Federal Construction Contracting Blog

Federal Construction Contracting Blog

Legal Information and Resources for Federal Construction Contractors

A Primer on Debriefings and Protests

Posted in Bid Protests, Contract Performance Issues, Contracting by Negotiation

Protest Construction WorkersPlease join us for Ed DeLisle and Maria Panichelli‘s webinar on October 06, 2015 from 2:00-3:00PM for TargetGov/ the Government Contracting Institute.

In today’s competitive federal contracting market, the source selection process is extremely competitive. As a result, many solicitations ultimately involve bid, size or status protests. Understanding these protests can make all the difference in actually getting the contract award you are after. In this webinar, we cover all aspects of the protest process. You will learn how to use debriefings and bid protests as an affirmative tool when a contract was improperly awarded to someone else. You will also learn how to defend against, or even avoid, bid protests filed against you by frustrated competitors. Lastly, you’ll learn about SBA/VA size and status protests, which address challenges to the size and eligibility of Small, 8(a), VO/SDVOSB, ED/WOSB and HUBZone businesses.

For more information and to register, please visit the TargetGov website.

Legal Landscape: Big Changes to Prevent Discrimination, Fraud and Non-Compliance

Posted in Contract Performance Issues, Contractor Information Sources, Small Business Contracting

Welcome to Onvia’s second edition of Legal Landscape, a series designed to provide government contractors with a quick, but thorough, summary of important legal developments and regulations in government contracting, as well as a plain-English explanation of how those developments may affect contractors at all levels of government. In this issue, we discuss recent compliance and enforcement trends in federal as well as state and local government contracting. State and local contractors should keep in mind that state and local agencies often look to changes in federal regulations as a guideline; changes recently made in the federal arena are likely to trickle down to state and local governments soon.


1) Increased Focus on Preventing Discrimination against LGBTQ Individuals

The Department of Labor (DOL) recently issued a final rule, implementing Executive Order 11478, and prohibiting all federal contractors from discriminating on the bases of sexual orientation and/or gender identity. The DOL’s FAQ page on the final rule is available on the agency’s website.

The final rule became effective on April 8, 2015, meaning that any federal contract entered into, or modified, after that date, must comply with the terms of the rule. Specifically, under both Executive Order 13672 and the Final Rule, federal contracting agencies must include sexual orientation and gender identity as prohibited bases of discrimination under the Equal Opportunity Clause incorporated into their contracts. Contractors have two options: They may simply use the phrase “equal opportunity employer;” or alternatively, contractors may state that they do not discriminate on any of the protected bases under Executive Order 11246, and list the bases on which discrimination is prohibited, including sexual orientation and gender identity. Contractors will also be required to display an updated “EEO is the Law” poster reflecting the new protected bases once that poster is finalized by the EEOC and OFCCP. Contractors are not required to engage in outreach activities or update their Affirmative Action Plans (AAPs), policy statements or handbooks.

The DOL’s final rule is consistent with an increased nationwide focus on preventing LGBTQ discrimination and improving LGBTQ civil rights laws. Many state and local agencies have already enacted, or are in the process of enacting, anti-discrimination laws, for example:

A growing number of cities in Pennsylvania, including Philadelphia, Pittsburgh and the state capital Harrisburg, have passed ordinances prohibiting discrimination on the basis of sexual orientation and/or gender identity.In the State of Pennsylvania (one of the few states on the east coast that does not already have LGBTQ discrimination laws on the books), Senator Larry Farnese co-sponsored Senate Bill 300, which would amend the Pennsylvania Human Relations Act by adding the terms “sexual orientation” and “gender identity or expression” as prohibited bases of discrimination.

Takeaways for Contractors:

  • Be familiar with all national laws relating to LGBTQ discrimination, as well as all state and local laws or ordinances, for every locality in which you do business. Often times, local laws are more specific, and prohibit a wider range of conduct.
  • Know the types of conduct prohibited by these laws and the specific steps you need to take to ensure prevention. For example, are you required to change your company’s affirmative action plan, conduct sensitivity training or set up a particular complaint process relating to incidences of discrimination?
  • Determine whether the applicable laws require changes to the contents of your contracts. For example, does a law require you to include a certain clause, or revise the contents of that clause, as the DOL rule, explained above, does?

2) Changes to Case Law Affecting Inter-Affiliate Sales Exception

If you are a small business contractor, you know that affiliation is generally something you want to avoid. As we have explained before, a finding of affiliation can increase a company’s size and thereby eliminate its small business eligibility. To avoid a finding of affiliation, many businesses rely on the exceptions to affiliation set forth in the Small Business Administration (SBA) affiliation regulation, 13 C.F.R. 121.103. However, a recent case our firm had before the SBA Office of Hearings and Appeals (OHA) case makes it clear that at least one of those exceptions – namely, the “inter-affiliate transactions” exception – is extremely narrow.

That exception is codified at 13 C.F.R. § 121.104(a) and explains how, when two companies are deemed affiliated, their collective receipts should be counted for purposes of making a size determination. However, the regulation states that total receipts do not include “proceeds from transactions between a concern and its domestic or foreign affiliates.” Based on a reading of the regulation, it seems that inter-affiliate transactions are excluded from a calculation of receipts for size purposes. As a result of this reading, our client appealed an SBA determination to the OHA, arguing that the SBA erred by calculating our client’s receipts by including transactions between itself and its affiliates. However, OHA took a different position, and ruled that the inter-affiliate transaction exclusion applies “only if the concerns in question have a parent-subsidiary relationship and are eligible to file a consolidated tax return.”

Takeaways for Contractors:

  • Be aware that, despite the clear language of 13 C.F.R. § 121.104(a), frequent transactions with affiliates are not excluded from the calculation of receipts, and thus could push you over your size standard threshold and destroy your small business eligibility.
  • Many contractors will need to review the way in which they structure transactions in order to avoid affiliation.

3) Increased Importance of Federal and State False Claims Acts

The past five years has seen an enormous uptick in Federal False Claims Act (FCA) actions. The federal government in particular has made FCA enforcement a real priority. It’s not surprising then, that 2014 set new FCA enforcement records, with even higher recovery totals. In fact, the Department of Justice (DOJ) obtained a record $5.69 billion in FCA recoveries in 2014. 2014 was the first year in which recoveries under the FCA exceeded $5 billion. With this enormous addition, recoveries from January 2009 through the end of the fiscal year 2014 now total approximately $22.75 billion.

In addition to the federal FCA, many state agencies have their own similar acts which address frauds perpetrated against state or local governments; state agencies were spurred to enact their own legislation when the Deficit Reduction Act (DRA) of 2005 was passed. In addition to their own recoveries, the DRA authorized state agencies to receive, 10 percent of the federal government’s share of recovered Medicaid funds if their state false claims acts were as strong, or stronger than, the federal FCA.

All of this demonstrates just how focused governments have become on their FCAs, and how much FCA enforcement has expanded. This trend seems likely to continue throughout 2015 and 2016:New York, California, Florida and Vermont are among the numerous states whose legislators worked to create, update or strengthen their respective false claims acts over the past few years.

  • Federal appeals courts have expanded FCA liability and drastically extended the applicable statute of limitations for FCA actions and penalties.
  • Qui tam actions and cases based on state and local false claims acts have also grown drastically.
  • The DOJ promises to place a renewed emphasis on nonmonetary methods of curbing fraud.
  • The Supreme Court is expected to rule in two cases that could greatly impact, and theoretically, further expand, federal FCA enforcement.

Takeaways for Contractors:

  • Stay vigilant to avoid any potential FCA liability and keep abreast of the various ways in which the federal FCA and its state and local counterparts are evolving.
  • Be prepared and informed: An experienced legal professional trained in government contracting law can assist in interpreting the laws of your locality and identifying any potential areas of liability.

4) Suspensions and Debarments on the Rise

On March 31, 2015, the Interagency Suspension and Debarment Committee (ISDC) issued a report to Congress, which detailed federal suspensions and debarment actions in 2014. According to the report, the number of suspensions climbed from 889 to 1,009, while proposed debarments increased from 2,229 to 2,241 and actual debarments rose from 1696 to 1929. In short, the report demonstrated an upward tick of nearly 14% in suspension and debarment proceedings. It’s no coincidence that the increase in these exclusion actions coincides with the escalation in FCA enforcement actions as discussed above. Increased scrutiny on wage, hour and labor violations could also be a factor. In the report, the ISDC efemphasizes that it plans to further strengthen suspension and debarment programs. So it would seem that the future will bring more aggressive enforcement, and even more exclusion actions, by federal agencies.

Takeaways for Contractors:It’s not surprising, then, that most state agencies (and even some smaller localities) have their own suspension and debarment programs, each of which operates to root out contractors engaging in misconduct and eliminate them from doing business with government entities.

  • Given this increased focus on suspension and debarment, contractors should take extra steps to ensure that they are compliant with every applicable regulation.
  • The best defense is a vigorous business ethics and compliance program. A good ethics training program can help educate employees and make sure issues are resolved before they cause a compliance program. Moreover, the existence of such a program is often a line of defense against certain types of fraud, compliance or exclusion actions.
  • Compliance concerns are business-specific, and thus ethics programs should be tailored to each individual contractor. If you have questions about what type of program is right for you, consult a legal professional.

We hope that you check back for more government contracting legal updates in the next edition of Legal Landscape.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.

E-Discovery- Bring Back the Boxes

Posted in Contractor Information Sources, Protection of Contractor Rights

It is not uncommon, in the litigation of a federal construction claim, for the Government to produce gigabytes of electronic data, amounting to thousands and thousands of documents, in response to a motion for the production of documents.  Frequently, these “electronic” documents are simply the scanned versions of paper files in the Government’s offices.  In the scanning process, extensive duplication occurs and documents that are clearly separate in paper file folders are scanned together in a manner that often combines multiple documents.  Once combining occurs, it is very difficult for the recipient of the electronic information to tell where one document ends and the next one begins.  Documents and their attachments become confused, are re-arranged, and difficult to follow.

EDiscovery Laptop

The rules require that documents are to be unitized, meaning that they are scanned into separate and discreet electronic documents that match the original paper versions.  I am not suggesting that the Government intentionally fails to unitize files for production, but when thousands of pages are scanned the resulting combination of individual files is inevitable.  It is particularly disturbing when an entire file folder is scanned as one document, leaving it up to the recipient to try to figure out where one document ends and the next one begins.

The problem is rooted in the fact that there is not always consistency among various offices within a Government agency, or among individuals within an agency, in the maintenance and filing of information.  Many people routinely print documents that were created on a computer and keep them in organized physical file folders.  While the electronic document is still on that person’s computer, it may be buried in a root directory or in a directory of miscellaneous files that are not limited to a particular project or issue.  In those cases, the individual is more likely to be able to quickly retrieve the hardcopy than the electronic version of the document.  It is this lack of centralization and consistency that accounts for the fact that government agencies, when faced with a demand for the production of documents, face an enormous task in locating those documents.  This also explains why government agencies often find it expedient to scan the hardcopies that have been maintained by various individuals within the agency, rather than locating and producing the native electronic versions.  To my way of thinking, however, the rules regarding the disclosure of Electronically Stored Information (“ESI”) are not intended to encourage the creation of electronic data that comes from the scanned hardcopies of documents.  If a document that was created natively in a program like MS Word, Exel, or PowerPoint, is printed, scanned, and produced in an Adobe PDF format, that does not qualify as the production of ESI.

In the pre-electronic era, which really was not that long ago, paper documents were routinely made available.  Typically, a Government agency would allow a contractor’s attorney to inspect the documents, which were stored in file cabinets and banker boxes, and select the ones the attorney wanted to have copied.  This was a time-consuming process that usually involved travel and a considerable time lapse before the selected documents were copied and furnished.  In addition, the government attorney knew exactly which documents the contractor’s counsel found interesting and made a copy for the government’s use as well.  That being said, in many cases it was nevertheless a faster and better process.

An attorney who is experienced in the government’s recordkeeping system can look at file drawers, boxes, and file folders and quickly eliminate those that are unlikely to have useful, or relevant information.  That attorney will also be able to zero-in on those documents that have a high potential of being relevant because of how they are filed and how they physically appear.  It is not always necessary to read each individual document, but entire file folders that are deemed likely to contain relevant information can be tagged for copying and reviewed more carefully later when the copies are furnished.  In the long run, it is less expensive, faster, and more likely to facilitate the selection of relevant information than the current  practice of providing electronic “data dumps” to the other side.

You need sophisticated computer software to remove duplicates among thousands of electronic documents, to predictively code those documents based on selected search terms to narrow down the amount of data, and ultimately to tag those documents by person and issue to facilitate later search and retrieval.  Obviously, that is a process that can be performed much more quickly by a computer than a human being, but what I am lamenting is the fact that we have created an electronic data system that effectively requires us to analyze documents that way.

I realize the email must be produced electronically, since it was created electronically.  In fact, it is very disturbing when a government agency prints its email messages and then scans the hardcopies to created electronic files (usually PDF files) for production to the other side.  This process strips the metadata that would be found in the original electronic version and violates the rules governing the production of ESI.  Without question, any information, whether it consists of email, CAD files, projects schedules, etc., should be produced in its native electronic form.  If information is stored in hardcopy format by the government and must be scanned in order to create electronic information for production, I believe that the contractor’s attorney should be given the option of inspecting the hardcopies to determine which, if any, of those documents should be scanned and produced.  In my experience, this is a good way to speed up the process and to eliminate the volume of information that is ultimately produced.

The bottom line is that if the information, even though it was created on a computer, is stored in hardcopy and regularly accessed that way by government personnel, the contractor’s attorney should be given the opportunity to inspect those hardcopy files before they are scanned en masse. Email, however, which has become the preferred method of business communication, should always be produced in its native electronic format.

Michael H. Payne is the Chairman of the firm’s Federal Contracting Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Difficulty in Obtaining the Approval of an Individual Surety

Posted in Contractor Information Sources, Federal Procurement Policy

In a recent decision issued by the United States Court of Federal Claims, Anthem Builders, Inc. v. United States,  April 6, 2015, WL 1546437, the Court considered a protest involving the proposed use of an individual surety to furnish required bonds.  Under FAR 28.203, an individual surety may be accepted on a federal construction project, instead of a corporate surety on the approved list found on Treasury Department Circular 570, provided that certain requirements are met.  FAR 28.203 provides, in relevant part:


(a) An individual surety is acceptable for all types of bonds except position schedule bonds. The contracting officer shall determine the acceptability of individuals proposed as sureties, and shall ensure that the surety’s pledged assets are sufficient to cover the bond obligation. . .

(b) An individual surety must execute the bond, and the unencumbered value of the assets (exclusive of all outstanding pledges for other bond obligations) pledged by the individual surety, must equal or exceed the penal amount of each bond. . .

(c) If the contracting officer determines that no individual surety in support of a bid guarantee is acceptable, the offeror utilizing the individual surety shall be rejected as nonresponsible. . .

The proposed use of an individual surety has frequently been problematic because of the questionable practices of some individual sureties, and because the required assets have often been difficult to verify.  In addition, when questions arise, FAR 28.203(a) grants the Contracting Officer with the discretion to “determine the acceptability of individuals proposed as sureties” and to reject “the offeror utilizing the individual surety . . . as nonresponsible.”  Although there were a number of arguments that the Court considered, the Court ultimately agreed with the Government’s position that Anthem was nonresponsible because its proposed individual surety offered an Irrevocable Trust Receipt issued by First Mountain Bancorp (FMB”) that was unacceptable because FMB was not a FDIC insured financial institution.  (The Court also cited other reasons for agreeing that the individual surety should be rejected).

In our experience, it is very difficult to convince a Contracting Officer to accept an individual surety.  First of all, the inability of the bidder to obtain bonding from a surety on the approved list raises a red flag and, secondly, there have been a number of cases of fraud in the proposed use of individual sureties.  Contracting Officers, therefore, will rightfully exercise great caution in protecting the government’s interests.

Michael H. Payne is the Chairman of the firm’s Federal Contracting Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Debriefing and Protests What's Really The Final Word?

Posted in Webinar

Concept of learning

The Construction Industry offers tremendous opportunities and challenges for any business owner.  However, when your customer is the federal government, there are extra requirements that can either make or break your business.  What happens when you get the bad news that you didn’t win that contract you were competing for?  Want to know why?  Join Jennifer Horn and Maria Panichelli for the WIPP/Give Me 5 webinar The Fundamentals of the FAR, Part 3: Debriefing and Protests on Wednesday, April 29th to find out if there is any way to fight an agency’s decision and prevail—in spite of an initial rejection.  In this webinar you’ll learn all about debriefings and protests.  Jennifer and Maria will not only teach you how to use debriefings to see what you did wrong and what you did right, they’ll walk you through the proper protest procedure when you know the contract was improperly awarded to someone else. Register here!

WIPP is a national nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million businesswomen including 75 business organizations. WIPP identifies important trends and opportunities and provides a collaborative model for the public and private sectors to increase the economic power of women-owned businesses.  Give Me 5%, named after the 5% federal contracting goal for women-owned businesses, was created to educate women business owners on how to apply for and secure federal procurement opportunities. GiveMe5 is working to improve the WOSB Procurement Program to increase access to contracts for women entrepreneurs.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.

Sikorsky and its Impact on Claims Submission

Posted in Contractor Information Sources, Federal Procurement Policy, Protection of Contractor Rights

In December 2014, the Court of Appeals for the Federal Circuit issued an important decision that impacts how the 6 year statute of limitations (SOL) is applied under the Contract Disputes Act (CDA).  In Sikorsky Aircraft Corporation v. United States, the Court of Appeals determined that the CDA’s 6 year SOL for filing a claim is not jurisdictional, contrary to  number of lower court opinions.  This ruling has a number of important consequences that Federal Government contractors should understand.

claims handwritten with chalk on a blackboard

The CDA states that, “each claim by a contractor against the Federal Government…and each claim by the Federal Government against a contractor…shall be submitted within 6 years after the accrual of the claim.”  Prior to Sikorsky, this requirement was considered by most to be jurisdictional.  This meant that the 6 year time limit was absolute and, even in extenuating circumstances, could not be missed.  Therefore, any claim brought beyond 6 years simply could not be considered by the court.  The court would not have the jurisdiction.

While the decision in Sikorsky did not eliminate the CDA’s 6 year SOL, it does open the door to “equitable tolling” an important exception in applying a limitations period.  Equitable tolling is a legal concept that, in certain circumstances, allows contractors to bring claims after the time allowed by an applicable SOL.  Specifically related to the 6 year SOL under the CDA, a claim can be equitably tolled if a claimant diligently pursues its rights to bring that claim but extraordinary circumstances stood in its way.  For example, in Sikorsky the activities that brought about that claim began in 1999 but did not become material until 2003.  The claim was eventually brought in 2008 and a dispute ensued regarding whether the claim was timely filed.  The claimant, in this case the Government, argued that because the claim was not material until 2003 the SOL did not start to run until then and, therefore, when the claim was filed with the court in 2008, it was brought within the 6 year SOL.  Sikorsky, on the other hand, argued that the claim accrued in 1999 and was, therefore, barred by the 6 year SOL because it was not brought until 2008.  Ultimately, the court did not decide whether the claim was timely filed because it found that the appellant failed to meet its burden in proving the merits of the claim.  In the process of discussing that issue, however, the court made the important determination that the 6 year SOL was not jurisdictional.

In addition to opening the door for equitable tolling, Sikorsky will also change how SOL issues are litigated under the CDA.  Prior to this decision, because the CDA’s 6 year SOL was largely considered jurisdictional, any challenge to the Court’s jurisdiction had to be decided if and when it was raised.  The issue could not be waived and could come up at any time.  After review, if it was found that the court did not have jurisdiction, the matter would be dismissed because jurisdiction is a prerequisite for the court to decide a matter on the merits.  Based upon Sikorsky, things have changed.  First, a defendant must now raise SOL as an affirmative defense.  An affirmative defense must typically be plead at the first opportunity possible (usually in the Answer to a Complaint) or it is waived.  Second, a non-jurisdictional challenge to the SOL is normally decided when a court renders a decision on the merits.  For contractors doing business with the Federal Government this has an important practical effect.  If a contractor brings a claim against the Federal Government and also argues that equitable tolling should apply, post-Sikorsky a judge or jury will likely decide whether equitable tolling has taken place after all of the evidence on the facts have been heard.  This means that a claimant may have to litigate its entire claim before the court will even determine if the claim was raised within the 6 year SOL.

As a practical matter, if you have a claim, or a potential claim, do not sit on your rights.  While Sikorsky is helpful and important in terms of how the SOL is considered under the CDA, do not take any chances.  6 years represents a very generous limitations period.  Seek professional assistance as early as possible and get the claim submitted.  If you have any questions, please let us know.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Amy M. Kirby is an Associate in the firm’s Federal Contracting Practice Group

Edward DeLisle and Maria Panichelli Team with Onvia to Publish Periodical Government Contracting Series, Legal Landscape

Posted in Contractor Information Sources, Small Business Contracting


Exciting news!  We recently teamed up with Onvia, a well-known government contracting resource delivering the necessary data, business intelligence, analytics and tools to help clients succeed in the government market.  In addition to our continued posts on this blog, we will now be publishing a series called Legal Landscape on Onvia’s blog.  The quarterly series is specifically designed to provide government contractors with a quick, but thorough, summary of important legal developments, as well as a plain-English explanation of how those developments may affect you.

As government contracting attorneys, a big part of our job is staying on top of legal changes that might affect our clients.  And – as many of you who read this blog know – these changes occur all the time.  In any given month there might be: proposed additions or revisions to the FAR; new SBA rules governing the various small business programs; new legislation that effects the federal procurement process in some way; executive orders that change federal contractors’ compliance obligations; and/or an important new case that alters how a government contractor should approach a problem.  As a practical matter, a lot of these changes aren’t very likely to affect your day-to-day business life.  But every few months, there are at least a few legal developments with the potential to change vital aspects of your business, or put you at risk in the event of non-compliance.  For that reason, smart contractors make every effort to keep current on the legal landscape upon which they operate.  However, because these changes can come from a range of sources, and cover a variety of topics, it’s very easy for even the most conscientious contractor to lose track of the truly important changes.  Knowing this, Onvia decided that its readers would benefit from a regular update of the most important legal developments.  Knowing us, and being familiar with our efforts to keep clients informed through posts to this blog, Onvia thought we might be just the people for the job.  We obviously agreed.

We are very excited to be working with Onvia on this series.  For more than 14 years, Onvia has been helping businesses succeed in the government market.   Their extremely comprehensive website offers a wealth of information relating to products and industries, as well as a specific “Solutions” page for government contractors.  It also has a free resource page filled with informative blogs and articles as well as interesting webinars.  It is no wonder that thousands of companies across the United States rely on Onvia as a comprehensive resource for timely and actionable sales opportunities and the industry-specific information needed to make intelligent sales decisions.   You can learn more about Onvia and their numerous resources here.

The first of what we hope will be many installments of Legal Landscape is available now.  We hope that you enjoy it, and that you check back for more government contracting updates in the next edition of Legal Landscape!

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.

New Anti-Trafficking Rule Presents Significant Challenges for Government Contractors

Posted in Contractor Information Sources, Protection of Contractor Rights

Effective today, a new Anti-Trafficking rule will substantially change and increase federal contractors’ compliance and certification requirements.  The Anti-Trafficking rule requires that all federal contractors take certain actions related to combating human trafficking and slavery in their supply and contracting chains.  Human trafficking has been a high-profile issue in government contracting in recent years, drawing attention from Congress, President Obama, and groups such as the American Civil Liberties Union.  It is estimated that forced labor in the private economy generates $150 billion in illegal profits each year.

With today’s far-reaching supply chains, and increasing numbers of businesses obtaining their goods from “high risk” countries, the importance and impact of human trafficking laws will only continue to grow.

The new rule amends the FAR to codify trafficking-related prohibitions involving federal contracts, including new compliance and certification requirements, and puts contractors on the hook for disclosing violations to the government.  The new rule requires contractors to:

  • Develop and maintain a detailed compliance plan for contracts for supplies (other than commercially available off the shelf items) acquired outside the U.S., or services to be performed outside the U.S., with an estimated value exceeding $500,000;
  • Ensure that recruiters adhere to local labor laws;
  • Cooperate with, and provide access to, enforcement agencies investigating compliance with anti-trafficking and forced labor laws;
  • Ensure that workers are not being charged recruitment fees, which are common in many foreign countries;
  • Notify agents and employees of the anti-trafficking policy;
  • Provide return transportation for qualified workers;
  • Disclose (or self-report) that an employee, subcontractor, or subcontractor’s employee is violating the rule; and
  • Annually certify that, (1) it has implemented a compliance plan, and (2) after a due diligence inquiry, there are no violations by the prime contractor, its subcontractors or agents, or, if such a violation exists, it has taken remedial action.

The new rule also prohibits contractors from confiscating passports or other immigration documents, using deceptive recruitment practices, and providing housing that fails to meet local housing and safety standards. Tag or word cloud human trafficking awareness day related

These changes will have an immediate and significant impact on federal contractors.  Most significant is the thorny position contractors are placed in by having to perform due diligence on their subcontractors (at every tier), and then continuing to monitor them for violations.  This is particularly difficult, as trafficking activity is notoriously hard to detect.  Adding to concerns is that ambiguity in the rule makes adherence more of an art than a science.  Particularly, regarding compliance plans, the plan must be “appropriate” for the “size and complexity of the contract and to the nature and scope of the activities performed, including the risk that the contract will involve services or supplies susceptible to trafficking.”  However, the rule provides contractors with little guidance as to what an “appropriate” plan should look like.  Further, what is considered “appropriate” may vary widely across various federal agencies.

Finally, and obviously, all of this will come at an additional cost to contractors, many of whom will now be forced to play catch-up to ensure they are in compliance, or risk severe penalties including debarment, as well as criminal and civil sanctions.  Given the uncertainties and costs of compliance, and severe penalties for non-compliance, it is imperative that government contractors fully appreciate and understand the import of this new rule and its requirements, and take appropriate steps to ensure compliance.

In a related effort to strengthen human trafficking protections, the House Foreign Affairs Committee approved a bill last Friday that would provide for a definition of the prohibited recruitment fees.  Under the Trafficking Prevention in Foreign Affairs Contracting Act, H.R. 400, the secretary of state and the administrator of the U.S. Agency for International Development would be required to submit reports defining what constitutes a recruitment fee in order to promote better compliance with federal anti-trafficking law.

Please let us know if you have any questions or concerns.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Robert G. Ruggieri is a Senior Associate in the firm’s Federal Contracting Practice Group.

Guilty By Affiliation

Posted in Contractor Information Sources, Protection of Contractor Rights, Small Business Contracting, Webinar

Vector podcast concept in flat styleRecently, Maria Panichelli was interviewed by Raymond Thibodeaux from AOC Key Solutions for a podcast entitled “Guilty by Affiliation.”  During this podcast, Maria and Ray spoke about a variety of affiliation-related issues. Topics covered included the various types of affiliation, the consequences of being deemed “affiliated” with another business, and, perhaps most importantly, how to avoid a finding of “affiliation.”  James McCarthy was also interviewed. Catch the whole podcast here.

Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.

The 4th Circuit Expands Liability Under the False Claims Act

Posted in Contractor Information Sources, Federal Procurement Policy, Protection of Contractor Rights

On January 8, 2015 the U.S. Court of Appeals for the Fourth Circuit issued a decision in United States v. Triple Canopy, which broadened the reach of the False Claims Act (FCA) by embracing the theory of implied certification. While it is too early to speculate about the impact of the decision, it certainly could result in a rise in whistle blower and government initiated actions under the FCA.

Money Exchange

The case stems from a security services contract at Al Asad Airbase in Iraq, which was awarded to Triple Canopy in 2009. As a part of the contract, Triple Canopy was required to provide security personnel who possessed specific firearms training and who were able to pass a U.S. Army qualifications course with a minimum score. Scorecards indicating that personnel passed the qualifications course were to be maintained in each employee’s personnel file.

Triple Canopy hired 332 Ugandan guards to work at the Airbase. The guards’ personnel files indicated that they met the training requirements; however, once they arrived on site and were retested, it was discovered that they were unable to properly perform. To overcome this, Triple Canopy falsified scorecard sheets indicating that its personnel were, in fact, qualified.

For the 12 month contract period Triple Canopy presented monthly invoices to the government and received payments totaling over 4 million dollars. Sometime later, a former employee filed a qui tam action in the Eastern District of Virginia alleging that the FCA had been violated. The government intervened alleging that Triple Canopy knowingly presented false claims to the government. Specifically, the government alleged “that Triple Canopy knew the guards did not satisfy [the contract’s] marksmanship requirement but nonetheless billed the government the full price for each and every one of its unqualified guards and falsified documents in its files to show that the unqualified guards each qualified as a Marksman on the U.S. Army Qualification course.”

Triple Canopy filed a motion to dismiss. The basis for this motion was the government’s failure to sufficiently plead that Triple Canopy submitted a demand for payment that contained a false statement. The motion went on to state that the government failed to prove that a false record was created by Triple Canopy, which the government relied upon in paying Triple Canopy. The Court agreed. In its opinion, the Court asserted that the government did not plead “that Triple Canopy submitted a demand for payment that contained an objectively false statement.” In other words, because the actual claim for payment did not contain a false statement, there was no violation of the FCA. Further, the Court held that the “Government … failed to allege that the [Contracting Officer’s Representative] ever reviewed the scorecards,” demonstrating that the government did not rely upon a false record because it did not examine the scorecards before it made payment. The United States (along with the former employee) appealed to the Fourth Circuit.

On appeal the Fourth Circuit reversed the District Court’s ruling. The Court held that the “Government pleads a false statement when it alleges that the contractor, with the requisite scienter, made a request for payment under a contract and withheld information about its noncompliance with material contractual requirements. The pertinent inquiry is whether, through the act of submitting a claim, a payee knowingly and falsely implied that it was entitled to payment.” The Fourth Circuit further found that, although Triple Canopy had not submitted certifications that were false on their face, the government plead sufficient evidence to sustain a FCA claim under a theory of implied certification.

In making this finding, the Court acknowledged the broad purpose of the FCA by stating that “claims can be false when a party impliedly certifies compliance with a material contractual condition [which] gives effect to Congress’ expressly stated purpose that the FCA should reach all fraudulent attempts to cause the Government to pay out sums of money or to deliver property or service.” Here, the material contractual condition was the guards’ qualifications, which Triple Canopy falsified. As the Court explained “common sense strongly suggests that the government’s decision to pay a contractor for providing base security in an active combat zone would be influenced by knowledge that the guards could not, for lack of a better term, shoot straight….[and further] if Triple Canopy believed that the marksmanship requirement was immaterial to the government’s decision to pay, it was unlikely to orchestrate a scheme to falsify records on multiple occasions.” Essentially, the Fourth Circuit found that the claim itself did not have to be false as long as the underlying information that formed the basis of the claim was material and false.

Prior to this ruling, it was difficult to bring a claim under the FCA under circumstances such as these because it was generally only permissible where there was fraud found in an actual certification for payment. Based upon this decision, a FCA claim can be sustained as long as the material upon which payment is based is false. This is yet another example of the expansive nature of the FCA. If you are a government contractor beware of its implications and if you have any questions, call a legal professional.

Edward T. DeLisle is Co-Chair of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Amy Kirby is an Associate in the firm’s Federal Contracting Practice Group.