By: Joseph A. Hackenbracht 

On July 18, 2012, the Small Business Administration published a proposed increase in the small business size standard for “Dredging and Surface Cleanup Activities” from $20 million to $30 million in average annual receipts. 77 FR 42197. The average annual receipts are calculated by averaging a concern’s receipts for the last three fiscal years. 13 CFR 121.104(c). Receipts means “total income.” 13 CFR 121.104(a).

In order to qualify as small on a Federal procurement, a concern must also perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern. 13 CFR 121.201; note 2. This requirement, sometimes referred to as the “40 percent rule,” has been in SBA’s size standards for small business since 1974. Before 1974, the Department of Defense’s Armed Services Procurement Regulations (ASPR’s) had contained such a requirement for many years. (ASPR 1-701.1(A)(2)). In 1974, it was determined that DoD was exceeding its authority because the obligation to set size standards for small business was within the jurisdiction of the SBA.

When the SBA proposed to increase the size standard for Dredging in July, 2012, it also sought comments regarding the requirement that in order to qualify as small that a concern must perform at least 40 percent of the dredging with its own equipment or equipment owned by another small dredging concern. SBA has heard from small dredging firms that believe they should be able to lease equipment from any size firm as long as employees from the small firm perform the work on the contract.

At this time, however, SBA has proposed to continue requiring small dredging concerns to comply with the “40 percent rule,” in order to ensure that these firms perform a significant and meaningful portion of a dredging project set aside for small business. SBA has asked for comments from the industry and the public concerning (1) whether there continues to be a need for the current 40 percent equipment requirement; (2) whether there is a rationale for a different percentage; and (3) whether a different and more verifiable requirement based on an alternative measure (such as value of contract or personnel involved) may achieve the same objective of ensuring that small businesses perform significant and meaningful work.

The following methods can be used for the submission of comments: (1) the Federal eRulemaking Portal: www.regulations.gov, by following the instructions for submitting comments; or (2) Mail/Hand Delivery/Courier to Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. Please note that SBA will not accept comments to this proposed rule submitted by email. Also, be sure to refer to “RIN 3245-AG37” when submitting comments, so that SBA correctly attributes your comments to the proposed rule in question.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Joseph A. Hackenbracht

From August 2, 2002 until July 14, 2004, Todd Construction, a general contractor located in Oklahoma, was awarded five indefinite delivery/indefinite quantity (ID/IQ) contracts by the Savannah District of the Corps of Engineers for design and construction of projects in Georgia, North Carolina, and South Carolina. Each contract was for a period of up to three years and together the task orders issued under the contracts could have added up to $65,000,000. On two of the task orders, each of which was for less than $500,000, Todd received unsatisfactory performance evaluations; it challenged those ratings.

Back in 2008, we reported (see our earlier blog article) about a decision by the U.S. Court of Federal Claims, Todd Construction, L.P. v. U.S., 85 Fed.Cl. 34, 2008, where the Court held that it had jurisdiction to hear a challenge to a performance rating. In that case, Todd submitted a CDA claim asserting that it received an erroneous performance evaluation. The Court concluded that the challenge constituted a “claim” within the meaning of the Contract Disputes Act, thereby giving the Court jurisdiction of what amounted to a non-monetary dispute.

In the years that followed, Todd proceeded on a legal odyssey in what came to be known as Todd I, Todd II, and Todd III. Todd’s counsel battled with government attorneys in written brief and after written brief over nuances regarding one’s ability to challenge a performance evaluation. In 2009, the Court issued Todd II, finding that plaintiff’s must “do more than recite the elements of a cause of action; they must make sufficient factual allegations to ‘raise a right to relief above the speculative level.’” Todd v. U.S., 88 Fed.Cl. 235 (2009). The Court then granted Todd the opportunity to amend its pleadings. In Todd III, decided in 2010, the Court of Federal Claims concluded that, even after revising its complaint, Todd failed to state a claim upon which relief could be granted, and dismissed Todd’s challenge of its rating. The Court also found that Todd lacked standing to bring the action because there was no discernable injury from the alleged errors in the evaluation. Todd v. U.S., 94 Fed.Cl. 100 (2010).

Once Todd’s journey in the Court of Federal Claims came to an end, Todd had two choices: abandon pursuit of its claim or appeal the decision to the United States Court of Appeals for the Federal Circuit. Todd chose to appeal. On August 29, 2011, the Circuit Court issued its decision. The Circuit Court agreed with the lower court’s finding that, in the absence of a showing of prejudice or injury in fact, Todd lacked standing to challenge the alleged procedural violations in the agency’s evaluation. Furthermore, the Court of Appeals agreed with the lower court’s dismissal of the case for failure to state a claim. Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A.Fed. 2011. The Court noted that the complaint did not “state a claim to relief that is plausible on its face,” and that Todd failed to “plead factual content that allows a court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” The Court of Appeals did confirm the jurisdiction of the Court of Federal Claims to hear challenges of performance ratings since, it concluded, the ratings are “related to” the contract and the challenge is a claim under the Contract Disputes Act.

So, on a contract that was performed between 2003 and 2005, concerning a performance evaluation issued on July 23, 2006, that was challenged in a claim submitted in August, 2006, which was denied in a Contracting Officer’s decision dated April 25, 2007, that was the subject matter of the Complaint filed on May 25, 2007, Todd learned on August 29, 2011, that the merits of the government’s evaluation of its performance would go unchallenged and unreviewed. Although Todd could appeal to the Supreme Court of the United States, there is no indication that Todd pursued the matter any further.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court will hear challenges of adverse performance ratings. However, in order to avoid the negative result suffered by Todd, contractors must plead the facts specifically and in detail, and identify individually which ratings are arbitrary and capricious and why they are erroneous. Contractors must also allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, contractors must be ready to provide evidence that the negative rating has caused injury, or has prejudiced the contractor.

Based upon the above, contractors should consult with a professional to the extent that they wish to challenge a performance rating to assure themselves that the prerequisites of Todd I, II and III have been met.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Joseph A. Hackenbracht

For many years, the boards of contract appeals have considered challenges to performance evaluations and declined, for various reasons, to hear those cases. Then, in 2008, the U.S. Court of Federal Claims held that it possessed jurisdiction to address a contractor’s challenge of the performance rating it had been given by the Corps of Engineers. Todd Construction Company, Inc. v. U.S., 85 Fed.Cl. 34, 2008. (see our earlier blog article) Todd had submitted a “claim” pursuant to the Contract Disputes Act (CDA) challenging its performance rating and the Court concluded that submission of the claim satisfied its “jurisdictional prerequisite.”

In 2010, after the Todd decision was issued by the Court of Federal Claims, the Armed Services Board of Contract Appeals decided that it also could address challenges to performance ratings based on the board’s jurisdiction to determine the rights and obligations of parties under the terms and conditions of their contract. Appeal of Versar, Inc., ASBCA No. 56857, 10-1 BCA ¶ 34437, May 6, 2010. Also in 2010, in a case where the contractor submitted a CDA claim challenging the performance rating, the Board held that under the CDA, it has jurisdiction to “decide any appeal” involving a claim “relating to a contract.” Appeal of Colonna’s Shipyard, Inc., ASBCA No. 56940, 10-2 BCA ¶ 34494, June 24, 2010.

Last month, the Board issued a follow-up decision in Versar addressing the merits of claimant’s position that its performance rating was issued in error. The Board found that Versar had failed to show that its performance rating was arbitrary and capricious, the requisite standard, and, therefore, denied Versar’s claim. In so doing, the Board stated that “bare or insufficient allegations cannot sustain a claim that the government issued an unjustified performance rating.”Appeals of Versar, Inc., ASBCA Nos. 56857 et al., 2012 WL 1579539, April 23, 2012. In its discussion, the Board referenced a decision of the United States Court of Appeals for the Federal Circuit, Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A. Fed. 2011, where the Circuit Court affirmed the decision of the Court of Federal Claims to dismiss a challenge to a performance rating on the basis that the contractor failed to state a claim upon which relief could be granted. In its decision, the Circuit Court affirmed the lower court’s determination that it had jurisdiction to hear cases involving challenges of performance ratings issued by the government.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court of Federal Claims will address challenges of performance ratings in accordance with the Circuit Court’s decision in Todd Const. L.P. v. United States. Contractors can be encouraged that it is now settled that both the boards and the court have jurisdiction to hear challenges of adverse performance ratings.

Upon receipt of an unacceptable performance rating, a contractor should submit a claim under the Contract Disputes Act challenging the rating as arbitrary and capricious. The contractor needs to raise specific objections to individual ratings and demonstrate the errors in the government’s evaluation. After receiving a decision, or in the event a decision is not issued, the contractor should file an action in either the appropriate board of contract appeals or the Court of Federal Claims.

Contractors must be prepared to plead the facts specifically and in detail, and identify individually, which ratings are arbitrary and capricious and why they are erroneous. Contractors also need to be sure to allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, it may also be necessary to establish that the negative rating has caused injury, and has prejudiced the contractor. One way to demonstrate the prejudice and injury may be to present facts that the negative rating resulted in the contractor not receiving a contract.

As the ASBCA noted in Versar, the contractor did not provide the board with “specifics of the rating, ratings process, categories, and details,” as well as evidence of what the rating should have been. If contractors want the court to step into the fray, they must furnish the court with the specifics to establish that the government’s evaluations are erroneous and the subsequent ratings are arbitrary and capricious. Unsupported allegations and conclusory statements will not win the day.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

 By: Joseph A. Hackenbracht

Federal contractors need to prepare for another change in the online environment. Currently scheduled to take place in late July of this year, the Central Contractor Registration (CCR) system will no longer exist. The Federal government is starting a new registration system called the System for Award Management, or SAM [Uncle, get it?] for short. In addition to replacing CCR, SAM will incorporate the Federal Agency Registration [FedReg], the Online Representations and Certifications Application [ORCA], and the Excluded Parties List System [EPLS]. For all those contractors already registered in CCR and ORCA, you can breathe a sigh of relief; the Federal government is going to transfer your information into the new system. Although some of the terminology is changing, enough has remained the same that SAM should be familiar, so when the time comes for a contractor to renew its registration, it will not have too much trouble. For more information, go to the website.  A quick introduction to the new system is attached.

The government, however, is not through with its centralization of procurement information. Contractors familiar with the FedBizOpps system for reviewing solicitations, amendments, and other procurement actions can look forward to it being incorporated into SAM, along with the PPIRS, Past Performance Information Retrieval System, and many other data sites.

That’s life in the digital age, changing so quickly that it is hard to know whether you’re coming or going.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.