Federal Procurement Policy

The Government Accountability Office (“GAO”) issues statistics each year regarding the outcome of bid protests.  In 2015, there were 2,639 cases filed and there we 587 decisions on the merits.  Of those, only 68 protests were sustained.  According to the way the GAO presents its statistics, that would indicate that protestors prevailed approximately 12% of the time.  In reality, since many protests were withdrawn or summarily dismissed, the protesters only prevailed in 68 of the 2,639 protests filed and the true success rate was closer to 3%.  With those odds, why would anyone file a GAO bid protest?  The answer requires a little closer scrutiny since statistics can be misleading.

Continue Reading Deciding Whether to File a GAO Bid Protest

In a recent decision by the Armed Services Board of Contract Appeals, Dick Pacific Construction Co., Ltd., ASBCA No. 57675 et. al., decided on December 15, 2015, the Board repeated something that has been said many times before:

We consider daily logs to be the most reliable evidence of what actually happened during construction. Technocratica, ASBCA No. 46567 et al., 99-2 BCA ¶ 30,391 (“Daily inspection reports have been held to be prima facie evidence of the daily conditions as they existed at the time of performance.”)

Continue Reading Timely Documentation is Critical

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:

Bond

(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.

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 and focuses her practice on government construction litigation. Amy’s practice includes a wide variety of federal construction matters.

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 M. Kirby is an Associate in the firm’s Federal Contracting Practice Group and focuses her practice on government construction litigation. Amy’s practice includes a wide variety of federal construction matters.

Join partners Michael Payne and Ed DeLisle at the 2015 National 8(a) Association Winter Conference in Orlando, Florida for their presentation, “How to Effectively Team on a Federal Project.” In this discussion, Michael and Ed will explore the importance of well-crafted teaming agreements and how they are viewed by courts of various jurisdictions. They will also explore the practical implications of negotiating terms from both the prime and subcontractor perspectives, as well as cover the nuts and bolts of executing teaming arrangements on federal projects. For more information, or to register, please visit the National 8(a) Association website.

8a logo

Cohen Seglias is a proud sponsor of the 2015 National 8(a) Association Winter Conference, which focuses on the federal, legal and business updates that impact the ever-changing world of federal contracting. This year’s conference will be held in conjunction with the TRIAD Winter Meeting, bringing over 85 additional Small Business Liaison Officers to the National 8(a) conference attendees.

With more than 500 companies and key government stakeholders represented, this is an event you can’t afford to miss!

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.

Edward T. DeLisle is a Partner in the firm and a member 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.

Please join Jennifer M. Horn and Maria L. Panichelli as they begin their “Core Construction Curriculum” series for Women Impacting Public Policy’s Give Me 5% program.

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.

Give me 5

Jennifer and Maria will begin the Core Construction Curriculum series with two webinars.  On November 12th at 2:00pm they will be presenting Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process.  The Federal Acquisition Regulations or “FAR” can be confusing whether you are new to federal contracting or have been contracting with the government for years. This webinar will focus on improving participants’ understanding of FAR and its application in the construction context. The presentation will cover the bidding process for both sealed bidding and negotiated procurement. You can find a description of the presentation and registration information, here.

On December 3rd at 2:00pm Jennifer and Maria will be presenting Best Practices in Federal Construction. Whether you a contractor working on federal, state or private projects, certain construction practices should be followed to ensure that you and your company are protected on the project. Observing best business practices can mean the difference between a profitable construction project and one that exposes your company to financial risk. This Webinar will focus on best construction practices before, during and at the conclusion of a construction project.  Read more and register, here.

We will keep you posted on additional webinar topics and times. If you have suggested topics, feel free to contact Jennifer or Maria.

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 Practice Group.

This past July, we told you about an important bill known as the Stop Unworthy Spending Act (“SUSPEND Act”). That bill, which was introduced by House of Representatives oversight committee chairman Darrell Issa, aimed to dramatically overhaul the suspension and debarment (“S&D”) procedures applicable to federal contractors. Currently, the suspension and debarment of contractors is handled by each individual contracting agency, by its respective S&D office. But under Issa’s SUSPEND Act, these forty-one individual offices would be consolidated into one, centralized “Board of Civilian Suspension and Debarment.” That board would be overseen by the General Services Administration. In addition to consolidating the forty-one civilian agency S&D offices, the Act aimed to standardize agencies’ S&D policies, and increase transparency.

On October 29, 2013, the House of Representatives’ Oversight Committee passed an amended version of the SUSPEND Act. According to an October 28, 2013 press release, the amended version of the bill “reflects extensive stakeholder and academic community feedback,” and differs from the draft version of the bill circulated in February in several key respects. Among the additions to the new version of the bill is a timeliness rule, which requires the new, consolidated “Board of Civilian Suspension and Debarment” to consider cases within thirty days of referral. The board would also be required to render a final decision on those cases within six months of referral. S&D procedures relating to wartime operations and other time-sensitive matters would be further expedited. The new bill would also require agencies to coordinate their S&D efforts; it encourages the agencies to utilize a range of fraud remedies, including civil and criminal enforcement, with an emphasis on the timely recovery of funds.

Pursuant to the new bill, over forty smaller executive agency S&D offices would be centralized under the control of the Board of Civilian Suspension and Debarment. In contrast, larger agencies and military departments would be permitted to operate their own independent S&D offices, as long as they can demonstrate that they are able to run an effective S&D program. Overall, proponents say, the SUSPEND Act will improve the consistency and transparency of governmental S&D programs by:

  • Combining the separate S&D regulations governing contracts and grants into a single, comprehensive regulation;
  • Mandating a single government-wide case management system to track cases and make publicly available all final resolutions of S&D cases;
  • Enhancing oversight to ensure the accuracy and completeness of a government-wide database of firms that should not receive awards;
  • Speeding up referrals for S&D, including the identification of contractors and grantees that repeatedly fail to perform; and
  • Ensuring accused parties have the opportunity to be heard prior to any adverse action being taken against them by requiring “show cause” letters.

In our view, the new S&D framework proposed in the SUSPEND Act is a considerable improvement over the current S&D system, if only because of the shortened governmental response deadlines. Under the current system, government contractors who were unfairly suspended or proposed for debarment are often forced to wait months before the matter is resolved. Hopefully, this bill could remedy that problem. We will keep you posted on the progress of the bill.

Michael H. Payne is the Chairman of the firm’s Federal 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. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

On August 15, 2013, the SBA put into effect a long-awaited Final Rule (Federal Register Volume 78, Number 136 (Tuesday, July 16, 2013)) designed to help small business subcontractors. The Final Rule, which implements policies set forth in the Small Business Jobs Act of 2010, provides for several very important changes to small business contracting.

First, the rule will impact the ways large business contractor-offerors must utilize small business subcontractors who help during the proposal stage. Small businesses frequently complain that they spend considerable time, effort, and resources assisting large businesses in preparing bids, quotes and proposals, only to be left without any subcontract when the large business actually secures an award of the contract. To combat this problem, the Final Rule requires that large business contractor-offerors (those in line for an award over $650,000, or, in the context of a contract for the construction of a public facility, an award over $1,500,000) “represent to the contracting officer that it will make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from small business concerns that it used in preparing its bid or proposal, in the same scope, amount, and quality used in preparing and submitting the bid or proposal.” Pursuant to the rule, an offeror “uses” a particular small business in its bid or proposal if:

  • The large business referenced the small business as a subcontractor in its bid or proposal;
  • The large business referenced the small business as a subcontractor in its small business subcontracting plan;
  • The large business has a subcontract or “agreement in principle” to subcontract with the small business to perform a portion of the contract work;
  • The small business drafted any portion of the bid or proposal; or
  • The large business used the small business’s cost/pricing information or technical expertise in preparing the bid or proposal.

If the large business ultimately fails to use the small business as a subcontractor it must provide the Contracting Officer with a written explanation as to why. Under the rule, the CO must consider these issues when rating the large business prime’s overall performance. Moreover, in the most extreme cases, the CO is required to report a large business’ non-compliance to the Federal Awardees Performance and Integrity Information System (FAPISS). In short, large business offerors will no longer be able to rely on the efforts of small business subcontractors during the proposal stage without conferring some of the benefits of award on those subcontractors.

Second, the rule provides that large business prime contractors are responsible for ensuring that small business concerns are given the “maximum practicable opportunity” to participate in the performance of the work. The prime contractors must conduct market research and use “all reasonable means” to identify small business subcontractors and suppliers. Contractors on larger awards also have additional administrative and substantive responsibilities. For example, they must give pre-award written notice to unsuccessful small business subcontractors. Lastly, the primes cannot prohibit subcontractors from discussing any material matter, including payment from the prime, directly with the contracting officer.

Third, the rule requires that prime contractors must notify the Contracting Officer, in writing, when it is more than 90 days behind paying its small business subcontractors. Primes must also notify the CO if they pay the small business contractor a reduced price, lower than that agreed to in the subcontract. A contractor will be deemed to have a history of slow or reduced payments if it self-reports 3 times within a one-year period. The contracting officer is required to evaluate these payment factors when ultimately rating the contractor’s overall performance.

Michael H. Payne is the Chairman of the firm’s Federal 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.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Suspension and debarment procedures have been a hot topic in recent years, and it appears that the issue will remain a focus of congressional debate for the rest of this year as well. On June 12, 2013, Congress heard testimony on the state of the federal government’s suspension and debarment (S&D) system. The testimony was meant to serve as a congressional follow up to two troublesome GAO reports, which emphasized the many problems with the current S&D system.

John Neumann, the GAO’s Director of Acquisition and Sourcing Management, offered testimony at this June 12th hearing. He spoke about the GAO’s recent efforts to alleviate the systematic issues identified in the GAO reports. Neumann’s testimony indicated that he believed the suspension and debarment system was, in fact, improving, and that no major changes to the system were necessary. However, his opinion is far from universal. Most people agree that the S&D system is inescapably flawed, and in need of a dramatic overhaul.

For example, Scott Amey, General Counsel for the Project On Government Oversight (a group that works “to achieve a more accountable federal government”), testified that many agencies “still are not utilizing the suspension or debarment tool” effectively. Amey went on to testify that “history proves” that the current system does not force agencies to employ “top-notch contractors that are not involved in illegal or questionable activities.” In other words, most agencies continue to look the other way, giving business to contractors the agencies know are involved in misconduct, rather than initiating suspension and debarment procedures. Amey cited the Nuclear Regulatory Commission and Social Security Administration as agencies that have “zero suspensions, proposed debarments, debarments, and administrative agreements.” He further identified the Departments of Commerce, Health and Human Services, and Labor as having only a handful of suspensions and debarments. In short, Amey indicated that he does not believe that the current system encourages agencies to diligently prosecute and punish “bad” contractors.

Amey did, however, suggest a possible solution to this systematic underuse, or misuse, of suspension and debarment procedures: the Stop Unworthy Spending (or “SUSPEND”) Act. The SUSPEND Act, which was introduced by House of Representatives oversight committee chairman Darrell Issa several months ago could dramatically overhaul the S&D procedures applicable to federal contractors. Currently, suspension and debarment of contractors is handled by each individual contracting agency, by its respective suspension and debarments office. But under Issa’s SUSPEND Act, these forty-one individual offices would be consolidated into the “Board of Civilian Suspension and Debarment,” which would be overseen by the General Services Administration. In addition to consolidating the forty-one civilian agency S&D offices into one centralized board, the Act would standardize agencies’ S&D policies, and increase transparency.

Proponents of the SUSPEND Act point out that it will result in consistent, uniform application of S&D procedures across various agencies, and thereby put a stop to the underutilization of the S&D process by individual agencies. It will also prevent these agencies from making mistakes with respect to reporting requirements. In Issa’s view, the SUSPEND Act is necessary to combat the award of government contracts to those he described as “fraudsters, criminals, or tax cheats.” However, opponents say that the proposed changes could be detrimental to both contractors and agencies.

Critics point out that a centralized Board of Civilian Suspension and Debarment could result in a bureaucratic behemoth, which would ultimately prove slower for contractors, and result in a more formal process that requires participation of legal counsel. Moreover, the restructuring could deprive agencies of their leverage in negotiating concessions from contractors during debarment negotiations. It might also lead to duplication and inefficiency as the agencies try to coordinate their suspension and debarment activities with a new government entity.

Pro or con, the SUSPEND Act has the potential to become very important in upcoming months, and we will keep you updated on the progress of the bill. Whether or not the bill ultimately passes, it is important to also keep in mind what it signifies. This bill, and the congressional attention paid to the S&D program in general, demonstrate the government’s increased vigilance with respect to contractor fraud. The government’s focus remains on increasing the prosecution of dishonest or fraudulent contractors, and on perfecting S&D procedures used to punish those contractors. As this process continues, it is important for contractors to be aware of the dangers, and consult with legal counsel to avoid any inadvertent infractions.

Michael H. Payne is the Chairman of the firm’s Federal 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. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.