President Trump has signed Executive Order 13767 that directs a wall to be built on the Mexico-United States border. The Department of Homeland Security has sought proposals to design and build a prototype of the border wall, and many contractors have submitted offers. At the same time, several state and local governments (such as New York City, San Francisco, Berkeley, Oakland, New York, Illinois, and California) are considering or proposing legislation to prohibit contractors working on the border wall from contracting with that state/local government. These contractor “sanctions” are a complex, untested issue, and contractors bidding, or considering working, on the border wall project need to know that the issue is now in play. Such legislation, if adopted by a state/local government, will raise constitutional issues. Aside from due process and equal protection issues, there are at least two relevant U.S. Constitution clauses both of which may ultimately doom any proposed state/local legislation to sanction border wall contractors: the Supremacy Clause and the Dormant Commerce Clause. Continue Reading Possible Constitutional Issues with Proposed State/Local Sanctions Against Contractors Working on President Trump’s Border Wall
In what appears to be the first litigation concerning “intergovernmental support agreements” (IGSA), the Government Accountability Office (GAO) in Red River Waste Solutions, Inc., B-414367 (March 21, 2017) declared that it has jurisdiction to review the award of IGSAs (in this particular case an IGSA for garbage collection services).
Section 331 of National Defense Authorization Act for FY 2013 (FY2013 NDAA) authorized a public-public partnership mechanism called “intergovernmental support agreements” (IGSA). Specifically, the Department of Defense (DoD) agencies “may enter into an [IGSA], on a sole source basis, with a State or local government to provide, receive, or share installation-support services if the Secretary determines that the agreement will serve the best interests of the department by enhancing mission effectiveness or creating efficiencies or economies of scale, including by reducing costs.” However, IGSA’s may only be used when the “State or local government … providing the installation-support services already provides such services for its own use.” Furthermore, the FY2013 NDAA also requires that any underlying contract used by the State or local government to provide the installation-support services must be awarded on a competitive basis.
In the Red River Waste Solutions case, Red River protested the Army’s award of an IGSA to Vernon Parish, Louisiana, to provide garbage collection services at Fort Polk, Louisiana. The Army awarded Vernon Parish an IGSA to perform garbage collection at the Fort Polk, and in turn Vernon Parish extended its existing contract for garbage collection in Vernon Parish (with Progressive Waste Solutions of Louisiana) to also cover garbage collection at Fort Polk.
Red River argued that the Army’s award of the IGSA to Vernon Parish was “contrary to the ‘enabling statute’ that authorizes the award of IGSAs” because (1) Vernon Parish did not already provide the services being procured, and (2) because Vernon Parish had not conducted a competition under which Red River could compete for the required services. While GAO ultimately dismissed the protest as untimely, GAO’s decision provided several important take-aways for future procurements involving IGSAs: Continue Reading GAO has Jurisdiction to Review Award of an Intergovernmental Support Agreement
In these early days of Donald Trump’s administration, domestic sourcing requirements are receiving heightened focus. President Trump’s Jan. 24, 2017, “Presidential Memorandum Regarding Construction of American Pipelines” asks the Secretary of Commerce to “develop a plan under which all new pipelines . . . inside the borders of the United States . . . use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.” Yet, when a company is asked to certify to its customer that its products comply with domestic content law, the answer is rarely straightforward. Contractors should therefore be proactive and review the Buy America and the Buy American Acts. The penalties for non-compliance are serious and include civil or criminal False Claims Act violations, suspension or debarment, contract terminations and other claims against a contractor by the Government.
Buy America Act
The Buy America Act is the popular name for a group of domestic content restrictions that attach to specific funds administered by the Department of Transportation (DOT). The Buy America provision of the Surface Transportation Assistance Act of 1982, 23 U.S.C. § 313, state that the Secretary of Transportation “shall not obligate any funds authorized to be appropriated to carry out the Surface Transportation Assistance Act . . . unless steel, iron, and manufactured products used in such project are produced in the United States.” These funds are used to make grants to states and other non-federal government entities for various transportation purposes. Continue Reading President Trump Puts Buy America and Buy American Acts in the Spotlight – What Contractors Need to Know
Back in October 2016, we wrote about the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule) and how its implementation had been temporarily halted by a federal court in Texas. The Blacklisting rule would have allowed agencies to essentially debar contractors on a contract-by-contract basis if a contractor had a labor law violation on its record. Many in the contracting community lobbied hard against this rule, arguing (among other things) that the Blacklisting rule would put contractors at risk of inconsistent disqualification from procurements without the same due process rights that go along with agency suspension and debarment programs. Well, it now looks like Congress has decided to step in and flex a rarely used law to get rid of the Blacklisting rule for good.
Today, by a vote of 236-187, the House of Representatives passed a disapproval resolution pursuant to the Congressional Review Act to repeal the Blacklisting rule. Continue Reading House Votes to Repeal the Fair Pay and Safe Workplaces (“Blacklisting”) Rule
President Trump’s Executive Orders have been front page news for the past week, many of which have been quite controversial. Yesterday the President issued another Executive Order that, although unlikely to garner major media buzz, may be the most impactful yet for government contractors. The Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs, which some have referred to as the “Two-for-One” Order, is aimed at reducing the number of regulations across the federal government. The gist of the Order is that for every one new regulation that an executive branch agency proposes, it must repeal two existing regulations. In addition, the agency’s estimated cost of any new regulations must be offset by reductions in cost by repeal of existing regulations.
The Order makes exceptions for regulations pertaining to the “military, national security, or foreign affairs function of the United States,” “regulations related to agency organization, management, or personnel,” and any other category of regulations exempted by the Director of the Office of Management and Budget (“OMB”).
The problem with this Order is that its terms are vague, and the person charged with providing additional guidance on the Order has yet to be confirmed by the Senate. Continue Reading Trump’s Executive Order on Reducing Regulations Leaves Questions Unanswered
Two pieces of federal legislation that recently became law will have a major impact on government contractors seeking to protest Department of Defense (DoD) and Civilian Agencies task order awards. Some changes are for the worse, others are for the better. However, the best news for contractors is probably that some of the changes that were proposed did not make it into the final legislation.
2017 NDAA Divests GAO of Protest Jurisdiction Over of DoD Task Order Awards Between $10 Million and $25 Million
Signed into law Dec. 23, 2016, the 2017 National Defense Authorization Act (2017 NDAA) amends 10 U.S.C. § 2304c(e)(1)(B) by increasing the GAO’s jurisdictional threshold value for DoD task order protests from $10 million to $25 million. Naturally, this large increase greatly impacts contractors on DoD acquisitions. No legal remedy to protest DoD task orders less than $25 million will now exist, unless the protestor contends that the the order increases the scope, period, or maximum value of the contract under which the order is issued. Since DoD lobbied for this large increase, contractors can expect DoD will aim to issue task orders under the new $25 million threshold knowing those task order awards will not be subject to a protest at GAO.
Civilian Task Order Act Restores GAO’s Protest Jurisdiction Over Protests of $10 Million+ Civilian Agency Task Order Awards
The Government Accountability Office (GAO) Civilian Task and Delivery Order Protest Authority Act of 2016 (Civilian Task Order Act), signed into law Dec. 14, 2016, restores GAO’s protest authority over civilian task orders valued at over $10 million. The reinstatement of civilian task order protest jurisdiction at GAO is welcome news for disappointed offerors on civilian task order procurement, since they had no remedy during the prior three months to protest civilian agencies’ task order awards.
Although the increase in the DoD threshold to $25 million is unwelcome news, contractors can breathe a sigh of relief that other proposed protest reforms were not part of the final enacted 2017 NDAA. Those proposed changes included an attempt to require contractors earning more than $100 million in annual revenue to reimburse GAO for costs incurred for processing an unsuccessful GAO bid protest and to make an incumbent contractor-protestor forfeit profits earned on a bridge contract or extension received during the resolution of an unsuccessful GAO bid protest, and to preclude contractors from filing a bid protest at the Court of Federal Claims after unsuccessfully pursuing a protest at GAO. However, these proposed changes may not be dead forever. The 2017 NDAA mandates that DoD contract with an independent research entity to carry out a comprehensive study on the prevalence and impact of bid protests on Department of Defense acquisitions, including protests filed with contracting agencies, the Government Accountability Office, and the Court of Federal Claims. One of the focuses of the report is too analyze bid protests filed by incumbent contractors. Contractors should keep an eye out for this report, as it could be used as ammunition to limit bid protests rights in the future.
Sea Sheppard Conservation Society (“Sea Sheppard”) recently found itself in the unfortunate situation of being in an auction bidding war against a single ineligible bidder in a General Services Administration (“GSA”) auction, resulting in Sea Sheppard having to pay a substantially higher sum for two vessels than if only eligible buyers had been allowed to participate in the auction. Sea Sheppard submitted a claim contending that it should have been permitted to buy the vessels at lower prices than those it actually paid, because it was required to raise its own bid solely to beat out bids submitted by an ineligible bidder. In denying Sea Sheppard’s claim on appeal, the U.S. Civilian Board of Contract Appeal (“CBCA”) may have created a real dilemma for future contractors bidding in government auctions.
In December 2014, the GSA listed for sale two Coast Guard vessels via an online auction. As a condition to participate in the auction, all bidders were required to recognize that the sale was subject to specific Terms and Conditions (Standard Form 114C, April 2001). Under the “Eligibility of Bidders” provision, the Terms and Conditions generally required bidders to: (a) be over 18 years of age; (b) not be a government employee of certain agencies or relative of same, and (c) not be debarred. The Terms and Conditions also stated that bidding was not limited to U.S. Citizens, but some items would only be sold to U.S. Citizens. Also, the Terms and Conditions put bidders on notice that all property was subject to all applicable export laws and regulations, including International Trafficking in Arms Regulations (“ITAR”) 22 CFR Part 120, et seq.
Sea Sheppard participated in the auction, ultimately against one other bidder (“Bidder 2”). On the first vessel, the Pea Island, Sea Sheppard started with a bid of $100,000, and after submitting multiple bids, ultimately outbid Bidder 2 at $275,800. On the second vessel, the Block Island, Sea Sheppard also started with a bid of $100,000, with its last bid being $155,100, before being outbid by Bidder 2.
Subsequently, the GSA determined that Bidder 2 was ineligible because it was not a U.S. Citizen. Thus, GSA offered the Block Island to Sea Sheppard as the next highest bidder, at $155,100. Sea Sheppard requested a price of $100,000, but that was rejected by the GSA contracting officer. Sea Sheppard accepted the Block Island at $155,100. Continue Reading Government Auction Bidders Beware: CBCA Denies Relief to Bidder Whose Bid Price was Driven Up by an Ineligible Bidder
Last month, the U.S. Court of Appeals for the D.C. Circuit handed down an opinion in Rothe Development, Inc. v. U.S. Department of Defense affirming a lower court’s 2015 decision denying a challenge to the constitutionality of Small Business Administration’s (“SBA”) 8(a) business development program (“8(a) Program”). However, reading the majority and dissenting opinion leads one to seriously question whether the book is truly closed on this case and/or other challenges to the constitutionality of the 8(a) Program.
As the D.C. Circuit put it, the 8(a) Program permits the SBA “to enter into contracts with other federal agencies, which the SBA then subcontracts to eligible small businesses that compete for the subcontracts in a sheltered market.” To be eligible to participate in the 8(a) Program, a business must be owned by “socially and economically disadvantaged” individuals, meaning persons “who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”
In the Rothe Development case, plaintiff Rothe, who was not an 8(a) Program participant (and who claimed it was not economically and socially disadvantaged and therefore not eligible for the 8(a) Program), filed a lawsuit against the U.S. Department of Defense (“DoD”) and SBA in federal court challenging the constitutionality of the 8(a) Program. Rothe alleged that the 8(a) Program violated Rothe’s right to equal protection under the Due Process Clause of the Fifth Amendment. Importantly, Rothe’s challenge was limited to whether the statutory provisions defining “socially disadvantaged” small business owners (15 U.S.C. § 637(a)(5)) were facially unconstitutional.
In June 2015, the U.S. District Court Judge Ketanji Brown Jackson issued summary judgment in favor of DoD and SBA, ruling that the 8(a) Program was constitutional on its face. Judge Jackson ruled that because the statutory provision at issue (15 U.S.C. § 637(a)(5)) contained a racial classification, the strict scrutiny test applied. However, Judge Jackson also ruled that the statutory provision was facially constitutional under the strict scrutiny test because the government satisfied both elements of the test: (1) the government articulated an established compelling interest for the 8(a) Program—namely, remedying race-based discrimination and its effects, and (2) the 8(a) Program is narrowly tailored to achieve the established compelling interest.
Rothe appealed, and this month the D.C. Circuit denied Rothe’s appeal. Interestingly, even though the D.C. Circuit found the statute constitutional, the D.C. Circuit’s reasoning significantly departs from the reasoning in Judge Brown Jackson’s decision. A two-judge majority on the D.C. Circuit concluded that the challenged statutory provision did not contains a racial classification, Continue Reading SBA’s 8(a) Program Survives Constitutionality Challenge … For Now
While we hate to be the bearer of bad news, disappointed bidders may soon face a significant obstacle to protest an agency’s award decision of a task or delivery order. Barring prompt Congressional action (a phrase that is rarely a good thing), the Government Accountability Office’s (“GAO”) jurisdiction over most civilian agency task or deliver order protests conducted will expire on September 30, 2016, leaving contractors little chance to challenge civilian agency award decisions.
Current Task or Delivery Order Bid Protest Jurisdiction
Jurisdiction for bid protests of task or delivery orders has endured a tumultuous history. Over the past 20 years, Congress has limited and expanded the task or delivery order bid protest jurisdiction numerous times.
Currently, a contractor’s ability to protest the “issuance or proposed issuance of a task or delivery order” is governed by two separate, but similar, statutes: (i) 41 U.S.C. § 4106 (applicable to civilian agencies); and (ii) 10 U.S.C. § 2304c (applicable to the Department of Defense). Both statutes contain identical language generally prohibiting bid protests of task or delivery order procurements, except under the following circumstances: Continue Reading “Sunset” Date Draws Closer on GAO’s Jurisdiction to Review Bid Protests of Civilian Agency Task Order Procurements
On September 2, 2016, the Department of Defense (the “DoD”) issued a memorandum entitled “Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for Commercial Items.” This new guidance effectively rescinds prior guidance issued by the DoD in February 2015 regarding commercial item determinations, and to preview guidance required by Section 831 of the FY 2013 National Defense Authorization Act (“NDAA”). The latest memorandum provides DoD’s guidance while awaiting the finalization of a proposed rule on commercial items (81 Federal Register 53101) implementing Sections 851-853 and 855-857 of FY 2016 NDAA and Section 831 of the FY 2013 NDAA.
DoD’s recently released guidance aims to highlight the underlying tenets of the FY 2016 NDAA legislation to improve the consistency and timeliness of commercial item determinations, and the price reasonableness determination for those items. Continue Reading Department of Defense Rescinds 2015 Commercial Items Guidance