James F. Nagle will give a special presentation at The Seminar Group’s upcoming 23rd Annual Washington Construction Law conference on September 15 at the Hilton Seattle. In Jim’s federal construction law presentation, he will provide an update on the False Claims Act, new programs from the Small Business Administration and other new developments affecting construction law. Guests of Jim are eligible for a $100 discount with the promo code “FAC100.” Continue Reading
On September 15, join Adam Lasky, partner in Oles Morrison’s Government Contracts Practice Group, along with Laurie Davis, senior contracting officer of Naval Sea Systems Command, as they discuss lessons learned from bid protests concerning cost or price realism analysis. In this webinar, Adam and Laurie will show procurement officers and contractors how they can avoid these same pitfalls and will focus on the following topics: Continue Reading
The Armed Services Board of Contract Appeal’s (ASBCA) decision in BAE Systems Tactical Vehicle Systems LP, ASBCA Nos. 59491, 60433 (July 25, 2016), denying the government’s motion to stay appeals due to a parallel False Claims Act (FCA) case in federal district court is an important reminder that the agency boards of contract appeals do not have jurisdiction over fraud. The decision underlines the CDA jurisdictional mandate and required statutory government contracts expertise of board judges to decide federal contractor claims, and the right of the contractor to have such claims decided by the board even when a fraud case is pending in federal court. Therefore, determination of a Contract Disputes Act (CDA) claim due to alleged defective pricing under the Truth in Negotiations Act (TINA) may proceed to a decision even if there is a district court FCA case concerning the same defective pricing allegation. This decision also highlights the benefit to a contractor of electing the agency boards over the Court of Federal Claims (COFC), as the government cannot assert a fraud counterclaim as may be done in a CDA claim action at the COFC.
The appeals concern a $56M CDA government claim that BAE provided defective cost or pricing data in connection with award of the Army’s Family of Medium Tactical Vehicles and BAE’s CDA TINA offset claim of $65M. The government moved to stay the appeals due to a civil defective pricing FCA case in federal district court. The ASBCA denied the motion to stay and lifted a temporary stay.
Four Factors Considered In Parallel Proceedings
In denying the motion the ASBCA considered four factors: (1) whether the facts, issues, and witnesses in both proceedings were substantially similar; (2) whether the on-going investigation or litigation would be compromised by going forward with the appeal; (3) the extent to which the proposed stay could harm the non-moving party; and (4) whether the duration of the requested stay is reasonable. Continue Reading
In the U.S. Small Business Administration (SBA) Office of Business Development’s most recent report to Congress, SBA’s statistics reflect that approximately 23 percent of companies that complete the 8(a) program either cease to exist, substantially curtail operations, or have no available information within three years of graduation from the program. Some of these recent graduates were previously protégés in the 8(a) mentor-protégé program, and many could certainly benefit from becoming protégés again under SBA’s new small business mentor-protégé program. But will former protégés be eligible to become protégés again under the new program? In theory, the answer is yes. However, there are restrictions in the new program that former 8(a) protégés will need to keep in mind when applying to be protégés in SBA’s new small business mentor-protégé program.
Restrictions on the Number and Duration of Mentor-Protégé Relationships
One of the challenges for SBA in crafting the new regulations was creating a maximum duration and number of mentor-protégé relationships under the new program, as well as making corresponding changes to the 8(a) program. This was not an issue in the past under SBA’s 8(a) mentor-protégé program because mentor-protégé relationships would terminate as a result of the protégé graduating from the 8(a) program (except for on already awarded contracts). But, since contractors do not “graduate” after a set time from the other small business and socio-economic programs, SBA felt it was necessary to set term-limits on mentor-protégé relationships. Continue Reading
Yesterday, we provided an overview of eleven of the biggest changes coming as a result of SBA’s release of its final rule expanding the mentor-protégé program to all small business. One of the changes we noted was that, in small business set-asides procurements, agencies will be required to consider projects performed by the individual members of a mentor-protégé joint venture offeror when evaluating experience/past performance.
Today we dissect this specific change, and examine whether it actually benefits mentor-protégé joint ventures. Arguably, this change does more harm than good to mentor-protégé joint ventures.
One thing the new rule solves is that it prohibits agencies from limiting consideration to projects performed by the joint venture itself when evaluating the experience/past performance of a joint venture offeror in a small business set-aside. While such restrictions (as ridiculous they were) were sometimes upheld by GAO when protested, these restrictions were not common, and when an agency lacked a legitimate reason for these restrictions they were often found unduly restrictive of competition and improper by GAO. So, since these restrictions were not common place, and often an agency voluntarily lifted such restrictions if protested, the benefit to mentor-protégé joint ventures from this new rule may be rather limited.
On the other hand, the new rule does not solve, and possibly worsens, a related and more pressing problem for mentor-protégé joint ventures in experience evaluations — where the agency considers the experience of both the mentor and protégé, but then downgrades the joint venture’s experience rating on account of the protégé’s lack of experience (despite the fact that the mentor has plenty of experience). Continue Reading
This week, the U.S. Small Business Administration (SBA) published its long awaited final rule providing for a major expansion of its mentor-protégé program. These regulations, which represent monumental changes to the federal contracting landscape (for small and large businesses), will go into effect August 24, 2016. In the coming days and weeks we will publishing a number of posts breaking down the impact of these changes in greater detail.
Today, we begin by highlighting eleven of the most important changes coming next month as a result of these new regulations:
- SBA has created a second mentor-protégé program, which will be open to all small businesses, with benefits similar to those available under SBA’s existing 8(a) mentor-protégé program
SBA will be starting a second mentor-protégé program open to all small business, with benefits and requirements similar to those in SBA’s existing 8(a) Mentor-Protégé Program. Mentor-protégé joint ventures approved under the new small business program will be considered a small business for any procurement that the protégé, on its own, would be considered small. For example, an approved mentor-protégé joint venture under the small business program, with the protégé being a WOSB, will qualify as small for any small business set-aside or WOSB set-aside that the protégé would qualify for on its own, but would not qualify for 8(a) or SDVO or HUBZone set-asides. SBA will continue running the 8(a) mentor-protégé program separately (with some revisions), and SBA has tailored the 8(a) and small business mentor-protégé programs to be as similar as possible. An 8(a) firm will be eligible to submit a mentor-protégé application under either program.
- Protégés no longer have to be quite as small to qualify for SBA’s mentor-protégé programs
Previously, to be a protégé under the 8(a) mentor-protégé program, a firm had to be less than half the size of the size standard applicable to its primary NAICS code, or being in the developmental stage of the 8(a) program, or have never received an 8(a) contract. Under the new regulations, a firm will only need be smaller than the size standard of its primary NAICS code. This new rule will apply to both the 8(a) and small business mentor-protégé programs.
- Mentor-Protégé joint ventures will be tracked through SAM.gov
In order to facilitate the tracking of awards to mentor-protégé joint ventures, all mentor-protégé joint ventures in either SBA program will be required to register the joint venture as a separate entity in SAM.gov, with its own unique DUNS number and CAGE code. The firm’s SAM.gov registration must also be identify the firm as a joint venture, and must identify the members of the joint venture.
- There will be no open/closed enrollment periods (for now)
Because of the expansion of the mentor-protégé program to all small businesses, SBA anticipates an influx in applications to the program. As a result of this expected influx, SBA had considered utilizing open and closed enrollment periods. Instead, for now, SBA will accept applications to the new mentor-protégé program at any time. However, SBA has left open the possibility of switching to open/closed enrollment periods in the future if the need arises. To help facilitate the review and approval of applications, a separate unit will be created within SBA’s Office of Business Development whose sole function will be to process mentor-protégé applications. In addition, contrary to previous statements by SBA, the new program is not being launched merely on pilot basis.
- The end of “populated” mentor-protégé joint ventures
Until now, 8(a) mentor-protégé joint ventures could be “populated” (persons performing the contract work would be employed directly by the joint venture) or “unpopulated” (persons performing the contract would be employed by the partners to the joint venture). Because of the difficulties in tracking the benefits gained by the protégé in a populated joint venture, SBA will required all mentor-protégé’s in either of its program to be unpopulated (though they may still be populated with administrative personnel). Continue Reading
Last 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:
- The claim does not merely request payment, but also makes specific representations about the goods or services provided; and
- 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
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.
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
The 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