Last month, we reported that the Government Accountability Office’s (“GAO”) statutory authority to hear bid protests on civilian task orders exceeding $10 million had expired, leading to a parade of dismissed protests and disappointed contractors left without legal recourse. As of last week, there is reason to be hopeful, as the House of Representatives and Senate agreed on legislation that promises to permanently restore the GAO’s authority to hear civilian bid protests.  Continue Reading Proposed 2017 NDAA is a Mixed Bag for Government Contractors

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  In reality, since many protests were withdrawn or summarily dismissed, the protesters only prevailed in 68 of the 2,639 protests filed and the true success rate was closer to 3%.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

On September 11, 2013, the American Legion filed an amicus curiae brief, asking the Federal Circuit to reverse the Court of Federal Claims’ November decision in Kingdomware Technologies, Inc. v. The United States. In Kingdomware, the COFC effectively overturned an important line of Government Accountability Office (“GAO”) decisions affecting VOSBs and SDVOSBs. Those GAO cases (commonly referred to as the Aldevra cases) addressed a critically important aspect of the Veterans Benefits, Health Care, and Information Technology Act of 2006, 8 U.S.C. §§ 8127-28 (“the Act”).

That Act established “the rule of two.” It required that “a contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. § 8127(d).

On multiple occasions, contractors Kingdomware Technologies and Aldevra brought protests before the GAO, wherein they cited the language above and argued that the VA failed to follow the requisite “rule of two.” Specifically, the contractors averred that the agency failed to perform market research to determine whether two or more VOSB/SDVOSB concerns could satisfy the requirements of numerous solicitations and/or failed to set contracts aside for such concerns when market studies indicated that two or more such companies existed. Instead, in multiple instances, the VA opted to simply select contractors from the Federal Supply Schedule (FSS). The contractors argued that doing so was a violation of the Act.

The VA looked at it differently. It argued that the Act did not require it to consider setting aside procurements for SDVOSBs or VOSBs when the FSS could be used. The VA felt that it had the discretion to meet its requirements through the FSS, regardless of any obligations imposed by the Act.

In the Aldevra line of cases, the GAO agreed with the contractors’ interpretation of the Act. However, in a surprising move, the VA refused to follow the GAO’s recommendation. In an effort to break the gridlock, Kingdomware opted to press its position in the Court of Federal Claims. Unfortunately, the COFC agreed with the VA’s interpretation and effectively rejected the GAO’s support of “Veterans First.”

The COFC concluded that “the 2006 Act must be construed in light of its goal-setting provisions and thus the statute is at best ambiguous as to whether it mandates a preference for SDVOSBs and VOSBs for all VA procurements.” Although the Act uses the phrase “shall award” in one place, the Court reasoned that this phrase “must be read in connection with the other terms in the 2006 Act.” The Court found that those other terms demonstrated that the Act was “goal-setting in nature.” As such, it did not require the VA to consider setting aside procurements for SDVOSBs or VOSBs. Based on this reading of the Act, the COFC held that the VA had broad discretion with regard to set-aside procurements and, therefore, that the agency was not required to consider setting aside the procurement at issue. Kingdomware appealed to the Federal Circuit, which is where the matter presently sits.

In filing its amicus brief, the American Legion has joined the fight against the VA. In the brief, the American Legion argues that the Act was specifically passed to increase the number of contracts set-aside for VOSBs and SDVOSBs. As such, Congress’ use of the word “shall” was entirely deliberate. The selected language was intended to force the VA to follow the “rule of two.” The American Legion’s brief cites to an earlier Federal Circuit decision, which stated that: “the word ‘shall’ is not ambiguous. . . ‘shall is mandatory language,’ and ‘nothing in the language of the statute states or suggests that the word shall does not mean exactly what it says.’ ” The amicus brief goes on to state that “[b]y awarding contracts to nonveteran businesses…the VA diverts up to nearly $3 billion per year in government contracts away from veteran-owned small businesses.” The American Legion argues that this result is unacceptable and calls on the Federal Circuit to reverse the COFC ruling.

It is difficult to argue with the American Legion’s position. By using the word “shall” in the Act, Congress made its intent clear. The Act was designed to place veterans and service-disabled veterans ahead of all others for contracting purposes. There is nothing ambiguous about that proposition and the statutory language supports such a conclusion. The fact that the VA refuses to make awards to those it is designed to serve, despite the clear intent of the Act, is mind-boggling. Let’s hope the Federal Circuit agrees.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. 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.

By: Edward T. DeLisle

As part of the National Defense Authorization Act of 2008 (the 2008 Act), Congress provided the General Accounting Office (GAO) with the authority to hear protests involving certain task and delivery order contracts emanating from both defense and civilian agencies. At the time, this authority was limited to a period of three years, meaning that it was set to expire later this year. A few months ago, President Obama signed the National Defense Authorization Act of 2011 (the 2011 Act). As part of that Act, Congress partially extended the GAO’s authority. It permitted the GAO to continue hearing task and delivery order protests for contracts in excess of $10 million, but only for those contracts issued by Department of Defense agencies. For a reason not readily apparent, Congress failed to extend the GAO’s authority over civilian agencies. A bill has emerged in the Senate to address this omission.

As reported by Law360, Senate Bill 498, entitled the “Independent Task and Delivery Order Review Extension Act of 2011,” was recently introduced by Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman, I-Conn. If passed, it would extend the GAO’s jurisdiction over task and delivery order protests relating to civilian agencies for an additional five and a half years, equaling the extension provided on DOD protests under the 2011 Act. This is an important development for government contractors. Many questions arose following passage of the 2011 Act. Why would Congress only extend the GAO’s authority over task and delivery orders on DOD work? It is possible that this was simply an oversight, though no one is quite sure. The legislative history is devoid of any discussion on the issue. Whatever the reason, if passed, S. 498 would maintain the status quo for five more years. We will continue to track this bill and report on its progress.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle

For those who regularly read our blog, you know that we have followed the government’s recent concern about fraud and abuse in the federal procurement process.  The GAO has issued reports that recite such abuse relative to the 8(a), HUBZone and SDVOSB programs.  As those reports indicate, companies have been awarded set-aside contracts through those programs, but were not qualified to receive them.  In certain circumstances, the apparent fraud was so blatant that the hubris, which certainly existed to think such abuses would go unnoticed, puts Charlie Sheen to shame.  Yet, as the GAO reports state, even when the abuses were uncovered, many of these contractors continued to receive government awards.  It appears that some contractors performing work overseas in places like Iraq and Afghanistan may also be receiving awards that they do not deserve.

As reported by Govexec.com, government agencies responsible for overseas contracts are not properly recording past performance history in the CPAR and PPIR electronic databases.  The biggest offenders appear to be the State Department, the Department of Defense and the U.S. Agency for International Development (USAID).  Based upon information supplied to the Commission on Wartime Contracting, congressionally mandated to investigate overseas contracting activities, these agencies have failed to properly report past performance history in up to 90% of the contingency contracts they have issued.  While the failure to report this information is problematic for many reasons, it certainly exposes the government to contractors who are less than ideal for important government contracts.  This is especially an issue as it relates to contractors in line for suspension or debarment.  As former Connecticut Congressman Christopher Shays, who is the chairman of the Commission, stated: “[I]f suspensions and debarments are impeded by bureaucratic decisions or inertia, then companies that have committed fraud may continue receiving taxpayer funds.  In either case, untrustworthy contractors can continue profiting from government work, responsible businesses may be denied opportunities, and costs to taxpayers can climb.”

Over the years, the government has increasingly relied upon “best value” procurement to let contracts.  Past performance is almost always an important factor in determining “best value.” In fact, in most cases, it is the most important factor.  If federal agencies intend to continue issuing contracts in this fashion, a practice that is highly questionable for the purchase of certain services, such as construction, then they must make it a point to create a system that allows those deserving of awards to receive them. In the case of small business set aside contracts, the government has started to slowly move in this direction.  The VA, for example, is now vetting those contractors on its on-line SDVOSB registry to verify eligibility.  If this function is performed correctly, it will greatly enhance the probability that contracts will be let to those who deserve them. With respect to past performance history, there is a system in place.  Federal agencies simply need to use it.  Hopefully, the findings exposed by the Commission on Wartime Contracting make this a reality.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle

This week the Department of Veteran’s Affairs announced that it will require all companies that wish to receive set-aside contracts as veteran-owned, or service-disabled, veteran-owned, businesses to verify their status. This announcement was made as part of the 2010 Veteran’s Benefit Act and is geared toward eliminating fraud and abuse. As reported by Government Executive.com, last month the VA began contacting companies currently listed in its contractor database, VetBiz.gov, and informed them that that they had ninety (90) days to provide the VA with business documents proving eligibility to qualify for set-aside contracts issued by, or on behalf of, the VA. The measures currently being put in place have resulted, in part, due to a GAO report issued in November of 2009, which cited numerous instances of fraud and abuse in the system.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle

On April 26, 2010, President Obama issued an executive order to study the way in which the government provides assistance to veteran-owned and service-disabled, veteran-owned businesses. This executive order could not have come at a better time. It appears that the government has a two-fold problem: achieving federally mandated goals for veteran-owned and service-disabled companies and eliminating fraud in its small business programs, generally. 

On April 30, 2010, the Government Accountability Office issued a report to the House of Representatives, Small Business Committee concluding that fraud continues to run rampant in the government’s small business programs. In an investigation conducted between October of 2008 and January of 2010, the GAO identified fourteen (14) companies that falsely held themselves out as 8(a) eligible and secured work through the government’s set-aside programs.  The work obtained by their companies totaled $325 million. This report was issued less than six (6) months after the GAO issued a similar report that focused on fraud relating to contracts set-aside for veterans and service-disabled veterans.

As revealed by the GAO reports, fraud in the federal small business programs is wide-spread and, undoubtedly, has been exacerbated by the economic slowdown. The once robust private sector has run dry. As a result, more and more contractors have become interested in entering the federal marketplace. That has resulted in many more contractors bidding on federal work. This increased competition has generated much interest in small business set-asides, where the field is not nearly as crowded. Unfortunately, not all contractors have entered the small business world consistent with the Federal Acquisition Regulations or the Small Business Administration’s regulatory framework.

If fraud was not enough, legitimate small businesses, including veteran-owned and service-disabled, veteran-owned firms, are also being hurt by the failure of the government to hit its contracting goals. As reported by BradentonHerald.com, the Department of Defense represents but one prominent government agency that has fallen short. In recent testimony before the House of Representatives, Veterans’ Affairs Subcommittee on Economic Opportunity, a representative of the American Legion cited statistics indicating that less than one percent of DoD’s contracts were awarded to service-disabled, veteran-owned companies last year, far less than the Congressionally-mandated three percent goal. While such numbers sound insignificant, they account for billions of dollars government-wide.

President Obama’s executive order is aimed at addressing at least some of these issues. The executive order requires the Administrator of the SBA to serve as the chairperson of a government-wide task force designed to do the following, among other things:

* Ensure achievement of the pre-established federal contracting goals for small business concerns owned and controlled by veterans and service-disabled veterans through expanded mentor-protégé assistance and matching small business concerns with contracting opportunities; and
* Increasing the integrity of certifications of status as a small business concern owned and controlled by a veteran or service-disabled veteran.

The task force must issue a formal report to President Obama within one year. After back to back GAO reports depicting systemic problems in the government’s small business programs, one can only hope that this administration says "Yes We Can" to small business reform. Lip service to reform is no longer an option. 

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. 
 

By: Joseph A. Hackenbracht

On April 2, 2010, the Government Accountability Office responded to a request from the House Subcommittee on Energy and Water Development to evaluate “whether the President’s recent budget requests for the Corps are presented so that agency priorities are clear and proposed use of funds transparent.” In its analysis, the GAO reviewed the Corps’ internal review guidance for fiscal year 2011 and interviewed Corps’ officials at the Headquarters office and all Division offices. The GAO concluded that the Corps’ budget presentation continues to lack transparency and should provide key information that would be useful for Congress’ review of the budget. GAO believes that the Corps should provide two types of project-level information: first, information on projects previously funded that may still have resource needs; and second, information on the amount of unobligated appropriations remaining on previously funded projects. GAO suggests that this detailed information would help Congress make better informed appropriations and oversight decisions. Both Senate and House members have indicated that this type of information would be useful, and the Corps has agreed to provide this type of project-level information in future budget requests. While some of the information has been provided for the 2011 budget, the Corps has indicated that it can supplement the budget request during Congressional consideration of the appropriations.

The GAO noted that the fiscal year 2011 budget request included 95 construction projects and 65 investigation projects. The budget request that President Obama presented to Congress on February 1, 2010, totaled 3.834 trillion dollars. The budget proposal includes 4.881 billion dollars to support the U.S. Army Corps of Engineers’ Civil Works Program. Highlights of the Corps’ proposed budget are:

• $164 million to construct commercial navigation improvements on America’s inland waterways. 
• $789 million for efforts to reduce the risk of flood and storm damage. 
• $506 million to restore aquatic ecosystems. 
• The budget gives construction priority to dam safety work, projects that reduce significant risks  to human safety, and projects that will complete construction during 2011.
• $58 million for the Corps share of the CALFED Bay-Delta Program designed to improve California’s water supply and the ecological health of the San Francisco Bay/Sacramento-San Joaquin River Delta.
• $180 million to advance Corps studies and key construction projects to restore the South Florida ecosystem, including the Everglades, an extraordinary but threatened ecosystem.
• $36 million for efforts to restore and protect the ecosystem along the Louisiana Coast, still recovering from Hurricanes Katrina and Rita.

The Corps’ 2011 proposed amount, however, represents a substantial decrease from the 2010 budget amount of 5.446 billion dollars. The budget proposal for the Corps also reflects a dramatic drop in fiscal outlays from the American Recovery and Reinvestment Act funding for the Civil Works Program.

The Water Resources Coalition, an organization established to promote the development, implementation and funding of a comprehensive national water resources policy, has expressed its concern that the budget cuts will have wide negative impacts “including reducing necessary flood control protection along coastlines, stifling inland waterway shipments, and the lost opportunity for job creation.” Among its members, the Water Resources Coalition includes the Associated General Contractors of America and the American Society of Civil Engineers.

Brian T. Pallasch, Co-Chairman of the Water Resources Coalition, stated that “the Administration’s budget ignores the public safety and environmental benefits these programs offer our nation. The residual risk to life and property behind such structures cannot be ignored.” The Water Resources Coalition has encouraged Congress to reverse these budget cuts and increase the funding for the Corps’ Civil Works Program. The project-level information that the Corps has indicated it would provide for the 2011 budget process may assist Congress in justifying increases in the funding for the Corps.