FAR Council Finalizes Rule Imposing Restrictions On Contracting With Companies With Felony Convictions And Delinquent Tax Liabilities

The Federal Acquisition Regulation (“FAR”) Council (the Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”)), recently finalized a rule that imposes significant restrictions on federal agencies in contracting with corporations that have federal tax liability or a recent federal felony conviction.  The final rule implements requirements created by the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. 113-235 (the “CFCAA”) and imposed by a December 4, 2015 interim FAR rule, which we wrote about previously.

The rule applies broadly to all DoD, GSA, and NASA procurements, and requires contractors to report any unpaid federal tax liabilities and to represent whether they have been convicted of a felony criminal violation within the previous twenty-four months.  In addition, for certain contracts in excess of $5 million, contractors must also certify that they:  (1) have filed all federal tax returns in the past three years; (2) have not been convicted of a criminal offense under the Internal Revenue Code; and (3) do not have any outstanding, unsatisfied federal tax assessments.  The rule imposes new requirements on procuring agencies as well: if a corporation discloses any tax delinquencies or felony convictions, the agency may only contract with it after first determining that suspension or debarment of the corporation is not necessary to protect the government’s interests.

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The Foreign Sovereign Immunities Act and the Fifth Amendment’s Takings Clause

EgyptAir Flight 648 was hijacked on November 23, 1985. Fifty-eight of the ninety-eight passengers died. Three years later, Pam Am Flight 103 exploded over Lockerbie, Scotland at 7:03 PM on December 21, 1988. All of the 259 passengers died.

Advancing a novel takings theory, the Plaintiffs in Aviation & Gen. Ins. Co., Ltd. v. United States—insurance companies and an asset management company—asserted that President George W. Bush’s restoration of sovereign immunity to Libya in 2008 constituted an unconstitutional taking of their property interest in insurance contracts. No. 14-687C, 2016 WL 3675437 (Fed. Cl. July 7, 2016). Judge Wheeler granted Defendants’ motion for summary judgment on July 7, 2016.

This post describes the legal background of the case and the Court’s opinion. It also discusses how Aviation & Gen. Ins. Co. should be a warning to clients and attorneys considering filing a takings claim. First, alternative methods of framing the takings claim may increase the likelihood of overcoming summary judgment. Second, litigants and lawyers must use Takings Claims as a strategic part of their larger litigation plan.[1]

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DoD Finalizes Rule on Policies for Cyber Incident Reporting

On October 4th, the Department of Defense (DoD) issued a Final Rule implementing mandatory cyber incident reporting requirements for DoD contractors and subcontractors who have “agreements” with DoD.  The Final Rule also highlights DoD’s desire to encourage greater participation in the voluntary Defense Industrial Base (DIB) cybersecurity information sharing program.  This Rule is effective on November 3, 2016.

This Final Rule implements, in part, statutory requirements for rapidly reporting cyber incidents, including section 941 of the Fiscal Year (FY) 2013 National Defense Authorization Act (NDAA) and sections 391 and 393 of Title 10, and follows an interim rule issued on October 2, 2015.  DoD intends for this Rule to incorporate and harmonize all of the cyber incident reporting requirements – both mandatory and voluntary – for entities that have any “agreements” with DoD.  81 Fed. Reg. 68316.  Key highlights of the Final Rule are addressed below.

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GAO Reports on “Limited Role” of Public-Private Partnerships in Disposing of and Managing Excess Real Property

In response to a request from the Senate Committee on Homeland Security and Governmental Affairs, the Government Accountability Office (“GAO”) recently reported on the “limited role” that public-private partnerships (“PPP”) play in disposing of and managing the federal government’s “excess or unneeded real property.”  Despite recent “[h]igh profile projects” — such as the 60-year lease of the Old Post Office in Washington, DC to be converted into Trump International Hotel — the General Services Administration (“GSA”) “consider[s]” PPPs “for fewer than ten cases each year.”  And while GAO identified three state governments that might use PPPs to dispose of unneeded real property, none was able to point to any recent instances.

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GAO Decision Illustrates Breadth of Agency Discretion in Past Performance Evaluations

In the recent bid protest decision of Halbert Construction Company Inc., the Government Accountability Office (GAO) illustrated the breadth of a procuring agency’s discretion in conducting a past performance evaluation.  Halbert Construction brought the protest after being excluded from the competitive range, arguing primarily that the Navy unreasonably included a non-relevant prior project in the past performance evaluation which led to Halbert Construction’s exclusion.  The GAO sustained the protest based on the well- established principle that offerors must be treated equally because the Navy excluded another offeror’s past performance reference from the evaluation as not relevant under the solicitation’s relevancy criteria but then failed to do the same for the protestor.

More notable than the relatively straight-forward application of the disparate treatment principle was the decision’s discussion of the very broad discretion of agencies in past performance evaluations.  In this competition for design-build services at multiple Navy installations, the protestor argued that the prior project was not relevant for a number of reasoning, including that the project did not include design-build work and instead “involved a specialized type of construction work that is distinctly different from the commercial and institutional work contemplated by the solicitation.”  In rejecting this argument, the GAO found persuasive that both the prior project and the current competition was under the same North American Industry Classification System (NAICS) code for Commercial and Institutional Building Construction.  This point merits attention because certain NAICS codes may be interpreted broadly and some projects may be improperly categorized for NAICS purposes.  Consequently, offerors may need to be mindful of NAICS codes in considering what prior projects may be evaluated for past performance.

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Paid Sick Leave Final Regulations Released

The Labor Department’s Wage & Hour Division (“WHD”) released final regulations implementing mandatory paid sick leave for employees working on federal service, construction, and concessions contracts.  The Labor Department incorporated some changes to the proposed regulations, which we previewed earlier this year, but the final rule still imposes significant obligations on federal contractors and subcontractors.

The costs are likely to come both from the paid sick leave itself (a maximum of seven days per year) and from the layers of complexity on top of contractors’ existing compliance obligations with respect to these types of contracts.  The regulations overlap with WHD’s responsibility for oversight of the Service Contract Labor Standards (commonly known as the Service Contract Act, or “SCA”), which is already a complicated compliance undertaking for employers.  In this post, we summarize the highlights of the final regulations and flag issues for contractors to consider before the regulations take effect in January 2017. Continue Reading

The GAO Is Not Down With OFCCP: Report Criticizes Agency’s “Weak” Compliance Evaluations and May Trigger Increased Contractor Oversight

The Government Accountability Office (“GAO”) recently released a study of the Office of Federal Contract Compliance Program’s (“OFCCP” or the “Agency”) oversight functions for fiscal years 2010 to 2015.  GAO’s report explains that “OFCCP has not found violations in the vast majority of its compliance evaluations,” noting that in the time period GAO studied, OFCCP found violations in 17% of evaluations.  GAO pointed out that OFCCP resolved 99 percent of these violations through agreements between the agency and contractor that outlined remedial measures.  Continue Reading

GSA Leaves Many Questions Unanswered, As Industry Assesses The New Transactional Data Reporting Rule

We recently wrote about GSA’s new Transactional Data Reporting (“TDR”) pilot program, which requires participating Federal Supply Schedule (“FSS”) contractors to report 11 items of transactional data to GSA each month. The TDR rule also eliminates the requirement to provide a Commercial Sales Practices (“CSP”) format as well as the Price Reductions Clause.  As we noted in our earlier post, the TDR rule promises to give GSA contracting officers greater flexibility in evaluating FSS offers and proposed pricing, but there still is significant uncertainty as to how GSA will apply the rule in practice.

Recognizing this uncertainty, the Coalition for Government Procurement recently submitted 65 questions to GSA focused on five aspects of the TDR rule: Use of the Data, Pricing, Pilot Administration and Operations, Public Disclosure of Information, and Evaluating the Pilot. GSA responded to the Coalition’s questions on September 19th.  While GSA’s efforts to engage with industry are commendable, GSA left unanswered many key questions that are of significance to FSS contractors, including how the TDR rule will impact FSS contract pricing negotiations.

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GAO’s Task Order Protest Jurisdiction Expires Today

GAO’s jurisdiction over protests of civilian agency task and delivery orders valued at more than $10 million will sunset today. 41 U.S.C. § 410(f)(3).  GAO will continue to have jurisdiction over Department of Defense task and delivery orders over $10 million — Congress made that jurisdiction permanent in 2011.  10 U.S.C. § 2304c(e).

Pending protests of civilian agency task orders are unlikely to be affected by the sunset of GAO’s jurisdiction. See Technatomy Corp., B-405130, June 14, 2011, 2011 CPD ¶ 107.  But unless and until Congress reinstates GAO’s lapsed jurisdiction, GAO’s ability to review new protests of civilian agency task orders will be limited to protests that an order increases the scope, period, or maximum value of the contract under which the order is issued.

The House version of the FY 2017 National Defense Authorization Act would reinstate GAO’s jurisdiction, and would make it permanent. But the Senate version contains no such provision.  Stay tuned.

DoD Finalizes Rule Expanding Contractor Rights in Technical Data

DoD has issued a Final Rule that gives added protections to the technical data of privately developed commercial items incorporated into major systems, including major weapon systems.  This rule implements Section 813(a) of the National Defense Authorization Act (NDAA) for Fiscal Year 2016 and modifies 10 U.S.C.§ 2321(f). Continue Reading