Key Takeaways From Recent Decisions Discussing Release Of Claims Provisions

Over the last few months, we’ve reported on various government contracts decisions that illustrate the impact a release of claims provision can have on contractors.  A few weeks ago, we published a Feature Comment in The Government Contractor (titled “Release Me? Five Things Every Government Contractor Needs To Know Before Signing A Release Of Claims”) in which we provided contractors  practical guidance on minimizing the risks of inadvertently releasing potential claims against the government and avoiding unnecessary (and costly) litigation regarding the interpretation of a release.  For example, we recommended that contractors should: (1) be precise when drafting and negotiating a release provision and, whenever possible, avoid using sweeping language, and (2) maintain contemporaneous documentation of release negotiations, including of any communications with the government before, during and after the release is executed.  This guidance likely would have helped the contractor in MBD Maintenance, LLC v. United States Post Service, PSBCA Nos. 6625, 6642, the latest Board of Contract Appeals decision to bar a contractor’s claims based on a broad release of claims provision.

In MBD Maintenance, the contractor submitted a claim (and initiated an appeal) after signing a broad release of claims form associated with its request for final payment.  That release stated the contractor would “remise, release, and discharge the Postal Service . . . of and from all liabilities, obligations, claims, and demands whatsoever under or arising” from the contract.  This release also included a block that allowed the contractor to identify any excepted claims, but the contractor left that block blank.

The Postal Service moved for summary judgment, arguing that the general release provision barred the claim. The contractor asserted that the release should not apply because it “reasonably believed it could continue to pursue its claim based on conversations between the parties” about the claim and prior to executing the release.  In denying the appeal, the Postal Service Board of Contract Appeals rejected the contractor’s argument, in part, because of lack of evidence supporting its argument.  In other words, the presentation of contemporaneous documentation may have helped the contractor overcome summary judgment and live to fight another day.

The bottom line: Contractors should never treat a release of claims provision as an afterthought or assume that the parties’ contemporaneous ─ but undocumented ─ discussions will provide a sufficient basis upon which to pursue claims moving forward. To the contrary, as demonstrated by this decision, and as discussed in our recent article, a broad release provision can result in a claim being dismissed outright – regardless of the substantive merits of the claim itself.

First-To-File Rule of the False Claims Act Continues to Present Interpretive Challenges

Two years ago, when the Supreme Court addressed the “first-to-file” bar of the False Claims Act (FCA) in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, it predicted that its holding might “produce practical problems,” as “[t]he False Claims Act’s qui tam provisions present many interpretive challenges, and it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine.”  Immediately validating this prediction, upon remand of the Carter case, a new interpretative challenge emerged in the same case regarding the first-to-file bar.  That challenge was presented to the Fourth Circuit in oral argument last week. Continue Reading

GAO Report Identifies Government-wide Contracting Trends In Stark Contrast To Proposed Presidential Budget

On March 9, 2017, the U.S. Government Accountability Office (“GAO”) issued a Report entitled “Contracting Data Analysis — Assessment of Government-wide Trends” (the “Report”), detailing Government-wide trends in federal contracting for goods and services during the five-year period from 2011 through 2015.  The report highlights trends in spending, competition, contract types, and contract recipients, and provides a snapshot of contracting by the Navy, Army, Air Force, and the ten civilian agencies with the highest contract obligations for fiscal year (FY) 2015.

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2017 NDAA’s Impact on Audits and Cost Accounting Standards

Section 820 of the National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-238, 130 Stat. 2000 (NDAA), makes three significant changes to the federal government’s future method of conducting audits and implementation of Cost Accounting Standards (CAS).  First, it empowers contractors to avoid Defense Contract Audit Agency (DCAA) audits by employing private auditors to audit their indirect rates.  Second, it provides new requirements intended to reinvigorate the federal government’s existing CAS Board.  Finally, it creates a new and independent Defense Cost Accounting Standards (DCAS) Board to implement the Cost Accounting Standards across the Department of Defense (DoD).  All of these provisions are due to take effect on October 1, 2018.

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DHS Elaborates on its Anticipated Request for Border-Wall “Prototypes”

Last week, we reported that the Department of Homeland Security, Customs and Border Protection (CBP) had published a presolicitation notice announcing its intent to issue a solicitation “for the design and build of several prototype wall structures in the vicinity of the United States border with Mexico.”  On Friday, March 3, CBP amended that notice “to provide additional information to interested bidders” and address “a revision in strategy.”  The revised solicitation includes several significant changes that will be of interest to contractors and other observers.     Continue Reading

President Trump’s First Address to Congress Foreshadows Increased Buy American Act Enforcement

On February 28, 2017, President Donald J. Trump addressed a joint session of Congress for the first time and outlined his plan for a “new chapter of American Greatness.”  That plan included continued emphasis on protecting United States labor and manufacturing, and can be summarized in a few words often repeated by President Trump: “Buy American and Hire American.”  This rhetoric foreshadows the significant likelihood that enforcement of requirements for domestic sourcing and content, including the Buy American Act,  41 U.S.C. §§ 8301–8305, and the Trade Agreements Act, 19 U.S.C. §§ 2501–2581, will be a priority of the Trump Administration.

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DHS Announces Intent to Award Contracts for Border-Wall “Prototypes” by Mid-April

On Friday, February 24, 2017, the Department of Homeland Security, Customs and Border Protection published a presolicitation notice announcing its intent to issue a solicitation “for the design and build of several prototype wall structures in the vicinity of the United States border with Mexico.”  At least on the government procurement front, this notice marks the most concrete indication of the federal government’s intent to construct a wall along the U.S. border with Mexico.

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Trump’s Commitment Against Human Trafficking Brings Greater Uncertainty for Contractors

Last Thursday, President Trump and his senior advisors met with representatives of organizations committed to fighting human trafficking. As reported by several news outlets (e.g., AP, NYT, and Reuters), the President stated during the meeting that he would commit the “full force and weight” of the U.S. government against what he views as an “epidemic” of human trafficking around the world.  He explained that he would “direct the Department of Justice, Department of Homeland Security, and other federal agencies that have a role in preventing human trafficking to take a hard look at the resources and personnel that they are currently devoting to this fight.”  He noted that these agencies “are devoting a lot, but we are going to be devoting more.”  The next day, President Trump appeared to reiterate his commitment on Twitter.

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

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.

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DARPA Seeks to Establish New Platforms for Rapid Development of Medical Countermeasures

Last week, the Defense Advanced Research Projects Agency (“DARPA”) issued a new broad agency announcement (“BAA”) seeking proposals to support the creation of an integrated “capability platform” for the delivery of medical countermeasures to prevent a pandemic threat within sixty days of targeting a known or newly emerging pathogen.  The BAA confirms DARPA’s commitment to addressing national security concerns raised by both naturally occurring public health emergencies and bioterrorism, as well other biological threats to members of the U.S. military.  Learning from recent experiences with Ebola, Zika, and Middle East respiratory syndrome, DARPA is targeting prophylactic solutions that are designed to prevent or halt the spread of an infectious outbreak, rather than solutions intended solely or primarily to treat infected individuals.

DARPA’s approach is consistent with recent guidance from the President’s Council of Advisors on Science and Technology in that it focuses on platform technologies and processes, which represent general approaches to medical countermeasure development that can be rapidly and reliably applied to varying threats.  The Biomedical Advanced Research and Development Authority has adopted a similar focus in its own platform-based BAA, and additional opportunities for platform development will likely arise in the near future under the most recent strategy and implementation plan of the Public Health Emergency Medical Countermeasures Enterprise.

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