In April, we wrote about  how President Trump’s estimated $1 trillion infrastructure plan may come with possible repeal or suspension of the Davis Bacon Act (DBA).  A few months later, and the Trump Administration seems to be singing a different tune.  More recently, comments from Transportation Secretary Elaine Chao suggest that the administration’s rebuilding package will maintain wage requirements mandated by the DBA.

At a June 8, 2017, House Transportation and Infrastructure Committee hearing, Secretary Chao answered questions related primarily to proposed plans to update the nation’s airports and corresponding changes to the Federal Aviation Administration.  When Congressman Scott Perry (R-PA) inquired about raising the monetary threshold for the Davis-Bacon prevailing wage requirements, Secretary Chao responded that for the “infrastructure projects … the administration’s proposal is to include Davis-Bacon.”  The Secretary added she would “like to see it passed,” and understood “that without the provision, the minority would not sign on.”  When Rep. Perry pushed further, asking “no changes at all?” Secretary Chao simply responded “I’m interested in getting the infrastructure bill passed.”  As mentioned in the previous article, Trump may choose to include DBA protections in order to gain support from typically pro-DBA Democrats for the administration’s infrastructure plan.

While Trump made a number of veiled comments surrounding his infrastructure plan during what the White House termed “Infrastructure Week,” federal contractors are still standing by waiting to see which (if any) of the DBA requirements will survive.

14567606128_ee826cf9bd_kFollowing Executive Order 13788 issued April 18, 2017, “Buy American and Hire American,” contractors and subcontractors should prepare for increased enforcement of the Buy American Act (BAA), Buy America legislation, the “Little Buy American Acts,” and related civil or criminal prosecution under the False Claims Acts (FCA).

In recent years, the Department of Justice has increased efforts to prosecute FCA violations in concert with BAA or Buy American violations. In 2016 alone the Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases under the FCA, its third highest recovery.

Every contractor or subcontractor on a federally funded project supplying construction materials must certify that the materials used are in compliance with the BAA.  Construction work for the DOT, DoD, and other federal agencies may trigger compliance requirements under both with the BAA and Little Buy American Acts. Certificates of compliance, however, can be fruitful grounds for federal prosecutors looking for FCA violations

When a certificate of compliance does not accurately reflect the origin of the materials used under the BAA or Little Buy American Acts, there is a high likelihood that FCA liability may follow. Executive Order 13788 is likely to bring additional attention to the dual enforcement of buying American under the FCA.

A few recent cases illustrate the FCA risks arising from BAA and related laws that require compliance certifications:

  • In 2016, Wisconsin-based architectural firm Novum Structures LLC entered a guilty plea and agreed to pay $3 million to resolve its criminal and civil liability under the False Claims Act 18 U.S.C. § 1001 arising from its concealment of the use of foreign materials on construction projects involving federal funds. Novum has also agreed not to contest its debarment from federal funded projects.

Continue Reading Uptick in Buy American Enforcement Means Increased False Claims Act Risks

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

7890051894_a68fa1ed9a_kThis post is the second in a multi-part series discussing the fundamental steps that protesters (and their outside counsel) can take to enhance their chances of success at GAO.  Previously, in Part 1 of this series, we discussed the importance of making the most of your debriefing.  Today, in Part 2 of the series, we discuss why its important to frame initial protest arguments with the big picture (obtaining information necessary to identify winning supplemental protest arguments) in mind.

In addition to arguments raised in the initial protest filing, a protester may file supplemental protest arguments based on new information learned during the course of the protest.  A supplemental protest argument must be filed within ten days of when the protester knew, or should have known, of the basis for the supplemental protest argument.  Finding and filing viable supplemental protests is a huge driver of your chances of succeeding at GAO.  In fact, a recent study showed that the odds of a protester having its challenge sustained by GAO nearly double when a protester files supplemental protest arguments.  So, filing strong supplemental protest arguments significantly increases your chances of winning a protest.  What many protesters do not realize is that the key to finding a winning supplemental protest arguments starts with how you frame your initial protest arguments. Continue Reading Fundamentals to Winning Bid Protests at GAO — Part 2: Framing Initial Protest Arguments with the Big Picture in Mind

060110-N-3019M-001In a decision publicly released June 5, 2017, the U.S. Government Accountability Office (GAO) ruled in favor of Oles Morrison Rinker & Baker LLP’s (“Oles Morrison”) client, TOTE Services, Inc. (TOTE), in a bid protest challenging the U.S. Navy – Military Sealift Command’s (MSC) award of $32 million O/M contract for the Sea-Based X-Band Radar (SBX-1).  The SBX-1 is the floating, self-propelled, mobile radar system used by the U.S. Missile Defense Agency to detect and track incoming ICBMs fired at the United States.

GAO sustained TOTE’s protest, holding that MSC had committed multiple errors in the evaluation of the awardee’s past performance.  Namely, MSC improperly credited the awardee for relevant performance without considering the quality of that performance, and credited the awardee for positive performance without considering its relevance.  GAO also held that MSC lacked a reasonable basis to conclude that the awardee’s singular past performance contract of its own was “very relevant.” Continue Reading Oles Morrison’s Government Contracts Team Wins GAO Bid Protest Challenging Award of O/M Contract for Missile Defense Radar Vessel – SBX-1

33625622256_9121ae6cdd_kImagine a scenario in which a solicitation, calling in part for certain vehicle storage by bidders, requires that “[t]he contractor shall provide evidence that it has complied with all laws and ordinances associated with vehicle storage.  Applicable permits shall be kept current throughout the terms of the contract.”  Imagine then that a bidder does not demonstrate in its proposal that its intended vehicle storage facility has the necessary permits and is in compliance with state law and local ordinances regarding vehicle storage.  Nevertheless, the Government awards the contract to that bidder after failing to consider whether the bidder has suitable property to satisfy the vehicle storage requirement of the solicitation.  This seems like a clear instance of error by the government justifying a protest, right?  This very scenario was recently addressed by the U.S. Court of Federal Claims (“COFC”) in Vintage Autoworks, Inc. v. United States, a decision that should remind bidders/protestors to pay careful attention to the difference between responsibility criteria and contract performance requirements (also known as “matters of contract administration”).  While the failure to demonstrate compliance with a responsibility criteria is protestable (with some limitations), the failure to demonstrate compliance with a contract performance requirements is a matter of contract administration and is not protestable.

Spotting the Difference

How can you tell the difference between a responsibility criteria and a performance requirement?  Responsibility criteria are those criteria that require the bidder to demonstrate, prior to award, its capability to perform the contract requirements. This does not necessarily mean that a bidder needs to have achieved contractual performance requirements at this point, it just means that a bidder must have the capability of doing so.  As the COFC has explained: Continue Reading Responsibility Criteria v. Contract Performance Requirements – When Can You Protest?

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?

8707585831_65f79c023d_kIn FY 2016, there were 2,789 bid protests filed at the Government Accountability Office (“GAO”) challenging federal procurement decisions.  In approximately 46% of these protests, the protester obtained some or all of the relief it was seeking, either through the protest being sustained by GAO, or through the federal agency taking voluntary corrective action in response to the protest.  However, many protests are not successful, and are either denied or dismissed by GAO.  Of all protests filed, approximately 19% were dismissed due to procedural or jurisdictional defects.  And, of the bid protests decided on their merits, approximately three-quarters were denied.

Why are so many protests dismissed or denied by GAO?  Frankly, in many cases a protest is lost because the protester, or its outside counsel, fails to take the fundamental steps necessary to enhance its chances of winning the protest.

This post is the first in a multi-part series discussing the fundamental steps that protesters (and their outside counsel) can take to enhance their chances of success at GAO.  Today, we discuss how contractors can use the debriefing process to enhance their chances of success at GAO.

Make Your Debriefing Count

If you are seriously considering a bid protest, you need to take full advantage of the debriefing process.  During the debriefing you should keep two main goals in mind.  Continue Reading Fundamentals to Winning Bid Protests at GAO — Part 1: Make Your Debriefing Count

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

Teaming JV Jun2017Join Howard Roth June 1st for “Teaming & Joint Venturing for Government Contracting Success” sponsored by Washington PTAC and Tri-City Regional Chamber of Commerce.  This seminar will be held at the Tri-Cities Business & Visitor Center Bechtel Board Room 7130 W. Grandridge Blvd., Kennewick WA 99338 from 10am to 12pm.  For more information and to register, go to http://washingtonptac.org/event/teaming-joint-venturing-for-government-contracting-success-june-1-2017-10-am-12-pm-tri-cities-kennewick/