Section 809 Panel Urges Congress to Bring DoD Spending into the 21st Century

The Section 809 Panel recently released an interim report and supplement (the “Interim Report”) advocating in broad strokes for a host of improvements to the Department of Defense’s (“DoD”) acquisition system to better streamline the process and increase industry offerings to the government.  The NDAA for FY 2016 established the Section 809 Panel to address “fundamental problem[s]” in the means by which the DoD acquires goods and services to support its warfighters.  Indeed, in meeting with over 200 government and industry representatives, the Interim Report found that the DoD’s acquisition system creates obstacles that make it unattractive for small and large businesses alike to offer their goods and services to the government.  The Interim Report explains that “the United States’ ability to maintain technological, military, and economic superiority is being challenged,” as our adversaries are recognizing vulnerabilities in our forces and modernizing their militaries in response.  Thus, according to the Interim Report, DoD’s acquisition procedures must be improved to achieve “a degree of agility that DoD is not currently able to deliver.” Continue Reading

The Perils of Bad Recordkeeping: A Lack of Country of Origin Documentation Results in Adverse Inference of Non-Compliance with the Trade Agreements Act

In a recent False Claims Act (“FCA”) case, United States ex rel. Louis Scutellaro v. Capitol Supply, Inc., the U.S. District Court for the District of Columbia held that the defendant’s failure to retain Country of Origin (“COO”) documentation for the products it sold to the government entitled the relator and the government to an adverse inference that the defendant did not comply with the Trade Agreements Act (“TAA”).  This ruling highlights the consequences of poor document retention practices and could have far-reaching effects in FCA cases and beyond.

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USSC Issues RFP For Report On Supply Chain IT Vulnerabilities From China

On May 11, 2017, the U.S. China Economic and Security Review Commission (“Commission”) issued a Request for Proposal to “to provide a one-time unclassified report on supply chain vulnerabilities from China in U.S. federal information technology (IT) procurement.”

Congress established the Commission in 2000 to monitor and report to Congress on the national security implications of China’s economic relationship with the United States.  See Commission website here.  The Commission is composed of 12 members serving two year terms, three of whom are selected by each of the Majority and Minority Leaders of the Senate, and the Speaker and the Minority Leader of the House.

The report being sought via the RFP will serve as a “reference guide for policymakers on how the U.S. government manages risks associated with Chinese-made products and services and the participation of Chinese companies in its information technology (IT) supply chains.”  It is envisioned that the report would be briefed to the Commission and interested members of Congress, among others.  The winning contractor must produce a report that addresses at least the following:

  • Summary of the laws, regulations, and other requirements since the passage of the Federal Information Technology Acquisition Reform Act in 2015.  See our discussion of final OMB guidance on implementing FITARA here.  Among the requirements is a comparison of the risk management process for non-national security and national-security-related IT procurements.
  • Evaluation of how Chinese firms and Chinese-made IT products and services enter U.S. government IT supply chains.  In particular, an evaluation of how reliant U.S. government and U.S. government IT contractors are on Chinese firms and Chinese-made IT products and services.
  • Assessment of points of vulnerability in the procurement system, particularly for IT products and services designated as high risk by the U.S. government’s Chief Information Officers (CIO).  Evaluation of whether the CIOs are adequately assessing risk in their ratings of IT products and services.
  • Assessment of why the vulnerability points identified above exist, and an explanation of the factors contributing to the challenge of supply chain insecurity.  Explanation of how vulnerabilities are expected to shift in the next 5–10 years, particularly as Chinese firms move up the value-added chain.
  • Assessment of whether the U.S. government’s management of the risks associated with Chinese firms and Chinese-made products and services to its IT procurement supply chains is sufficient.  Provide a comprehensive description of cases in which the Chinese government, Chinese companies, or Chinese products have been implicated in connection with U.S. supply chain vulnerabilities or exploitation.

This focus on supply chain vulnerabilities is consistent with DoD’s emphasis in the past few years on protecting its supply chain, including rules that address the exclusion of contractors that DoD perceives as presenting a supply chain risk in national security systems, as well as the Department’s rules requiring contractors to provide more oversight of their supply chains to help prevent counterfeit electronic parts.

Proposals are due on June 14 with a report due 90 days from contract execution.

GAO Recommends Improvements to DOE’s Fraud Controls; DOE Fires Back

Earlier this month the U.S. Government Accountability Office (“GAO”) released a report titled “Department of Energy: Use of Leading Practices Could Help Manage the Risk of Fraud and Other Improper Payments” (GAO-17-235) (the “Report”).  As the title suggests, GAO assessed the Department of Energy’s (“DOE”) internal controls to manage “the risk of fraud and improper payments.”  GAO found that DOE had not employed certain “leading practices” to combat fraud – like creating a “dedicated entity to lead fraud risk management activities” and using “specific control activities, such as data analytics” – and offered six recommendations for improvement.  Although DOE disagreed with certain findings in the Report, the agency represented that it either already has implemented or is implementing the majority of GAO’s recommendations.  Here is our assessment of the Report.

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Long Live Reasonableness: Reinforcing the Implied Duty of Good Faith and Fair Dealing in Government Contracts

Last month, in CanPro Investments Ltd. v. United States, COFC No. 16-268C (April 2017), the Court of Federal Claims (“COFC” or “Court”) denied the Government’s motion for reconsideration and reaffirmed its prior decision that CanPro Investments Ltd. (“CanPro”) may continue to litigate its claim for breach of the implied duty of good faith and fair dealing against the General Services Administration (“GSA”). CanPro alleged that the Government breached the implied duty by receiving an unreasonable number of visitors at the building it leased from CanPro – and despite their being no specific contractual provision regulating the number of permitted visitors. This decision is important because it reinforces the implied duty as a mechanism to protect a party’s reasonable expectations arising from a government contract.    Continue Reading

A Tale of Two Contract Releases: One for the Government, One for the Contractor

On the heels of our recent post offering key takeaways from recent release of claims decisions, the ASBCA and the CBCA have published another round of notable opinions regarding contract releases:  Supply & Service Team GmbH, ASBCA No. 59630 and ServiTodo, LLC, CBCA 5524.  Both decisions are important, albeit for different reasons.  The ASBCA decision demonstrates how a release provision in a contract modification providing an equitable adjustment can bar the government from processing an administrative offset against a contractor.  The CBCA decision illustrates the difficulties contractors face when attempting to minimize the impact of a broadly worded release of claims provision.

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Challenges and Priorities for the New Secretary of Labor

Alex Acosta was confirmed by the Senate to be the next Secretary of Labor.  He now takes responsibility for several high-profile issues with critical implications for government contractors.

As we have previously written, the Labor Department was an exceptionally active regulator from 2013 through the end of the Obama Administration.  Although few of us expect that pace to continue, Secretary Acosta will have to balance two competing pressures.  On one hand, the President has already signed a law repealing one of the Labor Department’s most controversial regulations (the Fair Pay and Safe Workplaces rule) and directed agencies to review current regulations with a critical eye.  On the other hand, Acosta will be leading a department charged with enforcing the laws that protect or favor workers’ rights, which sometimes compete with the priorities of their employers.  Continue Reading

Key Takeaways From President Trump’s “Buy American” Executive Order

[This article was originally published in Law360.]

President Trump took a significant step this week towards implementing his often touted objective of protecting U.S. manufacturers and workers by signing the “Presidential Executive Order on Buy American and Hire American” (the “EO”) on April 18, 2017.  In addition to addressing reforms to the H1-B visa program to protect U.S. workers, the EO sets forth a policy and action plan intended to “support the American manufacturing and defense industrial bases” by “maximiz[ing]” the Federal Government’s procurement of “goods, products, and materials produced in the United States,” and mandates strict compliance with the statutory and regulatory regimes for domestic sourcing preferences and restrictions (jointly referred to as “Buy American Laws”), such as the Buy American Act (41 U.S.C. §§ 8301–8305) and other buy America legislation, and implementing regulations.

In short, and as to procurement, the EO:

  • Requires all agencies to assess their monitoring, enforcement, implementation, and compliance with Buy American Laws and the use of waivers to those laws, and to propose policies designed to ensure that the use of domestic sources is maximized, consistent with existing law.
  • Requires an assessment of the impact on domestic procurement preferences of all free trade agreements and the World Trade Organization Agreement on Government Procurement.
  • Elevates to the Head of the Agency the granting of any public interest waivers to Buy American Laws requirements and requires such determinations to consider whether the cost advantage of the foreign product is due to dumping or the use of an injuriously subsidized product.
  • Requires the Secretary of Commerce to submit a report to President Trump within 220 days of the date of the EO which shall include “specific recommendations to strengthen implementation of Buy American Laws, including domestic procurement preference policies and programs.”
  • Requires agencies to submit annual reports to the Secretary of Commerce and the Director of the Office of Management and Budget on agency efforts to maximize the procurement of domestic products, and requires the Secretary of Commerce to submit an annual report to the President based on the agency submissions.

Although this EO establishes the Administration’s policy to strictly enforce Buy American Laws to maximize the use of domestic manufacturers and labor, it does not change existing law or regulation.[1]

Here are our key takeaways.

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COFC Awards Enhanced Attorney Fees In Protest Following “Egregious” Agency Conduct

Last year, we highlighted the Court of Federal Claims’ (“COFC”) decision in Starry Associates, Inc. v. United States, 127 Fed. Cl. 539 (2016), which sharply criticized a Department of Health and Human Services (“HHS”) decision to cancel a solicitation, a rare rebuke in an area where agencies enjoy considerable deference from the courts. The Court’s decision noted the unique circumstances of that case—a series of agency actions resulting in the cancelation of the solicitation at issue that the Court characterized as “capricious” and “reflect[ing] a lack of fidelity to the procurement process.” That cancelation resulted in multiple GAO protests, a hearing at GAO, multiple depositions of agency officials during a follow-on protest at the Court, and a decision enjoining HHS from cancelling the solicitation (raising the interesting question of whether HHS must now award the contract to Starry Associates). In a subsequent decision issued in the case last week, Starry Associates, Inc. v. United States, No. 16-44C (Fed. Cl. Mar. 31, 2017), the case’s exceptional nature was further demonstrated by the COFC’s decision to award “enhanced” attorney fees to plaintiff’s counsel. Continue Reading

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