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
When a government contractor is terminated for reasons other than default, the response from the contractor is often to evaluate the contracting officer’s decision and rationale for the termination and determine if an appeal is warranted. Government contractors sometimes appeal a contracting officer’s decision to terminate their contract by alleging bad faith and an abuse of discretion. While the contractor may legitimately believe that the contracting officer acted in bad faith or abused their discretion, proving its allegations and convincing the Court of Federal Claims or a Board of Contract Appeals to reverse the contracting officer’s decision is no simple task. Even a contracting officer who terminated a contract based on a mistaken understanding of the facts and circumstances may not constitute bad faith or an abuse of discretion.
Recently the Postal Service Board of Contract Appeals (“PSBCA”) had the opportunity to address this situation in the consolidated appeals of Cook Mail Carriers, Inc. v. United States Postal Service and Patricia J. Sasnett v. United States Postal Service. PSBCA No. 6583, 6584 (March 24, 2017). In these appeals two government contractors – Cook Mail Carriers, Inc (“Cook”) and Patricia J. Sasnett (“Sasnett”) – who provide mail transportation services in Alabama for the US Postal Service were terminated due to revisions in the mail routes directed at simplifying the transportation network, pooling resources, managing workloads, and gaining contract administration efficiencies. The contracting officer invoked the Postal Service’s “Termination with Notice” clause in order to terminate these contracts, a clause that allows either party to terminate the contract, without cost, provided proper notice (60 days) is given.
When the contracting officer decided to terminate the Cook and Sasnett contracts he believed that the need for revised routes was due to a mail processing plant in Gadsden, Alabama being closed and merged into a larger facility in Birmingham, Alabama. However, after the termination, the contracting officer learned that the Gadsden facility had previously been closed and the reason for the revised routes was due to mail transportation hubs (as opposed to processing plants) being relocated to Fort Payne and Boaz, Alabama.
Cook and Sasnett appealed the contracting officer’s decision arguing, among other points, that the contracting officer’s decision to terminate the contracts on 60 days’ notice (as permitted by the Termination with Notice provisions of the respective contracts) was made in bad faith or constituted an abuse of his discretion.
While the contracting officer terminated the contracts under the Termination with Notice clause, which does not include any express limitation to its use, the contracting officer’s exercise of the clause is not truly unlimited. A decision to exercise that clause can breach the contract if it was made in bad faith or as an abuse of discretion. Continue Reading Does a Contracting Officer’s Mistake about the Reasons for a Termination Constitute Bad Faith or an Abuse of Discretion?
Nearly 100 days into the new presidency, all eyes are on which of his campaign promises President Trump will implement next. One such promise put into motion is the President’s estimated $1 trillion infrastructure plan. Touted during his campaign as a means to stimulate job growth, the President’s plan may come with more federal deregulation than the construction and government contracting industries anticipated, including possible repeal or suspension of the Davis Bacon Act (DBA).
Introduced in the midst of the Great Depression, Congress enacted the DBA as a means to prevent failing wages. Eighty years later, the DBA has become synonymous with federal contracting. Also known as the federal prevailing wage statue, the DBA requires payment of prevailing wages on federally funded or assisted construction projects for contracts in excess of $2,000. Critics of the DBA argue that the prevailing rates artificially and unreasonably increase project costs, and that the U.S. Department of Labor is unable to develop an efficient process for determining market-rate wages. Proponents – particularly labor unions – argue the DBA prevents a “race to the bottom,” increasing productivity and improving local economies. Continue Reading President Trump’s Comments Stir Rumors of Possible Repeal or Suspension of the Davis Bacon Act
A federal judge in the Western District of Washington has ruled that tribal employees may still be liable in their individual capacities under the False Claims Act, even if Native American tribes themselves are protected from such suits by sovereign immunity. This interpretation could have important implications for Alaska Native-owned and Native American-owned businesses as federal courts across the country confront a range of tribal sovereignty issues in the coming months. Continue Reading Tribal Employees Potentially Liable Under False Claims Act, Washington Federal Court Finds
In Roy Allen Slurry Seal, Inc. v. American Asphalt South, Inc., (2017) 2 Cal.5th 505, the California Supreme Court recently ruled that disappointed bidders could not state a claim for the tort of intentional interference with prospective economic advantage against companies that obtain public contracts based on business practices that allegedly violate employment laws.
In this case, Roy Allen and another general contractor, Doug Martin Contracting, Inc., asserted the tort of intentional interference with prospective economic advantage in their lawsuit against American Asphalt, in which they alleged that they had lost a large number of public contracts to American Asphalt based on American Asphalt’s ability to submit deflated bids due to lower labor costs derived from not paying prevailing wages or overtime compensation to its workers. The trial court sustained American Asphalt’s demurrer without leave to amend, but the court of appeal reversed, holding that plaintiffs had stated a claim for intentional interference with prospective economic advantage. The California Supreme Court said no, plaintiffs did not state a claim. Continue Reading California Supreme Court Says No to Tortious Interference in Public Bidding
Contractors often sign modifications and change orders without being fully aware of the rights they may be waiving under the modifications’ terms. While the federal government’s standard modification form (Standard Form 30) does not contain waiver language, government agencies generally add such language to ensure that the modification forecloses future claims by the contractor for work associated with the modification. Unwitting contractors who later return to recover costs they had not previously requested are often surprised when they find out the extent of what they have forfeited under previous modifications (e.g., claims for overhead, cumulative impact, etc.). While the government enjoys such finality in costs, a recent Armed Services Board of Contract Appeals (ASBCA) decision highlights the fact that these waivers cut both ways.
In Appeal of Supply & Service Team GmbH, ASBCA No. 59631 (March 1, 2017) the ASBCA held that the Army lost its right to recoup overpayments to a contractor through broad waiver language it included in a modification. Continue Reading Army’s Broad Waiver in Bilateral Modification Waives its own Right to Recover Overpayments
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
Unlike bid protests filed at the Government Accountability Office (“GAO”), there is no automatic Competition in Contacting Act (“CICA”) stay that applies to protests filed at the U.S. Court of Federal Claims (“COFC”). Instead, a protester wishing for the contract award to be halted during the pendency of a COFC protest has two avenues of relief: (1) the government agrees to voluntarily stay contract performance/award during the pendency of the protest, or (2) seek a temporary restraining order (“TRO”) or preliminary injunction from the COFC enjoining contract performance/award during the pendency of the protest. Until now, obtaining a TRO required, at minimum, the protester demonstrate a likelihood of success on the merits (and that it will suffer irreparable harm absent injunctive relief). But, a COFC decision this week may reflect a significant change to the COFC’s standard for granting a TRO in a bid protest case. Continue Reading Did the U.S. Court of Federal Claims Just Make it Easier to Obtain a TRO in a Bid Protest?
Last month, we wrote about the House passing a resolution (H.J. Res. 37) pursuant to the Congressional Review Act to repeal the Fair Pay and Safe Workplaces rule (commonly known as the contractor “Blacklisting” rule). At the time we predicted the resolution would also pass the Senate and be signed by President Trump. On March 6, 2017, the Senate passed the joint resolution, and joint resolution was signed by President Trump yesterday, permanently nullifying the Blacklisting rule before it ever took effect. Continue Reading President Trump Signs H.J. Res. 37 Canceling the Fair Pay and Safe Workplaces (“Blacklisting”) Rule
It is not uncommon for a disappointed offeror in a fixed-price procurement to be astonished at how low the awardee’s proposal price ends up being. This astonishment can lead to the desire to file a bid protest based on the argument that the awardee’s price is unreasonably low. Unfortunately, in many of the instances this protest argument is simply not viable because the solicitation did not require (nor allow) the government to conduct a “price realism” analysis. Just this month, GAO dismissed such a protest, because the solicitation did not contain a price realism clause. Why is this argument raised so often in the absence of a “price realism” clause? Because both contractors and the government are commonly confused by the distinction between price reasonableness and price realism.
Price Reasonableness vs. Price Realism
It seems like every few months, GAO or the Court of Federal Claims is issuing a decision wherein it needs to explain the distinction between price reasonableness and price realism because the protester has argued the awardee’s price is “unreasonably low.” GAO recently reiterated this distinction in Mountaineers Fire Crew, Inc.; ASP Fire, LLC; Diamond Rd. Maint. Inc. (d/b/a Diamond Fire), B-413520.5 et al., Feb. 27, 2017: Continue Reading Price Realism Bid Protests: When Can You Argue that the Awardee’s Price is Too Low?