The Department of Defense (“DoD”) recently issued a final rule regarding contractor disclosures of defective pricing issues on DoD contracts, which can arise where the contractor’s certified cost or pricing data is inaccurate, incomplete or is not current.  In such cases, these errors and omissions can result in significant contract overpayments by the government.  While the new rule incentivizes contractors to voluntarily disclose defective pricing matters, the rule’s impact may be somewhat muted by contractors’ existing mandatory disclosure obligations under the Federal Acquisition Regulation (‘FAR”).

On May 4, 2018, DoD issued Defense Federal Acquisition Regulation Supplement (“DFARS”) 215.407-1(c)(i), Defective certified cost or pricing data.  The new rule, which can be found here, provides that, when in receipt of a contractor’s voluntary disclosure of a defective pricing matter, the contracting officer will discuss the level of involvement needed from the Defense Contract Audit Agency (“DCAA”) in reviewing the disclosure, which can range from a technical review of discrete cost elements, to a limited scope audit, or the requirement for a full scope audit of the contractor.  The contracting officer is, at a minimum required to discuss with DCAA:

  • The completeness of the contractor’s voluntary disclosure on the affected contract;
  • The accuracy of the contractor’s cost impact calculation for the affected contract; and
  • The potential impact on existing contracts, task or deliver orders, or other proposals the contractor has submitted to the government.

Moreover, although not directly stated in the rule, the analysis may, in practice, adopt many or all of the steps that DCAA currently undertakes (as set forth in DCAA’s Contract Audit Manual Section 4-707.7 regarding DoD’s Contractor Disclosure Program) to determine whether an audit is necessary in connection with all disclosures, including those involving contract overpayments. These factors include:

  • How the contractor discovered the disclosed matter;
  • The contractor’s methodology for quantifying the cost impact;
  • Whether the contractor took corrective action(s) in accordance with their business ethics awareness and compliance program;
  • Whether the disclosed subject matter is an isolated incident or appears to be systemic in nature;
  • Whether the contractor appears to have included all directly associated costs and related burdens;
  • Whether the contractor appears to have removed expressly unallowable costs associated with the incident;
  • Whether the contractor is planning to make a refund or credit to the government; and
  • The impact on currently planned and in-process audits that may be affected by the disclosed issue.

In any event, the new DoD rule is designed to encourage more voluntary disclosures by contractors on defective pricing issues on DoD contracts.  Because DoD contracting officers now have the discretion to request less than a full audit on the contractor, the new rule encourages contractors to voluntarily disclose defective pricing issues earlier and in a fulsome manner, as doing so may avoid the need to conduct a full audit in favor of a less burdensome and expedient approach.  In this regard, DFARS 215.407-1(c)(i) modifies, by relaxing, the requirement in FAR 15.407-1(c) that contracting officers must request a DCAA audit (previously read to be a full audit) regarding the accuracy, completeness, and currency of the contractor’s certified cost or pricing data.

While the effectiveness of DFARS 215.407-1 remains to be seen, the incentives it provides should encourage early engagement with the government on defective pricing issues, particularly due to the potentially serious consequences that such matters pose for contractors, which can include false claims implications.  However, notwithstanding the new rule,  contractors should not overlook their existing disclosure obligations, including whether they may already have an obligation to disclose defective pricing matters under the FAR’s mandatory disclosure rules.

Since December 2008, FAR 9.406-2(b)(1)(vi) and 9.407-2(a)(8), which apply to both DoD and civilian contracts, have required contractors to timely disclose significant overpayments to the government.  These rules have been broadly construed by the government to include all material contract overpayments which could include

certified cost or pricing data issues.  The failure to make a timely disclosure under FAR 9.406-2 and 9-407-2 may subject a contractor to false claims liability, suspension or debarment, or other serious administrative sanctions.  Accordingly, while the new DoD rule incentivizes contractors to disclose defective pricing issues, contractors should not overlook whether they have existing obligations to disclose under the mandatory disclosure regulations.

Oles Morrison Rinker & Baker, LLP, one of the West Coast’s most respected law firms, is pleased to announce that attorney David Yang has joined the firm as a partner.

Yang’s practice focuses on government contracts where he advises clients on all critical aspects of their business, whether the issues involve compliance, intellectual property, prime-subcontractor matters, cost accounting, claims, bid protests, false claims act or other disputes.

Yang has litigated on behalf of contractors before a diverse range of courts, boards and arbitration panels. He focuses on bid protests, where he has successfully protested and defended billions of dollars’ worth of some of the largest defense and civilian procurements in recent history before the U.S. Government Accountability Office and the U.S. Court of Federal Claims, where he served as a law clerk early on in his career.  In addition to his expansive protest work, Yang has recovered millions of dollars in Contract Disputes Act claims before the boards of contract appeals and also routinely defends contractors in False Claims Act cases in federal courts nationwide.  Yang has strategically obtained dismissal of several multimillion-dollar FCA lawsuits through the effective and efficient use of pre-trial motions.

Prior to joining Oles Morrison, Yang was a partner at an AmLaw 100 firm in Washington, D.C. He also served as a law clerk for the Honorable Mary Ellen Coster Williams at the U.S. Court of Federal Claims.

Yang received his law degree from George Washington University Law School, with high honers, and his bachelor’s degree from the University of Washington

The addition of David Yang expands Oles Morrison’s already skilled government contracts team, which, in addition to Yang, is led by Adam LaskyHoward Roth and Jim Nagle.

About Oles Morrison

With deep roots in the Pacific Northwest and Alaska, Oles Morrison Rinker & Baker LLP has built a legal practice with a focus on construction, government contracts, commercial litigation and real estate transactions. Our experienced team has been helping domestic and international companies of all sizes to resolve legal issues on a wide variety of complex public and private projects while protecting their business interests for 125 years.

Often times the most difficult part of the government contract claims process is checking all the procedural “boxes” of a certified claim.  Failure to file a claim within six years of accrual, request a contracting officer’s final decision, or include a wet ink signature are just a few of the procedural technicalities required by the Contract Disputes Act (“CDA”) that can get a claim kicked out before the Board ever has a chance to get to the merits.  Another significant procedural requirement under the CDA is that, for claims of more than $100,000, the claimant must provide a certification that certifies (among other things) that the claim is supported by accurate and complete data and the amount requested accurately reflects the contract adjustment for which the claimant believes the government is liable.

In Mayberry Enterprises, LLC v. Department of Energy, CBCA 5961 (March 13, 2018), the contractor appealed the denial of its uncertified claim seeking costs and excusable delay related to late payments, contract modifications and government-caused delays for a total of $529,895.59.  The contractor submitted three invoices to the government, each requesting a “category” of damages:

  • $87,990 – for suspension of work and late payment issues.
  • $41,000 – retained funds.
  • $400,905 – mobilization, prepatory, surfacing, design and other miscellaneous costs for extra work.

Continue Reading Contractor Escapes Total Dismissal For Failure To Certify $500,000 “Severable” Claim

When do agency Boards of Contract Appeals have jurisdiction to hear a federal contract dispute under the Contract Disputes Act (CDA) when the dispute is with a surety that issued a bond on the project?  Answering this question is key to avoiding a government motion to dismiss for lack of jurisdiction.

Typically, if a surety is forced to step in to take over for a contractor, both the terms of the bond and principles of equity allow the surety subrogation rights, which entitle the surety to the contract rights of the obligor (contractor). This includes the right to pursue payment from the government for work performed, and for overpayments to the contractor. Continue Reading When is a Surety a “Contractor” with the Government at the Boards Of Contract Appeals?

On May 1, 2018, Oles Morrison partner Adam Lasky will be on a panel discussing “Tips for Avoiding Litigation on Federal Construction Projects,” together with Paul Varela (Varela, Lee, Metz & Guarino), Neil O’Donnell (Rogers, Joseph O’Donnell, PC), and Jennifer Fiore (Dunlap Fiore, LLC), at the AGC Federal Contractors Conference 2018.  Adam and the panel will be discussing a number of topics relevant to construction contractors doing business with the federal governent, including false claims act liability, pass-through claims, and releases.

Click here for registration information.

In the RAND Corporations’s 2018 report on DoD bid protests, RAND highlighted some concerning statistics regarding bid protests filed by small businesses. RAND discovered that more than 50% of protests were being filed by small businesses (more than double the percentage of prime contract dollars going to small businesses), and at GAO protests filed by small businesses tended to have significantly lower sustained and effectiveness rates, and were 50% more likely to be dismissed as “legally insufficient.” As a result of these findings, and others, RAND recommended that Congress consider approaches to reduce and improve bid protests from small businesses.

Please join the ABA Section of Public Contract Law Small Business Committee’s panel for a broad discussion of RAND’s findings and recommendations specific to small business protests, and the feedback RAND received concerning these recommendations. In addition, the panel will examine other approaches under consideration that were not included in the report, and will open the floor to a discussion on ideas to reduce and improve bid protests from small businesses.

Moderator

Panelists

  • Brian PersonsSenior Management Scientist, RAND Corporation (Co-Author of the RAND Report)
  • Jessica TillipmanAssistant Dean for Field Placement and Professorial Lecturer in Law, The George Washington University Law School

This event will take place in-person (Morrison & Foerster LLP, 2000 Pennsylvania Ave NW, Suite 6000, Washington, DC) and by teleconference (Call-in: 855.890.6636 Participant Code: 7037607325), Noon – 1:00 pm EDT (9:00 am – Noon PDT) on Thursday May 3.  If you’re interested in attending, please RSVP to TFouch@mofo.com.

The case of Green Valley Company, ASBCA No. 61275, presents an interesting conundrum for contractors facing fraud allegations who also have a contract claim against the government.  In 2006, the contractor presented invoices for payment to the government.  In 2017, the contractor converted those invoices into a certified claim requesting payment.  Under the CDA, the contractor had clearly exceeded the 6-year statute of limitations.  However, the contractor requested the ASBCA equitably toll the CDA for what appeared to be sensible grounds.  From 2009 until 2016, the contractor had been defending a lawsuit the government filed against it alleging false claims act violations and breach of contract among other causes of action. The government had simultaneously been considering the contractor for debarment, the death penalty of government contracts.

The contractor argued it could not have submitted its claim to the contracting officer while the lawsuit was pending because the government would have alleged the contractor had made yet another false claim thus further potentially exposing the contractor to additional treble damages.  The ASBCA rejected the contractor’s argument stating “[n]or does [the contractor] explain why the possibility that the government might respond to its claim with fraud based defenses or causes of action would block it from submitting a claim.  The mere fact that such a response from the government might be undesirable to [the contractor] is irrelevant.”  Thus, the contractor’s claim was held to be outside the statute of limitations and the appeal was considered time-barred. Continue Reading Threat of Contractor Death Penalty Does Not Toll the CDA Statute of Limitations

Oles Morrison partner Adam Lasky will co-present with Shene Commodore, president of Commodore Consulting, LLC during National Contract Management Association’s “Maximizing Teaming Under SBA’s Joint Venture Rules” webinar.

Hear about new rules and major changes the U.S. Small Business Administration (SBA) has made to its joint venture programs.

Learn:

  • SBA’s teaming regulations,
  • Joint venture requirements,
  • Principles for establishing joint venture programs, and
  • How to draft agreements that comply with SBA regulations

Click here to register for the webinar.

As we were reviewing the regulatory agendas of various federal agencies for upcoming regulations that might impact federal contractors, we noticed that the U.S. Small Business Administration’s (“SBA”) most recent regulatory agenda included an upcoming proposed regulation entitled “Consolidation of Mentor Protégé Programs and Other Government Contracting Amendments.”  Specifically, SBA’s regulatory agenda states that:

SBA proposes to consolidate the All Small Mentor Protégé Program and the 8(a) Business Development Mentor Protégé Program into one program.  This rule will also make other revisions in the Government Contracting programs, including the process for approving management changes in entity owned concerns.

According to SBA’s regulatory agenda, this proposed rule was estimated for release in March 2018.  While that obviously did not happen, it is not uncommon for SBA (or other agencies) to issue proposed regulations months (or even years) after originally estimated.

For an 8(a) contractor, there is little (or arguably no) benefit to applying to the 8(a) Mentor-Protege Program (8(a) MPP) instead of the All-Small Mentor-Protege Program (ASMPP), and SBA reviews and approves mentor-protege agreements at a much faster rate if one applies to the ASMPP.  While the ASMPP has been around for over a year now, many 8(a) contractors are still under the misconception that they need to be in the 8(a) MPP in order to bid as a joint venture on 8(a) set-asides.  This is simply not the case, as the ASMPP provides the same advantages to an 8(a) protege as the 8(a) MPP.  Consolidation of these two program should streamline the mentor-protege approval process, and result in the elimination of duplicative and confusing regulations.  We eagerly anticipate the issuance of this proposed regulation to consolidate SBA’s two mentor-protege programs, and hopefully SBA will at the same time address some of the other problems with the mentor-protege regulations (such as eliminating the requirement for SBA to approve a joint venture agreement before award of an 8(a) contract).

 

For years bid protest filings at the Government Accountability Office (GAO) have been done by e-mail (or even fax, mail or hand delivery).  In January 2014, Congress directed GAO to establish a electronic filing and document dissemination system (not unlike the PACER system used by federal courts), and authorized GAO to charge a filing fee to those filing bid protests.  Since that time, GAO has been working on developing an electronic filing system, which GAO calls “EPDS.”  The process has taken longer than most expected, but in February 2018 GAO announced EPDS was almost ready and started handling some protests on EPDS as part of a pilot program.  Today, GAO issued the final rule for EPDS, and announced that rule would take effect on May 1, 2018.  This means that starting in May all bid protest at GAO must be filed through EPDS (protesters will no longer be able to file protests by email) and GAO will charge a $350 fee for filing a protest.

Given the short and strictly enforced time limits for filing protests at GAO, those who file bid protests should consider signing up for an account immediately at https://epds.gao.gov/, and familiarize themselves with the new rules well before they take effect May 1st.  GAO has provided handy instruction manuals and videos for EPDS at https://www.gao.gov/legal/bid-protests/file-a-bid-protest.