DoD Reassures Major Contractors It’s Not Returning to Old IR&D Practices, But Significant Questions Still Remain

On January 4, 2017, the Department of Defense’s top acquisition official issued a memorandum further clarifying the implementation of a November 2016 final rule concerning the reimbursement of major contractors’ Independent Research & Development (“IR&D”) costs.  In a move likely intended to reassure major defense contractors, Undersecretary of Defense for Acquisition, Technology & Logistics, Frank Kendall, stressed that the recent final rule “merely codifies a long standing practice” used by contractors.  Mr. Kendall also emphasized that DoD does not require major contractors to obtain formal or “de facto” approval of IR&D projects before incurring such costs.

But while DoD’s efforts to comfort industry are commendable, some key questions remain, including most prominently: whether and how DoD auditors will utilize the results of pre-IR&D “technical interchange” meetings to question the allowability of IR&D costs.

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Contracting by Tweet: What Impact Can the New Administration Have on Existing Contracts and Future Awards?

Among the many subjects to receive President-elect Trump’s attention in advance of his swearing in on January 20 are venerable defense contractors and their performance of major systems contracts.  The Boeing Company (Boeing) and Lockheed Martin (Lockheed) have both felt the “heat of the tweet” – Boeing for the projected cost of the next generation of presidential aircraft and Lockheed for its F35 Joint Strike Fighter.  The pointed attention has led some to question the authority of a president to alter existing contractual relations or to impact the award of future contracts.  Can a president require contractors to lower prices on existing contracts or direct that future awards not be made to companies that fail to adopt practices the president favors, e.g., retaining jobs in the United States?  A president always has the bully pulpit to pressure high-profile government contractors to “voluntarily” take actions to their detriment and in favor of the government, but what legal tools or contractual remedies are available if a president forces a particular outcome? Continue Reading

A self-effectuating deemed release of claims? Say it ain’t so.

A few weeks ago, we provided a few tips for negotiating and assessing a release contained in a contract modification, and discussed why the Civilian Board of Contract Appeals (CBCA) found that a global release contained in one of many contract modification was ambiguous.

Now, we consider a different scenario: what happens when a final payment clause requires the government to present a “final [payment] voucher” and “draft release of claims” form to the contractor—as opposed to the typical reverse scenario prescribed by FAR 52.232-5(h)—and the contractor fails to sign and return that voucher and release of claims form before the deadline stated therein?  According to the CBCA in Ahtna Envtl., Inc. v. Dept. of Transp., CBCA 5456 (December 22, 2016) (AEI), this type of self-effectuating deemed release will not bar a contractor’s claim when the government knew about the claim and considered it despite the alleged release.

Continue reading for a summary of the AEI decision and our key takeaways. Continue Reading

Updated OMB Breach Response Policy Includes Required Breach-Related Provisions for Federal Agency Contracts

On Monday, our colleague Caleb Skeath posted on Inside Privacy an engaging article that discusses the new Office of Management and Budget policy setting forth minimum standards for federal agencies in preparing for and responding to breaches of personally identifiable information (PII) and the expected contractual changes that agencies will impose on contractors whose systems house government data that includes PII.  The article can be read here.

Double Your Pleasure: GAO’s Annual Protest Report Shows that Sustain Rate Has Almost Doubled, But the Effectiveness Rate Remained Flat

In mid-December, GAO issued its Bid Protest Annual Report to Congress for Fiscal Year 2016.  The report reveals, among other things, that GAO’s protest sustain rate for this past fiscal year (“FY”) was 22.56%, almost double that of FY 2015.  While this is perhaps the most notable data point, the report once again provides a wealth of interesting information for the contractor community.

The Competition in Contracting Act requires that GAO report to Congress certain data concerning GAO’s handling of bid protests, including the number of protest filings and a summary of the most relevant grounds for sustaining protests.[1]  Unpacking this data provides helpful insight to contractors considering whether or not to challenge a procurement award via a bid protest at GAO.  The report includes a chart comparing the statistics over the last five fiscal years; below we summarize some of the highlights for FY 2016: Continue Reading

More Cybersecurity Changes Expected for Contractors in 2017

In 2016, the dangers presented by an increasingly digital world clearly were on display. A cyber-attack using an army of Internet of Things devices interfered with the operations of major commercial websites. And the Presidential Election was plagued with allegations of state-sponsored cybersecurity hacking (for which the Obama Administration just issued sanctions against the Russian government). Cybersecurity threats are unlikely to cede the spotlight in the coming year. Indeed, Marcel Lettre, the Undersecretary of Defense for Intelligence recently described cybersecurity as a “political, economic, diplomatic and military challenge” that is “evolving and growing more acute over time.”

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When does a contract release release a claim? A classic contract tongue twister.

You are reviewing a contract modification and notice a paragraph titled “Release of Claims.”  Do you know what claims will be released by this language?  Or worse, the contracting officer just issued a final decision rejecting your claim (under the Contract Disputes Act) because the release in a contract modification constituted an accord and satisfaction.  Did you sign that release and realize its impact?

The Civilian Board of Contract Appeals’ (CBCA) recent decision in Perry Bartsch Jr., Constr. Co. v. Dept. of the Int., CBCA 4865, 5071 (December 8, 2016) helps contractors answer these questions and understand the scope and contours of a release.  Generally, this case offers  important guidance about how to draft a release in an effective and narrow way, and the types of factors that the CBCA will consider when interpreting a release.  Specifically, this decision addresses the issue of whether an apparent global release of claims, contained in just one of many contract modifications, can extinguish all potential claims against the Government.

For a more complete review of Bartsch and its implications, please continue reading.

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Supreme Court Says False Claims Act Does Not Enact So Harsh a Rule: Dismissal Not Required for Violation of FCA’s Seal Requirement, But Still Available

Earlier this month, in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, the Supreme Court held that the False Claims Act (“FCA or Act”) does not require that a FCA qui tam complaint be dismissed because of a violation of the seal requirement.  Writing for a unanimous Court to resolve the split among precedent and based on the facts that we recently wrote about here, Justice Kennedy explained that the Act’s text, structure, and purpose do “not enact so harsh a rule.”  Op. at 6.  Instead, the Court concluded that deciding the remedy for violating the seal requirement “should be left to the sound discretion of the district court.”  Op. at 10.  Thus, importantly for qui tam defendants rightfully concerned about the reputational harm that may result from breach of a seal, dismissal remains an available form of relief.  Watch this space for analysis of how the lower courts interpret this decision.

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New Guidance on Contractor Risk Management Under the Human Trafficking Rule Released

On December 7, the Office of Management and Budget, the Department of Labor, and the Office to Monitor and Combat Trafficking in Persons in the Department of State, issued a proposed memorandum titled “Anti-Trafficking Risk Management Best Practices & Mitigation Considerations.”  The document is intended, at least in part, to “promote clarity and consistency in the implementation of anti-trafficking requirements” imposed by Executive Order 13627, Title XVII of the FY 2013 National Defense Authorization Act, and the implementing regulatory provisions applicable to all federal contractors at FAR 22.17 and FAR 52.222-50.  Although the guidance document is in draft form, it is important for contractors to consider closely because it (1) outlines the government’s contemplated expectations on anti-trafficking risk mitigation, and (2) informs agencies that they may immediately take the contents of the memorandum “into consideration in applying the anti-trafficking requirements in the Federal Acquisition Regulation.”

In addition to reiterating the basic requirements of the anti-trafficking FAR rule (which we have covered in other posts), the memorandum outlines a series of “best practices and mitigation considerations” designed to inform contracting officers’ assessments of whether contractors are effectively carrying out their compliance responsibilities.  Although the guidance states that it is “not intended to augment or otherwise change existing regulatory requirements,” it does specify that, in the event the government becomes aware of a trafficking violation, a contractor’s compliance with the practices identified in the guidance are to be construed as mitigating considerations weighing in the contractor’s favor.   Continue Reading

New FAR Rule Encourages “Constructive Exchanges” between Federal Agencies and Contractors

On November 29, 2016, the Department of Defense, General Services Administration, and the National Aeronautics and Space Administration proposed an amendment to the Federal Acquisition Regulation (“FAR”) aiming to encourage pre-acquisition communications between industry professionals and federal agencies.  This amendment is part of a five-year long effort by the Obama Administration to clarify that communications between potential government contractors and federal agencies are not only allowed, but encouraged.  Continue Reading

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