With every new administration, there is both great uncertainty and opportunity in federal government contracting. To help you navigate the rough seas of doing business with the federal government in this new administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors large and small, novice and seasoned. Session topics include:
– Ten Things Every Contractor Needs to Know When Doing Business with the Federal Government
James F. Nagle | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Writing a Winning Technical Proposal – From the Contracting Officer’s Perspective
Mona Carlson, Mary Jo Juarez | PTAC Kitsap Economic Dvlpmnt. Alliance – Navy Contracting Officer (retired) | Kitsap, WA
 
– Keys to Winning Bid Protests and Defending Contract Awards
Adam K. Lasky | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Navigating the Complex Rules Governing Data Rights
Jonathan M. Baker | Crowell & Moring LLP | Washington D.C.
 
– Overlooked Risks of Being a Lower-Tier Government Contractor
Alan C. Rither | Pacific Northwest National Laboratory | Richland, WA
 
– Mistakes to Avoid in the Claims and Litigation Process
Donald G. Featherstun | Seyfarth Shaw LLP | San Francisco, CA
 
– Adapting to Buy American and Domestic Preference Rules in the Trump Administration
Howard W. Roth | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Understanding & Managing the Risk of Suspension & Debarment
Dominique L. Casimir | Arnold & Porter Kaye Scholler LLP | Washington D.C.

Thursday, November 16th 

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A recent case makes clear the importance of focusing on the fundamentals, such as knowing the rules on who the government is required to pay on a government contract.  In The Hanover Insurance v. United States, the U.S. Court of Federal Claims recently found that a surety’s letter to the Government adequately notified it of the contractor’s default of bond agreement, triggering the surety’s equitable subrogation right to payments issued by the Government.

In that case, the surety, Hanover Insurance Company (Hanover), overcame a summary judgment motion filed by the Government, concerning a Veterans Administration (VA) contract awarded to B&J Multi-Service Corporation (“B&J”) for facilities maintenance at a VA facility in West Haven, Connecticut.  The Government paid termination for convenience (“T/C”) costs to B&J to which Hanover as surety claimed it was entitled.

The Government asserted that Hanover, as surety to B&J, had not given proper notice of B&J’s default, thereby precluding any Government obligation to pay Hanover directly.  The Government argued proper notice was not given because Hanover did not invoke the precise words “the principal is in default” prior to the VA’s payment to B&J.  As evident from the court’s opinion, the Government was aware that Hanover was making payments to B&J’s subcontractors.  Hanover put the Government on notice that the funds for termination for convenience should not be paid directly to B&J, because Hanover was asserting a subrogation right to the T/C funds.  However, the Government ignored the surety and paid the termination for convenience funds directly to B&J. Continue Reading Termination for Convenience: Government Pays the Wrong Party, No Magic Words Needed to Trigger Surety’s Right of Equitable Subrogation

Under the National Defense Authorization Acts (NDAAs), Congress provides legislation on various aspects of how the Department of Defense (DOD) defines and purchases commercial items. In July, Government Accountability Office (GAO) released a study on detailing (1) trends in the DOD’s acquisition of commercial items; and (2) recent NDAA changes from fiscal years 2013-2017 related to procurement of commercial items and actions taken by DOD in response to this legislation.

The Federal Acquisition Streamlining Act of 1994, of course, established a preference within the federal government to procure commercial items rather than items developed exclusively for the government.  “Commercial items” are generally defined as products and services readily available in the commercial marketplace. Purchasing commercial items enables the DOD to participate in the commercial marketplace (when appropriate) and to take advantage of market innovations and reduce its acquisition costs. Despite this preference, the GAO study shows the DOD has been slow to embrace the preference to buy commercial items – but why?  Continue Reading GAO Reports Decrease in Department of Defense Commercial Item Acquisitions

Oles Morrison attorney Howard W. Roth commented to the L.A. Times on proposed “Buy American” provisions in NAFTA. Howard explained that while proponents for “Buy American” cite a Government Accountability Office review stating that the U.S. has available twice as much government procurement to foreign companies, a lot of other countries just do not have the same military budget and needs as the U.S. “Denmark sells us a lot of goods and services,” he said, “but there’s not a whole lot we can sell to Denmark. Its defense budget is next to nothing.”

To read the full article, click here.

On July 25, 2017, the U.S. Department of Labor (DOL), Wage and Hour Division, issued a memorandum increasing the health and welfare fringe benefits rate for contracts covered by the McNamara-O’Hara Service Contract Act (SCA).

The SCA requires contractors and subcontractors performing work on federally funded prime contracts in excess of $2,500 to pay service employees no less than the wage rates and fringe benefits required by the locality in which the contract is being performed or the rates and benefits included in a contractor’s collective bargaining agreement.  Each year the DOL adjusts its health and welfare fringe benefits rates, referred to as “wage determinations.”  This year, the DOL issued two adjustments – one for SCA covered contracts, and another for SCA covered contracts that are also covered by Executive Order 13706.

As to the former category, the DOL increased the benefits level from $4.27 per hour to $4.41 per hour.  Hawaii’s rates – set differently pursuant to § 2(a)(2) of the SCA because it already provides certain benefits under its individual state law health care law, the Hawaii Prepaid Health Care Act (HPHCA) – increased from $1.78 to $1.91 per hour.

For those contracts covered by Executive Order 13706, the health and welfare rates will be slightly lower.  Nearly two years ago, President Obama signed Executive Order 13706, requiring contractors that enter into certain federally funded contracts provide covered employees with up to 56 hours (seven days) of paid sick leave in addition to paid leave for family care.  The DOL issued a Final Rule in accordance with the Executive Order on Sept. 30, 2016.  To help offset the costs of complying with EO 13706, the DOL set the health and welfare fringe benefits rates to $4.13 per hour, and $1.63 per hour for contractors required to comply with the HPHCA.

The new rates go into effect for service contracts awarded after Aug. 1, 2017.

In April, we wrote about  how President Trump’s estimated $1 trillion infrastructure plan may come with possible repeal or suspension of the Davis Bacon Act (DBA).  A few months later, and the Trump Administration seems to be singing a different tune.  More recently, comments from Transportation Secretary Elaine Chao suggest that the administration’s rebuilding package will maintain wage requirements mandated by the DBA.

At a June 8, 2017, House Transportation and Infrastructure Committee hearing, Secretary Chao answered questions related primarily to proposed plans to update the nation’s airports and corresponding changes to the Federal Aviation Administration.  When Congressman Scott Perry (R-PA) inquired about raising the monetary threshold for the Davis-Bacon prevailing wage requirements, Secretary Chao responded that for the “infrastructure projects … the administration’s proposal is to include Davis-Bacon.”  The Secretary added she would “like to see it passed,” and understood “that without the provision, the minority would not sign on.”  When Rep. Perry pushed further, asking “no changes at all?” Secretary Chao simply responded “I’m interested in getting the infrastructure bill passed.”  As mentioned in the previous article, Trump may choose to include DBA protections in order to gain support from typically pro-DBA Democrats for the administration’s infrastructure plan.

While Trump made a number of veiled comments surrounding his infrastructure plan during what the White House termed “Infrastructure Week,” federal contractors are still standing by waiting to see which (if any) of the DBA requirements will survive.

14567606128_ee826cf9bd_kFollowing Executive Order 13788 issued April 18, 2017, “Buy American and Hire American,” contractors and subcontractors should prepare for increased enforcement of the Buy American Act (BAA), Buy America legislation, the “Little Buy American Acts,” and related civil or criminal prosecution under the False Claims Acts (FCA).

In recent years, the Department of Justice has increased efforts to prosecute FCA violations in concert with BAA or Buy American violations. In 2016 alone the Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases under the FCA, its third highest recovery.

Every contractor or subcontractor on a federally funded project supplying construction materials must certify that the materials used are in compliance with the BAA.  Construction work for the DOT, DoD, and other federal agencies may trigger compliance requirements under both with the BAA and Little Buy American Acts. Certificates of compliance, however, can be fruitful grounds for federal prosecutors looking for FCA violations

When a certificate of compliance does not accurately reflect the origin of the materials used under the BAA or Little Buy American Acts, there is a high likelihood that FCA liability may follow. Executive Order 13788 is likely to bring additional attention to the dual enforcement of buying American under the FCA.

A few recent cases illustrate the FCA risks arising from BAA and related laws that require compliance certifications:

  • In 2016, Wisconsin-based architectural firm Novum Structures LLC entered a guilty plea and agreed to pay $3 million to resolve its criminal and civil liability under the False Claims Act 18 U.S.C. § 1001 arising from its concealment of the use of foreign materials on construction projects involving federal funds. Novum has also agreed not to contest its debarment from federal funded projects.

Continue Reading Uptick in Buy American Enforcement Means Increased False Claims Act Risks

6869764745_7087710505_zIt is common for corporations to compensate executives (and other employees) based upon stock price performance.  Tax implications lend support for this practice with respect to high-paid employees, as executive compensation is only deductible up to a limit of $1 million per year, so companies are inclined to compensate executives with stock performance-based compensation because it is not subject to a deductible cap.

However, the tax benefits of stock performance based compensation lead to competing interests for government contractors with respect to allowable compensation.  These contractors must be cautious with stock performance based compensation because the Federal Acquisition Regulation (FAR) puts several restrictions on what is allowable compensation.  The restriction that most frequently comes up is the FAR’s own cap on allowable compensation ($487,000 as of 2014 and adjusted for inflation annually).  However, unlike the tax code which treats stock performance based compensation favorably, FAR 31.205-6(i) deems compensation based upon stock performance strictly an unallowable cost, stating in part: “Any compensation which is calculated, or valued, based on changes in the price of corporate securities is unallowable.”

The rationale for deeming stock performance based compensation an unallowable cost has largely been based on the view that compensation is to be based on the employees’ performance, and compensation based on stock prices is not sufficiently related to work actually performed.  A further concern that has been raised is the possibility of short term stock price manipulation by managers.

While these compensation restrictions are not a new development (the FAR provision was first implemented in 1983 and is frequently revised), companies sometimes seek to find ways to indirectly incorporate stock performance into compensation in a way that would deem such compensation allowable under FAR, presumably to allow for the best of both worlds under both tax code and FAR.  For example, in one recent ASBCA decision, the Board wholly rejected the contractor’s argument that because (a) the pool of cash available to the employees was set separately from its stock price, and (b) the formula for calculating compensation was based upon performance relative to its peers, and not on the contractor’s stock price alone, FAR 31.205-6(i) was not applicable.

The takeaway from this recent decision is that the interpretation of this FAR provision continues to be strictly construed, and if contractors with cost reimbursement contracts (and in some cases fixed price contracts that are sole sourced) intend to maximize the amount of allowable compensation to employees, they must balance both the FAR cost caps, and the structure of the compensation packages, avoiding stock performance based compensation entirely.

Image Courtesy of Flickr (licensed) by 401(K) 2013

7890051894_a68fa1ed9a_kThis post is the second in a multi-part series discussing the fundamental steps that protesters (and their outside counsel) can take to enhance their chances of success at GAO.  Previously, in Part 1 of this series, we discussed the importance of making the most of your debriefing.  Today, in Part 2 of the series, we discuss why its important to frame initial protest arguments with the big picture (obtaining information necessary to identify winning supplemental protest arguments) in mind.

In addition to arguments raised in the initial protest filing, a protester may file supplemental protest arguments based on new information learned during the course of the protest.  A supplemental protest argument must be filed within ten days of when the protester knew, or should have known, of the basis for the supplemental protest argument.  Finding and filing viable supplemental protests is a huge driver of your chances of succeeding at GAO.  In fact, a recent study showed that the odds of a protester having its challenge sustained by GAO nearly double when a protester files supplemental protest arguments.  So, filing strong supplemental protest arguments significantly increases your chances of winning a protest.  What many protesters do not realize is that the key to finding a winning supplemental protest arguments starts with how you frame your initial protest arguments. Continue Reading Fundamentals to Winning Bid Protests at GAO — Part 2: Framing Initial Protest Arguments with the Big Picture in Mind

060110-N-3019M-001In a decision publicly released June 5, 2017, the U.S. Government Accountability Office (GAO) ruled in favor of Oles Morrison Rinker & Baker LLP’s (“Oles Morrison”) client, TOTE Services, Inc. (TOTE), in a bid protest challenging the U.S. Navy – Military Sealift Command’s (MSC) award of $32 million O/M contract for the Sea-Based X-Band Radar (SBX-1).  The SBX-1 is the floating, self-propelled, mobile radar system used by the U.S. Missile Defense Agency to detect and track incoming ICBMs fired at the United States.

GAO sustained TOTE’s protest, holding that MSC had committed multiple errors in the evaluation of the awardee’s past performance.  Namely, MSC improperly credited the awardee for relevant performance without considering the quality of that performance, and credited the awardee for positive performance without considering its relevance.  GAO also held that MSC lacked a reasonable basis to conclude that the awardee’s singular past performance contract of its own was “very relevant.” Continue Reading Oles Morrison’s Government Contracts Team Wins GAO Bid Protest Challenging Award of O/M Contract for Missile Defense Radar Vessel – SBX-1