Contract Performance Issues

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Disputes frequently arise because the government refuses to agree that a contractor is entitled to additional money or time resulting from constructive changes, differing site conditions, government-caused delays, or countless other reasons. These disagreements typically are dealt with through the submission of Requests for Equitable Adjustment (REAs) or certified claims and are ultimately resolved through the disputes process. They focus on the rights of the parties under the specific terms of the contract. The problem, however, is that contractors also incur costs because of government indecisiveness that has not yet generated an REA or claim under a particular contract clause. This places the contractor in a state of limbo, not knowing whether there will be a significant impact to the project.

Continue Reading The Impact of Government Indecision on Government Contractors

The Judgment Fund was established by Congress in 1956 to alleviate the need for specific legislation following every successful claim against the United States. The purpose behind the Judgment Fund was to eliminate the procedural burdens involved in getting an individual appropriation from Congress, allowing for the prompt payment of judgments and reducing the amount of interest accrued between the time the judgment was awarded and payment was made. Although the Judgment Fund successfully eliminated the need for legislative action in almost every case, and in most cases resulted in prompter payments to successful claimants, it also had the unintended consequence of incentivizing procuring agencies to avoid settling meritorious claims in favor of prolonged litigation. Specifically, an agency could avoid making payment from its own appropriated funds if it refused to settle a case and instead sought a decision from a court, subsequently providing it access to the Judgment Fund which draws money straight from the Treasury. Congress eliminated this problem when it passed the Contracts Disputes Act (CDA) of 1978, which requires agencies to reimburse the Judgment Fund with appropriated funds that are current at the time of the judgment against the agency. Although contracting officers are no longer incentivized to avoid settlement, the source and availability of funds can still impact whether or not they decide to settle a claim because there are differences between how a judgment is funded and how a settlement can be funded.  Continue Reading How the Judgment Fund’s Availability Impacts a Contracting Officer’s Decision to Settle a Claim

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Government contractors know that an unfavorable performance review posted to the Contractor Performance Assessment Reporting System (“CPARS”) can be extremely costly. Many negotiated solicitations include past performance as an important or even primary evaluation factor for contract award. An unfavorable review on a past contract can impose significant costs on the contractor to address the unfavorable review with contracting officers on future solicitations. However, the contractor saddled with an unfair and inaccurate CPARS review may now have a means to challenge the review and recover some of these costs.  Continue Reading A New Way to Claim Damages Resulting from an Unfavorable CPARS Rating

WelOnviaLegalLandscapecome to the second edition of Legal Landscape, a series we have developed with Onvia’s  blog 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.

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

Several months ago, we told you about Ambuild Company v. LLC v. U.S., a very important case pending before the Court of Federal Claims (“COFC”).  The AmBuild case was of particular interest to our firm because it concerned the interpretation of a Department of Veterans’ Affairs (“VA”) regulation, which the VA revised following an adverse ruling in our case, Miles Construction, LLC v. United States.  AmBuild was of particular interest to SDVOSBs because of its potential impact on their due process rights in the context of status protests. Gavel and book

Well, the COFC issued its opinion.  The decision is a major victory for veteran-owned businesses, wherein the Court rejects the VA’s attempt to circumvent the ruling in Miles, and reaffirms that the VA cannot cancel a concern’s SDVOSB status without first allowing it an opportunity to respond to potential eligibility issues.

As those of you that follow this blog know, Miles involved the cancellation of our client’s SDVOSB status.  The cancellation stemmed from a protest lodged by a competitor.  However, the VA’s basis for cancellation was something that was never raised in that competitor’s protest.   Rather, the cancellation was based upon a new issue that the VA brought up on its own when deciding the protest, which Miles knew nothing about prior to cancellation.  When Miles protested the cancelation of its status, the COFC found that the VA had violated Miles’ due process rights.  The Court reasoned that an agency performing an investigatory function must provide the investigated party with notice, and afford that party an opportunity to meaningfully participate in the investigation.  The Court said: “an interpretation of 48 C.F.R. § 819.307(c) [the regulation pertaining to SDVOSB/VOSB eligibility protests] that does not allow this basic procedural due process is plainly erroneous and cannot be upheld.”

Following the Miles decision, the VA revised its regulations.  The amended version of 48 C.F.R. § 819.307 (which went into effect on September 30, 2013) added language that gave the VA the ability to determine the status of a protested concern based upon “a totality of the circumstances.”  (48 C.F.R. 819.307(e)).  In AmBuild, the VA relied on this language, arguing that it allowed the VA to consider facts or issues not specifically raised by the protesting party when reviewing a concern’s SDVOSB status.  In effect, the VA argued that “totality of the circumstances” meant that it could review any potential issue affecting a concern’s eligibility under the SDVOSB Program, whether or not it was raised as part of a protest.

In the AmBuild decision, the COFC squarely rejected the VA’s argument.  The Court again emphasized the importance of a protested party’s due process rights, and the necessity of giving a protested party a chance to respond to any allegations affecting its status.  It stated that: “The requirements of due process rest at the core of our nation’s Constitution and governmental institutions and are ingrained in our national traditions. . .”  As a result, “[b]efore adverse action is to be taken by an agency, the individual immediately concerned should be apprised not only of the contemplated action with sufficient precision to permit his preparation to resist, but, before final action, he should be apprised of the evidence and contentions brought forward against him so that he may meet them.”  Accordingly, the Court reasoned that the VA’s “strained construction” of 48 C.F.R. § 819.307 “would convert [the VA’s] scope of review into a general license to act on a protest without giving notice of issues not raised by the protesting party or contracting officer but rather generated sua sponte by [the VA]. The requirements of procedural due process cannot be so easily cast aside.”  The Court concluded that the 2013 amendment to 48 C.F.R. § 819.307 may be interpreted to establish a scope of review only – not to abrogate the requirements of procedural due process.  Thus, going forward, the “totality of the circumstances” language in 48  C.F.R. § 819.307(e) must be read to include only those issues to which the protested party was afforded an opportunity to respond.   That is, the VA may consider the totality of the information available relating to a protested concern’s eligibility for the SDVOSB Program, but only within the context of the issues raised in the protest itself.  The Court ruled that AmBuild was entitled to reinstatement to the VetBiz database, that it must be considered for the award of the contract at issue in the protest, and that AmBuild was entitled to its costs of suit.

This is a major victory for VOSB/SDVOSBs.  AmBuild reaffirms that the VA cannot cancel a concern’s VOSB/SDVOSB status without explicitly notifying that concern of any and all potential issues concerning its eligibility status, giving that concern an opportunity to provide a meaningful response, and allowing that concern to participate in the investigatory process.  It will be interesting to see if the VA attempts to amend its regulations again to circumvent the ramifications of this decision.

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.

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

By: Michael H. Payne & Maria L. Panichelli

On August 7, 2013, the DoD, GSA, and NASA proposed a rule (78 FR 48123) that would amend the FAR to significantly alter the past performance evaluation and assessment process. Specifically, the rule would cut in half the time that contractors have to comment on their own performance evaluations. It would also ensure that all agencies have immediate access to all performance evaluations, even before the end of the shortened contractor comment period.

The FAR currently addresses past performance evaluations at FAR subpart 42.15, “Contractor Performance Information.” Under the current system, the Contractor Performance Assessment Reporting System (CPARS) collects past performance assessments. CPARS provides an automatic notification to the contractor when a past performance evaluation has been submitted to the system, and following that notification, the contractor is allowed 30 days to comment on its evaluation. It is only after that comment period has expired that the CPARS system assembles and provides the past performance-related information, including the contractor’s comments, to the Past Performance Information Retrieval System (PPIRS). Agency source selection officials can then use PPIRS to review the reports and utilize the past performance information in making their selection decisions.

The rule, which was drafted pursuant to directives set forth in the National Defense Authorization Act, seeks to alter this system. It would require that a contractor’s past performance ratings be immediately added to both the CPARS and PPIRS databases, without any delay. Though, under the rule, contractors will be allowed to comment on their performance evaluations, they will be able to do so only after the evaluation is already in the PPIRS, meaning that source selection officials will be able to view evaluations before the contractor is given an opportunity to finish its response. Moreover, under the rule, contractors’ “comment period” will be shorted from 30 to 14 days.

The proposed rule explains the rationale behind its proposed changes, stating that: “[i]t is important for past performance information to be shared with source selection officials immediately, so that award decisions can be better informed and made in a more timely manner… Expediting the time allotted to contractors to respond to performance evaluations should improve communication between the contractor and the government, enable current information to be shared quickly throughout the government, and ultimately ensure the government does business with high performing contractors.” While this is certainly an admirable goal, the reality of the proposed system is that it deprives contractors of a full and fair opportunity to respond to negative evaluations, thereby depriving them of ample due process. This is compounded by the lack of administrative or judicial avenues open to contractors seeking to challenge performance evaluations.

We believe that the proposed changes are unfair because they increase the opportunity for contracting officers to use performance evaluations as a weapon. Posting a rating even before a response has been furnished not only is a little like executing the prisoner before trial – it is like executing the prisoner immediately after arrest. In an age where past performance ratings are critical in source selections, there should be more safeguards, not less. In fact, we believe that marginal and unsatisfactory past performance ratings should be subject to a due process review, including a hearing, before they are posted. If contracting officers realize that they must be prepared to defend past performance ratings, they will be less likely to assign poor ratings in defense of claims, or to gain unfair leverage against the contractor.

It is not yet clear whether this rule will go into effect, let alone what the timetable for these proposed changes will be if the rule is implemented. The comment period ends on October 7, 2013. We will keep you updated on the progress of the rule.

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.

An Armed Services Board case, ADT Construction Group, Inc., involves an appeal from a contracting officer’s final decision denying a claim for $826,725.16 and a 278-day time extension. The contractor had filed a claim for pre-construction delays arising out of a contract for the design and construction of a munitions maintenance facility at Nellis Air Force Base, Nevada. Although the contract in question was ultimately terminated for default and appealed to the Board (ASBCA No. 55358), the termination appeal was suspended pending the outcome of the appeal on the underlying delay claim. The Board obviously concluded that the merits of the underlying delay claim could have an effect on the merits of the termination for default.

Although the Board found that some of the delay was the fault and responsibility of the Government, we were particularly interested in the Board’s conclusion about the contractor’s right to pursue "fast track." After drafting the solicitation the government learned that the Department of Defense Explosives Safety Board ("DDESB") required 100% design of the entire project before it would review the plans. Thus, the drafters sought to modify the solicitation to remove all references to fast track as an option. The Board found that they "failed miserably at that task" and several references to fast track as an option remained in the solicitation when it was issued. ADT stated in its proposal that it would use the fast track method for design and construction.

The Board concluded that to the extent the contract was ambiguous in that regard, the contractor repeatedly gave notice when it said it wanted to do fast track and the government repeatedly ignored that notice. The evidence shows that the government never intended to allow fast track, and indeed its actions supported that intention, yet it failed to communicate those intentions to ADT. The government’s utter silence when the contractor repeatedly raised the issue of fast track squarely put the burden on the government to respond during the design phase – and it did not. Therefore, the Board found that the contractor had a contract right to pursue fast track.

In a recent decision issued on July 6, 2007, Appeals of FFR-Bauelemente + Bausanierung GmbH, ASBCA Nos. 52152, 54563, 54808, 54809, 55017, the Armed Services Board of Contract Appeals held that the government had shown that the Contracting Officer was “justifiably insecure about the contract’s timely completion” and that a termination for default was justified.  The CO and COR (Contracting Officer’s Representative) believed, based on experience with other Corps of Engineers barracks renovations, that nine months was needed for a contractor to perform the barracks renovation work.  After 113 days of the 290 day revised performance period (or almost 40% of the period) expired with little or no work accomplished by FFR (i.e., clearly less than 5% of contract work completed), the CO terminated FFR’s contract for default.  While over 40% of the original performance period had passed, FFR had not yet obtained necessary approvals to commence the initial item of renovation work under the contract, the performance of asbestos abatement. The lack of activity by FFR with respect to the contract obviously made the CO insecure about FFR’s timely completion of the barracks renovation work. 

The contractor appeared to be having difficulty procuring a subcontractor to perform asbestos abatement work, failed to meet numerous contract progress milestones (timely submission of a BLG, mobilization within 15 days of issuance of NTP, and timely submission of its asbestos training certificates and other contract submittals), and apparently did not possess a contract performance history with respect to the barracks renovation that instilled confidence in the Contracting Officer.  These facts constituted further tangible, direct evidence that the CO was “justifiably insecure about the contract’s timely completion.”  Thus, the Board concluded that the government has met its prima facie burden of proving it was justified in terminating FFR’s contract for default.

A default termination is a drastic sanction, which should be imposed and sustained only on “good grounds and on solid evidence.” E.g., Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987).  Government contract provisions authorizing termination of a contract for default are a species of “forfeiture” and are to be strictly construed.  Forfeitures are not favored, and one who asserts that there has been a forfeiture is held to the letter of its authority.

Continue Reading Termination for Default Sustained in Barracks Renovation Case

A recent decision by the Court of Federal Claims, AAB Joint Venture v. United States, (January 26, 2007), illustrates some of the subtleties of the Contract Disputes Act of 1978.  The contractor was awarded a design-build contract for a military storage complex.  The government provided a geotechnical report in the solicitation for the contractor’s use in preparing its proposal and subsequent design.  The contractor discovered, during construction, that the actual subsurface conditions differed materially from those represented in the government’s geotechnical report. Specifically, the report stated that the material was “limy dolomite rock, mostly massive and hard.”  However, the contractor discovered that there was less hard rock and more expansive, clayey material.  The latter material adversely affected the contractor’s plan to use shorter piles and spread footings for the building foundations.

The contractor submitted a certified claim to the contracting officer for the impact of the differing site conditions on the length of piles required for the perimeter of the structures, contending that the softer material required longer pile lengths.  When the government failed to issue a contracting officer’s decision, the contractor appealed to the Court of Federal Claims on the basis of a deemed denial of its claim. 

In its complaint, the contractor included a claim for the removal of unsuitable subsurface material in the footprint of the structures and requested a $412,000 equitable adjustment. The government objected to that part of the claim, arguing that the claim had not been presented to the contracting officer and, consequently, had not been certified. The government sought dismissal of the unsuitable material claim because the Court lacks jurisdiction to hear a claim that has not been presented to the contracting officer and certified. Continue Reading Court of Federal Claims Rules That A Differing Site Conditions Claim Must Be Precise