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Scott Freling represents civilian and defense contractors, at all stages of the procurement process, in their dealings with federal, state, and local government customers and with other contractors. He has a broad-based government contracts practice, which includes compliance counseling, internal investigations, strategic procurement advice, claims and other disputes, teaming and subcontracting, and mergers and acquisitions. He represents clients in federal and state court litigation and administrative proceedings, including bid protests before the Government Accountability Office and the U.S. Court of Federal Claims. He also represents clients in obtaining and maintaining SAFETY Act liability protection for anti-terrorism technologies. Mr. Freling’s experience covers a wide variety of industries, including defense and aerospace, information technology and software, government services, life sciences, renewable energy, and private equity investment in government contractors.

(This article was originally published in Law360 and has been modified for this blog.)

Government contractors undergoing an asset transaction know all too well the peculiarity and uncertainty associated with the transfer of a U.S. government contract through the required novation process. In two recent decisions, the Government Accountability Office considered the impact of such transactions and the novation process on the pursuit of new task orders from the U.S. government, with disappointing results for the affected contractors.
Continue Reading More Novation Complexity In Gov’t Contracts M&A?

Pursuant to Sections 817 and 881(b) of the FY 2017 National Defense Authorization Act (“NDAA”), the Department of Defense (“DoD”) recently issued a proposed rule to amend certain sourcing restrictions found in DFARS subpart 225.70 and related clauses.  Specifically the proposed rule would amend the DFARS to:

  • extend the Berry Amendment’s domestic sourcing restrictions to the acquisition of certain athletic footwear for members of the Armed Forces, when the procurement is valued at or below the simplified acquisition threshold [Section 817], and
  • recognize that Australia and the United Kingdom of Great Britain and Northern Ireland (the “UK”) are now members of the National Technology Industrial Base (“NTIB”), thereby permitting the United States to acquire certain items (that are subject to the sourcing restrictions in 10 U.S.C. 2534) if they are manufactured in the UK, Australia, Canada or the United States [Section 881(b)].

We provide our takeaways below.
Continue Reading Takeaways from DoD’s Proposed Changes to Certain Sourcing Restrictions

Last month, the Government Accountability Office (GAO) issued a bid protest decision regarding the application of Buy American Act (BAA) requirements to a solicitation for construction.  In this decision, GAO rejected the agency’s determination that an offeror’s bid was nonresponsive because the offeror failed to provide certain required information for the evaluation of a potential BAA exception.  A summary of the decision and our takeaways are below.

Continue Reading Pragmatism Wins the Day in GAO Buy American Protest

[This article was originally published in Law360.]

A steady flow of M&A activity in the government contracts industry continues. Indeed, last year we saw over 100 publicly reported deals involving government contractors, and this pace has continued into 2018. This M&A activity has taken a variety of forms, including a number of “carveout” transactions, where a government-focused business is separated from its existing corporate structure. For instance, earlier this month L3 announced an agreement to sell its Vertex Aerospace to American Industrial Partners in what L3 described as an effort to optimize its portfolio of operations. Similarly, last month Siemens’ sold its federal business Dresser-Rand to Curtiss-Wright in order to allow Siemens to refocus on its core strengths.

Whether a carveout is absorbed by another company — such as Lockheed Martin’s sale of its IS&GS business to Leidos — or a carveout results in a new, stand-alone company — such as iRobot’s sale of its robot defense and security government business to private equity firm Arlington Capital, carveout deals can create great opportunities. They can allow a seller to realize the value of the carved-out business, while also creating exciting opportunities for both the remaining and sold businesses to refocus resources on their missions. Also, carving out a business that is less than a natural fit with its larger organization can allow for the realization of synergies if the carved out business is placed in a structure more suited to the carved out business’s specialties.

Continue Reading 4 Considerations For Gov’t Contractor Carveout Deals

In corporate transactions involving government contracts, “novation” has become a dreaded process.  Many buyers and sellers express uneasiness and concern about having to subject their deal to the U.S. Government’s discretionary framework for accepting the transfer of a government contract from one party to another.  In particular, they fear the uncertain timeline and arcane requirements for securing approval.

While the cumbersome novation approval process has drawn significant attention in recent years, the National Defense Authorization Act mark-up released by the House Armed Services Committee earlier this month was again silent on the issue.  In the absence of Congressional enthusiasm, the government contracts bar seems to have focused its efforts to fix the novation process on the Section 809 Panel, which is considering ideas to streamline and simplify the defense acquisition system.  The American Bar Association Section of Public Contract Law offered thoughts on the current novation process in comments to the panel late last year, and it remains to be seen how the Section 809 Panel will react to those comments in the two public reports the Panel is expected to publish over the coming months.

The ABA comments focused on three primary issues with the current novation process under FAR 42.1204:  (1) the timing of novation approvals; (2) corporate entity conversions; and (3) the content of novation packages.

Continue Reading The Future of Novations in Contractor M&A

[This article was originally published in Law360 and has been modified for the blog.]

This was not an April Fools’ Day joke: The New York Buy American Act (“NY BAA”) went into effect on April 1, 2018. Signed by Governor Andrew M. Cuomo in December 2017 and championed by state legislators on both sides of the aisle, the NY BAA amends the existing domestic content restrictions in Section 146 of the N.Y. State Finance Law and Section 2603-a of the N.Y. Public Authorities Law by adding another layer of “Buy American” requirements focused on structural iron and structural steel products used in certain construction projects.

Although Governor Cuomo has noted that this new law is intended “to support hardworking men and women, revitalize infrastructure across the state, bolster the strength of our manufacturing industries and cement our status as a global economic leader” – a sentiment in step with President Trump’s stated “Buy American” policy – the economic impact of this legislation remains to be seen. As will be discussed, this set of requirements is focused on only two categories of items (structural iron and structural steel) used on a specific set of construction projects (roads and bridges) that will be awarded by certain New York agencies or authorities during a two-year window.

Notwithstanding, the NY BAA is a noteworthy development because it further reinforces the general rallying cry behind “Buy American.” Most importantly, this new law serves as a reminder to contractors that an already cumbersome regime of federal and state domestic preferences will continue to remain complex.

Continue Reading Key Takeaways From The “New York Buy American Act” And Beyond

GSA recently announced it is supporting an Inspector General investigation into alleged, third-party fraudulent activity in the System for Award Management (“SAM”). The GSA announcement suggests that fraudulent SAM accounts may have been used to divert certain federal payments to unauthorized bank accounts. The announcement does not elaborate on the scope of potentially impacted entities or the amount of misdirected payments at issue. GSA has advised impacted entities to validate their SAM registration and confirm their financial information. Although GSA has indicated it has or will reach out to impacted entities, contractors would be well advised to confirm independently the accuracy of their current SAM registration.

Continue Reading Fraudulent SAM Accounts Lead to More Complicated SAM Registration Requirements

A few years ago, we reported on regulations governing federal contractors’ nondiscrimination obligations with respect to LGBT employees.  The Trump Administration has taken steps to roll back many Obama-era efforts, although the Executive Order and rules establishing LGBT-related protections for employees of federal contractors remain in force, at least for now.  The Second Circuit recently decided a high-profile case that affirmed the legal basis for those obligations and extended them beyond the federal contractor community.  In doing so, the Second Circuit rejected the Trump Justice Department’s position with respect to LGBT nondiscrimination.

The case, which has generated significant press coverage, deserves close attention from all employers, including contractors, as LGBT nondiscrimination rules continue to develop in courts, executive agencies, and legislatures.  In this post, we examine the considerations for government contractors and outline some best practices for companies that work with the federal government. 
Continue Reading In Sexual Orientation Nondiscrimination Claims, “EEO Is the Law,” and Not Just for Government Contractors

[This article also was published in Law360.]

On June 30, 2017, Commerce Secretary Ross and OMB Director Mulvaney issued a Memorandum to Federal agencies regarding the “assessment and enforcement of domestic preferences in accordance with Buy American Laws,” which includes the Buy American Act (“BAA”). Although the Memorandum purports to provide guidance to help agencies implement the vision expressed in President Trump’s April 2017 Buy American Executive Order (E.O. 13788), which we previously analyzed, the Memorandum focuses mostly on what agencies must include in the reports that they are required, under Section 3 of the Executive Order, to submit to the Commerce Department and OMB by September 15. It also offers some clues for contractors about how the Trump Administration plans to implement its “buy American” vision.
Continue Reading Key Takeaways from Trump Administration Memo on Buy American Laws

[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.

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