Federal Construction Contracting Lawyer & Attorney : Payne Hackenbracht & Sullivan : Construction Law, Dredging and Claims

The Federal Acquisition Regulation, at FAR 36.201, requires government personnel to be fair and accurate in the evaluation of a construction contractor’s performance, but there is the inherent potential for an unfair and overreaching evaluation. Government personnel are required to use DD Form 2626 for performance evaluations. This form lists five major factors to be evaluated: quality control, effectiveness of management, timely performance, compliance with labor standards and compliance with safety standards.  If, for example, a contractor’s employee has an accident and sustains an injury, a government evaluator could rate the contractor as unsatisfactory for violation of the safety standards, marginal in effectiveness of management (jobsite supervision, compliance with regulations (safety), and marginal in the implementation of its quality control plan. All of this would stem from a single incident. 

     In prosecutorial circles, this is known as “stacking the charges,” meaning that every possible charge is listed so that the prosecutor may plea bargain a deal on a lesser included charge.  However, in the case of a performance evaluation, there is little, if any, “bargaining” with the evaluator. The potential exists for the government evaluator to magnify a single incident into three deficiencies on the contractor’s part, as shown by the real life example above. 

     The consequences of this approach are serious for a government contractor. The regulations permit a contracting officer to review a contractor’s past performance evaluations in making a responsibility determination in a pending contract award. Therefore, it is important for contractors to insure that their performance evaluations are fair and accurate, particularly since the government is required to retain these evaluations for six years. One of the ways that a contractor may address its performance evaluation is by the submission of written comments to the evaluator. The evaluator must review these written comments, include them with the evaluation, and revise the evaluation, if the evaluator believes such a revision is necessary. However, this process is only available to those contractors who receive an overall “Unsatisfactory” performance rating. According to the regulations, the government is not under any obligation to advise a contractor of a “marginal” performance rating.

Because of the retention and use of the performance evaluations, we recommend that every contractor obtain a copy of its performance evaluation when it completes a project over $550,000.00. If the overall evaluation is either marginal or unsatisfactory, the contractor should submit a written rebuttal within thirty days of receipt and request that the evaluating official review and include these written comments with the performance evaluation. The goal, obviously, is to present a fair and accurate representation of the contractor’s performance and to lessen, if not eliminate, the impact of “stacking the charges” in the evaluation.

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A decision has been issued in the United States District Court for the Eastern District of Louisiana, by Judge Stanwood R. Duval, Jr., dismissing the consolidated class action lawsuit against the United States Army Corps of Engineers for the failure of the Orleans Parish outfall canals and, in particular, the 17th Street Canal that allegedly accounted for approximately 80% of the flooding of downtown New Orleans in the wake of Hurricane Katrina (“In Re: Katrina Canal Breaches Consolidated Litigation, No. 05-4182 E.D. La.).  The only remaining defendants are the Orleans Parish Levee Board and the New Orleans Sewerage and Water Board.

Judge Duval ruled that the 17th Street, London and Orleans Avenue outfall canals were federal flood control projects and therefore statutorily immune from suit under the Flood Control Act of 1928.  In an opinion that was very critical of the Corps of Engineers, Judge Duval stated the following:

“While the United States government is immune for legal liability for the defalcations alleged herein, it is not free, nor should it be, from posterity’s judgment concerning its failure to accomplish what was its task. The citizens of each and every city in this great nation have come to depend on their government and its agencies to perform certain tasks which have been assigned to federal agencies by laws passed by Congress and overseen by the Executive Branch.

It should not be unreasonable for those citizens to rely on their agents, whom they pay through their taxes, to perform the tasks assigned in a timely and competent way. However, because of § 702c, there is neither incentive, nor punishment to insure that our own government performs these tasks correctly. There is no provision in the law which allows this Court to avoid the immunity provided by § 702c; gross incompetence receives the same treatment as simple mistake.

This story–fifty years in the making–is heart-wrenching. Millions of dollars were squandered in building a levee system with respect to these outfall canals which was known to be inadequate by the Corps’ own calculations. The byzantine funding and appropriation methods for this undertaking were in large part a cause of this failure. In addition, the failure of Congress to oversee the building of the LPV and the failure to recognize that it was flawed from practically the outset–using the wrong calculations for storm surge, failing to take into account subsidence, failing to take into account issues of the strength of canal walls at the 17th Street Canal while allowing the scouring out of the canal–rest with those who are charged with oversight.

The cruel irony here is that the Corps cast a blind eye, either as a result of executive directives or bureaucratic parsimony, to flooding caused by drainage needs and until otherwise directed by Congress, solely focused on flooding caused by storm surge. Nonetheless, damage caused by either type of flooding is ultimately borne by the same public fisc. Such egregious myopia is a caricature of bureaucratic inefficiency.

It is not within this Court’s power to address the wrongs committed. It is hopefully within the citizens of the United States’ power to address the failures of our laws and agencies. If not, it is certain that another tragedy such as this will occur again.”

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The Armed Services Board of Contract Appeals (“ASBCA”) recently decided a case involving the issue of whether a contractor could recover the fees charged by a consulting firm as a contract administration cost.  Fru-Con Construction Corporation. Although the cost principles in the FAR, at 31.205-47(f), provide that "costs are unallowable if incurred in connection with the prosecution of claims or appeals against the Federal Government," FAR 31.205-33 provides that "professional and consultant services" are allowable in certain circumstances. One of those circumstances occurs when a consultant's preparation of a request for equitable adjustment was for the purposes of seeking a negotiated settlement of pending issues with the government.  In such a case, a consultant’s costs may be allowable if otherwise found to be reasonable.

The ASBCA addressed the issue of whether the consultant's fee of $612,000 was reasonable. Troubled by the lack of specificity in the consultant's contract, the summary nature of the consultant's bills, and the apparent lack of oversight by the contractor, the Board decided that it was almost as if the contractor had given the consultant a blank check. The Board concluded that a prudent business person in the conduct of a competitive business would not have reasonably incurred the expenses in an effort to negotiate with the government. The Board concluded that the contractor was entitled to recover a reasonable amount for its consulting fees and, in a jury verdict, decided that $65,000, not $612,000, was allowable as a reasonable contract administration cost.

When contracting for professional services on a Federal government contract, it is important to clearly define what the professional will do, to obtain itemized bills that include sufficient detail regarding the nature of the services provided, and to oversee the consultant's activity. In addition, obtaining the consultant's work product, including trip reports, minutes of meetings, memoranda and reports will go a long way in helping a contractor avoid a later determination that the consultant’s costs were unreasonable and, therefore, not recoverable. 

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The Equal Access to Justice Act (“EAJA”) allows the recovery of attorney’s and expert witness fees provided that the applicant submits a timely application “which shows that the party is a prevailing party and is eligible to receive an award under this section. . . .”  The applicant “shall also allege that the position of the agency was not substantially justified.”  5 U.S.C. 504(a)(2).

In a recently decided case by the Armed Services Board of Contract Appeals, Environmental Safety Consultants, Inc., ASBCA Nos. 47498 and 53485, the United States Naval Facilities Engineering Command (NAVFAC) awarded Environmental Safety Consultants a contract in the not to exceed amount of $299,125 for sludge removal, disposal and cleaning services in lagoon #1 and lagoon #2 at the Naval Air Development Center, Warminster, Pennsylvania.  Environmental Safety Consultants applied for EAJA fees and other expenses in the amount of $119,067. The Board had earlier held that the appellant was entitled to an equitable adjustment for certain additional costs, in the amount of $93,989, incurred in performance of the contract.  In other words, the Appellant was a “prevailing party.”  However, as this decision demonstrates, just because a government contractor is a prevailing party does not necessarily mean that the company is entitled to recover EAJA fees.

In considering the EAJA application, the Board turned to the question of whether the position of the government was substantially justified.  EAJA provides in relevant part:

An agency that conducts an adversary adjudication shall award . . . fees and other expenses . . . unless the adjudicative officer of the agency finds that the position of the agency was substantially justified . . . . Whether or not the position of the agency was substantially justified shall be determined on the basis of the administrative records, as a whole, which is made in the adversary adjudication for which fees and other expenses are sought. 5 U.S.C. 504(a)(1).

The Supreme Court has ruled that “a position can be justified even though it is not correct, and we believe it can be substantially (i.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact.”   The Board found that the final decision represented a good faith effort to analyze the issues as they were known to the government at the time, not an unjustifiable agency action forcing litigation. Accordingly, the EAJA application was denied.

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As recently reported by Elise Castelli in the Federal Times, "The long slog to rebuild the Gulf Coast devastated by Hurricane Katrina might be gaining some speed."  A new order signed by GSA Administrator Lurita Doan will make it simpler and faster for the U.S. General Services Administration to award millions of dollars in recovery contracts to local small business in the Gulf Region supporting Hurricane Katrina recovery efforts.  Contracts for debris clearance, supply distribution, reconstruction and other disaster relief will be set aside for local businesses under the order.  "The order gives blanket justification for the set-aside awards, which will limit competition to local firms."

 "Local small businesses are the backbone of every community," said Administrator Doan. "Revitalizing the small businesses is one of the most significant ways we can aid in the recovery of the Gulf Coast region."

    Over the past year, Administrator Doan has met with GSA contracting officers, small business owners, and local officials in the region. Each group has asked for help in streamlining the process to get recovery work awarded to local firms. The new GSA Order, ADM 2851.5, does just that, promoting maximum participation of local small business in the impacted area for acquisitions supporting Hurricane Katrina recovery efforts.

    Additionally, GSA has taken a number of other steps to help small businesses along the Gulf Coast, including the following:

    -- Conducted over 9 small business partnering events to connect  local businesses with subcontracting opportunities.

    -- Awarded over $29 million to local businesses for renovation  of the U.S. Customs House in New Orleans.

    -- Planned a series of monthly meetings throughout the region to enroll local small businesses in the HubZone and GSA Schedules program.

After Hurricane Katrina, the President declared the Gulf Coast a Major Disaster area under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. This allows GSA's contracting officers to give a preference to local firms in the affected area. Instead of writing separate justifications, GSA Order ADM 2851.5 provides a blanket justification for all local preference awards under the authority of the Stafford Act.  The Order will remain in effect until the Presidential declaration of a Major Disaster is lifted.

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Engineering New Record reports that House and Senate conferees have reached a deal on a long–delayed bill that would authorize about $21 billion for hundreds of Army Corps of Engineers water projects and require more review by outside experts of work the Corps plans to do.  Funding would provide for projects to restore the Louisiana coast and Florida's Everglades, upgrade navigation on the upper Mississippi River and improve flood control efforts nationally.  Key lawmakers announced July 27 they had reached an agreement on major elements of a new Water Resources Development Act.

The package represents a melding of a $14.9–billion WRDA bill that the House approved in April and a $13.9–billion measure that the Senate passed in May. House Transportation and Infrastructure Committee Chairman James Oberstar (D–Minn.), who also chairs the House–Senate WRDA conference committee, told reporters that the reason the final version's price tag exceeds the House–passed total is that it also includes projects from the Senate bill.  Final votes by both chambers to approve the compromise agreement are expected next week, before the August recess.

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On May 17, 2007, we presented a seminar in Richmond where we discussed the “New World of Federal Construction Contracting” with a number of contractors interested in obtaining and performing Indefinite Delivery Indefinite Quantity (IDIQ) and Multiple Award Task Order (MATOC) contracts. Federal agencies are turning to IDIQ and MATOC contracts more and more often for construction projects, particularly in conjunction with the military construction involved in the Base Relocation and Closure Program (BRAC).

A recent article in the May 24, 2007 on-line publication Mid-Atlantic Construction stresses the substantial market opportunities for contractors in the Richmond area, as well as in all of Virginia.  Many of these opportunities involve military construction for the U.S. Army and the U.S. Navy.  Quoting Harold B. Kelly, president of the Virginia Chapter of the Associated Builders and Contractors, "2007 looks terrific for many, many of our members." He predicts that the consolidation of Army logistics units at Fort Lee in Prince George County alone will have a major impact on the market. The Army plans to spend at least $1 Billion to build 6 million square feet of new space. Chris Jarling, general manager of Turner Construction Company in Virginia, noted that he anticipated that the U.S. Army Corps of Engineers will use the design-build delivery method to construct many of the BRAC projects in Virginia.

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The Society of American Military Engineers (SAME) reports, in its latest issue of the SAME Government & Industry e-News, that since the Department of Defense (DOD) Mentor-Protégé program began 16 years ago with one agreement, industry participants have formed nearly 1,000 more agreements. The scope of the program also has grown to include women-owned, service-disabled veteran-owned and historically underutilized business zone concerns.  In a recent Web-based survey of 48 former protégés conducted by the Government Accountability Office, most protégés reported that the program was a valuable experience that enhanced their business development and helped increase their contracts and revenues. Verifying the value of the Mentor-Protégé Program, 98 percent of the protégés reported that they would recommend the program to other eligible small businesses. Presently, more than 230 firms participate in the program, representing the manufacturing, service, construction, and research and development industries.

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We recently presented a number of seminars on the topic “How to Succeed in the New World of Federal Construction Contracting” that dealt with the shift from sealed bidding to negotiated procurement in federal construction contracting, as well as the increased use of Indefinite Delivery Indefinite Quantity (IDIQ) and Multiple Award Task Order Contracts (MATOC).  (See our upcoming seminar schedule and agenda).  One of the byproducts of this shift in procurement policy has been a reduction in the number of competitive opportunities resulting from the combination of many smaller projects into very large negotiated contracts.  As the examples below demonstrate, the era of $320 million construction contracts and $9 million to $24 million task orders has arrived.

Shaw-Dick Pacific, LLC, Honolulu, Hawaii, was awarded a $175,983,523 (first increment) firm-fixed-price contract for construction of the Hawaii Regional Security Operations Center at Naval Computer and Telecommunications Area Master Station Pacific. An additional $144,016,477 will be funded upon the passage of FY2008 Military Construction Appropriation Bill making the total amount $320,000,000. The contract contains one option which may be exercised within three months, bringing the total cumulative value of the contract to $320,040,000.  Work will be performed at Wahiawa, Hawaii, and is expected to be completed by June 2010.  This contract was competitively procured with 38 proposals solicited and two offers received. The Naval Facilities Engineering Command, Pacific, Pearl Harbor, Hawaii, is the contracting activity (N62742-07-C-1329). 

Rogers-Quinn Construction, Inc., Bonsall, Calif., was awarded $9,820,000 for firm-fixed-price Task Order 0009 under a previously awarded indefinite-delivery/indefinite-quantity multiple award construction contract (N68711-02-D-8062) for construction of the Reserve Training Center at Marine Corps Air Ground Combat Center, Twentynine Palms.  The work to be performed provides for the construction of a single-story, steel framed structure with spread footing foundation, concrete floor, reinforced masonry walls, standing seam metal roofing system, fire protection system, heating, ventilation and air conditioning systems, specially constructed weapons storage area (armory), lithium battery storage area, staging areas, classrooms, storage and supply areas, drill hall, administrative spaces, locker and shower rooms, workshops, electrical utilities and mechanical utilities. Work will be performed in Twentynine Palms, Calif., and is expected to be completed by June 2008.  The Naval Facilities Engineering Command, Southwest, San Diego, Calif., is the contracting activity.

Harper Construction Co., Inc., San Diego, Calif., was awarded $24,855,000 for firm-fixed price Task Order 0005 under a previously awarded multiple award construction contract (N68711-02-D-8019) for family housing replacement in the Desert View and Club Street Area at Marine Corps Logistics Base, Barstow.  The work to be performed provides for design and construction services for 74 family housing units and a community center, consisting of all necessary site clearing, grading, demolition, improvements, structures, and off-site work as required. Work will be performed in Barstow, Calif., and is expected to be completed by June 2008.  The Naval Facilities Engineering Command, Southwest, San Diego, Calif., is the contracting activity.

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One of the most important factors considered by agencies in negotiated procurements is the past performance of an offeror. In addition to the information that an offeror might provide in response to a solicitation, source selection officials can access the performance evaluations from an offeror's prior federal contracts.  It is important, therefore, for Federal construction contractors to know what information on their past performance is available to procurement officials.

A contractor can review its own performance evaluations on the internet by accessing the Business Partner Network website, [www.bpn.gov]. and clicking on the link Past Performance Information Retrieval System, PPIRS. [www.ppirs.gov].  The PPIRS is maintained for the government by the Department of the Navy.  The Navy requires that, before accessing the system, a senior management representative must register by submitting a Senior Management Access Request Form to the office identified on the form. [http://www.cpars.navy.mil/accessforms/csmarf.htm]

In addition, before accessing the PPIRS a contractor must not only be registered with the Central Contractor Registration (CCR), [www.ccr.gov] but also must have created a Marketing Partner Identification Number (MPIN) in its CCR profile. Instructions on creating an MPIN are available on the CCR website.

As everyone who has dealings with the federal government is learning, access to government information is becoming more difficult, particularly information from the Department of Defense.  Obtaining the past performance information on your federal contracts is no exception.  As of November 1, 2006, contractors must also have a valid DoD PKI (Public Key Infrastructure) certificate.  For most federal construction contractors, this certificate must be obtained from an External Certificate Authority (ECA). The approved ECA vendors for the Department of Defense are VeriSign, Inc. and Operations Research Consultants, Inc.

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The American Society of Civil Engineers calls attention, on its website, to the rapid deterioration of our nation's highways, bridges, airports, dams, waterways, water systems, wastewater systems and other infrastructure facilities that are vital to our nation's economy and our quality of life.  Estimating that over $1.6 trillion needs to be invested during the next five years to restore the infrastructure to only a good condition, the ASCE offers a plan of action for Congress to address this national emergency.

Implementation of this action plan, or even just portions of the plan, would represent a significant opportunity for Federal construction contractors.

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Earlier this month, the President submitted the Administration's FY2008 Budget to Congress. Federal construction contractors should be encouraged by the large number of projects that are proposed for funding.  The budget provides the highest level of funding ever included in any President's budget for U.S. Army Corps of Engineers’ water resources projects and programs.  The proposed budget for the Department of Defense includes over $8 billion for the BRAC (Base Realignment and Closure) program.  The Defense FY2008 budget also includes considerable funding for military construction to support the Integrated Global Presence and Basing Strategy (IGPBS) that is presently being implemented to move U.S. forces from overseas to continental U.S. installations to better position them to support worldwide contingencies.

For more information on where these projects will be built in the coming years, please click here. The FY2008 Budget for military construction totals over $18 billion.  

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MATOC – IDIQ – “Best Value” – BRAC

These are the terms that contractors are hearing more and more and they are part of the rapidly changing world of construction contracting with the federal government.  It is no longer enough to simply be the low bidder; now, in many federal procurements, it is the “best value” that gets the job.  To make matters even more complicated, projects that were once bid individually, on a project-by-project basis, are now being awarded under Indefinite Delivery Indefinite Quantity (IDIQ) or Multiple Award Task Order Contracts (MATOC) and the number of contracting opportunities is shrinking.  Nevertheless, for those who understand the system and know how to put an effective proposal together, there continue to be many opportunities for construction contractors and subcontractors to participate in the federal government’s vast construction program, including the upcoming Base Realignment & Closure (BRAC) program.

If you are interested in learning more about construction contracting with the Army Corps of Engineers, NAVFAC, and other federal agencies, we invite you to attend one of the upcoming seminars sponsored by Payne Hackenbracht & Sullivan on How to Succeed in the New World of Federal Construction Contracting.  The seminars are to be held in Charlotte, Dallas, New Orleans, Orlando, or Philadelphia on one of the dates in February 2007 listed above and on the attached agenda.  The speakers include former Corps of Engineers attorneys and engineers, the former Deputy District Engineer of the New Orleans District, and the former Chief of the Construction Division of the Philadelphia District. The program will be presented from 8:30 a.m. until 1:00 p.m.

The program will focus upon Identifying Contracting Opportunities, Understanding the Latest Contracting Methods, Successfully Competing for Negotiated Procurements (including effective proposal preparation), and How to Deal Effectively with Federal Agencies, and will include information about how to protect your rights in both the bidding and contract performance stages of a project.  While contracting with the government provides many potentially profitable opportunities for a contractor, the federal contracting process is fraught with peril for those who do not understand federal procedures.  We will help you understand both what you should do, and what you should not do, when dealing with the federal government.

Please review the enclosed agenda and registration form, and feel free to contact us if you have any questions.  The attendance fee is $195, and additional attendees from the same company will only be charged $95.  Please register early because space is limited.

Our Seminar Coordinator, Rachel McNally, is available to answer your questions and she may be contacted at 215-542-2777, rem@phslegal.com.

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In order to implement the 2005 Base Realignment and Closure Program (BRAC), Congress has a bill under consideration to fund recommendations in the amount of 5.43 billion dollars (H.R. 5385).   Although this is a substantial amount of money, it is 400 million dollars less than the Administration requested.  Nonetheless, once a funding bill is passed for this phase of the BRAC program, a significant number of projects are planned for Texas, Maryland, Virginia, North Carolina, Georgia, and Kentucky.  

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