which aims to award  certain federal contracts to entities that employ at least 75% of their direct labor with people who are blind or severely disabled.  The program is administered by an independent commission, and aided by the non-profit, SourceAmerica, which functions as a technical evaluation panel and makes recommendations to the Commission on the qualifications and abilities of prospective agencies to perform the work. Continue Reading

SBA’s Expanded Mentor-Protégé Program to be Launched as a “Pilot Program” in Summer 2016?

Posted in Legislative and Regulatory Developments, Small Business

As many readers may know, in February 2015, the U.S. Small Business Administration (“SBA”) released its proposed rule to establish a mentor-protégé program for all small businesses.  Currently available only to participants of the SBA’s 8(a) Program, the SBA’s proposed rule would create a new mentor-protégé program open to all small businesses, including firms in the HubZone, Women-Owned Small Business, and Service-Disabled Veteran Owned Small Business programs.  Having been relatively silent since proposing the changes, it seems the SBA’s mentor-protégé expansion program might soon become a reality.  However, that immediate reality may only be as a “pilot program.”

Concerned about the delay in implementing the new program, the House Committee on Small Business Subcommittee on Contracting and Workforce called a hearing to examine the progress of the program, and invited testimony from the SBA to provide an update on the program.  The Subcommittee had expressed concerns over a number of issues related to the progress of the program, including the SBA’s ability and preparedness to cope financially with the expected influx of mentor-protégé applications commensurate with the expansion, and what impact President Obama’s veto of the FY 16 NDAA will have on the progress of the program.

According to the testimony of the SBA’s Associate Administrator for Government Contracting Business Development, John Shoraka, the SBA is currently drafting a final rule and has begun planning for implementation of the new program.  In response to questions from members of the Subcommittee, Mr. Shoraka testified that the SBA anticipates that the final rule will be issued in the first quarter of 2016, to be launched in the later part of the summer of 2016.  However, Mr. Shoraka further testified that it will initially be launched as a “pilot program” to determine the program’s impact, “and from there decide how its implemented fully.”  Unfortunately, Mr. Shoraka did not clarify what he meant by the program being launched on a “pilot” basis, but Mr. Shoraka’s references in his testimony to a limit on SBA resources available to implement the mentor-protégé expansion indicates that the “pilot” program may be limited to a smaller scope of participants than indicated in the proposed regulations.

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When an Improperly Submitted Proposal is Still Acceptable

Posted in Bid Protests

6600657455_976503bae2_zThe deadline for the submission of proposals in response to a RFP is looming.  The proposal team is frantically using the last moments before the submission deadline to ensure that every component of their proposal is perfect.  Inevitably, nothing becomes more important than ensuring that the proposal is correctly submitted to the Agency.  But what happens when you submit your proposal the Agency through the wrong web-portal?

The scenario described is enough to give any federal contractor nightmares.  In a recent Government Accountability Office (the “GAO”) bid protest decision, however, the GAO determined that the Agency improperly rejected a proposal because the offeror mistakenly submitted the proposal through the incorrect web portal.

In AECOM Technical Services, Inc., B-411862, the Agency utilized a web portal for the submission of proposals, FedConnect.  Importantly, FedConnect contained two separate communication features for prospective offerors: (1) the Message Center, available for offeror’s to submit questions concerning the RFP; and (2) the Response Center, designated in the RFP as the method to submit proposals.  Although submitted a day early, AECOM mistakenly submitted its proposal through the Message Center, rather than the Response Center.  Immediately recognizing this mistake, the contracting specialist attempted to communicate with AECOM through the FedConnect Message Center.  AECOM, however, did not receive the communication from the contracting specialist before the RFP’s deadline for the receipt of proposals.  Subsequently, the Agency informed AECOM that its proposal was rejected because it was not submitted properly through the FedConnect’s Response Center feature.

AECOM filed a bid protest at the GAO challenging the Agency’s decision to reject its proposal.  While underscoring the fundamental principle that a RFP may impose reasonable submission instructions, and that deviations from those instructions may result in the rejection of the proposal, GAO explained that not all deviations are created equally:

Bids and proposals that deviate from solicitation requirements . . . need not be rejected in every instance.  When the deviation involves a matter of form rather than of substance, or when the government’s needs will be satisfied by acceptance of a deviating offer and other offerors would not be unfairly prejudiced by the acceptance, such an offer can be accepted.

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Thou Shalt Not Wait Until the Last Minute to Submit an 8(a) Joint Venture Agreement to SBA for Approval

Posted in Bid Protests, Small Business

A recent decision by GAO in FedServ-RBS JV, LLC, B-411790, provides yet another reminder to 8(a) joint ventures to submit proposed joint venture agreements to the U.S. Small Business Administration (“SBA”) for approval as early as possible.  This case shows that waiting until the last minute to submit your joint venture agreement to SBA can result in the loss of a contract award.

Under SBA’s regulations, an entity submitting an offer as an 8(a) joint venture for an 8(a) set-aside procurement must have its joint venture agreement approved by SBA before it can be awarded the contract (13 CFR 124.513(e)(1)).  If the procuring agency selects a 8(a) joint-venture for award, but then SBA informs the agency that it has not approved that offeror’s joint venture agreement, the agency can eliminate the offeror and award the contract to the next offeror in line (13 CFR 124.507(b)).  Unfortunately, this scenario happened to FedServ-RBS. Continue Reading

ASBCA Fiscal Year 2015 Annual Report: Sustain Rate of Appeals Remains over 50% and ASBCA Resolves More Appeals

Posted in Claims and Disputes

On O5006396635_c5359a439d_zctober 20, 2015, the Armed Services Board of Contract Appeals (ASBCA) released its Annual Report of Transactions and Proceedings for the fiscal year ending 30 September 2015.  The report indicates that the number of appeals pending have more than doubled since 2011, but that the increase has slowed considerably with a net increase of 21 appeals, for a total of 1,087 appeals pending at the end of FY 2015.

This stability can be attributed to the fact that the ASBCA continues to dispose of more appeals each year (647 appeals this year) and that there was a slight decrease in the number of appeals docketed in FY 2015, 668 as compared to 708 in FY 2014.  At the same time, 52.9% of the published decisions of the ASBCA found the contractor’s claim meritorious (in whole or in part).  The ASBCA report indicates that 526 appeals were dismissed and states that “in the majority of cases, a dismissal reflects the parties have reached a settlement.”  The success rate measured by sustained appeals and settlements indicates the ASBCA remains an excellent avenue for the resolution of contractors disputes, and that the ASBCA is resolving appeals at an increasing pace.

At the same time, the success rate for non-binding Alternate Dispute Resolution (ADR) at the ASBCA remains extremely high.  Continue Reading

GAO: No OCI When Proprietary Information Obtained is of “No Relevance or Competitive Usefulness”

Posted in Bid Protests, Organizational Conflicts of Interest

720px-US-GovernmentAccountabilityOffice-Logo.svgA recent Government Accountability Office (GAO) bid protest decision provides yet another example of the importance for contractors to identify potential organizational conflicts of interest (OCI) when submitting a proposal in response to a federal government solicitation.

In DV United, LLC, B-411620, B-411620.2, Sept. 16, 2015, GAO denied a bid protest challenging the award of a contract to NES Associates, LLC (NES) by the Department of the Interior (on behalf of the Department of the Army).  Among other arguments, DV United (DVU) alleged that NES had access to a DVU team member’s proprietary information through it performance of an unrelated Army contract, thus creating an unequal access to information type OCI.

As a refresher, FAR Part 9.5 governs the “responsibilities, general rules, and procedures for identifying, evaluating, and resolving organization conflicts of interest.”  Accordingly, contracting officers are obligated to avoid, neutralize, or mitigate potential significant OCIs to prevent situations in which a contractor’s objectivity may be impaired, or a contractor may gain an unfair competitive advantage. Continue Reading