Over the past couple of months, we have had several clients contact us to discuss issues involving Organizational Conflicts of Interest (OCIs). In each case, it seemed like there was some confusion either by the government, the contractor, or both, regarding what amounted to a conflict of interest and how having one could impact contract performance. In most cases, we were able to work with the contracting officer and develop a mitigation plan to avoid, neutralize, or mitigate each OCI successfully. This blog post will cover the basics about OCIs and discuss some ways that contractors can work with the government to mitigate them.
As I mentioned in a recent post, the Department of Defense (DoD) is using its “other transaction” authority with increased frequency to attract non-traditional defense contractors and to capitalize on the cutting-edge technological advancements found in the commercial marketplace. Other Transaction Agreements (OTAs) are not procurement contracts, grants, or cooperative agreements and, as such, many procurement laws and regulations do not apply, including the Competition in Contracting Act (CICA) and the Federal Acquisition Regulation (FAR). Continue Reading Bid Protests: Are Other Transaction Agreements (OTAs) Really Bulletproof?
On March 9th, 2016, join Maria Panichelli and Amy Kirby for their two seminars, “The Fundamentals of the Far Part 1, 2 and 3,” and “Debriefings, Bid Protests and Size Status Eligibility,”as part of the Procurement Technical Assistance Center of Delaware‘s (PTAC) two part seminar event, Two Seminars on the Same Day, One Price.
For more information on these seminars, please click here.
After you’ve secured your Federal government contract award, what comes next? As any Federal contractor will tell you, the contract award is only the beginning. The FAR and its supplementary regulations impose a host of obligations on contractors, and can impact the ways in which a contractor performs a contract. These rules and regulations also dictate the ways in which those contractors can seek compensation for unanticipated costs incurred on the job. In this webinar, Ed and Maria will explore Requests for Equitable Adjustment, Claims, and the differences between the two. As they walk you through the Contract Disputes Act process, you will also learn how to maximize your chance of success when making claims against the Federal government.
You can listen to their webinar here.
Please join us on November 18th and 19th for Maria Panichelli’s three seminars at the 2015 National Veterans Small Business Engagement in Pittsburgh, PA. To view the dates and times of Maria’s seminars, and to register, visit the NVSBE website. Continue Reading The 2015 National Veterans Small Business Engagement
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:
(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.
The Construction Industry offers tremendous opportunities and challenges for any business owner. However, when your customer is the federal government, there are extra requirements that can either make or break your business. What happens when you get the bad news that you didn’t win that contract you were competing for? Want to know why? Join Jennifer Horn and Maria Panichelli for the WIPP/Give Me 5 webinar The Fundamentals of the FAR, Part 3: Debriefing and Protests on Wednesday, April 29th to find out if there is any way to fight an agency’s decision and prevail—in spite of an initial rejection. In this webinar you’ll learn all about debriefings and protests. Jennifer and Maria will not only teach you how to use debriefings to see what you did wrong and what you did right, they’ll walk you through the proper protest procedure when you know the contract was improperly awarded to someone else. Register here!
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.
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 Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.
Effective today, a new Anti-Trafficking rule will substantially change and increase federal contractors’ compliance and certification requirements. The Anti-Trafficking rule requires that all federal contractors take certain actions related to combating human trafficking and slavery in their supply and contracting chains. Human trafficking has been a high-profile issue in government contracting in recent years, drawing attention from Congress, President Obama, and groups such as the American Civil Liberties Union. It is estimated that forced labor in the private economy generates $150 billion in illegal profits each year.
With today’s far-reaching supply chains, and increasing numbers of businesses obtaining their goods from “high risk” countries, the importance and impact of human trafficking laws will only continue to grow.
The new rule amends the FAR to codify trafficking-related prohibitions involving federal contracts, including new compliance and certification requirements, and puts contractors on the hook for disclosing violations to the government. The new rule requires contractors to:
- Develop and maintain a detailed compliance plan for contracts for supplies (other than commercially available off the shelf items) acquired outside the U.S., or services to be performed outside the U.S., with an estimated value exceeding $500,000;
- Ensure that recruiters adhere to local labor laws;
- Cooperate with, and provide access to, enforcement agencies investigating compliance with anti-trafficking and forced labor laws;
- Ensure that workers are not being charged recruitment fees, which are common in many foreign countries;
- Notify agents and employees of the anti-trafficking policy;
- Provide return transportation for qualified workers;
- Disclose (or self-report) that an employee, subcontractor, or subcontractor’s employee is violating the rule; and
- Annually certify that, (1) it has implemented a compliance plan, and (2) after a due diligence inquiry, there are no violations by the prime contractor, its subcontractors or agents, or, if such a violation exists, it has taken remedial action.
The new rule also prohibits contractors from confiscating passports or other immigration documents, using deceptive recruitment practices, and providing housing that fails to meet local housing and safety standards.
These changes will have an immediate and significant impact on federal contractors. Most significant is the thorny position contractors are placed in by having to perform due diligence on their subcontractors (at every tier), and then continuing to monitor them for violations. This is particularly difficult, as trafficking activity is notoriously hard to detect. Adding to concerns is that ambiguity in the rule makes adherence more of an art than a science. Particularly, regarding compliance plans, the plan must be “appropriate” for the “size and complexity of the contract and to the nature and scope of the activities performed, including the risk that the contract will involve services or supplies susceptible to trafficking.” However, the rule provides contractors with little guidance as to what an “appropriate” plan should look like. Further, what is considered “appropriate” may vary widely across various federal agencies.
Finally, and obviously, all of this will come at an additional cost to contractors, many of whom will now be forced to play catch-up to ensure they are in compliance, or risk severe penalties including debarment, as well as criminal and civil sanctions. Given the uncertainties and costs of compliance, and severe penalties for non-compliance, it is imperative that government contractors fully appreciate and understand the import of this new rule and its requirements, and take appropriate steps to ensure compliance.
In a related effort to strengthen human trafficking protections, the House Foreign Affairs Committee approved a bill last Friday that would provide for a definition of the prohibited recruitment fees. Under the Trafficking Prevention in Foreign Affairs Contracting Act, H.R. 400, the secretary of state and the administrator of the U.S. Agency for International Development would be required to submit reports defining what constitutes a recruitment fee in order to promote better compliance with federal anti-trafficking law.
Please let us know if you have any questions or concerns.
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.
On November 25th, the DOD, GSA and NASA issued a final rule incorporating a new clause into the FAR regarding accelerated payments to small business subcontractors on Government projects. The new rule, which takes effect December 26, 2013, requires large business prime contractors receiving accelerated payments from the Government to, in turn, accelerate payments to all of their small business subcontractors. The purpose of the new clause is to ensure that small business subcontractors are paid as promptly as possible.
The clause will be inserted into all new solicitations and resulting contracts issued after the effective date, including those contracts for the acquisition of commercial items. Unfortunately, the rule does not create any new remedies, where accelerated payments must be issued and they are not. Under such circumstances, the Government can discontinue accelerated payment to the prime contractor, but nothing more.
One interesting aspect of the new rule is that large business prime contractors cannot prevent their small business subcontractors from speaking to the contracting officer about the status of payment. Subcontract Agreements often state the exact opposite. Prime contractors typically do not want their subcontractors asking the contracting officers questions of any kind, let alone questions regarding payment. While this is certainly understandable, by virtue of the new rule, large business prime contractors will not have the same legal support for their position.
There’s not a lot to sink your teeth into here. However, the fact that small business subcontractors can go right to the contracting officer about payment issues without fear of legal retribution is at least something. If you have any questions about this, or other, aspects of the new rule, please contact us. The information contained above was reported yesterday by Law360.
Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.
Amy Kirby is an Associate in the firm’s Federal Practice Group.
Teaming Agreements in the world of federal procurement are commonplace. They are formally encouraged by the government at FAR part 9.602 (wherein it states that “Contractor team arrangements may be desirable from both a Government and industry standpoint in order to…complement [contractor]’s capabilities; and [o]ffer the Government the best combination of performance, cost, and delivery…”) and can be critically important to small, and small disadvantaged, business concerns in winning small business set-aside contracts of all types. Very often a government agency will consider the collective strength of a team’s credentials in awarding such contracts, particularly if the procurement is of the larger variety. But what if a government agency awards a contract based on a teaming agreement, and you and your teammate cannot then reach accord on a subcontract agreement? Can you sue to enforce the teaming agreement? A recent decision from Virginia provides some guidance.
Cyberlock Consulting, Inc. v. Information Experts, Inc. was truly a tale of two agreements. The plaintiff, Cyberlock Consulting, Inc. (“Cyberlock”), entered into two separate and distinct teaming agreements with the defendant, Information Experts (“IE”). In both cases, IE was the prospective prime contractor. In the first agreement, the parties very clearly set forth their intent to be bound to each other. The language was clear. Reinforcing that intent, the agreement had appended to it a very detailed breakdown of the scope of work to be completed by each party in the event of award. Also attached was a formal subcontract agreement. The teaming agreement clearly stated that, if IE was awarded the prime contract, IE would, “within five (5) business days from date of award…enter into the subcontract attached to this Agreement.” Lastly, the first teaming agreement identified a number of bases that could result in its termination. None of those bases included the failure to agree upon the terms of a subcontract agreement.
The second teaming agreement, which pertained to a different solicitation, stood in stark contrast to the first. The second teaming agreement identified only a generic “percentage of work” to be completed by each party. The attention to detail, and the explicit assignment of specific, discrete tasks, which was evident in the first teaming agreement, was conspicuously absent in the second. Moreover, the parties did not attach a draft subcontract to the second teaming agreement, as they did with the first agreement. In addition, the second teaming agreement contained language providing for a number of situations that could result in termination of the relationship, including the “failure of the parties to reach agreement on a subcontract after a reasonable period of good faith negotiations.”
While I find it a little odd that Cyberlock would agree to terms that were so drastically different than those contained in the first teaming agreement, I’m sure there were reasons that it did so. Perhaps there was insufficient time to fully negotiate the second teaming agreement and Cyberlock simply trusted IE, especially after successfully negotiating the first agreement. Whatever the reason, it would come back to haunt Cyberlock later. Let’s consider what happened.
After entering into the first teaming agreement, the government agency awarded IE a prime contract; IE and Cyberlock quickly executed the subcontract agreement attached to the teaming agreement. No problem. The problems arose in connection with the second teaming agreement. Although IE received the prime contract in connection with the second solicitation as well, after negotiating for a month, IE and Cyberlock were unable to agree on a subcontract agreement. Cyberlock was NOT happy and sued IE.
It was up to a judge to determine whether the second teaming agreement was enforceable. It was Cyberlock’s position that it had a deal with IE. If IE was awarded a contract by the government, Cyberlock was entitled to a share of the work, in this case 49%. IE saw it differently. IE argued that the parties did not have an agreement at all. All they really did was “agree to negotiate later.” Such agreements, according to IE, were not enforceable. The judge agreed with IE.
Citing to Virginia law, the judge concluded that the second teaming agreement simply was not definitive enough to qualify as an enforceable agreement. The problem was that the parties left too many details up in the air, and subject to too many conditions, if IE were able to secure the prime contract. Most disturbing, the court went on to state the following: “Indeed, calling an agreement something other than a contract or a subcontract, such as a teaming agreement or a letter of intent, implies ‘that the parties intended it to be a nonbinding expression in contemplation of a future contract.'” Wow…what is one to take from a statement like that? The FAR specifically refers to, and encourages, teaming agreements. How does that position comport with this court’s view?
While I think that the court went a hair too far in making that last statement, it does draw attention to something that is often taken for granted: the assumption that the document that you’re signing is enforceable. It’s actually something that you need to consider when it comes to teaming because, if successful, the parties do expect a second agreement, a subcontract (which, incidentally, is where all the money is) to follow their teaming agreement. That said, it’s not an issue that arises very often in my practice. Why? Well, I think because, very often where teaming takes place, the parties have a distinct need for each other. If, for example, a procurement is set aside for small disadvantaged businesses, such as 8(a) concerns or SDVOSBs, the small disadvantaged business may need a large business concern’s experience, or manpower, or bonding capacity to help it. On the flip side, the large business concern needs the small business concern for it would not have access to this set-aside work at all without the small business. It is assumed that things will work out just fine if an award is made. Let this opinion be a lesson that you really do need to consider the terms of your teaming agreement and, moreover, consider the possibility that things could go wrong.