2018 was another banner year for government contract cybersecurity requirements.  Reports separately released by OMB and MITRE suggest that risks for cyber intrusions remain as prevalent as ever, if not more so.  Accordingly, dozens of statutory, regulatory, and agency guidance memoranda on this critical subject were released in 2018 and more are expected to come in 2019, and beyond, as those measures are fleshed out for further development and implementation.

One of these more significant developments is the Department of Defense’s (DoD) increased emphasis on maintaining supply chain integrity for cybersecurity risks.  In this regard, the DFARS Safeguarding Clause 252.204-7012, which applies in all DoD procurements, governs the protection of covered defense information provided to or generated by defense contractors.  In particular, the Clause requires contractors that access covered defense information to take precautions to protect this information.  It also requires that contractors who access this information report cyber incidents, submit malicious software to the Department of Defense Cyber Crime Center, and facilitate a damages assessment in the event of a cyber incident.  The Clause also defines covered defense information to be unclassified controlled technical information or other information marked as such in the contract, or collected, developed, received, transmitted, used, or stored on behalf of the contractor in support of the performance of the contract. Continue Reading The DoD Is Watching Contractor Cyber Security Compliance: DoD Will Use the Defense Contract Management Agency to Audit Contractors’ Supply Chain Compliance with the DFARS Safeguarding Clause

To help you navigate the rough seas of doing business with the federal government in the Trump administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors across all industries.

Session topics include:

  • The Small Business World – What’s Happened and What’s Happening?
    David Yang, Partner, Oles Morrison Rinker & Baker LLP
  • The Buy America Act and the Buy American Act—What’s the Difference and How Do They Affect Your Business?
    Howard Roth, Partner, Oles Morrison Rinker & Baker LLP
  • Everything You Need to Know About Design Build Projects
    Douglas Oles, Partner, Oles Morrison Rinker & Baker LLP
  • What’s On the Economic Horizon for Alaska for 2019
    Neal Fried, Economist, Research Section, Alaska Department of Labor and Workforce Development

Two Ways to Attend:

  • In-person, AGC Anchorage (8005 Schoon Street, Anchorage, AK 99518)
  • On-line live stream

When:

  • March 19, 2019
  • Seminar 1:30 p.m. – 4:30 p.m. Alaska Standard Time (2:30 p.m. – 5:30 p.m. PST / 5:30 p.m. – 8:30 p.m. EST)
  • Networking 4:40 p.m. – 5:30 p.m.
  • $40 per person

Click HERE for the program flyer and complete details.

Click HERE to Register.

Questions? Contact Kimberley Gray at 907.561.5354 or kimberley@agcak.org.

 

Perhaps the greatest risk in a federal construction project is the risk of the unknown.  This is especially true in the case of a fixed price project where the majority of the risk is on the contractor who has agreed to do the job for a fixed price, which generally includes all known and unknown risks of performance.  This narrative, however, has some relief in that the parties understand that there will, at times, be truly unforeseeable circumstances that even the most prudent contractor could not have reasonably prepared for.

Accordingly, all fixed-price construction contracts with the federal government include Federal Acquisition Regulation (“FAR”) 52.236- , the Differing Site Conditions (“DSC”) Clause, which provides for an equitable adjustment of the cost and time required for construction when (1) subsurface or latent physical conditions at the site differ materially from those indicated in the contract, or (2) unknown physical conditions at the site of an unusual nature differ materially from those ordinarily encountered, and the contractor meets specified notice requirements.  The DSC Clause seeks to reduce and/or eliminate bidding contingencies by shifting the risk of qualified unanticipated subsurface conditions to the government.

The Two Types of Differing Site Conditions

The DSC Clause contains two distinct types of DSCs.  The first, known as a Type I DSC, covers unexpected natural or man-made conditions that materially differ from conditions indicated in the specific contract.  The second, known as a Type II DSC, covers unexpected natural or man-made conditions that materially differ from conditions normally expected in similar work.  Unexpected natural conditions can include things such as unexpected subsoil composition, while man-made conditions can include things such as unknown utility lines.  One note to be aware of is that weather and acts of God that take place during performance of a contract do not constitute DSCs.  Continue Reading It’s What You Don’t Know! What to Know About FAR 52.236-2: Differing Site Conditions

The Section 809 Panel, which is tasked with developing and providing recommendations to improve and enhance the efficiency of the Department of Defense procurement system, issued the third volume of its report and recommendations Jan. 15, 2019.  Among the numerous recommendations for streamlining DoD acquisitions, several of which relate to bid protest practice, three in particular propose potentially significant changes to the DoD bid protest process, with the aim and constant challenge, of balancing the dual interests of ensuring accountability in the procurement process while managing or reducing the delay and disruption that protests invariably have on procurements.  The notable recommendations are Recommendations 35, 67 and 69.

Perhaps the most potentially impactful recommendation is Recommendation 35.  Among other things, this recommendation proposes changes that would deprive the Government Accountability Office and the U.S. Court of Federal Claims of both pre and post-award bid protest jurisdiction for acquisitions of “readily available” products or services in DoD acquisitions that are valued at $15 million or less.  The term “readily available” differs from commercial items or commercial-off-the-shelf offerings.  As proposed, “readily available” would mean “with respect to a product or service, . . . a product or service that requires no customization by the vendor and can be put on order by customers.  Such term includes optional, priced features of products and services in a form that is offered for sale in the normal course of business.”  Offerors would still have an option of protesting at the agency but the traditional forums for protests would be rescinded if this proposal goes through.  Along with the already existing jurisdictional limits for certain task order protests, Recommendation 35, if implemented, would further curtail DoD protest options.  Continue Reading The Section 809 Panel Recommends Substantial Changes to DoD Bid Protests

While domestic preference requirements in federal procurements, namely the Buy America and Buy American Acts, are not new their increased emphasis are.  As has been well publicized, a central focus of the Trump Administration has been to encourage and increase the use of domestically sourced products and materials in connection with federal procurements.  While this policy objective is relatively straightforward, the intersection and resulting nuances, between these Acts, their regulations and related trade statutes, agreements or exceptions generally are anything but.  On Jan. 31, 2019, the President added to the mix by signing an executive order to further the administration’s Buy American push.  The Jan. 31, 2019 Executive Order, “Strengthening Buy American Preferences for Infrastructure Projects,” expands on the President’s April 18, 2017, Executive Order 13788 and instructs federal agencies to develop plans and rules to encourage contractors to adhere to domestic preference requirements to the maximum extent practicable in all projects that receive indirect federal government assistance by way of loans, loan guarantees, or grants and other cooperative agreements.  The Jan. 31, 2019 Executive Order has significant, potential implications for the contractor community because prior to the Executive Order the Buy American Act only applied in cases of federal procurements directly issued by the government.  With the new Executive Order, however, the Buy American Act now potentially applies to any project that receives financial assistance from the federal government even if the project is not a procurement that was solicited by the federal government.

So what is covered now?  The Executive Order directs federal agencies to “maximize, consistent with law, the use of goods, products, and materials produced in the United States . . . [including] through the terms and conditions of Federal financial assistance awards.”  In this regard, the Executive Order directs agencies “[w]ithin 90 days . . . [to] encourage recipients of new Federal financial assistance awards pursuant to a covered program to use, to the greatest extent practicable, iron and aluminum as well as steel, cement, and other manufactured products produced in the United States in every contract, subcontract, purchase order or sub-award that is chargeable against such Federal financial assistance award.”  The scope of the Executive Order, in terms of the materials, projects, and the types of work that are covered, is very broad.  For example, “manufactured products” broadly covers any “items and construction materials composed in whole or in part of non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.” This term also encompasses iron, aluminum, steel and even cement.  Continue Reading President Trump Expands Buy American Act – Another Wrench in the Works?

The partial government shutdown is now the longest running shutdown in history and there is no clear end in sight.  Some 800,000 federal employees have been affected by the shutdown.  They have either been furloughed, or even if they are working, they are going without pay.  However, although affected federal employees will get back pay after the shutdown ends, the current political landscape surrounding recovery for potentially affected federal contractors and their employees is less clear.  Thus, while the shutdown’s effects have introduced significant uncertainty, the aftermath of the shutdown poses an equal degree of uncertainty.

Further to our post about the best practices for contractors to weather the shutdown, contractors should also evaluate their options and strategies for seeking recovery of their costs due to the shutdown.  Although the current political landscape has not provided any full guarantees to affected federal contractors, most government contracts have clauses from the Federal Acquisition Regulation (FAR) that may provide a basis for recovery.  The primary clauses that may aid a contractor in such endeavors include: FAR 52.242-14 (suspension of work), FAR 52.242-15 (stop work order), FAR 52.242-17 (government delay of work), and FAR 52.243 (changes).  A common requirement with all of these clauses, however, is that they impose a quick turnaround on the contractor to notify and assert any rights to the government, with some clauses providing as little as 30 days from the end of the work stoppage period to take action. Continue Reading Federal Contractors May Have a Bumpier Road to Recovery After the Shutdown

One of the more significant developments in 2018 for both small business primes and large companies with small business subcontractors was the passage of the Small Business Runway Extension Act (the “Act”), which was signed into law December 17, 2018.  The Act, in amending the Small Business Act, increases the look-back period for determining a contractor’s size status based on average annual revenues from three years to now five years.  For many services-based procurements, a contractor must average its annual receipts over a certain period to determine if it falls under the revenue-based size standard for the opportunity, and if so, whether it is a small business for that contract.  The Act expands this period from the prior period of three years to now five years.  Although not without its detractors, the Act has generally been hailed as a positive, and much needed, development for contractors pursuing set aside contracts, because it gives them more room to grow, and remain small, in order to bid on and capture the increasingly complex requirements being procured by the government.  The new law also allows contractors to even out a particular year of higher than average revenue with the revenues of more representative years and still remain small, thus resulting in a more accurate representation of the contractor’s size status.  Continue Reading The Small Business Runway Extension Act: Contractors Are Not Cleared for Take Off

One of the biggest differences between federal government and commercial contracting is that certain clauses may be incorporated by reference (and hence controlling) in a federal contract even if the clause was not expressly included in the contract by the parties.  In a departure from the general principle that contracts should only reflect the bargain made by the parties, and hence courts should not read provisions into a contract that are not there, federal government contracts take a different approach because of the public policy considerations that underlie every federal contract that ultimately is being performed on behalf of the taxpayer.  In this regard, when it comes to government contracts, the courts will on occasion apply the so-called Christian doctrine (taken from L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963)) to determine whether a provision should be read into a government contract because not doing so would frustrate important policy considerations for either the protection of the government or the contractor.  While the application of the Christian doctrine has only been applied to certain contract clauses, a recent decision has now added the Miller Act’s bonding provisions to the list of clauses that has been held to be incorporated by reference into a government contract.

In this regard, the United States Court of Appeals for the Federal Circuit recently held, in K-Con, Inc. v. Secretary of Army, that bonding requirements under the Miller Act apply to federal government construction contracts, even when the bonding provisions were not part of the contract. C.A. No. 2017-2254, 2018 WL 5780251 (Fed. Cir. Nov. 5, 2018). The Miller Act, as implemented at Federal Acquisition Regulation (FAR) 28.102-1, requires that before any contract of more than $150,000 is awarded for the construction, alteration, or repair of any public building or public work of the federal government, a person must furnish to the government, performance and payment bonds, which become binding when the contract is awarded. 40 U.S.C. §§ 3131(b).  Continue Reading Know What You’re Signing Up For—The Miller Act Is Now Part of Your Federal Government Construction Project

Following Escobar, the issue of materiality remains at the forefront of False Claims Act motion practice at both the pleadings and judgment stage. Escobar emphasized that the FCA materiality requirement is demanding. In the case of Gilead Sciences, Inc. v. United States Ex Rel. Jeffrey Campie, et al. the respondents, qui tam relators, learned that the United States might agree on the law, but not the merits of the claim.

In Gilead Sciences, respondents pled that petitioner misrepresented the source of certain drugs used to treat HIV by manufacturing drugs in unregistered facilities and falsely telling the Federal Drug Administration that the drugs came from an approved manufacturer. The petitioner eventually obtained approval of the unregistered facility, which respondents allege was based on falsified and concealed data. Petitioner later stopped using the facility due to contamination issues. Respondents allege that because the drugs were adulterated or misbranded, they were not FDA approved and not eligible for payments under government programs.

The district court dismissed the second amended complaint on the basis that petitioner’s alleged misrepresentation to the FDA, rather than the paying agencies, could not establish a false claim for payment. The Court of Appeals for the Ninth Circuit reversed finding that respondents adequately alleged materiality. In applying the multi-factor materiality inquiry, the Ninth Circuit held that the government’s continued payment of the petitioner, despite alleged knowledge of the misrepresentations to the FDA, was not solely dispositive on the issue of materiality at the pleading stage.  Continue Reading That’s a Wrap—When the United States tells the Supreme Court Your Qui Tam Suit is a Goner

As yet another government shutdown looms on the horizon, contractors must again prepare for the ramifications of a shutdown.  At present, the President does not look likely to sign a budget bill unless Congress includes significant appropriations for a border wall which also does not appear likely.  If no compromise is reached, parts of the government could begin to shut down as early as next week (December 21).  While industry has no control over Washington politics, the effects will still be felt nationwide and will probably impact your business as a federal contractor.  While not an exhaustive list, a government shutdown can halt your incremental funding stream, delay other payments, preclude you from executing new contracts or modifying existing ones, impose logistical challenges such as closed government facilities or furloughed government employees who are your counterparts on a program, increase your costs (both direct and indirect), and delay or defer the exercise of contract options.  So, what can you do to weather the storm?  Here are some suggestions for mitigating your risks during a potential shutdown. Continue Reading Five Tips for Surviving Another Potential Government Shutdown