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Herbert Fenster focuses his practice on litigation, particularly, against the United States and on the subjects of procurement, environmental, administrative and tort law. He has extensive experience in the negotiation, interpretation, and litigation of contracts for major weapons systems, as well as the procurement of research and development.

Earlier this week, the Federal Circuit unanimously affirmed a 2017 ruling by the Armed Services Board of Contract Appeals (“ASBCA”) that held the United States Government breached its contractual obligation to provide physical security to KBR and its subcontractors during the height of the Iraq War.  The decision awards KBR $44 million, plus interest, in private security costs that the Government unilaterally recovered under the LOGCAP III contract.

The Court’s decision is significant in two respects.  First, it confirms that the affirmative defense of prior material breach is not a Contract Disputes Act (CDA) “claim” that must be presented to a contracting officer under M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1331 (Fed. Cir. 2010).  Second, the decision makes clear that a contractor is entitled to CDA interest on its claim to recover amounts taken or held by the Government to enforce a government claim.  We discuss each of these important rulings below.
Continue Reading Federal Circuit Further Clarifies Maropakis and CDA Interest Rule in Significant “Contractor-on-the-Battlefield” Decision

The motivating force behind the False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”) is its provision for qui tam enforcement, which authorizes private parties (aka relators) to initiate FCA cases on behalf of the United States. Id. § 3730(b)(1). Immediately after re-invigoration of the FCA in 1986, scholars and litigants questioned the constitutional validity of statutory authorization for relators to sue on behalf of the U.S. government. After 15 years of litigation, this debate withered, but has been recently re-invigorated.

This post summarizes four principal challenges to the constitutionality of qui tam enforcement, and then discusses two recent events in which these challenges have reappeared: the confirmation hearings for Attorney General nominee William Barr and a cert petition that asks the Supreme Court to rule on qui tam constitutionality.
Continue Reading Debate Over Qui Tam Constitutionality Resumes After 20-Year Hiatus

On January 9, 2018, Department of Defense (“DoD”) issued Class Deviation 2018-O0009, designed to reduce barriers to entry for innovative entities through streamlining the awards process for research and development contracts. This Class Deviation allows for the use of simplified acquisition procedures and excuses certain procurement obligations when DoD awards contracts and subcontracts valued

Under Chevron U.S.A. v. NRDC and its progeny, courts show great deference to administrative agencies’ interpretations of statutes and regulations.  However, it does not necessarily follow that courts will provide that same deference to agencies’ interpretations of government contracts.  Last week, in a statement respecting the denial of certiorari in Scenic America, Inc. v. Dept. of Transportation, Supreme Court Justice Neil Gorsuch pointed out this distinction and raised an issue that merits further judicial attention.
Continue Reading Government Contracts and Chevron Deference: Justice Gorsuch Weighs In

In public comments submitted earlier this month, the defense industry and the public contract bar called upon the Department of Defense (DoD) to withdraw or significantly revise a proposed rule altering how independent research and development (IR&D) costs are treated.  These public comments reflect the defense industry’s growing concern that DoD is moving to constrain the industry’s ability to utilize IR&D projects as a tool for furthering technical innovation.

The proposed DFARS rule change would require contracting officers managing procurements for major defense acquisition programs and major automated information systems in a development phase to adjust the total evaluated cost/price of a proposal to account for the contractor’s proposed reliance on government-funded IR&D projects. The goal of the rule is to address the concern in the Better Buying Power 3.0 Implementation Directive that contractors may use IR&D such that “development price proposals are reduced by using a separate source of government funding (allowable IR&D overhead expenses spread across the total business) to gain a price advantage in a specific competitive bid.”

Public comments were submitted by the American Bar Association Section of Public Contract Law (SPCL) and the Council of Defense and Space Industry Association (CODSIA), as well as several private law firms. These comments uniformly oppose the proposed rule, raising a range of concerns, such as the following:

  • The proposed rule conflicts with the statutory framework governing IR&D, which encourages contractors to administer IR&D programs independently to encourage IR&D investment by contractors.
  • The proposed rule disadvantages contractors undertaking research that is directly relevant and applicable to current government needs, and the proposed rule instead favors contractors that have not invested in innovation.
  • The proposed rule addresses a problem that has not been clearly identified or articulated. As the SPCL comments observe, the Department of Defense has failed to articulate a basis for differentiating between IR&D and other indirect costs.
  • The propose rule ignores relevant case law that already determined that burdening a single contract with underlying R&D costs related to contract performance is unreasonable and would curtail innovation.


Continue Reading Defense Industry Calls on the Pentagon to Withdraw Proposed Changes to IR&D Rules

As Yogi Berra famously quipped, “It’s like Déjà vu all over again!”  In that spirit, Congress has again signaled that it will pass a continuing resolution to fund the Government through spring—despite vocal opposition from the Pentagon.  As a result of this short term funding mechanism, contractors face a number of potential pitfalls:  contract options are at risk, the next round of incremental funding is unlikely to arrive, and new contract awards and program approvals will be scarce.  These pitfalls, however, can be mitigated—and even exploited—by diligent contractors.


Continue Reading Déjà Vu: Continuing Resolution Raises Potential Pitfalls for Contractors

As we discussed in a recent post, the Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States left a number of questions unanswered regarding the implementation of set-aside requirements for veteran-owned small businesses under Federal Supply Schedule (“FSS”) contracts.  The decision has already had repercussions outside the set-aside context, with the Court of Appeals for the Federal Circuit recently applying Kingdomware’s reasoning in Coast Professional, Inc. v United States to confirm bid protest jurisdiction under the Tucker Act for orders placed under FSS contracts.

Congressional testimony subsequent to Kingdomware also now confirms that a number of agencies are considering whether the Supreme Court’s decision has broader implications for other small business programs.  Specifically, the U.S. Small Business Administration (“SBA”) has publically recognized that the Supreme Court’s reasoning may extend beyond a relatively narrow statute governing U.S. Department of Veterans Affairs (“VA”) set asides and require significant changes to long-standing principles established under the Small Business Act.  As result, the VA’s and the SBA’s interests may no longer be aligned as the agencies attempt to reconcile currently differing implementations of related set-aside programs.


Continue Reading SBA Considers Potential Consequences of Kingdomware Technologies

Pursuant to the Truth in Negotiations Act (TINA), contractors are required to submit current, accurate, and complete cost or pricing data when negotiating certain contracts with the Government.  On November 20, the Department of Defense (DoD) published a proposed rule to amend the Defense Federal Acquisition Regulation Supplement (DFARS).  The change would require DoD contracting officers to request a limited-scope audit if a contractor voluntarily discloses defective pricing,[1] unless a full-scope audit is “appropriate for the circumstances.”  In theory, if the rule is implemented, contracting officer would have the flexibility to focus an audit on the defective portions disclosed by the contractor and not reexamine all previously provided pricing data.  Though the proposed rule appears to be DoD’s attempt to provide limited relief to defense contractors facing significant regulatory burdens under TINA, it is not clear the rule as written will provide any such relief.
Continue Reading DoD Proposes DFARS Changes in Attempt to Promote Voluntary Disclosure of Defective Pricing

Last week, a federal court reaffirmed its decision to hold an upcoming False Claims Act (“FCA”) trial in two parts, in what is the known instance of a court bifurcating the liability phase of a FCA trial.

The case, United States v. AseraCare, Inc., Civ. Action No. 2:12-CV-245-KOB (N.D. Alabama), concerns the alleged submission of false claims to Medicare for hospice benefits. The defendant, AseraCare, is a for-profit national chain of hospice providers. Like other similar organizations, AseraCare receives a significant amount of Medicare funds on behalf of individuals eligible to receive Medicare benefits. To be eligible for hospice care paid by Medicare, an individual must be certified by a physician as “terminally ill,” meaning that the individual has a life expectancy of six months or less. The Government alleges that AseraCare hid information from physicians in order to secure certifications of hospice eligibility for patients who were not terminally ill, making the claims the company submitted for Medicare reimbursement false. The Government also alleges that AseraCare had a general pattern and practice of obtaining false certifications, motivated by an interest in obtaining Medicare funds and more revenue. 
Continue Reading Judge Rejects Government’s Objections and Orders 1st Bifurcated FCA Trial of Its Kind