Employee Efforts to Stop Employer FCA Violation is Protected Activity Even When No Distinct Possibility of FCA Litigation, says Fourth Circuit

The Fourth Circuit recently held, in an unpublished opinion, that the anti-retaliation or “whistleblower” provisions of the False Claims Act (“FCA”) protect an individual’s efforts to stop a contractor from violating the FCA, even when there is no “distinct possibility” of litigation.  This “distinct possibility” standard was adopted prior to 2009 when the whistleblower provision protected employee activity that was in furtherance of an FCA action, “including investigation for, initiation of, testimony for, or assistance” in an FCA action.  Under that version of the whistleblower provision, courts had held that a retaliation suit under the FCA would only pass muster if “an employee engages in protected activity when litigation is a distinct possibility, when the conduct reasonably could lead to a viable FCA action, or when . . . litigation is a reasonable possibility.”  Amendments to the FCA in 2009 and 2010, however, broadened coverage of the whistleblower provision, creating two prongs of protected activity: (1) “lawful acts done by the employee . . . in furtherance of an action under [the FCA]”; and (2) “other efforts to stop 1 or more violations” of the FCA.  31 U.S.C. § 3730(h).  In this case, Carlson v. Dyncorp Int’l LLC, the Fourth Circuit held that the “distinct possibility” standard does not apply to the second prong of the whistleblower provision, as that prong was intended to be broader than the first prong. This case may open the door to broader liability for contractors who take adverse employment actions against employees who attempt to stop or prevent conduct that the employee reasonably believes to be in violation of the FCA.  Notably, in Carlson, the Fourth Circuit nevertheless affirmed the district court’s dismissal of plaintiff’s retaliation lawsuit because the plaintiff was alleging that his contractor-employer was under-billing the government and he could not reasonably believe that that practice would lead to a violation of the FCA.  Continue Reading

NARA Sets the Stage for a Final FAR Cyber Clause

On September 14, 2016, the National Archives and Record Administration (“NARA”) issued a Final Rule, effective November 13, 2016, establishing cross-agency practices and procedures for safeguarding, disseminating, controlling, destroying, and marking Controlled Unclassified Information (CUI).  Although the Final Rule only applies directly to executive branch agencies that designate or handle information that meets the standards for CUI, it also applies indirectly to non-executive branch entities through incorporation into agreements.  These non-executive branch entities include contractors whose agreements will include CUI handling requirements.  Accordingly, contractors must be aware of the new rule’s requirements, which will almost certainly be encapsulated in an expected final FAR clause that will govern contractor CUI safeguarding (and potentially impose cyber incident reporting requirements) across the Government.  More information regarding the Final Rule can be found in a Covington & Burling Client Alert that was issued following publication of the rule, available here.

DOD Final Rule Addresses Source Requirements and Cost Recovery for Use of Counterfeit Electronic Parts

Supply chain protection has been a point of increasing emphasis by the Government and especially the Department of Defense (“DoD”) in recent years. In no area is this more true than ensuring that Government systems and equipment are free from counterfeit electronic parts, which can raise both security and defect concerns.  DoD has accordingly taken several steps, many of which have taken the form of new requirements on contractors, to protect against counterfeit electronic parts.  With these requirements has come added risk to contractors that even mistakenly use electronic parts in the goods they sell to DoD.  However, an August 30, 2016, final DFARS rule (implemented at DFARS 231.205-71) seeks to mitigate some of this risk by allowing contractors to recover the cost of replacing counterfeit electronic parts, as long as the contractor has taken certain steps to prevent the use of such parts. Continue Reading

“Fair Pay and Safe Workplaces” Final Rule and Guidance Released

Just in time for Labor Day, the Labor Department and FAR Council issued a final rule and accompanying “Guidance” to implement the Fair Pay and Safe Workplaces Executive Order.  The new regulations will take effect on October 25, 2016.  The regulations—which run to nearly 900 pages—contain a number of changes from the proposed regulations to demonstrate that the Department listened to stakeholders during the lengthy comment period.

Despite some concessions to industry comments, the final regulations still establish substantial compliance obligations.  In light of those burdens, the contracting community is well advised to invest time to understand these provisions.  In this post, we summarize key changes and examine the way ahead for contractors.  Continue Reading

Take Two: Proposed DFARS Commercial Item Rule Still Fails to Rein in Contracting Officer Discretion

On August 11, 2016, the Department of Defense (“DoD”) published a revised proposed rule to amend the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement sections of the National Defense Authorization Acts for Fiscal Years 2013 and 2016 relating to commercial item acquisitions. This proposed rule replaces the rule that DoD proposed last August and retracted last December following critical commentary from the acquisition community.  We wrote about the prior proposed rule here.  While the revised proposed rule seemingly lessens the burden on contractors selling commercial items to the DoD by, among other things, restricting the contracting officer’s discretion to conclude that an item is not commercial when a DoD component has previously determined that it is and establishing a “hierarchy” of data for contracting officers to consider when making determinations of price reasonableness, both of these provisions fall short.  Continue Reading

ISDC Reports a “Plateauing” in Suspension and Debarment Activity

Each year, the Interagency Suspension and Debarment Committee (ISDC) reports to Congress on the status of the Federal suspension and debarment system.  With its mission of assisting agencies to build and maintain efficient and effective suspension and debarment activities, the ISDC is uniquely situated to provide comments and insight on the status of suspension and debarment practices generally.  Continue Reading

Recent GAO Decision Highlights Possibility of Limited Evaluations in Best-Value Procurements

Offerors in best-value procurements are generally accustomed to a review of their complete proposals during the evaluation process.  The recent Government Accountability Office (GAO) decision in The COGAR Group, Ltd., B-413004 (July 22, 2016) highlights the ability of agencies to blend lowest-price technically-acceptable (LPTA) procurement principles into best-value procurements and thereby limit the scope of proposal evaluations.

The COGAR Group timely submitted a proposal in response to a Department of Homeland Security (DHS) solicitation seeking to award an indefinite-delivery/indefinite-quantity contract under FAR Part 12 for professional security services.  This procurement was structured as a best-value competition, but the solicitation also advised that the agency might not evaluate all technical proposals, and instead the agency might limit the competition to those proposals that were “most competitive” on price.  After receiving 19 proposals, DHS considered the mean ($42,501,995) and median ($42,752,035.66) proposal prices, and concluded that only proposals priced under $40,500,000 would proceed to technical evaluations and the ultimate best-value trade-off.

The COGAR Group’s price of $40,531,635 came in just over the threshold, excluding the company from the technical evaluations.  By comparison, the awardee’s price of $40,399,510 came in just under the threshold.  The COGAR Group protested, arguing that there was a difference of only $132,125 (0.3%) between the two offerors, and therefore it was impossible to assess which offeror presented the best value to the Government without a technical evaluation.

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HHS Seeing Stars After Recent Loss in COFC Bid Protest

In Starry Associates, Inc. v. United States, No. 16-44C (Fed. Cl. July 27, 2016), the Court of Federal Claims (“COFC”) sharply criticized a Department of Health and Human Services (“HHS”) decision to cancel a solicitation following two bid protests at the Government Accountability Office (“GAO”).  The history and outcome of the case are exceptional among bid protests — an area of the law characterized by deference to agency decisions and arbitrary-and-capricious review.

HHS’s Program Support Center (“PSC”) issued a lowest-price, technically acceptable solicitation to procure business-operations services in support of HHS’s financial management system.  Protestor Starry Associates, Inc. was the incumbent, but Intellizant, LLC won the award as the lowest-price offeror.  Starry ended up filing three protests at GAO and the instant protest at the COFC, alleging that the procurement process was “tainted” in favor of Intellizant.  Protests accusing the agency of bias rarely prevail, but the COFC’s decision laid out in detail “a series of actions which,” by the court’s description, “reflect a lack of fidelity to the procurement process.”  And while the court declined to formally determine whether the procurement was tainted by bias, it functionally ended up in the same place.

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Changes to Small Business Subcontracting On the Horizon

Last week, the Federal Acquisition Regulation (“FAR”) Council issued a Final Rule to implement regulations adopted by the Small Business Administration in 2013.  The Final Rule significantly amends FAR Parts 19 and 52 by imposing additional small business-related obligations on prime contractors and clarifying the consequences of failing to satisfy those obligations.  The Final Rule largely tracks the proposed rule, which we previously discussed.  It will be effective November 1, 2016. Continue Reading

Federal Circuit Confirms that Award Term Extension Constitutes New Contract for Purposes of Bid Protest Jurisdiction

On July 12, 2016, in Coast Professional, Inc. et. al v. United States, No. 2015-5077 (Fed. Cir. July 12, 2016), the U.S. Court of Appeals for the Federal Circuit overturned a Court of Federal Claims (“CoFC”) decision, finding that the CoFC erred in ruling that it did not have bid protest jurisdiction over the award of task orders characterized as “award-term extensions.”   The Federal Circuit’s decision provides clarity on the scope of Tucker Act’s bid protest jurisdiction, and provides a strong defense against Government arguments that attempt to limit that jurisdiction going forward.

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