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Michael H. Payne is a Partner and Chair of the Federal Construction Group at Cohen Seglias Pallas Greenhall & Furman PC as well as an experienced trial lawyer who has represented contractors, subcontractors, and suppliers in all aspects of federal contract and construction law. His efforts have included assistance in the preparation of bids and proposals, interpretation of contract provisions, filing of protests, negotiation of contracts, and the litigation and settlement of contract claims and appeals.

Michael co-authored Bidding and Managing Government Contracts, published by R. S. Means Co., Inc, and also co-authored chapters in two books on Federal Government contracting published by Thompson/Reuters. He currently presents several seminars each year on a variety of federal government contracting topics including construction, proposal preparation, and ethics in government contracting, while maintaining an active national construction practice.

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The Small Business Administration (“SBA”) has had a very busy week. First, on May 24, 2016, the agency issued “Statement of General Policy No. 3” (“the Statement”) clarifying the hotly debated inter-affiliate sales exclusion (an issue relating to the counting of annual receipts for purposes of determining size). Then, yesterday, the agency published a lengthy final rule, which implements the long-awaited small business regulation changes mandated by the National Defense Authorization Act (“NDAA”) of 2013. Collectively, the Statement and the rule make a number of very important changes affecting Federal contractors. Some of the most important changes are: Continue Reading SBA Issues Important Changes and Clarification Concerning Small Business Regulations

On March 3, 2016, the SBA announced that it has expanded the list of industries in which a contract can be set-aside for women-owned small businesses (“WOSB”) or economically disadvantaged women-owned small businesses (“EDWOSB”). This expansion was mandated last year by section 825 of the National Defense Authorization Act for Fiscal Year 2015 (“NDAA”), which required numerous changes be made to the SBA’s WOSB/EDWOSB contracting program.

Continue Reading In a Major Win for Women Owned Businesses, SBA Expands WOSB/EDWOSB-Eligible Industry List

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

A contractor performed a project involving the construction of stone dike extensions and other work at four sites on the Mississippi River.  Nelson, Inc.  ASBCA No.  57201 (December 15, 2015).  One of the issues was whether the four distinct sites were separable for purposes of applying the Termination for Default clause (FAR 52.249-10).  In other words, the question was whether the contractor could be terminated for failing to diligently prosecute the work on one of the four work sites, even though the overall contract allowed 165 days for completion.  The Board stated that “Where a contract is separable (sometimes also referred to as severable, or divisible) and a contractor is delinquent only as to a separable part of the contract work, it is improper for the contracting officer to terminate for default the entire contract.”  The contractor would not be prohibited from continuing performance on any of the sites where work was being performed in a timely manner.

Continue Reading Termination for Default Held Improper

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 post publisConstruction Sitehed in 2013, we addressed the use of termination for default as a weapon. Unfortunately, construction contractors who fall behind schedule are automatically on the defensive and they rarely find that contracting officers are willing to concede government responsibility. The government, of course, is in a difficult position when it must explain to its customer – the end-user – that the scheduled completion date will not be met. All too often, instead of admitting that the contractor is not responsible, the threat of a termination for default is held over the contractor’s head because it is easier to blame the contractor than to admit that the government made a mistake. Continue Reading Defenses to a Termination for Default

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

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.

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.

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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.

My partner, Ed DeLisle, and I recently attended two Industry Days sponsored by the Army Corps of Engineers (“USACE”).  The first one was held in New York City on October 20th, and the second one was held in Tel Aviv on November 5, 2014. The purpose of the programs was to introduce American and Israeli construction contractors and A/E firms to the upcoming opportunities in Israel. Information was provided on the general scope of USACE design build and design bid build projects within Israel; typical infrastructure and facilities being procured; potential repair, maintenance and construction opportunities to support Israeli Ministry of Defense (“MoD”) facilities in Israel; as well as information on the solicitation and proposal process. The projects are funded by the Foreign Military Finance program and it is projected that  hundreds of millions of dollars in military construction will be undertaken by the Corps in the near future, with significant expenditures in the next year.Israel Construction Site

The contracts, for the most part, will be solicited as Multiple Award Task Order Contracts (“MATOC”), but there will also be some stand-alone projects that will be solicited through individual Requests for Proposals. An important requirement of the program is that all of the contracts must be awarded to American companies, and those companies will generally be expected to perform at least 25% of the work with their own forces. That 25% does not necessarily involve field labor, and may be made up of activities associated with construction management. The idea is to assure that American companies benefit financially from the program and that they remain responsible for project completion. The Corps is understandably wary of companies that serve only as “brokers,” and expects the American contractors to be fully engaged in the performance of the projects.

Since most American companies will not want to incur the expense of sending their own labor forces to Israel, teaming arrangements with Israeli subcontractors will be vital.  Fortunately, there are a number of very capable Israeli construction contractors interested in the work and many of them attended the Industry Day in Tel Aviv. At this point, however, there are more available Israeli subcontractors than there are American companies participating as primes, so the Corps is interested in generating more participation by American firms.

Given recent events, the first thing that many people will think about is whether it is safe to work in Israel. The answer is “yes,” not only because the extent of the turmoil is often exaggerated by the media, but because all of these projects will be performed on Israeli military bases. Even the recent rocket attacks from Gaza did virtually no damage because of the overwhelming success of the Iron Dome missile defense system. I can tell you that Ed and I were not concerned at all about our safety while in Israel and the daily life of Israeli citizens was entirely normal. That being said, American sureties are inherently risk averse and some contractors are having difficulty obtaining bonding. Although the Corps is currently requiring payment and performance bonds, there is also a possibility that some solicitations may permit Bank Letter Guarantees as the Corps has done in the past.

If you are interested in learning more about this program and the opportunities for American construction contractors, please contact us. We can put you in touch with both American and Israeli companies, as well as the knowledgeable people in the Corps of Engineers.  The program is administered by the Europe District of the Corps located in Wiesbaden, Germany.

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…