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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.

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.

Our last blog article focused on the ability of an SDVOSB to control his company remotely thanks to the advancements of technology. Well, technology can be both a blessing and a curse. It can allow you to work from pretty much anywhere, but, as we all know, there are certain places where you should simply avoid using the technology available to you, such as when you are behind the wheel. The hazards of texting while driving has become a major problem and, as a result, it’s been rendered illegal in many states. Based upon recent changes to the FAR, now the federal government is getting into the act.

Pursuant to FAR Subpart 23.11 (incorporated into every government contract through clause 52.223-18) a government contractor should adopt and enforce a policy banning employees from texting whenever an employee is: (1) driving a vehicle owned or rented by the company; (2) driving a vehicle owned by the government; or (3) driving a privately owned vehicle when performing any work on behalf of the government. Moreover, contractors are required to “flow down” this anti-texting clause to all of its subcontractors, if the value of the subcontract exceeds the “micro-purchase threshold” (currently $3,000).

More importantly, 52.223-18 requires federal contractors to “conduct initiatives” to educate employees about the dangers of texting while driving; these initiatives should be “commensurate with the size of the business.” If you are a large government contractor, this likely means that the government will expect some sort of training in addition to a written policy or employee handout covering this topic. If you are conducting periodic ethics training (and you should be), you can likely incorporate any necessary training on anti-texting as part of those sessions. If you do not conduct periodic ethics, and other government contracting, training to refresh yourself regarding what the government requires of its contractors, you should certainly consider doing so. If you have any questions, please feel free to contact us.

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.

By: Edward T. DeLisle & Maria L. Panichelli

When it comes to problem-solving, we are often encouraged to “think outside the box.” The idea is to be creative; to look beyond the norm. Well, when it comes to certifying a claim, you’re probably better off simply doing what the FAR tells you to do. The Civilian Board of Contract Appeals made this point clear in URS Energy & Construction v. Dept. of Energy.

As most contractors are aware, all claims over $100,000 must be accompanied by a certification. FAR § 33.207(a). FAR §33.207(c) sets forth the exact language that such a certification must contain. That language is as follows:

“I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am duly authorized to certify on behalf of the Contractor.”

In URS Energy & Construction, the contractor certified its claim to the Department of Energy using language that differed from the FAR:

“I certify that this invoice is correct and in accordance with the terms of the contract and that the costs incurred herein have been incurred, represent the payments made by the Contractor except as otherwise authorized in the payments provision of the contract, and properly reflect the work performed.”

The government asked the CBCA to dismiss the contractor’s claim on the basis that the certification used was defective, thereby depriving the CBCA of subject matter jurisdiction over the claim.

In ruling on the motion, the CBCA noted that “technical” defects in a certification can be cured; however, “[i]f the certification is made with intentional, reckless or negligent disregard for the applicable regulation, it is not correctable.” The CBCA found that the contractor’s claim was made with “intentional, reckless or negligent disregard” because the contractor wholly failed to include a certification that “the claim is made in good faith,” or that “the supporting data [was] accurate and complete to the best of [the contractor’s] knowledge and belief.” Moreover, the certification failed to include a statement that the person signing the certification was duly authorized to certify the claim on behalf of the contractor. Accordingly, the CBCA dismissed the case.

The lesson: certifying a claim is not the time to be creative. The language in FAR §33.207(c) must be reviewed carefully and, unless there is very good reason to diverge from what is identified therein, you are better off simply incorporating it verbatim into your claim. If you cannot attest to those issues required by the FAR, you should think twice about filing a claim at all, for submitting a defective certification, which is true, is far better than submitting a false certification. That is something you should avoid at all costs.

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.

By: Edward T. DeLisle & Maria L. Panichelli

Be careful what you ask for, or, in the context of federal government contracting, be careful how you ask and how the government responds. If you’re not careful, you may get what you ask for, but lose a contract. That’s the lesson learned in NCI Information Systems, Inc.

In NCI Information Systems, Inc., the Department of Defense, U.S. Transportation Command (“USTRANSCOM”) issued an RFP, seeking IT administrative and management support services. The RFP incorporated FAR § 52.215-1(c)(3)(i), which states that if no time is specified in the solicitation, the deadline for receipt is 4:30 p.m., local time on the date identified.

Following the initial submittal of proposals, discussions ensued. After three rounds of discussions, the agency requested that those companies remaining in contention for award submit final proposal revisions “by close of business on 31 August 2011.” It did not specify what time constituted “close of business.” The agency’s failure to specify a time created some confusion, because USTRANSCOM employees work flextime schedules, with different hours on different days. Because of this, its office would "close" at different times on different days.

Knowing this, on August 31, at 4:21 p.m., Harris IT Services (“Harris”), one of the prospective contractors, sent an e-mail to the Contracting Officer, asking whether the government would extend “close of business” until after 4:30 PM CST. The Contracting Officer responded to Harris stating: “[u]ntil 5:00 PM Central Time is acceptable as meeting the close of business deadline.” Harris’ final proposal revisions reached the agency’s central server at 4:57 p.m. CST and arrived at the Contracting Officer’s computer at 4:59 p.m. CST on August 31. Harris was ultimately awarded the contract.

Thereafter, a protest was initiated by a competitor, NCI Information Systems, Inc., which claimed that Harris was ineligible for award because its final proposal revisions were untimely. Specifically, NCI argued that the agency set the due date for Final proposal revisions as the close of business on August 31, and that because the Contracting Officer’s notice did not provide a specific time, the time for receipt of FPRs was 4:30 p.m. pursuant to FAR § 52.215-1(c)(3)(i). The GAO agreed.

Though Harris argued that “close of business” should be interpreted as “any time prior to when the office closed for the day . . . so long as an employee remained in the office during that employee’s regularly scheduled duty hours,” the GAO declined to adopt such a rule. It reasoned that “[a]doption of such a rule would result in confusion and a lack of uniformity." Instead, the GAO held that where an agency, such as USTRANSCOM, lacks official working hours, FAR § 52.215-1(c)(3)(i) will govern, and 4:30 p.m. local time will be considered to be the close of business. The GAO was not persuaded by Harris’ argument concerning the Contracting Officer’s extension of the time for submission, concluding that “an offeror acts unreasonably when it relies on the informal advice of a contracting officer rather than following the solicitation’s instructions.” Accordingly, the protest was sustained, and Harris was divested of its contract.

The lesson is not to rely on informal advice from a Contracting Officer, even if it is in writing. If the advice you receive was not given to all potential bidders, or incorporated into a formal modification of some kind, the terms of the most recent instructions provided to all will govern, despite what the Contracting Officer told you.

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.

Join the Federal Construction Group of Cohen, Seglias as it presents, "Unraveling the Mysteries of Federal Construction Contracting," at two different locations.

Dates/Locations:
March 29, 2011 – Hyatt Regency Savannah, GA
March 31, 2011 – Hyatt Regency Grand Cypress Orlando, FL

Time:
8:00a.m.-1:00p.m.

Cost:
$195.00 per person and $95 for each additional person from the same company.

Attendees will learn about the following topics:

  • Understanding the FAR and how a Federal construction contract works
  • The RFP procurement process
  • Preparing winning proposals on “best value” solicitations
  • Understanding the IDIQ/MATOC process
  • How to successfully team on Federal projects
  • Knowing when, and whether, to file a bid protest
  • Negotiating contract modifications
  • Maintaining proper project documentation
  • Obtaining prompt payment
  • Preparing and submitting Requests for Equitable Adjustment and Claims
  • Protecting your rights through the dispute resolution process

Regardless of your experience level, this seminar will help you understand these key concepts and develop strategies for both obtaining federal contracts and profiting from them.

Please click here for complete seminar details and registration form.  For questions, please contact Rachel McNally at (215) 564-1700 or rmcnally@cohenseglias.com.

By: Joseph A. Hackenbracht

On April 13, 2010, the FAR Council published in the Federal Register a Final Rule that adds a new section to the Federal Acquisition Regulation – Subpart 22.5 – Use of Project Labor Agreements for Federal Construction Projects. The Final Rule implements Executive Order 13502, which President Obama signed on February 6, 2009, encouraging Federal agencies to consider the use of a project labor agreement (“PLA”), on large construction projects. Use of project labor agreements by Federal agencies had been curtailed by an Executive Order issued by President Bush in 2001. (See earlier blog article dated February 10, 2009 for more information).

As of May 13, 2010, Contracting Officers can include in solicitations for construction projects clauses FAR 52.222-33 and FAR 52.222-34 that will require an offeror to negotiate a PLA and that will “bind the offeror and all subcontractors engaged in construction on the project to comply with the PLA.” Use of the FAR provisions concerning PLAs, however, is limited to projects where the total cost to the Federal Government is $25 million or more. The Alternate clauses are to be used if the Contracting Officer determines to only require the “apparent successful offeror” or the awardee of the contract to negotiate the PLA.

In deciding whether or not to require a PLA, agencies must conclude that use of a PLA will “advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters.” Agencies can also consider other factors in determining whether a PLA is appropriate, such as: (1) the project involves multiple contractor or subcontractors employing multiple crafts; (2) a shortage of skilled labor exists in the project area; (3) the project has a relatively long performance time; (4) PLAs have been used on comparable projects, public and private, in the project area; and (5) a PLA promotes the agency’s long term program interests.

Jared Bernstein, Chief Economic Advisor to Vice President Biden, reports that “Project Labor Agreements have also been used by the private sector for a variety of construction projects that are similar in nature to those undertaken in the public sector, including for manufacturing plants, power plants, parking structures, and stadiums. The executive order and the final rule now enable Agencies to consider whether their projects might gain some of the benefits found in the private, state and local construction sectors as well.” Mr. Bernstein quoted the Secretary of Labor, Hilda Solis, as saying, “Project labor agreements are a win-win; they benefit businesses, workers and taxpayers.” Simon Brody, with the National Association of Government Contractors, however raises the question whether the Federal government’s PLA initiative is pro-labor and anti-small business. Mr. Brody suggests that the use of PLAs will “put more Federal contracts out of reach for the mid-sized and small contractors who are best able to infuse the crippled job market with immediate opportunities.” He reported that Representative John Kline, member of the House Education and Labor Committee, observed that “PLAs are an antiquated approach to federal contracting designed to favor large, unionized contractors at the expense of smaller employers,” and that “PLAs reduce competition, increase costs for taxpayers, and add layers of bureaucracy and red tape to federal construction projects. Creating a formal federal process for imposing these Depression-era mandates on construction projects may be a win for special interests, but it’s a loss for workers, taxpayers, and small businesses hoping to compete for federal jobs.”

The use of PLAs has always been controversial, and has been the subject of contentious litigation. It can be expected that challenges to their implementation will continue, particularly in light of Mr. Bernstein’s comment that “[m]any agency contracting offices have little knowledge of or experience with PLAs.” However, he did note that an Inter-Agency PLA Working Group had been convened to provide technical assistance to agencies. With the soon-to-go into effect FAR provisions, we will need to wait and see what types of, and how many, solicitations Contracting Officers decide are appropriate for a Project Labor Agreement.
 

The Court of Appeals for the Federal Circuit has decided two cases that assure the continued use of the Multiple Award Task Order Contract (“MATOC”) in federal construction contracting. In the first case, Weeks Marine, Inc. v. United States, the United States Court of Federal Claims decided a bid protest in favor of Weeks Marine.  The protest challenged the right of the South Atlantic Division of the Corps of Engineers to use MATOC procurement to solicit all maintenance dredging and shore protection projects for the next five years by establishing a MATOC pool of contractors who would compete for projects solicited on a task order basis.  The Protester contended, and the Court agreed, that since sealed bidding had been used successfully in the procurement of dredging for many years, there was no basis to use contracting by negotiation, much less MATOC. The Court found that the Corps’ Acquisition Plan did not provide a rational basis for a departure from sealed bidding.

The Court of Appeals reversed the lower court and concluded that the Corps was required to “supply a reasoned chronicle of the risk assessment,” and did so “by stating the reasons for its procurement decision and the thinking behind those reasons.”  Therefore, the Court concluded that as long as the Corps stated its reasons, and the thinking behind those reasons, the Court would not “second-guess” the Corps. In other words, even if the Corps’ rationale for using MATOC procurement made no sense and was not well supported, the Court would not disturb the Corps’ right to use a MATOC as long as some reasons were given.  In this regard, the Court stated “If the court finds a reasonable basis for the agency’s action, the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations.”

The second MATOC decision, Tyler Construction Group v. United States, involved a protest by a small business concern against the use of MATOC procurements to procure barracks construction in an eight state region. The protester contended that Indefinite Delivery Indefinite Quantity (“IDIQ”) contracts may only be used to procure supplies and services, and not construction, pursuant to FAR 16.5.  MATOC procurements are solicited through the IDIQ contracting procedures specified in FAR 16.5, but that section of the FAR does not mention “construction” even once.  Tyler argued that the Corps, under the guise of “innovation,” had adapted a contracting method used to procure supplies and services, like rounds of ammunition or electrical repair services, to the acquisition of large multi-million dollar buildings.

The Tyler protest also addressed the issue of improper bundling in violation of the Small Business Act. By taking individual projects, many of which were less than the $31.5 million (now $33.5 million) small business size standard for general construction, and bundling them into a $300 million MATOC procurement, the Corps effectively prevented small business concerns from competing as prime contractors.  In other words, even though many small businesses could compete for projects in the $30 million range, they are excluded by the size of the bundled MATOC solicitation. In fact, both small businesses and small to medium-sized large businesses are effectively excluded from competition by MATOC procurements.

The Court of Federal Claims ruled that since the use of IDIQ/MATOC was not specifically prohibited in the procurement of construction by the FAR, it was therefore permitted.  The Court also found that the Corps had conducted market research and had concluded that there was an industry consensus that bundling was “necessary and justified.”  The Court of Appeals agreed with the lower court and decided that “The Corps, like other federal procurement entities, has broad discretion to determine what particular method of procurement will be in the best interests of the United States in a particular situation.”

In this writer’s opinion the widespread use of MATOC procurements to procure large dollar value construction projects is not consistent with the FAR. It is interesting that the use of the IDIQ procedure for construction was not subjected to review by the Defense Acquisition Regulations Council (DAR Council), as is commonly done when a new regulation is needed, or when there is a request for a deviation from an existing regulation.  Although the Corps has taken the position that IDIQ/MATOC is an innovative method that is within its procurement discretion, we find it to be strange that a method affecting billions of dollars of construction procurement is not specifically addressed by the FAR, or the supplemental agency regulations (DFARS, AFARS, EFARS). In fact, when the Corps was challenged because it was not following its own regulations (EFARS) that addressed IDIQ contracting,  it promptly rescinded those regulations. What the construction contracting community is left with is a multi-billion dollar procurement methodology that is unregulated, is ripe for abuse, and that only serves the interests of a reduced federal procurement workforce.  It certainly remains to be seen whether MATOC is truly more efficient or cost-effective than traditional single project solicitations.

Most disturbing of all, is the hands-off policy adopted by the Court of Appeals for the Federal Circuit on matters of federal procurement.  If the agencies can do whatever they want, as long as it is not expressly prohibited by law or regulation, and as long as they provide some reason for their decisions, the competitive opportunities that have been the hallmark of federal construction contracting will continue to be eroded.  Many capable contractors have been, and will be, denied a fair opportunity to compete and, in the long run, that cannot possibly be in the best interests of the construction contracting community, or the federal government.

Michael Payne is a Partner and is the Chairman of the firm’s Federal Practice Group.

Strangely, the Department of Homeland Security’s Supplemental Federal Acquisition Regulations (HSAR) is not included on the official Code of Federal Regulations website. However, an unofficial online beta test site, the Electronic Code of Federal Regulations (e-CFR), does include the HSAR.  This beta test site is updated daily and also contains the Federal Acquisition Regulation, FAR, as well as the individual agency supplements.  By accessing Title 48 of the CFR on this website, the most recent versions of these regulations were accessible.