Most government contractors are well-aware that the road to preserving and pursuing a claim against the government is one where opportunities for contractors to waive or otherwise lose their right to assert valid claims abound. In a decision where form has once again prevailed over substance, the Armed Services Board of Contract Appeals (“the Board”) recently determined in Appeal of NileCo General Contacting LLC that a typewritten signature block in a company director’s email was not a sufficient signature to certify the contractor’s claim under the Contract Disputes Act (“CDA”).

In December 2011 the U.S. Army Corps of Engineers (”USACE”) awarded NileCo General Contracting LLC (“NileCo”) a contract to construct a dining facility and other structures at Manas International Airport in Kyrgyzstan. Two years later, the government suspended work, and directed NileCo to demobilize and quit the site. By July 2016, the government was still withholding payments. NileCo sent the contracting officer a $2,079,137.25 claim. The emailed claim included certification language required by the CDA, but the sender—the contractor’s director, Anwar Ahmed—included only his typewritten name and not an “electronic or digital signature.”

The government’s contracting officer acknowledged receiving NileCo’s email, advised that he needed additional time to prepare his final decision, and stated that the final decision would “be issued by November 20, 2016.” Soon thereafter, the government terminated NileCo’s contract for convenience. Having received no final decision by Nov. 20, 2016, NileCo filed its notice of appeal with the Board. The government sought to dismiss NileCo’s appeal because it contended that NileCo’s email did not constitute a valid claim under the CDA as it did not provide the required certification. Continue Reading Form Matters: Contractor Loses $2M Claim Because Emailed Certification Was Not “Electronically or Digitally” Signed

A recent case makes clear the importance of focusing on the fundamentals, such as knowing the rules on who the government is required to pay on a government contract.  In The Hanover Insurance v. United States, the U.S. Court of Federal Claims recently found that a surety’s letter to the Government adequately notified it of the contractor’s default of bond agreement, triggering the surety’s equitable subrogation right to payments issued by the Government.

In that case, the surety, Hanover Insurance Company (Hanover), overcame a summary judgment motion filed by the Government, concerning a Veterans Administration (VA) contract awarded to B&J Multi-Service Corporation (“B&J”) for facilities maintenance at a VA facility in West Haven, Connecticut.  The Government paid termination for convenience (“T/C”) costs to B&J to which Hanover as surety claimed it was entitled.

The Government asserted that Hanover, as surety to B&J, had not given proper notice of B&J’s default, thereby precluding any Government obligation to pay Hanover directly.  The Government argued proper notice was not given because Hanover did not invoke the precise words “the principal is in default” prior to the VA’s payment to B&J.  As evident from the court’s opinion, the Government was aware that Hanover was making payments to B&J’s subcontractors.  Hanover put the Government on notice that the funds for termination for convenience should not be paid directly to B&J, because Hanover was asserting a subrogation right to the T/C funds.  However, the Government ignored the surety and paid the termination for convenience funds directly to B&J. Continue Reading Termination for Convenience: Government Pays the Wrong Party, No Magic Words Needed to Trigger Surety’s Right of Equitable Subrogation

With every new administration, there is both great uncertainty and opportunity in federal government contracting. To help you navigate the rough seas of doing business with the federal government in this new administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors large and small, novice and seasoned. Session topics include:
– Ten Things Every Contractor Needs to Know When Doing Business with the Federal Government
James F. Nagle | Oles Morrison Rinker & Baker LLP | Seattle, WA
– Writing a Winning Technical Proposal – From the Contracting Officer’s Perspective
Mona Carlson, Mary Jo Juarez | PTAC Kitsap Economic Dvlpmnt. Alliance – Navy Contracting Officer (retired) | Kitsap, WA
– Keys to Winning Bid Protests and Defending Contract Awards
Adam K. Lasky | Oles Morrison Rinker & Baker LLP | Seattle, WA
– Navigating the Complex Rules Governing Data Rights
Jonathan M. Baker | Crowell & Moring LLP | Washington D.C.
– Overlooked Risks of Being a Lower-Tier Government Contractor
Alan C. Rither | Pacific Northwest National Laboratory | Richland, WA
– Mistakes to Avoid in the Claims and Litigation Process
Donald G. Featherstun | Seyfarth Shaw LLP | San Francisco, CA
– Adapting to Buy American and Domestic Preference Rules in the Trump Administration
Howard W. Roth | Oles Morrison Rinker & Baker LLP | Seattle, WA
– Understanding & Managing the Risk of Suspension & Debarment
Dominique L. Casimir | Arnold & Porter Kaye Scholler LLP | Washington D.C.

Thursday, November 16th 

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6869764745_7087710505_zIt is common for corporations to compensate executives (and other employees) based upon stock price performance.  Tax implications lend support for this practice with respect to high-paid employees, as executive compensation is only deductible up to a limit of $1 million per year, so companies are inclined to compensate executives with stock performance-based compensation because it is not subject to a deductible cap.

However, the tax benefits of stock performance based compensation lead to competing interests for government contractors with respect to allowable compensation.  These contractors must be cautious with stock performance based compensation because the Federal Acquisition Regulation (FAR) puts several restrictions on what is allowable compensation.  The restriction that most frequently comes up is the FAR’s own cap on allowable compensation ($487,000 as of 2014 and adjusted for inflation annually).  However, unlike the tax code which treats stock performance based compensation favorably, FAR 31.205-6(i) deems compensation based upon stock performance strictly an unallowable cost, stating in part: “Any compensation which is calculated, or valued, based on changes in the price of corporate securities is unallowable.”

The rationale for deeming stock performance based compensation an unallowable cost has largely been based on the view that compensation is to be based on the employees’ performance, and compensation based on stock prices is not sufficiently related to work actually performed.  A further concern that has been raised is the possibility of short term stock price manipulation by managers.

While these compensation restrictions are not a new development (the FAR provision was first implemented in 1983 and is frequently revised), companies sometimes seek to find ways to indirectly incorporate stock performance into compensation in a way that would deem such compensation allowable under FAR, presumably to allow for the best of both worlds under both tax code and FAR.  For example, in one recent ASBCA decision, the Board wholly rejected the contractor’s argument that because (a) the pool of cash available to the employees was set separately from its stock price, and (b) the formula for calculating compensation was based upon performance relative to its peers, and not on the contractor’s stock price alone, FAR 31.205-6(i) was not applicable.

The takeaway from this recent decision is that the interpretation of this FAR provision continues to be strictly construed, and if contractors with cost reimbursement contracts (and in some cases fixed price contracts that are sole sourced) intend to maximize the amount of allowable compensation to employees, they must balance both the FAR cost caps, and the structure of the compensation packages, avoiding stock performance based compensation entirely.

Image Courtesy of Flickr (licensed) by 401(K) 2013

14287520378_7b26b29d20_kMaritime government contracting is a multi-billion dollar industry involving the Navy, Army, Coast Guard and other agencies. Most contractors are familiar with the Federal Acquisition Regulation (FAR) 33.211 provision at the end of each contracting officer’s (“CO’s”) decision on a Contract Disputes Act (“CDA”) claim stating: “Instead of appealing to the agency board of contract appeals, you may bring an action directly in the United States Court of Federal Claims (except as provided in 41 U.S.C. 7102(d), regarding Maritime Contracts) within 12 months of the date you receive this decision.” As a result of this language specifically referencing the U.S. Court of Federal Claims (“COFC”), some maritime contractors incorrectly appeal CO final decisions on maritime claims to the COFC.  Unfortunately these contractors do not understand that this language limits court appeals of a CO’s decision on a maritime contract claim to U.S. District Courts.  The question for the COFC then becomes whether to transfer to U.S. District Court or dismiss the case. Certainly, no contractor wants to find itself in this situation because their claim has appealed to the wrong court.

The CDA’s language establishes the alternative procedure for claims arising under maritime contracts, such as contracts for the repair of vessels, ship management, stevedoring, port facilities and dredging.  The effect of § 7102(d) is that contractors who are a party to a maritime contract may, after receiving a decision from the CO, (1) file an appeal at the board of contract appeals (“BCAs”) within 90 days of receipt of the decision, or (2) file an “action” appealing the decision directly in U.S. District Court within 12 months. Continue Reading Which Courts have Jurisdiction to Consider Appeals of Maritime CDA Claims?

13233537673_cd8705c3af_kA Request for Equitable Adjustment (REA) is not defined by the Federal Acquisition Regulation (FAR), but is only referenced therein.  What then, is an REA?

REAs are requests for additional monies or time based on contract clauses that provide for such relief, for instance the Changes clause of the contract or the Differing Site Conditions clause.  Historically, no less an authority than the Supreme Court has explained an REA is equal to a breach of contract:

With respect to claims arising under the typical government contract, the contractor has agreed in effect to convert what otherwise might be claims for breach of contract into claims for equitable adjustment.

Thus, an REA is a means for a contractor to get paid for additional costs as well as obtain a time extension to the contract.  A successful REA requires a clear factual narrative supported by documents, and a legal theory tying those facts to a basis of recovery. Continue Reading Key Ingredients for a Successful Request for Equitable Adjustment

16064264536_9c9caeb509_hWhen 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?

3007805773_38716560d9_bContractors 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

ASBCAWhile the Armed Services Board of Contract Appeals (ASBCA or Board) has jurisdiction over contract claims, the ASBCA does not have jurisdiction over fraud.  This can lead to competing cases in multiple jurisdictions if the government has a claim of fraud against a contractor while the contractor is pursuing a contract claim concerning the same contract at the ASBCA.  To manage these conflicts, the Board will stay the Board proceeding or dismiss it without prejudice pending the outcome of the fraud proceeding based on the consideration of the following four factors: 1) whether the facts, issues and witnesses in the two proceedings were similar; 2) whether the parallel matter would be compromised by proceeding here; 3) whether the non-moving party would be harmed by more delay; and 4) whether the duration of the suspension sought was reasonable.

In Kellogg Brown & Root Services, the ASBCA held that a request to stay or dismiss without prejudice had limits.  In 2010, Kellogg Brown & Root (KBR) submitted certified claims for subcontract settlement costs, which it later appealed to the ASBCA.  In 2013, the ASBCA dismissed these appeals without prejudice because of a pending FCA suit.  In February 2016, the ASBCA reinstated the appeals.  The government moved to stay or dismiss the appeals again because the FCA case was still in the discovery stage.  For the fourth factor, the Board held the stay sought was not reasonable because it would essentially be an indefinite stay.  For the third factor, the Board held another dismissal could prejudice KBR due to the length of time that had occurred since the certified claims had been submitted.  The Board found there was a “substantial risk” that evidence would become stale if a more significant delay occurred.  For the second factor, the government had admitted the Board proceeding would not compromise the government’s FCA case as long as it could obtain complete discovery and develop the record.  For the first factor, the Board held similarity of facts, witnesses, and issues between the two proceedings alone were insufficient to dismiss the appeal.  Therefore, the ASBCA denied the government’s motion to dismiss or stay the appeals. Continue Reading Fraud Jurisdiction at the ASBCA: Complicated and Complex

14076937585_ca93f6db1a_kAs past performance reviews become an increasingly important part of the bid evaluation process, the performance assessments catalogued in the Contractor Performance Assessment Reporting System (“CPARS”) will have greater significance than ever before. CPARS reviews generally set forth the Government’s evaluation of a contractor’s performance based on several factors, including quality of performance, adherence to performance schedule, cost control, and management capabilities. While each assessment is theoretically based on objective facts and data, it is not unheard of for contractors to receive biased, inaccurate, or misleading evaluations. These unfair assessments can substantially damage a contractor’s prospect for securing future Government contract awards, but contractors currently have limited avenues to address them.

The strongest remedy available in recent years has been a declaration from the Armed Services Board of Contract Appeals (“ASBCA”) or the Court of Federal Claims (“COFC”) that the evaluation was arbitrary and capricious together with a remand to the contracting officer with “proper and just” instructions, but this remedy does not necessarily scrub the negative review from CPARS. However, the ASBCA may have left the door open for a new type of remedy available to contractors who receive an unfair CPARS assessment. Continue Reading ASBCA Opens the Door to Contractors Seeking Monetary Damages for Unfair CPARS Reviews