The Procurement Playbook

The Procurement Playbook

Legal Insight for Government Contractors

Failure to Debar? OECD Foreign Bribery Report Finds Only 2 Debarments Out of 427 Foreign Bribery Cases

Posted in Suspension and Debarment

This month I wanted share an article I recently found on the OECD Foreign Bribery Report, written by Richard Bistrong.  Mr. Bistrong is a former international sales executive who himself was convicted of bribery and debarred, and Mr. Bistrong spent 14 ½  months in prison.  Prior to his conviction, Mr. Bistrong acted as a government witness and participated in covert cooperation to uncover Foreign Corrupt Practices Act and other export violations.

Of the 427 cases used by the OECD (Organisation for Economic Co-operation and Development) as a data set, only two cases resulted in debarment, one of which was Mr. Bistrong.  From Mr. Bistrong’s perspective, a debarred person, debarment is both a fair and appropriate measure.  As such he questions why it is not used more frequently.  Mr. Bistrong cites to Professor Brandon Garrett of the University of Virginia, who argues prosecutors and regulators want to avoid debarring companies as they are effectively death penalties for the company.  Mr. Bistrong argues more of these cases should end in debarment as it is a valuable tool for governments.  The OECD report itself encourages countries to debar entities and individuals that have bribed foreign public officials.

So why does it appear this tool has been used so infrequently?  There are several potential reasons.  First, prosecution for foreign bribery and debarment itself has experienced a resurgence of popularity in the last decade.  The OECD report demonstrates a spike in foreign bribery between 2007 and 2013 with a peak in 2011.  Debarment in the United States has existed in some form since the Civil War, but the current form was established in the late 1980s.  Other countries have recently developed models for a debarment regime or updated their existing models.  The timeframe the OECD used (1999-2014) captured the rise in debarment popularity.  Even given that change in conditions, two is still a low number.

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Alaska Native Corporation Loses Bid Protest of Award to AbilityOne Contractor

Posted in Bid Protests

800px-Flag_map_of_Alaska.svgLast month, the U.S. Court of Federal Claims denied a post-award bid protest of a contract set aside by the National Geospatial-Intelligence Agency (NGA) for AbilityOne Program contractors.  The court found the government correctly considered the impact of the award on the incumbent contractor, an Alaska Native Corporation (ANC), and correctly considered the awardee (an AbilityOne contractor) “qualified” to perform the contract.  The court’s decision is an interesting case on the limits of an Alaska Native Corporation’s rights under the Alaska Native Claims Settlement Act, and on the amount of labor required to be performed by AbilityOne program contractors.  The Ability One program (discussed in more detail in a prior post) assists nonprofits that employ persons with severe disabilities (PWSD) to be awarded contracts by the Committee for Purchase from People who are Blind or Severely Disabled (CFP), after referral by agencies such as the NGA.


The incumbent contractor, Akima Intra-Data, an ANC, protested on the basis that ServiceSource was not a “qualified” AbilityOne contractor  under  The Javits-Wagner-O’Day (JWOD) Act because blind or severely disabled employees would not perform 75% of the contract’s labor. The court denied this protest argument, disagreeing with protestor’s interpretation of the JWOD Act.  The court held the AbilityOne program’s calculation of the 75% direct labor ratio is based on all of the AbilityOne contractor’s work, rather than mandating a 75% minimum for each contract.  The court concluded that “CFP’s reliance on all of ServiceSource’s agency-wide work to find that they were ‘qualified’ and thus eligible to participate in the AbilityOne program was consistent with the statute and was not in violation of the law or any CFP regulation.”


The incumbent contractor, Akima Intra-Data, an ANC, argued that NGA did not give enough consideration to the fact that the award would take away a major revenue source from an ANC.  Akima Intra-Data further argued the Alaska Native Claims Settlement Act entitled them to receive “the maximum practicable opportunity to participate in performing contracts awarded by Federal agencies,” and that the award to ServiceSource  violated the Alaska Native Claims Settlement Act.  The court disagreed, holding as follows: “The JWOD Act does not include or reference any other statutory preference provisions. Indeed, the AbilityOne Program is itself a program designed to provide a preference in the circumstances specified by the JWOD for the benefit of PWSD. Further, the court is not aware of any requirement that CFP must omit from the procurement list contracts where the incumbent enjoys an economically-disadvantaged status by virtue of the Alaska Native Claims Settlement Act.”


GAO Rejects Challenge to NASA’s Space Shuttle Services Contracts with Boeing and SpaceX

Posted in Bid Protests


Sierra Nevada Dream Chaser (NASA image)

Sierra Nevada Dream Chaser (NASA image)

Back in September 2014, NASA awarded contracts to Boeing and SpaceX to provide Commercial Crew Transportation Capability (aka space shuttle services) to transport astronauts to/from the International Space Station by 2017.  Subsequently, Sierra Nevada, who submitted a proposal but was not awarded a contract, filed a protest at GAO challenging the awards to Boeing and SpaceX.  This week GAO announced that it had denied Sierra Nevada’s protest.

Although GAO has not yet publicly released a formal decision on the protest, it did issue a press release providing some insight on the reasons why NASA selected Boieng and SpaceX over Sierra Nevada, and why Sierra Nevada’s protest has been denied:

In making its selection decision, NASA concluded that the proposals submitted by Boeing and SpaceX represented the best value to the government.  Specifically, NASA recognized Boeing’s higher price [$3.01 billion], but also considered Boeing’s proposal to be the strongest of all three proposals in terms of technical approach, management approach, and past performance, and to offer the crew transportation system with most utility and highest value to the government.  NASA also recognized several favorable features in the Sierra Nevada and SpaceX proposals, but ultimately concluded that SpaceX’s lower price [$1.75 billion] made it a better value than the proposal submitted by Sierra Nevada [$2.55 billion].

GAO disagreed with Sierra Nevada’s arguments about NASA’s evaluation, and found no undue emphasis on NASA’s consideration of each offeror’s proposed schedule, and likelihood to achieve crew transportation system certification not later than 2017.  GAO also noted that, contrary to Sierra Nevada’s assertions, the RFP clearly advised offerors that their proposals would be evaluated against the goal of certification by the end of 2017.

Sierra Nevada also argued that NASA conducted an inadequate review of the realism of SpaceX’s price and overall financial resources, conducted a flawed and disparate evaluation of proposals under the mission suitability evaluation factor, and improperly evaluated the relevance of offerors’ past performance.  Based on our review of the issues, we concluded that these arguments were not supported by the evaluation record or by the terms of the solicitation.

A redacted copy of GAO’s decision will likely be made public in the next few weeks.

Interestingly, this is not the first clash at GAO precipitated by NASA’s retirement of its space shuttles and privatization of the space program.  As discussed in an earlier post, in 2013 and 2014 GAO issued protest decisions concerning Blue Origin’s challenge to a lease awarded to SpaceX for NASA’s historic Launch Complex 39a at the Kennedy Space Center.



Top Three Reasons Why Firms are Denied “Veterans First” SDVOSB and VOSB Verification

Posted in Small Business

The Veteran’s Administration (VA) administers the “Veterans First” Service-Disabled-Veteran-Owned Small Business (SDVOSB) and Veteran-Owned Small Business (VOSB) verification program. The VA’s program requires companies to apply for verification through the VA’s Center for Verification and Evaluation (CVE) and to re-certify every two years. The CVE’s verification process is challenging and requires applicants to produce extensive documentation. Nevertheless, verification is worth the effort, as it allows the SDVOSB and VOSB to participate in VA’s “Veteran’s First Contracting Program” contract set asides and sole source contracts.

According to the VA, the following are the top three reasons for denial of certification in the 4th Quarter of FY2014:

  1. Veteran does not demonstrate full-time devotion to business (38 CFR 74.4(c)(3)).  “One or more veterans or service-disabled veteran owners who manage the applicant or participant must devote full-time to the business during the normal working hours of firms in the same or similar line of business. Work in a wholly-owned subsidiary of the applicant or participant may be considered to meet the requirement of full-time devotion. This applies only to a subsidiary owned by the VOSB itself, and not to firms in which the veteran has a mere ownership interest.”
  2. Veteran does not control decision-making and/or serve as managing member of LLC  (38 CFR 74.4(e)).  “In the case of a limited liability company, one or more veterans or service-disabled veterans must serve as management members, with control over all decisions of the limited liability company.” 
  3. Non-veteran receives highest salary (38 CFR 74.4(g)(3)).  “With the exception of a spouse or personal caregiver who represents a severely disabled veteran owner, no such non-veteran or immediate family member may … [r]eceive compensation from the applicant or participant in any form as directors, officers or employees, including dividends, that exceeds the compensation to be received by the highest officer (usually chief executive officer or president).”

These represent just the top 3 reasons why the VA denies applications for verification and recertification of program participants. Applicants and participants recertifying also are denied for reasons such as: unconditional ownership, undue influence, control of decision-making, managerial experience/critical license, 51% majority ownership, and day-to-day management and administration of operations issues.

How the AbilityOne Program Provides Federal Contracting Jobs to Individuals with Disabilities

Posted in Procurement Issues

The National Industrial Recovery Act, part of the New Deal policies in 1934, allowed businesses employing individuals with disabilities to pay less than minimum wage to their disabled workers. This “sub-minimum” wage policy was buttressed by the 1938 Fair Labor Standards Act which allows employers to apply for Section 14(c) certificates to pay their employees with disabilities less than the prevailing wage if their disability impacts their productivity. So, if a disabled worker’s productivity is reported to produce 50% of the productivity of a nondisabled worker doing the same kind of work, the disabled worker can be legally compensated with 50% of the prevailing wage. As of 2011, approximately 420,000 people with disabilities are employed under Section 14(c) of the Fair Labor Standards Act.

In a slightly different category is the AbilityOne program. The Javitz-Wagner-O’Day Act of 1971 (41 U.S.C. §§ 46-48) requires federal agencies to purchase certain supplies and services from non-profit agencies with a minimum of 75% of the total agency work hours being performed by individuals with disabilities. Today, the program is administered by the Committee for Purchase from People Who are Blind or Severely Disabled, an independent federal agency, and is called AbilityOne. FAR Subpart 8.7 prescribes the policies and procedures for purchasing from AbilityOne sources to satisfy procurement needs. A significant minority of employees with disabilities are employed through AbilityOne and under a 14(c) certificate, making AbilityOne a more ethically attractive option in terms of hiring practices. In fact, the average wage of workers in the AbilityOne program in FY2013 was  $13.03 per hour.

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Changes Impacting Contractors in the FY 2015 National Defense Authorization Act

Posted in Legislative and Regulatory Developments

On December 12, 2014, Congress passed the National Defense Authorization Act (NDAA) for Fiscal Year 2015.  The $585 billion bill funds the Pentagon’s activities in FY 2015.  Within this massive bill, there are number of items of interest to government contractors, including:

  • Design Build Contracting.  Section 814 gives contracting officers more authority to increase the number of offerors for Design-Build contracts.  Current law requires design-build solicitations to be a two-phase procurement.  The solicitation states the maximum number of offerors permitted to submit proposals for the second phase of the procurement.  The limit on offerors is currently five, “unless the agency determines with respect to an individual solicitation that a specified number greater than 5 is in the Government’s interest and is consistent with the purposes and objectives of the two-phase selection process.” 10 U.S.C. § 2305a(d).  Section 814 allows a written determination by a contracting officer that a number greater than five is in the Government’s best interest under the two phase procurement.  Approval of this contracting officer determination is by “the head of the contracting activity, delegable to a level no lower than the senior contracting official within the contracting activity.”   This approval at a much lower level should lead to more opportunities for design-build contractors.
  • No Reverse Auctions.  Section 824 bans the use of reverse auctions for the procurement of design-build construction unless specifically authorized in another law.  This provision was supported by the Association of General Contractors of America.  Construction contracts were viewed as being unsuitable for reverse auctions due to having many variables as to budget and owner needs compared to commodities manufactured with little or no variability.
  • Service Contracting Spending Cap.  Section 813 extends the caps on dollars spent on contract services by the military.  Service contracts may only be awarded up to the amounts in the FY 2010 NDAA.  Moreover, the 10-percent-per-fiscal-year reductions in spending for contracts that are “inherently governmental” functions continue.  Contractors can continue expect fierce competition for services contracts based on Section 813’s continuation of the spending cap.

OFCCP Extends Equal Protection Rights Prohibiting Discrimination Based on Sexual Orientation and Gender Identity

Posted in Labor, Legislative and Regulatory Developments

On December 9, 2014, the U.S Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published a final rule implementing Executive Order (EO) 13672 effectively amending EO 11246, which previously only prohibited discrimination by federal contractors and subcontractors on the bases of race, color, religion, sex, and national origin.  EO 13672 now extends sexual orientation and gender identity protections to employees and applicants in the federal contracting workplace.  The final rule does not take effect until April 8, 2015 and applies to all covered contracts entered into or modified on or after that date.  The new rule does not define “sexual orientation” or “gender identity,” however according to OFCCP, the agency will utilize the same definitions used by the Equal Employment Opportunity Commission and developed under Title VII case law.

The new rule will affect several aspects of the federal contracting workplace including the following:

  • New Equal Opportunity Clause Required.  Currently, 41 C.F.R. § 60-1.4 requires that government contracts include an equal opportunity clause which in part prohibits a federal government contractor from discriminating any employee or applicant on the basis of race, color, religion, sex, or national origin.  When the rule takes effect in April 2015, covered contracts entered into or modified after that date must contain the new equal opportunity clause which adds reference to sexual orientation and gender identity.
  • New Taglines for Federal Government Contract “Advertising.”  The final rule also requires that in all solicitations or advertisements for employees or applicants, contractors must state that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sexual orientation, gender identity, or national origin.”  According to OFCCP, this requirement may also be satisfied by simply including that the contractor is an “Equal Opportunity Employer.”
  • Compliance Reporting Requirements.  EO 13672 broadens the requirement that prospective contractors may be required by the Secretary of Labor to provide a statement from any labor union or agency referring workers to the contractor stating that the contractor’s practices and policies do not discriminate on the basis of sexual orientation or gender identity as part of its Compliance Report.

Notwithstanding these new requirements, EO 13672 does not impose several requirements that are usually par for the course in equal opportunity amendments: Continue Reading

Debarment Heads North of the Border

Posted in Suspension and Debarment

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In the not so very distant past, companies mainly needed to worry about exclusion from public contracting in the United States.  However, the exclusion trend has caught on internationally.  Recently, Canada has revised their exclusion policies to require companies to certify that neither the company nor its affiliates have committed a list of criminal offenses anywhere in the world dating back 10 years. Any offense within the 10 year period excludes the company from bidding on the contract.  The first to be notified of its exclusion in Canada was Siemens, which had the well-publicized guilty plea in 2008 for corruption-related offenses in the United States and Germany.  However, many more large companies are faced with potential exclusion.  As exclusion regimes widen in popularity, companies need to be ever more aware that a conviction in one country may have significant collateral effects on their ability to participate in public contracting in another country for an extended period of time.

One of the key differences between the United States’ debarment regime and Canada’s exclusion regime is the concept of present responsibility.  In the United States,  a contractor has the opportunity to demonstrate to the Suspending and Debarring Official that it appreciates the significance of the misconduct and has appropriately remediated the causes such that a similar incident is unlikely to occur again.  The Suspending and Debarring Official then has the discretion to lift the debarment.  In Canada’s Integrity Framework, no similar discretionary provision exists.  Instead, the contractor is automatically excluded for a ten year period from the time of the conviction.  The only exception is a Public Interest Exception, which allows the government to contract with an excluded company on the basis that no other supplier is capable of performing the contract, an emergency, national security, health and safety, or economic harm.   Thus the impact of a conviction on potential work in Canada is more severe than in the United States as Canada’s exclusions are automatic and last for three times as long as average debarments in the United States.

Image Courtesy of Flickr (licensed) by Jamie In Bytown

VA Sanctioned for Discovery Abuses at the Civilian Board of Contract Appeals

Posted in Claims and Disputes

In most litigation, the plaintiff and the defendant are equally susceptible to being sanctioned by the court for bad or dilatory behavior. However, government contracts litigation is not most litigation. In government contracts litigation (claims or protests), the contractor is more susceptible to being sanctioned than the government. But the government is not entirely immune to being sanctioned, as was evident in a recent case (discussed in this blog last month) where the Court of Federal Claims recently imposed monetary sanctions on the EPA for backdating a document during a bid protest.

Another example of the government being sanctioned came recently in Brasfield & Gorrie, LLC, v. Dept. of Veterans Affairs, CBCA 3300, 3354, 3538, Nov. 13, 2014. In that case, the Civilian Board of Contract Appeals (CBCA) imposed sanctions on the VA for its “egregious” abuses of the discovery process. The following passage speaks for itself as to what the CBCA thought of the VA’s behavior in the case:  Continue Reading

Department of Defense Solicits Ideas for Flying Aircraft Carriers

Posted in Uncategorized

DARPA’s “artist concept” for a flying aircraft carrier (DARPA image)

Could a new generation of aircraft carriers change how future conflicts are fought from the sky? The U.S. Defense Advanced Research Projects Agency (DARPA) aims to find out. This month, DARPA, the agency charged with developing new military technologies for the Department of Defense, issued a Request for Information (RFI) for “Distributed Airborne Capabilities,” or in other words “Ideas for Transforming Planes into Aircraft Carriers in the Sky.” According to DARPA, flying aircraft carriers would expand the range of drones thereby allowing the military to conduct more unmanned air operations and reducing the number of missions where pilots are put at risk.

A look back at history shows that this is not the first time the U.S. military has experimented with the idea of flying aircraft carriers. Continue Reading