Ken Weckstein leads Brown Rudnick's Government Contracts team. He regularly litigates bid protests before the Government Accountability Office and courts, contract disputes before BCAs and courts, and commercial disputes throughout the country. In his blog, he offers thoughts and commentary on a range of related, timely topics.

The views expressed herein are solely the views of Mr. Weckstein and do not represent the views of parties represented by the blogger or the views of Brown Rudnick LLP or parties it represents.
 

Get ready. Government contractors may be paying higher wages.
POSTED ON MARCH 3, 2010
BY KENNETH B. WECKSTEIN and SHLOMO KATZ

The media have been reporting that the Obama Administration plans to make the wages and fringe benefits that a bidder pays its workers an evaluation factor in competitions. We haven't seen the details yet but are curious as to what wages will be favorably evaluated. Will offerors get extra points for proposing reasonable wages, high wages, low wages? Government contracts have long been used to promote social policy. And this Administration has made no secret of its pro-labor leanings. So if we get one guess, it is that this policy, if implemented, could lead to higher wages. After all, in many evaluations the Government already evaluates the reasonableness of wages and there is no chance that the Government will be promoting lower wages.

In fact, most contractors are already subject to laws that govern wages and benefits. First, there is the Fair Labor Standards Act (FLSA) which requires that nonexempt employees receive the minimum wage as well as premium compensation for working overtime. Second, there are state minimum wage laws that often require higher wages than the federal minimum wage. There also are so-called prevailing wage laws, including the Davis-Bacon Act, which applies to construction contracts, and the Service Contract Act (SCA), which applies to contracts that are principally for services. Both the Davis-Bacon Act and the SCA also require the payment of fringe benefits. In many cases, the wages and benefits required under these two laws are at union scales.

Many contractors may not be aware of the serious consequences for violating these laws. In the case of the SCA, for example, a contractor can be debarred, i.e., prohibited from competing for government contracts, for three years. Agencies may also terminate the contracts of companies that violate these laws.

In short, the Government already has tremendous influence over the wages and benefits that its contractors pay. And it is not uncommon for a solicitation to include evaluation criteria that relate to whether offerors will be able to retain the workers necessary to perform the contract. However, as a general rule, compliance with these laws is not expressly an evaluation factor in awarding contracts.

We will keep our eyes open for new developments on the wage front. But don't be surprised if you see future RFPs that lead offerors to propose higher wages and benefits for employees.

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"The money truck will back up to the building" -- but whose money?
POSTED ON FEBRUARY 26, 2010
BY KENNETH B. WECKSTEIN and SHLOMO KATZ

It's a well-known principle in contract law that each subcontractor usually has a relationship (called "privity of contract") only with the contractor at the tier directly above the sub. This applies no matter how many levels or tiers of subcontractors there are.

A recent case from Utah (E and M Sales West, Inc. v. Bechtel Jacobs Co.) demonstrates the risks of blurring those lines of privity. In that case, a third-tier sub below Bechtel Jacobs was required to provide a second heater for a Government job after the first had failed inspection testing. E and M thought it should be paid for the second heater. Ordinarily, this would not have been Bechtel Jacobs' immediate problem. The third-tier sub should have sued the second-tier sub, which could have sued the first-tier sub, which could have sued Bechtel, which could have submitted a claim to and sued the Government. While that may sound like a wasteful mess, the beauty of the system is that each tier has the opportunity to assert whatever defenses it has, which may differ based on the contract language at each level.

Here, though, a Bechtel Jacobs manager allegedly told E and M to build the second heater and said "The money truck will back up to the building." He probably did not intend for it to be Bechtel Jacobs' money in the truck, but a court found that, if he really said those words, he formed a new and direct contract with E and M, and that could form the basis for Bechtel Jacobs to pay.

We suspect that wherever that manager is working now, he has learned to be more careful with his words.

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AUCTIONS ARE FUN
POSTED ON JANUARY 29, 2010
BY KENNETH B. WECKSTEIN

Admit it, you have gone to an auction or you would like to go to an auction. And, first time auction goers often are scared about scratching their ear and ending up with an ugly painting, or worse. So how does the Government handle an accidental bid in the age of electronic auctions?

The Federal Government auctions a lot of stuff. On GSA Auctions, there are categories for aircraft and aircraft parts, construction equipment, crash test vehicles and even the NASA Shuttle/Hubble (no current auctions).

If you are in the market for a barge, forklift or test equipment, you can check in at Government Liquidation.

But just like private auctions, Government auctions have a lot of rules. For example, the terms and conditions for GSA Auctions go on and on. Among other things, "contracts resulting from the sale of any offer in the GSAAuctions.gov website are subject to the Contract Disputes Act of 1978 (41 USC 601-613), as amended."

One difference between Government and private auctions is that if you submit the winning bid and fail to pay up, the private auction company may not chase after you for $730. Not so with the Government. Ask James Duyon. Mr. Duyon was the winning bidder for a 2006 Guld Stream CVDH Travel Trailer. Mr. Duyon did not pay within two days of being notified that he had submitted the winning bid. After notice, GSA terminated the contract (the agreement to purchase the property) and assessed $730 in liquidated damages against Mr. Duyon. Mr. Duyon appealed to the United States Civilian Board of Contract Appeals. He claimed he made a mistake. The Board, in a five page decision, denied the appeal holding that the mistake was a unilateral error of judgment that arose from the appellant's negligence. The decision is well-written and legally correct. But can't we come up with a better way for the Government to resolve and collect disputes over $730? Duyon v. GSA was decided on January 14, 2010.

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BIBLE STUDY IN THE BATTLEFIELD
POSTED ON JANUARY 22, 2010
BY KENNETH B. WECKSTEIN and TAMMY HOPKINS

On Monday, January 18, 2010, ABC News reported that Trijicon, a Federal government contractor, was placing “secret” Biblical codes on gun sights that it sold to the U.S. Government for use in Iraq and Afghanistan. Those “secret” codes essentially are abbreviated citations to Bible verses that are printed along side of the serial number for the sight. Bible citation examples included on the sights include: 2COR4:6 or Second Corinthians 4:6 and JN8:12 or John 8:12.

When the story first broke, the Trijicon representative stated that the Bible citation inscriptions had “always been there.” And according to a statement released by Trijicon on January 20, 2010, the Biblical references have been on the Trijicon sights for “two decades.” Trijicon stated in part:

As part of our faith and our belief in service to our country, Trijicon has put scripture references on our products for more than two decades. As long as we have men and women in danger, we will continue to do everything we can to provide them with both state-of-the-art technology and the never-ending support and prayers of a grateful nation.

At the same time, spokespeople for the U.S. Army, the Marine Corps, the New Zealand’s Defense Force, and Britain’s Ministry of Defence (all customers of Trijicon) said they were unaware of the Bible verse inscriptions when each purchased the sights from Trijicon.

The public relations issues presented by this story seemingly are obvious. What isn’t so clear is whether the US military had a contractual basis to require Trijicon to act to remove the inscriptions from sights that already had been sold to the US military. Trijicon’s statements suggest that the sight with the Biblical verse inscription is how Trijicon sells its products to all customers.

And, the spokesman for the overall command for the U.S. military in Iraq and Afghanistan (“CentCom”) down played the controversy, claiming that the inscriptions (on the military weapon sights) were essentially the same as the “In God We Trust” language on US currency. According to that spokesperson, since the weapon sights were not being given to the “locals”, the Biblical verse inscriptions did not amount to proselytizing in the countries where the sights were in use. Significantly, there is a US military directive that prohibits such proselytizing. But, as noted, the military spokesperson is on the record asserting that Trijicon has not violated that directive with the religious inscriptions sold to the US military as part of its sights.

As is often the case in high profile Federal government contract controversies, public relations (and business realities) work faster than possible contractual remedies. While Trijicon and the CentCom were defending Trijicon’s practices, spokespeople for the U.S. Marines announced intentions to meet with the contractor to speak about “future” procurements. The Britain Ministry of Defence similarly announced its intention to “talk with” the contractor to discuss the issue. New Zealand announced plans to remove the “inappropriate” inscriptions from the sights it had purchased and to make sure the contractor did not include such inscriptions on future sights.

And, yesterday, Trijicon reportedly “voluntarily” offered, among other things, to stop placing scripture references on the products manufactured and sold to the U.S. military; provide 100 modification kits to remove the scripture code from sights already in the field; make sure that future sights provided for Department of Defense procurements are produced without the scripture references; and provide similar remedies to foreign military forces that have purchased Trijicon sights with the “secret” Bible verse references.

As part of routine compliance training, contractors often are advised to approach possible compliance challenges by asking: “How does this play out on the first page of The Washington Post?” Turns out, not so good for the so-called “Jesus-guns”.

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Delinquent federal contractors better fess up if they owe taxes – NOW.
POSTED ON JANUARY 21, 2010
BY KENNETH B. WECKSTEIN and HOWARD A. WOLF-RODDA

President Obama yesterday directed the Internal Revenue Service (“IRS”) to conduct a review to identify federal contractors who have falsely certified that they do not presently owe taxes for which they are delinquent. Contractors whose certifications are found to be false may face severe consequences such as suspension, debarment, or even criminal charges for violations of the False Statements Act. At a minimum, contractors could be subject to a finding that they are not responsible offerors.

In yesterday’s announcement, the President stated that he intended that “the Office of Management and Budget, together with the Treasury Department and other federal agencies . . . take steps to block contractors who are delinquent on their taxes from receiving new government contracts.” Thus, the memorandum signed by the President, specifically directed the IRS to compare its records with the certifications required of federal contractors that state whether the contractor has “been notified of any delinquent Federal Taxes in an amount that exceeds $3,000 for which the liability remains unsatisfied” in the three year period preceding the certification. This review is to be completed in the next 90 days.

The President further directed the Office of Management and Budget (“OMB”) to make “recommendations on process improvements to ensure [that] contractors [whose taxes are delinquent] are not awarded new contracts….” These recommendations are due to the President within the same 90 day period as the IRS review of contractor certifications.

Finally, the President called on Congress to provide contracting officials with the tools “necessary to ensure that the public’s tax dollars are not used to boost the profits of companies who refuse to pay their taxes.” These tools presumably would include the authority to “to recoup [delinquent taxes] or stop tax scofflaws from getting federal contracts,” which was proposed by the President in legislation he sponsored while he was in the Senate.

The President is on the hunt for deadbeats. Contractors who owe delinquent taxes must immediately review their responsibility certifications. If they are inaccurate, immediate correction and remedial efforts to satisfy the tax liability may be a contractor's best tools to mitigate the consequences of a false certification.

The White House Press Release announcing these actions can be found here. The Presidential Memorandum is available at here.

The certification requirement is set forth at Federal Acquisition Regulation (“FAR”) Clause 52.209-5 Certification Regarding Responsibility Matters (Dec 2008), specifically § 52.209-5(a)(1)(i)(D). Provisions regarding responsibility, suspension and debarment are located in subparts 9.1 and 9.4 of the FAR.
 

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A Federal Agency Must "Stay" When Told
POSTED ON JANUARY 12, 2010
BY KENNETH B. WECKSTEIN and AMY WALBORN

In a recent decision, the Court of Federal Claims held that if GAO timely notifies an agency of a protest, the agency must comply with the Competition in Contracting Act ("CICA"), 31 U.S.C. § 3553, provision requiring an automatic stay of the protested contract. See Unisys Corp. v. U.S et al, No. 09-800C. That is true even if the agency is disputing GAO's jurisdiction. A challenge to GAO jurisdiction, by itself, does not override an otherwise proper CICA stay.

The case arose out of a Transportation Security Agency ("TSA") task order awarded under a Department of Homeland Security ("DHS") Indefinite Delivery/ Indefinite Quantity contract. Some confusion on protest jurisdiction was created because the task order contained a provision indicating the Federal Aviation Administration's ("FAA") Acquisition Management System ("AMS") governed. And, AMS covered contracts are exempt from all federal acquisition laws and regulations. Also, AMS provides that the FAA's Office of Dispute Resolution for Acquisition ("ODRA") has exclusive protest jurisdiction. However, the task order also incorporated by reference the DHS IDIQ contract which is governed by the FAR and allows for GAO protest jurisdiction. As a result, the parties to the lawsuit were in disagreement whether GAO had jurisdiction and, in turn, whether the CICA provisions requiring an automatic stay of contract performance were applicable, or whether the ODRA was the proper forum and CICA did not apply. TSA, arguing that CICA did not apply, lifted the stay without following the statutory procedures to override the stay.

The Court of Federal Claims' answer - it doesn't matter- the automatic stay applies when the statutory requirements are met. The Court focused only on the statutory language that requires GAO to properly notify the "Federal agency involved" within "one day after the receipt of a protest." And, if the notice was made within ten calendar days of contract award or within five days of debriefing then the agency is required to suspend performance. 31 U.S.C. § 3553. In this case there was no dispute that the prerequisites for application of the automatic stay were met and GAO had not dismissed the protest. Further, the court held there was nothing in the laws creating AMS that exempts TSA from following a directive to a "federal agency". Therefore, the Court held that the plain language of the statute requires an agency, including TSA, to comply with the automatic stay until such time as GAO dismisses the protest or the agency follows the statutory procedures to override the stay. For an agency to ignore the stay--even if it believes that GAO does not have jurisdiction--is not an option.

 

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DoD relaxes Buy American Act requirements.
POSTED ON DECEMBER 29, 2009
BY KENNETH B. WECKSTEIN and SHLOMO KATZ

"MADE IN U.S.A." Those words on the label or packaging of an item used to be a must when the item was being delivered under a contract covered by the Buy-American Act. That law is intended to give the home field advantage to American manufacturers by prohibiting or penalizing (in proposal evaluations) the use of foreign items on many Government contracts. But the protections that the Buy-American Act provided to American companies and their workers have gradually eroded as new laws and treaties have expanded the list of countries entitled to have some or all of their products treated just-like those "Made in U.S.A." goods.

As a dubious holiday present to American workers, the Department of Defense announced on December 24th that it was finalizing an interim rule announced earlier this year that allows commercially-available off-the-shelf-items to be treated as American-made so long as the final manufacture occurs in the United States. That means that it will no longer be necessary to track where the components within a manufactured good came from in order to say the COTS item was "Made in U.S.A." Instead, a COTS product that consists entirely of foreign-made components, but is "Assembled in U.S.A." or "Fabricated in U.S.A.," might now be just as American as if it had been "Made in U.S.A."

DoD says this is not a big deal because it already has waived the component test for U.S.-made items in acquisitions that are subject to the World Trade Organization Government Procurement Agreement. That ignores the fact that the new rule is broader than the WTO Agreement.

How companies will react to the new rule is uncertain. Maybe foreign manufacturers will set-up assembly plants in the U.S. so they can sell their "American" products to the Government. Maybe U.S companies will buy all foreign components for COTS products and assemble the products in the U.S. ; Either way, someone will try to use the new rule to its advantage. That, for better or worse, is the American way.

 

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Looking for loose change in Uncle Sam’s couch: Obama focuses on overpayments to contractors.
POSTED ON DECEMBER 7, 2009
BY KENNETH B. WECKSTEIN and PAMELA A. REYNOLDS

According to OMB, the U.S. Government made $98 billion in improper payments in 2009. That is up from $72 billion in 2008.

These figures represent a wide-range of alleged mistakes or abuses -- from improper payment of benefits under Medicare or Medicaid to overpayments to government contractors. But does this new data show a dangerous trend? Not likely. The 36% increase in improper payments may simply be a result of increased government spending associated with the ARRA or TARP funds. Nonetheless, this new data has encouraged the Obama Administration to go digging for its missing change.

President Obama recently signed an executive order aimed at reducing these improper payments by requiring additional transparency and accountability. Among other things, it requires the Secretary of the Treasury to create a web page to post information about improper payments (including the originating agencies and entities that have received the most overpayments) as well as a centralized, internet-based system for the public to report suspected overpayments. Agencies must establish methods to identify and measure improper payments and a plan to reduce overpayments.

And as a government contractor, if you fail to disclose an overpayment, you may be subject to financial penalties, listed as an “offender” on the internet, or be debarred or suspended from receiving government contracts. There will likely be additional FAR guidance on this topic. The Executive Order requests the FAR Council to recommend “actions designed to enhance contractor accountability for improper payments” including subjecting government contractors to “debarment, suspension, financial penalties, and identification through a public internet website…for knowingly failing timely to disclose credible evidence of significant overpayments received on Government contracts.” (Section 4(a)). Government contractors are already subject to debarment for failing to timely disclose credible evidence of a significant overpayments (see FAR 9.406-2(b)(1)(vi)(C)), so it is possible that the FAR Council will recommend additional incentives, e.g., financial penalties or public identification.

We can expect specific guidance about the implementation of the Executive Order within the next three months. In the meantime, check out “Executive Order – Reducing Improper Payments and Eliminating Waste in Federal Programs.”

 

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OMG Like the Gov Totally Wants ur Ideas; Social media meets Government Contracts.
POSTED ON NOVEMBER 16, 2009
BY KENNETH B. WECKSTEIN and HOWARD A. WOLF-RODDA

"Betterbuyproject.com”, a recently launched website has set up a forum and blog for people to post ideas for improving Government acquisition practices with an eye towards greater collaboration and use of social media. When we checked in at twitter.com/betterbuyproj the first tweet was "Ideas are rockin' on @betterbuyproj - would love to see you give us yours!"

The site asks “How can we use collaboration and social media to make the federal acquisition process more efficient and effective?” Focusing primarily on “the pre-contract-award stages of the process,” GSA will choose “[p]romising ideas . . . to be piloted on future acquisitions.” Ideas have ranged from conducting pre-bid/Q&A conferences using onlinevideo to providing updates on procurements via Twitter. Site visitors can register, post ideas, and vote on the ideas that others have posted. What’s the top vote getter – more training for acquisition professionals. Closely trailing in second place: putting an end to the “dump” of end-of-year procurements. These ideas are not particularly 2.0, but they get our votes.

GSA does seem serious about moving towards “acquisition 2.0.” It’s in the process of assembling a team, figuring out how this could work under the law and selecting procurements on which to test some of the new ideas.

For more, go to www.betterbuyproject.com. The project's blog is blog.betterbuyproject.com. C u l8r.
 

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Get it right the first time
POSTED ON NOVEMBER 6, 2009
BY KENNETH B. WECKSTEIN and HOWARD A. WOLF-RODDA

A recent case in the US Court of Federal Claims sends a clear message: pick your forum and give it your best shot – you won’t get a second chance.

That’s the painful lesson given to the owner of a small trucking company that had objected to the loss of two contracts to haul mail. The contractor appealed the contracting officers’ decisions to the Postal Service Board of Contract Appeals. The Board rejected the appeals, and the Federal Circuit Court of Appeals declined to reverse the Board’s judgment. Undaunted by the losses, the claimant turned next to the Court of Federal Claims where he reworked the same facts into a new legal theory. The Court threw the case out because it was nothing more than an attempt to get a second bite at the apple.

The Court based its decision on two legal doctrines that prohibit judicial do-overs: collateral estoppel and res judicata. Collateral estoppel prevents you from getting one court to retry an issue identical to one that was essential to a judgment you previously litigated in another court (or, in this case, a Board of Contract Appeals). Res judicata prohibits the pursuit of a second case against the same party, if the second case is based on the same transactional facts.

We won’t bore you with the subtle differences between collateral estoppel and res judicata because the point actually is quite simple: if you don’t like a contracting officer’s decision, appeal it to the Board of Contract Appeals or the Court of Federal Claims and put forward your best case. Because, once it’s over – it’s over.

The case is Emiabata d/b/a Nova Express v. United States, No. 06-702C (Oct. 30, 2009) and is posted on the Court’s website: http://www.uscfc.uscourts.gov/sites/default/files/SMITH.EMIABATA103009.pdf.
 

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Justice delayed is justice delayed
POSTED ON OCTOBER 29, 2009
BY KENNETH B. WECKSTEIN and AMY WALBORN

Contractors do have a right to damages if the Government breaches a contract, but the judicial process can be long and slow.
 
Republic Savings Bank, et al v. U.S., Case No. 2008-5075, (Fed. Cir. 2009), is a Winstar case that dates back to 1985 when the U.S. Government solicited bids to take over failing thrifts. During the early 1980's rising interest rates triggered widespread insolvency in the savings and loan industry. The Government began offering incentives to encourage private investors to take over failing institutions. The Plaintiffs were the successful bidders to take over two of the failing thrifts that formed the contract that is the basis of the suit.

The case for restitution damages first was filed in June 1992. In January 2008, the Court of Federal Claims found that the Government breached the contract when it changed regulations in a way that was contrary to the terms of the original contract with the Plaintiffs. As a result of the breach, the Plaintiffs were awarded $14,641,059.29 in restitution damages. The U.S. Government appealed the decision to the Court of Appeals for the Federal Circuit. The court largely affirmed the lower court's decision holding that restitution damages on summary judgment was appropriate because there was no real question as to the value of the assets at the time of contracting. However, the court did agree with the Government that Plaintiffs were not entitled to proceeds from a sale that the Government had not turned over to the Plaintiffs. The court also agreed that $4.287 million in tax benefits that Plaintiffs enjoyed from the contract should offset the restitution damages and remanded the case on those points.

Now, the case goes back to the Court of Federal Claims and the long road to justice continues.
 

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GAO does more than decide bid protests
POSTED ON OCTOBER 28, 2009
BY KENNETH B. WECKSTEIN

The U.S. Government Accountability Office (GAO) is "an independent, nonpartisan agency that works for Congress." GAO conducts audits, investigations and analyses, and issues legal decisions and opinions. Those who practice Government Contracts law are most familiar with GAO's bid protest function. Less well known is the fact that GAO acts as a board of contract appeals. Congress has authorized GAO to hear appeals of Contracting Officer Decisions involving contracts of legislative branch agencies. That means, for instance, if you have a contract dispute with the Government Printing Office or the Architect of the Capitol, and you are not satisfied with the decision of the GPO or AOC Contracting Officer, you can file an appeal with the GAO Contract Appeals Board. The rules of the GAO Contract Appeals Board are at: http://www.gao.gov/cabrulesjun2008.pdf.

The published decisions of the GAOCAB over the last several years can be found at: http://www.gao.gov/legal/appeals.html. There are seven reported decisions dating back to 2004. And based on the docket numbers, it looks like there are less than 10 cases heard each year.

Despite its light caseload, the GAOCAB can present an attractive forum for contractors with the right case. In one case, the contractor received an award in excess of $2 million, and the Board wrote a 362 page decision with 596 footnotes. See: http://www.gao.gov/cab2003-1.pdf. Somebody got their day in court.
 

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Does being a friend of the District of Columbia Mayor qualify you for $82 million in contract awards?
POSTED ON OCTOBER 26, 2009
BY KENNETH B. WECKSTEIN

In the Federal system, a personal relationship with the Source Selection Official could disqualify you from receiving a contract award. In Washington, D.C., the opposite may be true.

On October 23, 2009, the Washington Post reported that the D.C. Housing Authority awarded $82 million of contracts to build parks, ball fields and recreation centers. The paper reported that a spokesperson for the D.C. Housing Authority did not known whether the contracts had been competitively bid. The article did report that the construction manager on 12 of the contracts was Banneker Ventures, a firm that is owned by a fraternity brother of D.C. Mayor Adrian Fenty. And on two of the projects, RBK Landscaping and Construction, which was reported as being owned by another friend of the mayor, was listed as the general contractor.

Were the contracts awarded after competition? Was there improper influence exercised to make the contract awards? Were the evaluation factors for award followed? All good questions for an Inspector General. But apparently not on the radar of the D.C. Government yet. The focus for now is how is it that the contracts were awarded at all. Apparently the law in D.C. requires that all contracts greater than $1 million must be approved by the D.C. Council. Surprise. The contracts never were presented to the D.C. Council for review and approval.

So next time you have a complaint about the Federal contracting system, be grateful that you are not competing for a D.C. contract--or jealous that you are not a friend of the mayor.
 

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You got your ARRA money-now tell us about it.
POSTED ON OCTOBER 16, 2009
BY KENNETH B. WECKSTEIN and AMY WALBORN

The long awaited American Recovery and Reinvestment Act ("ARRA") contractor reporting tool initially scheduled to launch in July 2009 was scheduled to be open for reporting on October 1, 2009. The reporting tool will be available at FederalReporting.gov. Contractors that have been anxiously awaiting the availability of the reporting tool will now be able to publish the data from the quarter ending June 30, 2009. The purpose of the reporting is to provide transparency to the public on how ARRA funds are being used and how many jobs are being generated. Using the reporting tool, contractors will input data that identifies the contractor, the amount of ARRA funds received, information about the contract, and the congressional district of the contractor. Contractors must also report how many jobs are retained each quarter and how many full time equivalent jobs are created each quarter. And, the FederalReporting.gov website even provides a calculator tool to assist contractors in determining jobs created and retained. Certain contractors also will have to report the name and total compensation of each of their five most highly compensated officers--not a happy prospect for privately held companies. Once the reporting tool is up and running, contractors will have to update their information quarterly no later than the 10th day after the end of the quarter. ARRA contractors should get ready for the new reporting because contracting officers will be watching. And, a failure to make these required reports can impact a contractor's performance assessment.

For more information on reporting requirements see FAR Case 2009-009, 74 Fed. Reg. 14639 and 74 Fed. Reg. 48971.
 

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Defense Department to Private Security Contractors: Drinking While Carrying a Weapon in a War Zone is Bad
POSTED ON SEPTEMBER 18, 2009
BY KENNETH B. WECKSTEIN and BILL SCHMIDT

It looks like private security contractors will continue to play a large role in Iraq and Afghanistan. And DOD wants to make sure that they are not drunk when they fire their weapons. That has to be a reason for a new DOD regulation designed to improve oversight of private security contractors working in areas of military operations.  Click here for link.  

The regulation requires DOD officials to develop and publish guidance and procedures for certain private security contractors and personnel. Those procedures must include a process for arming those personnel. Requests for permission to arm personnel must include written acknowledgement from both the contractor and the personnel of several rules. These include acknowledgement that private security contractor personnel are “prohibited from consuming alcoholic beverages or being under the influence of alcohol while armed.” These rules definitely will hamper the guards in bar fights. And hopefully they will not be deployed to Virginia, and other states, where patrons can legally carry concealed weapons in restaurants.

Kidding aside, oversight of private security contractors in war zones is likely to become increasingly more important. DOD noted in the preamble to the regulation that “The expansion of troops in Afghanistan will result in a corresponding increase in the number of [private security contractors] performing” there. DOD plans to issue further regulations on this controversial issue.
 

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Small Business Fair Competition Act Would Stifle Competition
POSTED ON SEPTEMBER 17, 2009
BY KENNETH B. WECKSTEIN and TAMMY HOPKINS

How many times growing up did you complain to your parents that something was not fair, only to be given the sage advice: “Life is not fair”? Along the lines of that sage advice (and as something of a misnomer), Representative Griffith from Alabama introduced legislation entitled the “Small Business Fair Competition Act.” The primary purpose of the legislation is to permit businesses that are no longer considered “small” to compete for certain follow on work as if they still were small. Thus, even though those businesses legally would be "large", they would be considered "small". Real small businesses that have to compete against these large business under contracts set aside for small businesses might have a hard time seeing how this legislation introduces any “fairness” in small business competitions.

The legislation is H.R. 3558 and it was introduced on September 14, 2009. A copy of the bill can be viewed at: http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3558:.  The legislation would create a loophole in the Small Business Act that would permit certain large business incumbent contractors (who were once small) to compete for follow on requirements that are set aside specifically for small businesses.

According to the legislation, an admittedly large business incumbent contractor could represent itself as a “small business concern” if, among other things, it was small at the time of the initial award of the incumbent contract, and it would “revert to being a small business (as defined in the solicitation for the proposed contract) if not awarded” the follow-on contract. H.R. 3558, Sec. 2(a)(2).

So here's the deal. When the follow-on small business set-aside contract is competed, the competitors would include the now large business incumbent contractor. That large business would have the resources of a large business and direct experience (and likely dedicated staff) for the follow-on requirement. If the incumbent, formerly small, now large business has been doing a good job performing the work, it will be very hard for legitimately small businesses to displace the now, large business incumbent. There is nothing the matter with that if the follow-on work were competed under full and open competition, but to let a large business win a small business set-aside contract does not sound very fair. In fact, the new "Fair Competition Act" would allow the large business incumbent to protest the size of its small business competitors but would not allow the small businesses to protest the size of the large business incumbent. How fair is that?

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It is impossible for the Government to act in bad faith--well almost.
POSTED ON SEPTEMBER 15, 2009
BY KENNETH B. WECKSTEIN and MIKE MALONEY

Companies not selected for award of government contracts sometimes claim they are the victims of a government official's "bad faith." Sometimes such clients present counsel with objective evidence--in the form of statements made by government evaluators or questionable consulting relationships by former government selection officials--that appear to support these allegations of bad faith.

The problem is, bad faith allegations rarely succeed in government contract litigation. The standards to support bad faith allegations are very high.

In AFR & Associates, Inc. v. HUD, CBCA 946, August 7, 2009, the contractor ("AFR"), filed a claim against HUD for failing to exercise its option to extend a management and marketing ("M&M") contract, claiming that the decision was tainted by HUD's bad faith. AFR based its bad faith claim on the actions of two of the government personnel on whose advice the contracting officer relied in making her decision. Those actions included the following:

(1) One HUD official told AFR's president, "I've one run [sic] M&M contractor out of town and I have no problem running AFR [out of town]."

(2) Another HUD official retired from government service and launched a consulting firm that served clients who were HUD M&M contractors, including AFR's competitor that was selected to replace AFR for the work under the M&M contract at issue.

The Board was not impressed by AFR's allegations. The Board said that there is a presumption that Government officials act in good faith and to overcome that presumption, the proof must be almost "irrefragable ". That is a great word. We ran for our dictionaries when we first saw it years ago. It means "that cannot be refuted; indisputable." It seems that if you cannot refute the good faith, you will never be able to show bad faith. However, the standard is not quite that high. In the cases where courts have considered allegations of bad faith, the necessary "irrefragable proof" has been equated with evidence of some specific intent to injure the plaintiff.

At the end of the day, the Board denied AFR's claim and characterized the one official's comments as "intemperate." The Board also noted that the other government official retired five months after HUD made the decision not to extend AFR's contract and that there was no evidence that she acted unfairly in her assessment of AFR.

The lesson is that bad faith claims are tough to win. Even with some objective evidence to support them, bad faith allegations rarely satisfy the standard necessary to overcome the presumption that the Government has acted in good faith. Now use the word "irrefragable" when you go home and talk to your spouse.

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The Public Health Option that you will not hear about.
POSTED ON SEPTEMBER 11, 2009
BY KENNETH B. WECKSTEIN and SHLOMO KATZ

When President Obama addressed a joint session of Congress on September 9, 2009, there wasn't much in his speech about the possibility of a Government-funded health insurance plan as a fallback for the poor and uninsured. Ironically, many well-paid American workers already are receiving Government-funded health insurance as a result of being covered by the Service Contract Act (SCA) or the Davis Bacon Act (DBA). These federal laws require Government contractors to pay service and construction workers certain minimum wages and health and welfare benefits. (Sometimes the minimum wage is $50 an hour--quite a change since we were making minimum wages.) Under the SCA, service contractors must pay their non-unionized workers a health and welfare benefit of $3.35 per hour, while unionized workers may get even more. While employers could pay their workers this benefit in cash, employers are permitted to, and many do, use this amount to pay for or subsidize a health insurance plan.

So there's the health insurance, but where's the Government funding?

The reason that Congress passed the SCA and the DBA was to ensure that contractors do not compete for work by slashing employee wages and benefits. And Congress fully understood that contractors would pass these wage and benefit costs on to the Government. Contractors who are bidding on a contract covered by one of these laws should make sure they understand what the laws require and permit in order to ensure that their proposals are priced appropriately. It will not be an excuse to non-compliance that the contractor can't afford to pay the correct wages or benefits. And, the sanction for non-compliance is severe--an automatic three-year debarment for Government contracting for SCA violations, for example.

The math is simple. Each time the Federal Government increases spending on service and construction contracts, more health benefits are provided to more private sector employees. So increasing spending on Government Contracts is good for the economy, good for private enterprise and good for the health of American workers. That's another reason why we are fans of Government Contracts.

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GE Beats Back FOIA Request
POSTED ON SEPTEMBER 10, 2009
BY KENNETH B. WECKSTEIN and TAMMY HOPKINS

As most readers likely know, the Freedom of Information Act (“FOIA”) lets private parties request the release of information related to Federal Government contracts. In many industries, FOIA requests are a routine part of a company’s “intelligence” gathering efforts. Where bid and proposal information is not otherwise exempt from FOIA disclosure, a competitor can gather pricing information and technical proposal submission(s) of the winning contractor.

What is and is not FOIA exempt, however, often is decided by Federal courts. A recent case involved unit prices of General Electric Company under two different Air Force contracts to supply spare parts for certain GE engines.  The contracts were awarded to GE in 1999 and 2000. And, in 2000 and 2001, the Air Force received two FOIA requests seeking public release of the GE contracts, including GE’s unit prices.

In what appears to be a somewhat tortured history, the Air Force initially determined that the unit pricing information was releasable under FOIA. GE objected, arguing, among other things, that it would suffer substantial competitive harm if the unit prices were released. GE argued that its competitors, once armed with the unit pricing from the Air Force contracts, would be able to “reverse engineer” certain GE pricing strategies. And, GE argued that future commercial customers could leverage the admittedly lower unit pricing offered the Air Force to negotiate lower prices with GE in the future for similar commercial work. GE ultimately prevailed (in court) with both arguments.

The case took approximately eight years to wind its way through the system to final decision by the District Court. (The eight years included a remand to the Air Force and a stay pending the appeal of another reverse FOIA case presenting similar issues.) And, during that eight year period, GE’s unit prices were not released to the public (or to the two FOIA requesters who sought the information).

So what's the take-away? You have the right to fight the Government release of your information under FOIA. By just fighting the release, you may be able to tie up things until your information loses any value it might have to competitors. (Did we say that the case took eight years?) And, GE not only brings good things to life, but when it wants, it can keep things from seeing the light of day.

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New Contract Performance Database Emphasizes Integrity
POSTED ON SEPTEMBER 10, 2009
BY KENNETH B. WECKSTEIN and AMY WALBORN

Contractors better shape up. A new database containing past performance and integrity information on contractors, the Federal Awardee Performance and Integrity Information System ("FAPIIS") is on its way. See FAR Case 2008-027, available at 74 Fed. Reg. 45579. FAPIIS will draw from current past performance databases and include performance and integrity information on contractors dating back five years. Contracting Officers will be required to review and consider the information in the database before making any awards over $100,000--including contracts for commercial items and commercial-off-the-shelf items.

Previous bad conduct will cost you. Contracting Officers will be required to input new findings of non-responsibility due to lack of satisfactory performance or poor integrity into FAPIIS. There is also a requirement that Suspension and Debarment Officials enter information on administrative agreements between the contractor and the Government that are entered into in lieu of suspension or debarment. And, because FAPIIS displays data spanning a five year period, Suspension and Debarments (which could be for three years or less) that are no longer in effect may be included in the database.

Contractors get their say as well. For example, contractors that have contracts totaling $10 million are required to provide information relating to certain criminal, civil and administrative proceedings, including in some cases settlement agreements. Contractors also can input comments regarding any adverse information in the database.

The creation of this new database and the data that is required to be included for consideration indicate an emphasis on business ethics and integrity. Ergo [we love that word], Contractors are on notice to mind their P's and Q's. The proposed rule has not been finalized. If you have concerns, you have until October 5, 2009 to submit comments.

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Who wants to be a multi-millionaire?
POSTED ON SEPTEMBER 3, 2009 BY KENNETH B. WECKSTEIN

The stock market could be stalled for years. Real estate may not reach its prior heights for a decade. And the odds of winning big money on a game show are miniscule. Where is the aspiring multi-millionaire to turn?

Some enterprising folks have sued their employer or a Government contractor for making false claims to the Government. If you win, Jackpot! The Department of Justice could decide to prosecute your case and you could receive 15-25% of the proceeds of the action or any settlement of the claim.

Our latest multi-millionaires come to us courtesy of Pfizer. According to a Department of Justice Press Release on September 2, 2009, "Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. ... have agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice, to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products..." See http://www.usdoj.gov/opa/pr/2009/September/09-aag-900.html  As a part of the resolution of the cases, "six whistleblowers will receive payments totaling more than $102 million from the federal share of the civil recovery."

Let's see, that is $102 million divided by six, an average of $17 million per person--not Warren Buffet numbers, but probably better than Dog the Bounty Hunter makes in a day.

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Obama Administration Reaffirms its Commitment to Small Businesses--So what?
POSTED ON AUGUST 31, 2009 BY KENNETH B. WECKSTEIN

Since he took office, President Obama has spoken of the importance of small and minority businesses, his commitment to those businesses and how he would use government contracts to promote the growth of small businesses. The President reaffirmed those commitments in an August 18, 2009 announcement (SBA Release Number: 09-58). However, when you look more closely at the President's new initiative, it looks like the Administration is talking the talk but not walking the walk.

The announcement says that over the next 90 days there will be over 200 events to share information on government contracting opportunities. The announcement also says that small business contracting opportunities will be promoted in remarks by the Secretary of Commerce and the Administrator of SBA. Yawn. That will just get out the word that there are (or could be) some opportunities for small businesses. That will not increase the amount of awards to small businesses. It only will create more competition between small businesses. That is not a bad thing. But by itself, it will not move contracting dollars to small businesses.

There are only two ways small businesses can get business from government contracts: 1. When the government sets aside or otherwise awards a contract to a small business (in a full and open competition), and 2. When a prime contractor to the government awards a subcontract to a small business. Having 200 meetings to tell small businesses that there are contracting opportunities, by itself, does not put more contracting dollars in the pockets of small businesses. That is not how it works in the real world.

For example, SBA can ask agencies to set-aside certain contracts for small businesses. That means that only small businesses can compete for that set-aside contract. However, the agencies have the right to reject recommendations from SBA. And while SBA and the agency can fight back and forth, as between SBA and the agency, "[t]he decision of the agency head shall be final." 48 CFR 19.505(e). That's not good or bad; it is the law. And, the law presumably recognizes that agencies are more qualified than the SBA to decide whether specific contracting work should be set aside for small businesses. So while the Administration may sincerely want to increase the government contracts work of small businesses, it might want to focus more on persuading contracting agencies to make more awards to small businesses than on holding meetings to tell companies about contracting opportunities.

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How to Leverage a Loss into a $1 Billion Win
POSTED ON AUGUST 13, 2009 BY KENNETH B. WECKSTEIN

We all know that companies compete for trillions of dollars in Government contracts. We all know that the Government has to follow the rules in awarding those contracts and that disappointed bidders can file bid protests with the US Government Accountability Office and with the US Court of Federal Claims. Those protests can take three months to over a year to resolve. However, sometimes the mere fact that a protest is filed is enough to force a quick resolution of the dispute. Sometimes the Government agency will act on its own and take corrective action. Sometimes the competing contractors will get together and cut a deal. While two competitors getting together to divide up business might have anti-trust implications in other circumstances, such a collaboration may be possible as a device to resolve bid protests. Federal Times is reporting one such deal today.
See http://www.federaltimes.com/index.php?S=4232395

According to the story, Dyncorp's Global Linguistic Services Division and L-3 competed for an Army translation services contract. Dyncorp won the $4.65 billion contract. L-3 protested. Dyncorp then agreed to give L-3 22.5% of the contract if L-3 dropped its protest. L-3 dropped the protest. In exchange, Dyncorp eliminated the risk that the protest would be sustained and was able to proceed with performance without waiting for a decision on the protest. Effectively, Dyncorp received 77.5% of the work and L-3 received 22.5% of the work as a subcontractor. The deal was worth $1 billion to losing contractor L-3. The lesson is that bid protests can be an effective tool to win business--even where the protests never are decided.

Is that the end of the story? Probably. Will such deals between competitors always go through smoothly? Not necessarily. Every time the Government takes an action in connection with a competition, there are disappointed bidders who have protest rights. Here, the Government directly or indirectly approved the Dyncorp/L-3 post-competition division of the work. Other, third party companies that competed for the work would have had standing to complain that the Army approval of the award to the "new" Dyncorp/L-3 team was improper. That could have led to a new round of protests. Here, it looks like any such protest now would be too late and that losing bidder L-3 has turned its loss into a big win.

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When is final acceptance of work not "final"?
POSTED ON JULY 31, 2009
BY KENNETH B. WECKSTEIN and MIKE MALONEY

Imagine performing a contract, having your work inspected by your customer, the customer accepting the work, the customer paying you, and then the customer taking back the payment. It can happen. If you engage in fraud to get the acceptance, the customer can argue that the acceptance shouldn't count. That makes sense. But what if you just made mistakes in performing the work? If the mistakes are bad enough, the result can be the same.

Under the Inspection of Construction clause in most government construction contracts, the Government can revoke "final" acceptance for a contractor's "gross mistakes amounting to fraud." Recently, the Armed Services Board of Contract Appeals upheld the Air Force contracting officer's decision to revoke acceptance and to terminate the design/build contract for default. See Appeals of -- American Renovation and Construction Company, ASBCA Nos. 53723, 54038, June 30, 2009. There, the contractor made some bad mistakes and compounded those mistakes by failing to provide inspection reports to the Government in a prompt manner. The contractor's foundation preparation work for military family housing at an Air Force base in Montana was found to be "inadequate." The contractor allegedly mismanaged water, selected improper foundation backfill and performed improper compaction during the course of the construction project. The Government argued that these mistakes caused the housing units to move--or "heave"--and led to significant exterior damage. According to the ASBCA, the contractor's mistakes were so egregious that they amounted to fraud that justified the Government's decision to revoke final acceptance and to terminate the contract for default. Apparently, the Government relied on the contractor's representation at the time of acceptance that the units were ready for occupancy. The nature of the contractor's mistakes and the fact that the contractor failed to provide the required inspection reports prevented the Government from discovering the mistakes.

So if you think that you have to intend to commit fraud, think again. "Honest" mistakes, if frequent--and egregious--enough, can lead to claims of fraud and all the negative consequences that follow allegations of fraud.

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OMB to Agencies: Cut back on sole-source and cost reimbursement contracts
POSTED ON JULY 31, 2009
BY KENNETH B. WECKSTEIN and BILL SCHMIDT

As we discussed in our first blog entry, the President’s March 4, 2009 memo outlined his government contracting policy and tasked the Office of Management and Budget, in two steps, to help Federal agencies implement that policy. The memo triggered much discussion about what changes OMB might make to the procurement rules. OMB took the first step on July 29, 2009, but is apparently waiting to make what could be the most important moves in the fall.

The President’s memo directed OMB to issue Government-wide guidance:

to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner.

With its three July 29, 2009 memos, OMB started the ball rolling. The memos are titled “Improving Government Acquisition,” “Improving the Use of Contractor Performance Information,” and “Managing the Multi-Sector Workforce.”

 “Improving Government Acquisition” requires agencies to develop plans to cut 3.5% of contract spending in Fiscal Year 2010 “and a further” 3.5% in FY 2011. It also requires agencies to cut by 10% the percentage of money spent on new contracts awarded with “high-risk contracting authorities.” The memo targets as “high risk” acquisition methods noncompetitive contracting, cost-reimbursement contracts, and time-and-materials and labor-hour contracts. It further provides guidance to help agencies meet these requirements. Regardless of how and when the agencies get there, the bottom line is that some contractors who have gotten used to cost-reimbursement and sole-source work are going to have to compete for fixed-price contracts. More details are likely to follow by September 30, 2009, the deadline from the President’s memo for further OMB action.

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HUBZone battle opens on another front
POSTED ON JULY 14, 2009
BY KENNETH B. WECKSTEIN and BILL SCHMIDT

A conflict has developed between GAO and the Obama Administration over which small businesses must be first in line when Federal agencies limit competitions for contracts to small businesses. We first blogged about a controversial GAO decision on July 13, 2009, and predicted there would be fallout. GAO decided that agencies must consider whether they are required to set aside an acquisition for HUBZone small businesses before setting it aside for other kinds of small businesses.

The Office of Management and Budget is telling Federal agencies that they can ignore GAO’s decision, at least for now. In a memo dated July 10, 2009, the OMB said the GAO’s decision is not binding on Federal agencies, and that it is contrary to the Small Business Administration’s regulations. OMB says the SBA regulations require “parity” among three small-business contracting programs: HUBZone, 8(a), and Service Disabled Veteran Owned Small Businesses. It argues that agencies “should not, as a result of the GAO’s decisions, be compelled to prioritize HUBZone small businesses” over the others. Ultimately, OMB is telling agencies not to follow the GAO decision until “the Executive Branch” completes a legal review.

So, a key rule on who’s first in line for set-aside competitions for a large number of government contracts is up in the air, or up for grabs. Because OMB is relying on regulations and GAO relied on a statute, next stop for aggrieved parties could be Congress or the courts.

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You are now entering the HUBZone
POSTED ON JULY 13, 2009 BY KENNETH B. WECKSTEIN

The Federal Government uses its contracts to implement social policy. There are special rules that allow for sole source contracts to Alaska Native Corporations and limited competitions to small businesses and 8(a) concerns (businesses certified as socially and economically disadvantaged). Now, after a recent GAO decision, they all take a back seat to Historically Underutilized Business Zone (HUBZone) small businesses.

HUBZone small businesses are those located in historically underutilized business zones. Contract awards to such businesses are supposed to increase economic development and employment in those areas. The law requires that contract opportunities "shall" be awarded on the basis of competition limited to qualified HUBZone small businesses if the Government has a reasonable expectation that two or more qualified HUBZone businesses will submit offers and award will be made at a fair market price.

So what happens when one social policy pushes up against another social policy? In the May 4, 2009 Decision in Matter of Mission Critical Solutions, GAO said that HUBZone businesses trump Alaskan native and 8(a) businesses. In that case, GAO sustained a protest against an Army contract for IT support that had been filed against a sole source award to an Alaska Native Corporation. GAO also said that setting aside a contract opportunity for HUBZone businesses also had to be considered before a contract opportunity could be set aside for 8(a) concerns. While these are small businesses, this is no small matter. Billions in contracting dollars are at stake.

The Small Business Administration did not like the GAO Decision. SBA asked GAO to reconsider its decision. However, on July 6, 2009, GAO denied the SBA's request for reconsideration.

There will be fallout from the decision in Mission Critical Solutions. Small businesses will try to qualify as HUBZone businesses. Large businesses will look to team with HUBZone businesses. And we probably will see legislation in the next year that will attempt to restore 8(a) contractors to the King of the Hill.

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God bless America--Give me money.
POSTED ON JULY 6, 2009 BY KENNETH B. WECKSTEIN

Sarah Palin celebrated Independence Day by declaring her independence from the governship of Alaska. As governor, her salary is $125,000. In the next year, she will take in how much? $1 million? $2 million? $5 million? More? But according to Palin, it is wrong for lame duck governors to "draw a paycheck" and "kind of milk it." According to reports, she used phrases like a "higher calling" and "it's about country" to describe her abdication from Alaska's throne.

As a public official, Palin is governed by ethics rules and Government contract conflict of interest rules. As governor of Alaska, it would be problematic for Palin to collect $60,000 for giving a speech or big bucks for serving on a corporate board. But as a former governor, many of those restrictions go away. What may not go away are rumors that Palin, as mayor of Wasilla, Alaska, benefited from the construction of the Wasilla Sports Complex. An attorney for Palin has denied those allegations. See http://www.politico.com/static/PPM124_release_for_7-4-09-1.html.

Is this a great country or what? Where else can a former third place finisher in the Miss Alaska pageant play a pivotal role in electing the country's first black President. And where else can milking your popularity make you a millionaire overnight and be called a "higher calling"?

Our founders would be proud. Happy July 4th.

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Sole source is bad and competition is good, except when it is not.
POSTED ON JUNE 29, 2009 BY KENNETH B. WECKSTEIN &
MICHAEL D. MALONEY

The Obama administration has become the champion of competition in government contracting. Or has it?

The President has stated the policy of the Federal Government that executive agencies shall not engage in noncompetitive contracts except when fully justified and when appropriate safeguards are in place to protect the public fisc. But there may be limits to how far the administration will go to foster competition in Government Contracts. And one area where recent developments suggest competition may give way is when it must go head to head with the interests of federal government employee unions.

OMB Circular A-76 (May 29, 2003) provides that it is the longstanding policy of the Federal Government to rely on the private sector for needed commercial services. The Circular provides for agencies to make determinations about which services are "commercial activities" and to set up competitions between private sector contractors and the existing public sector workforce in appropriate circumstances. According to OMB, there were 1375 public-private competitions from Fiscal Year 2003 to 2007. Competitions often are used for IT support, logistics and property management.

These A-76 competitions can save the taxpayer money. Estimates are that DOD saves more than $1 billion a year from such competitions. In these days of bailouts and trillion dollar deficits, $1 billion does not seem like much. But outsourcing work to the private sector also has the potential to create new private sector jobs.

Recently, the House Armed Services Committee reported out language as part of the Defense Authorization bill for Fiscal Year 2010 that places a three year moratorium on future A-76 studies and a temporary hold on studies already in progress. The moratorium is to give the Administration an opportunity to "study" the process. The House passed the bill on June 25th and the Senate now is considering similar language.
When it comes to competing commercial work being performed by Government employees, it looks like the Administration wants to continue performance of that work by Government employees on a sole-source basis.

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Follow the Rules or you don't get to play.
POSTED ON JUNE 10, 2009 BY KENNETH B. WECKSTEIN &
TAMMY HOPKINS

Everyone knows that the Government's RFP sets forth the rules for submitting proposals. And, if you don't follow the rules, the Government could reject your proposal. But sometimes, you may think you are following the rules when in fact you are not. That is what happened in the protest of Northern Lights Production decided by the GAO on June 1, 2009.

In that case, the National Park Service sought proposals for audiovisual production and services. The protester received a total of 95.64 points out of a possible 100 as a result of the evaluation--a pretty good score. However, the National Park Service rejected the proposal as unacceptable because the protester included language in its final proposal that the Contracting Officer thought took exception to the Data Rights requirements of the solicitation.

The solicitation included FAR 52.227-17 Rights in Data-Special Works, which defines “unlimited rights” as: the rights of the Government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so.

The solicitation also included another “Ownership of Products” provision that, according to the GAO decision, said: “All original media produced under this contract is the property of the National Park Service.”

In response to these requirements, the protester submitted a proposal that addressed the Government’s data rights by stating: “All materials will be cleared for educational and museum presentation use for the life of the program, up to twenty years.” That was its downfall. The National Park Service wanted the property period. It didn't just want the property for 20 years or for just certain uses.

The protester argued that its proposal should not have been rejected because it did not label the above language an "exception" or a "deviation". GAO rejected that and found that "the plain language of protester's proposal clearly took exception to a material term of the RFP." And, in denying the protest, GAO repeated a basic tenet of government contracts law—“a proposal that fails to comply with the material terms of the solicitation should be considered unacceptable and may not form the basis of award.”

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Is that Elliott Ness at the Door?
POSTED ON JUNE 4, 2009 BY KENNETH B. WECKSTEIN &
HOWARD A. WOLF-RODDA

FBI Director Robert Mueller, in remarks delivered on Tuesday before the Economic Club of New York, spoke of the Government's plans to step up enforcement efforts to combat abuses of stimulus funds. "Where there is money to be made, fraud is not far behind, like bees to honey." Director Mueller's speech highlighted the FBI's intention to work with other agencies "to prevent what has the potential to be the next wave of cases: fraud and corruption related to the TARP funds and the stimulus package."

In recent weeks, we have blogged about the expansion of compliance requirements directed at government contractors whose projects are funded by the stimulus package. Director Mueller's remarks make it clear that the FBI will scrutinize contractors with greater intensity than perhaps the government contracting industry has seen before. To do this, the Director stated the FBI "must collect the intelligence necessary to target potential waste and abuse at all levels [so it is] able to follow the money all the way down the line."

Strict adherence to recordkeeping, reporting and compliance requirements will be critical so contractors can demonstrate that they are trusted stewards of taxpayer funds. Otherwise, Director Mueller may send a Special Agent to knock on your door.

The full text of the Director's speech can be found at http://www.fbi.gov/pressrel/speeches/mueller060209.htm.

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Supreme Court, Here We Come
POSTED ON JUNE 3, 2009 BY KENNETH B. WECKSTEIN &
WILLIAM S. SCHMIDT

Bad facts make bad law. Bad facts and determined adversaries make big legal fees.

The dispute over the Navy's termination for default of the McDonnell-Douglas and General Dynamics A-12 contract is now entering its 18th year. There apparently have been 14 reported decisions on the case to date. Beside the many attorneys for the two plaintiffs, the Navy and at least one trade association retained outside counsel. (Yes, we are jealous that we didn't have any part of this work.)

The most recent decision was released by the Court of Appeals for the Federal Circuit on June 2, 2009. It found that the default termination was justified. As things now stand, the contractors recover nothing and the Navy can pursue a money judgment against the contractors.

Was the decision good? Was the decision bad? Does it make a difference? The Court struggled with the decision. It sympathized with the contractors but held against them. The next decision for the contractors is whether to appeal to the US Supreme Court. The contractors’ claim at one time was nearly $4 billion, plus perhaps 18 years of interest. The Navy has asserted a claim against the contractors for $1.35 billion. If there is no appeal, the contractors get nothing. After 18 years of fighting, what would you do?

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Greenbacks for Green Buildings
POSTED ON JUNE 1, 2009 BY KENNETH B. WECKSTEIN &
WILLIAM S. SCHMIDT

The American Recovery and Reinvestment Act provides at least $4.5 billion to convert federal buildings to “High-Performance Green Buildings.” Pub. L. No. 111-5, 123 Stat. 115,149. GSA already has begun the process of contracting out that work, and companies eligible to perform Federal Government contracts can compete for it.

But what kind of work is this? What makes a building a “high-performance green” building?

The Recovery Act defines “High-Performance Green Buildings” by reference to the Energy Independence and Security Act of 2007 (“EISA”), Pub. L. No. 110-140. To qualify as a high-performance green building under that law, the building has to be “high-performance.” That means that the building has to integrate, throughout its lifecycle, “all major high performance attributes.” Those include energy conservation, environment, safety, security, durability, accessibility, cost-benefit, productivity, sustainability, functionality, and operational considerations.

Then comes the “green” part. The building must meet the following requirements, compared with similar buildings: (1) cut energy, water, and material resource use; (2) improve indoor environmental quality, including reducing indoor pollution, improving thermal comfort, and improving lighting and acoustic environments that affect occupant health and productivity; (3) cut negative impacts on the environment, including air and water pollution and waste generation; (4) increase the use of environmentally preferable products, including biobased, recycled content, and nontoxic products with lower life-cycle impacts; (5) increase reuse and recycling opportunities; (6) integrate systems in the building; (7) cut the environmental and energy impacts of transportation through building location and site design that support a full range of transportation choices for building users; and (8) consider indoor and outdoor effects of the building on human health and the environment, including improvements in worker productivity and other factors. EISA § 401(13).

GSA gave Congress a preview earlier this month of the kinds of projects it planned. Trees on roofs apparently could be in play. GSA plans to replace flat roofs with energy star “membranes, integrated photovoltaic panels bonded to the membrane, photovoltaic panels, or planted roofs.” It also plans to install “intelligent lighting systems” that provide daylight and provide controls for occupants to adjust for ambient light versus task light. For GSA’s full testimony on these plans, visit the following link: http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_BASIC&contentId=28011&noc=T.

Contractors interested in competing to help GSA turn Federal buildings into high-performance green buildings should monitor the agency’s solicitations on FedBizOpps, at www.FBO.gov.

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President Starts His Full-Court Press Against Contractor (and Subcontractor) Fraud
POSTED ON MAY 28, 2009 BY KENNETH B. WECKSTEIN &
MICHAEL D. MALONEY

President Obama promised to cut out fraud, waste and abuse from government contracts, and Congress is on board with the President's program. Last week, Congress delivered and President Obama signed the Fraud Enforcement and Recovery Act of 2009 (FERA). This new law includes important changes to the federal False Claims Act that will make it easier for whistleblowers and their attorneys to file qui tam lawsuits against government contractors--and their subcontractors.

FERA includes new provisions that allow for liability even though the "false claim" was not presented directly to a federal official or agency. The effect will be to expose businesses to federal false claims act liability at all tiers. Under FERA, subcontractors--who have no direct relationship with the government--may be liable to the federal government and/or to whistleblowers/relators for false claims submitted to a prime contractor. Liability under FERA also may extend to sub-subcontractors. Another effect of the new law will be to expand the universe of claims outside of the federal government contract sphere. Under FERA, state government contractors and their subcontractors may be liable for false claims under state government programs that include disbursement of federal funds.

The Justice Department has estimated that recoveries under the False Claims Act have exceeded $20 billion since 1986. Those numbers likely will increase substantially under this new law. Unfortunately, not all False Claims Act suits are meritorious and with the expanded ability to sue, businesses should expect to spend more money fighting questionable cases.

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Protecting Your Company in the Age of Government Transparency
POSTED ON MAY 22, 2009
BY KENNETH B. WECKSTEIN & TAMMY HOPKINS

“A democracy requires accountability, and accountability requires transparency,” according to President Obama’s January 21, 2009 Memorandum for the Heads of Executive Departments and Agencies. Since that pronouncement and the March 19, 2009 Memorandum issuance by the Attorney General, many in the government contracts community have been questioning whether government contractors can count on government agencies to apply the Freedom of Information Act (“FOIA”) exemptions to withhold confidential information from their competitors.

Standing alone, the FOIA exemptions are considered “discretionary” as opposed to mandatory. And, in issuing new FOIA guidelines, the Attorney General specifically instructed that “an agency should not withhold information simply because it may do so legally.” According to the Attorney General, just because records fall within a FOIA exemption “as a technical matter” does not mean that the records should be withheld from public disclosure.

This change in policy (and guidelines) very well may mean that government contractors will need to be more vigilant in asserting their rights for nondisclosure of their trade secrets and privileged/confidential commercial or financial information. It, however, does not mean that the government has the discretion to release such trade secrets. That is because the Trade Secrets Act, 18 U.S.C. § 1905 makes it a crime for Federal government employees to disclose information covered by the Act. And, the Trade Secrets Act covers: "trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association...." So for now, no matter how much transparency is required by new policies, there is at least one very important tool that contractors can use to protect their trade secrets from disclosure by the Government.

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How to Save Money on Labor Costs and Lose Your Government Contract
POSTED ON MAY 13, 2009
BY KENNETH B. WECKSTEIN & SHLOMO D. KATZ

Innocent until proven guilty! It's as American as motherhood and apple pie.

But not if you're a Government contractor charged with violating the Service Contact Act (SCA), as Mr. Ousama Karawia and his company, International Services, Inc., recently learned.

The SCA requires companies performing service contracts for the Federal Government to pay the prevailing wages and fringe benefits specified in Wage Determinations prepared by the U.S. Department of Labor and included in the contract. The law says that, "Unless the Secretary [of Labor] otherwise recommends because of unusual circumstances," a contractor that violates the SCA will be debarred from Government contracts for three years. That means no new contracts, no exercises of options, and possibly termination of existing contracts. And, debarment applies both to the company that holds the contract and to its principals--officers, directors and sometimes even shareholders.

Usually the prosecutor has the burden of proof. Not in an SCA debarment case. Debarment is automatic, unless the contractor can prove "unusual circumstances" exist to relieve him from the penalty of debarment. As the U.S. District Court in New York stated in Mr. Karawia's case, it is a long-standing rule that "debarment of contractors who violated the SCA should be the norm, not the exception, and only the most compelling of justifications should relieve a violating contractor from that sanction."

So you say, "No problem. If I'm caught violating the SCA, I'll promptly rectify my violation and pay the back wages. Then they won't debar me." That's what Mr. Karawia thought, but you'd be wrong, just as he was. "Alright, then. I'll cooperate with the Government's investigation. They won't debar me if I cooperate." Guess again. Those are not "unusual circumstances" justifying relief from debarment. How about this one: "They can't expect me to pay wages on time when the Government pays me late"? Nice try, but wrong again.

Well, then, is all hope lost for a contractor who violates the SCA? Of course not. DOL nearly always prefers to negotiate a pay-out to employees rather than litigate with a contractor over debarment. Plus, a lawyer who knows the ins-and-outs of the SCA could help contractors limit their liability for back wages and fringe benefits, and help the contractor develop "legal issues of doubtful certainty" that constitute unusual circumstances and justify relief from debarment penalties. Prudent contractors also often conduct SCA self-audits in which they bring in outside counsel to investigate their compliance with the law.

It beats taking an involuntary vacation from contracting for three years.

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Trade Wars--Coming to a Country Near You
POSTED ON MAY 7, 2009 BY KENNETH B. WECKSTEIN &
BILL S. SCHMIDT

The “Buy American” provision in the economic stimulus plan sparked an outcry that the United States is resorting to every-nation-for-itself protectionism. The determinations of who gets the pieces of the stimulus package from the government of the world’s largest economy could also decide which firms survive the economic downturn, and which firms fail. Despite the criticism, the Recovery Act’s primary “Buy American” provision allows plenty of room for foreign firms and firms offering foreign materials to convince government agencies that they deserve a piece of that pie.

The provision does block Recovery Act funds for certain projects unless all of the iron, steel, and “manufactured goods used” in it are produced in the United States, but it doesn’t cover every acquisition that uses those funds. First, the provision only applies to projects for the “construction, alteration, maintenance, or repair of a public building or public work.” That leaves room for procurements of several kinds of goods and services that don’t fall within this description. Second, even when a project does fall within the restriction, the provision carves out three exceptions: (1) the restriction is contrary to the public interest; (2) there aren’t enough quality U.S. materials available; or (3) the use of materials produced in the United States will increase the project’s cost too much. Third, for high-value construction contracts, the materials from nearly 100 countries are eligible for a complete exemption from the Buy American restriction. A recently published Federal Acquisition Regulation interim rule implements the provision. It provides an exemption when the value of construction meets a threshold; $7,443,000 for most of the eligible countries. When a specific construction project meets or exceeds the threshold, the Buy American restriction does not apply to materials from any of the nearly 100 listed countries. Despite these exceptions, the fact is that any preference for US products will be met with restrictions on access of US companies to foreign markets.

Remember that the new FAR Recovery Act Buy American rule is an interim rule. So, if you want to weigh in on how the Government decides who gets a piece of the funding pie, you can submit comments through June 1, 2009. Check out the rule at the following link: http://edocket.access.gpo.gov/2009/pdf/E9-7031.pdf.

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Congress Considers Adding New Exception For Sole-source Contract Awards?
POSTED ON MAY 5, 2009 BY KENNETH B. WECKSTEIN

Under the FAR, there are seven exceptions to full and open competition. These are: 1. only one responsible source, 2. unusual and compelling urgency, 3. need for industrial mobilization, 4. required by international agreement, 5. required by statue, 6. national security, and 7. public interest. These exceptions often are used to justify sole-source awards or limited competition. The President believes that there are too many sole source awards and not enough competition. And we expect that these exceptions will be tightened up.

Despite that, today's news brought word of "$4 million in Defense Department contracts, all of them without competitive bidding, for a range of warehousing and engineering services" received by Murtech Inc. We don't know the exception to competition that was used to justify these contract awards. And one would think that DoD could find more than one responsible source for warehousing services. Could there be another exception to competition at work? How about the nepotism exception? You see, Murtech Inc. is apparently owned by Robert Murtha, Jr.--who happens to be the nephew of Representative John Murtha--who happens to be the Chairman of the House Appropriations defense subcommittee.

We think that it is wrong for commentators to suggest that Murtech Inc. received special treatment because of its family relationships. We look forward to the bi-partisan investigation that permits Robert Murtha, Jr. to fully explain the basis for the non-competitive awards. The hearing could be held at Johnstown. PA Airport, otherwise known as "Fort Murtha"--something to do with the $150 million in federal funds and $800,000 in stimulus moneys steered to the airport by Congressman Murtha.

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The Path to Stimulus Money is Paved with--Rules
POSTED ON APRIL 24, 2009
BY KENNETH B. WECKSTEIN & AMY WALBORN

The Government is giving out money. Well, not really. But every special interest group rightly thinks that if banks, automobile manufacturers and other industries can be bailed out, why can't they receive a bailout. News media have reported that the porn industry has asked for a $5 billion bailout, Hollywood wants the Feds to show them the money, and funeral homes want help digging out.

In reality, there are funds available under The American Recovery and Reinvestment Act ("Recovery Act") to create jobs and stimulate the economy. But if you are fortunate enough to navigate the maze and receive funds, there are strings attached. These include quarterly reporting, compliance with the Buy American Act, paying prevailing wages, and maintenance of records to track the recovery funds separately from other monies. Now there is a rulebook (at least interim rules) that OMB issued, effective April 23, 2009. The rules outline certain requirements for recipients of Grants, Cooperative Agreements and Loans. (74 Fed.Reg. 18449).

First, any entity, other than an individual, receiving these funds as well as first tier sub-contractors must register in the Central Contractor Registration ("CCR") database. Financial assistance recipients must also follow the quarterly reporting requirements that have been created to track the use of the funds. Some of the reporting requirements include: the total amount of Recovery Act funds received, the total amount of funds obligated to a project, the name and description of the project for which the funds are being used, an evaluation of the project's completion status, and an estimate of the number of jobs created and retained for the project. If recipients sub-contract out any of the work using these funds, that must be reported. Also, State and local governments that use Recovery Act funds for infrastructure projects must report the purpose, cost and rationale of using Recovery Act funds for the project. According to the rulebook, failure to comply with these reporting requirements can lead to termination and will become part of a recipient's past performance record.

Recipients of Recovery Act funds must also comply with the Buy American Act. The Recovery Act prohibits the use of funds on any construction, alteration, maintenance or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. Of course, there are a number of exceptions to this rule such as when there is not enough American made supplies, or the American made supplies are too costly, or if it is determined that the restriction is inconsistent with public policy. There are also exceptions made under a number of trade agreements.

Recipients of Recovery Act funds also must pay prevailing wages. This requirement includes recipients whose awards are only partially funded out of Recovery Act funds. Essentially, this requirement follows the Davis Bacon Act requirement to pay all laborers and mechanics wages at rates not less than those prevailing on projects of a similar character in the locality. The rules require Federal Agencies providing grants, loans and cooperative agreements using Recovery Act funds to include the standard Davis-Bacon contract clauses from 29 CFR 5.5(a) in contracts that are in excess of $2,000 for construction, alteration or repair, including painting and decorating.

Finally, Uncle Sam wants to be able to follow the money trail. States, local governments and non-profits must separately identify expenditures of Recovery Act funds including to whom the money goes, when it is awarded and how much is given out. These entities must also require the ultimate recipients of these funds to separately identify the Recovery Act funds in their expenditure reports, in order to continue tracking the funds to sub-recipients.

If your feathers are ruffled by any of this -- remember these are interim rules. The door is open for comments to Office of Management and Budget until June 22, 2009.

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Wanted: Systems Engineer, Salary $19.2 Million
POSTED ON APRIL 16, 2009
BY KENNETH B. WECKSTEIN 

According to an April 8, 2009 Settlement Agreement, Igor Kapuscinski worked for NetApp as a Systems Engineer and in other positions. He sued his former employer in a qui tam action. That allows private individuals to file lawsuits in the name of the USA. The lawsuit alleged that NetApp made false statements and claims to GSA and violated the price reduction terms of two contracts "by failing to extend proper discounts to government customers..." NetApp denied all of these contentions. Nonetheless, as part of the Settlement Agreement, NetApp agreed to pay $128 million to the USA and the USA agreed to pay $19.2 million of that amount to Igor.

Now I know what you are thinking. Why would NetApp agree to pay $128 million to the USA after denying all the allegations of wrongful conduct? And the answer is "to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation...." That would have paid for a lot of uncertainty and litigation expenses. I would have been happy to handle the litigation for half that amount.

Besides the fact that mothers should tell their children to grow up to be engineers or qui tam relators, what does this settlement tell us? First, there are some very good mechanisms in place to detect alleged fraud. These include the qui tam provisions of the False Claims Act, which may have created more millionaires than AIG.

Second, don't be surprised if the Obama Administration publicizes and strengthens the qui tam provisions so that more such lawsuits are encouraged. Third, the Price Reduction clause in GSA FSS contracts is a big trap for the unwary. Putting aside those pesky allegations of false statements and claims, you can get in trouble by giving commercial customers discounts that you do not give to the Federal Government.

As to Igor's former job, we don't know whether it still is open.

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No Matter Who Is President, There Always Will Be Sole Source Contract Awards
POSTED ON APRIL 13, 2009 BY KENNETH B. WECKSTEIN  &
HOWARD A. WOLF-RODDA

President Obama wants to cut back on sole source contracts. That may be easier said than done. Sole source contracts are specifically allowed by the law and are necessary in many cases. GAO recently upheld the Army's award of a sole source contract in Matter of Pegasus Global Strategic Solutions, LLC, B-400422.43 (March 24, 2009).

Pegasus challenged the Army's sole source award of a contract modification to SRCTec, Inc. for the production of a device that would upgrade existing systems to thwart remote control detonation of IEDs by Iraqi insurgents. Pegasus claimed that the Army should have acquired the device under a separate competitively awarded contract. GAO rejected Pegasus's protest and determined that the "continuing and urgent need to address the use of more sophisticated IEDs" justified the modification of SRCTec's contract where it was the only contractor positioned to meet the Army's urgent needs. In GAO's view, the Army reasonably determined that no other contractors in the marketplace (including Pegasus) were positioned to meet the Army's schedule. A competitive procurement would have delayed the delivery of this device vitally needed for the protection of troops on the ground.

Long after the President's new policies are in place, we are likely to see that competitive awards are not always a panacea. Yes, in some cases sole source contracts look like sweetheart deals. And yes, in some cases sole source contracts may cost the US more than if the contract had been awarded after competition. However, what will happen when an urgent requirement is competitively let and the selected contractor doesn't get the job done? In those cases, there will be second thoughts about cutting back on sole source contracts. The Government always will need the flexibility to say that only one contractor can get the job done. If new policies take away the discretion of the technical folks to award sole source contracts, we may not like the result.

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Government Contracts Continue to Occupy Center Stage
POSTED ON APRIL 9, 2009 BY KENNETH B. WECKSTEIN

In an April 6, 2009 Budget Press Briefing, Defense Secretary Gates announced plans for a budget that would increase "the size of defense acquisition workforce, converting 11,000 contractors and hiring an additional 9,000 government acquisition professionals by 2015 – beginning with 4,100 in FY10." The Secretary also announced plans for "greater funding flexibility and the ability to streamline our requirements and acquisition execution procedures."

What does this all mean? We will be seeing more fights in the Government Contracts arena: Fights over what to buy; fights over whether the work should be done with Government employees or outside contractors; and fights about how to award contracts. Stay tuned, or click here for more information.

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Keeping Your Dirty Laundry Out of Bid Protests
POSTED ON APRIL 8, 2009 BY KENNETH B. WECKSTEIN

Bid protests serve an important function in the Government procurement system. The rewards of winning bid protests can be significant and shift billions of dollars from one competitor to another. The main consequence of losing a bid protest generally is the cost of pursuing the protest. That, however, is not always the case.

How would you like to read the following about your company in a GAO Decision: "In sum, we find reasonable the agency's determination here that KBR's LOGCAP IV program manager knowingly and improperly obtained access to source selection sensitive and proprietary information ...." Or how about: "Nor...is there any question that the program manager, at a minimum, knowingly obtained that source selection sensitive and proprietary information by accessing the 6:35 p.m., September 23 e‑mail and attachment; that he did so even though he had been previously advised by the agency that the e‑mail and its attachment should be deleted without being viewed; and that he did so after he had in fact advised the agency that he had complied with the direction to delete the e‑mail and its attachment." KBR recently had that experience when it protested its elimination from certain Army task order competitions and GAO denied KBR's protests. See Kellogg Brown and Root (B-400787.2; B-400861, February 23, 2009).

Is there any way to file a protest and avoid seeing your dirty laundry aired in public? Maybe. After you file a protest, you often receive the Agency Report and the documents on which the agency relied to make its decision. If you can read the tea leaves and see that the protest is likely to be denied, you always have the right to withdraw the protest. Also, sometimes GAO will help you by holding an outcome prediction conference. (That did not appear to be the case in the KBR protests.) In most cases, if GAO predicts that it will sustain the protest, the agency should take corrective action on its own. If GAO predicts that it will deny the protest, that usually is good sign that the protest will be denied and withdrawal may be appropriate. And although a withdrawal is not a win, it will feel better than having someone rub salt in your wound.

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What in the World is a RAT Board?
POSTED ON APRIL 1, 2009 BY KENNETH B. WECKSTEIN &
PAMELA A. REYNOLDS

You don't use it to hit rats and it is not made up of rats. My guess is that the officials at Names Intended to Thrill, Wow, Instruct and Tutor (NITWIT) sat around a table and said that the crooks who stole from the Government were rats and they needed a RAT Board to ferret out that fraud. They probably are having second thoughts now, at least about the name.

The fact is that with billions of dollars of federal stimulus money being made available for government spending through the American Recovery and Reinvestment Act of 2009 (ARRA), the desire to ferret out fraud and abuse has increased. As a result, government contractors who receive stimulus funds should expect an unprecedented level of information about their government contracts to be made available to the public.

The ARRA (for real) has created a new Recovery Accountability and Transparency Board (RAT Board) to coordinate and conduct oversight. The RAT Board can conduct audits, issue subpoenas and hold hearings. The RAT Board will maintain a website, Recovery.gov, to provide the public with access to data relating to contracts and grants awarded with stimulus funds and the results of audits. The public also will be able to give feedback on the performance of government contracts that use stimulus funds. According to Earl Devaney, the Chairman of the RAT Board, Recovery.gov is only in its early development stage and has not yet been transitioned to the Board's control.

There is no doubt that the public is extremely interested in how this money is spent. According to news sources, Recovery.gov is already receiving an estimated 3,000 or 4,000 hits per second. It remains to be seen how intrusive these new transparency measures will be for government contractors or how effective they will be in curbing fraud, waste and abuse in government contracting.

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GAO Denies Protest Against DOE Award of $3.3 Billion Liquid Waste Contract
POSTED ON APRIL 1, 2009 BY KENNETH B. WECKSTEIN

One of the challenges presented in the Government Contracts field is litigating bid protests. Most cases involve proprietary material belonging to the competing contractors. The protected materials often include the proposals of the competitors and the Government's evaluation records. Those materials are disclosed to the attorneys for the parties under Protective Orders. The protected materials cannot be disclosed to the parties in the case--the actual competitors. That means that protest documents are reviewed, supplemental protest allegations are made and protest hearings are conducted, all without the full knowledge of the clients that are the actual parties and are paying for the litigation. And, even when GAO issues its decision, the parties cannot see the decision until a public version is prepared. Until then, the actual litigants in the case only know that the protest was denied, dismissed or sustained. However, at that point, there is one happy client and one disappointed client.

On March 30, 2009, GAO denied a series of three protests filed against DOE's contract award to Savannah River Remediation, LLC as the liquid waste contractor for DOE’s Savannah River Site in Aiken, South Carolina. The contract is a cost-plus award-fee contract valued at approximately $3.3 billion. DOE's web-site says that Savannah River Remediation, LLC is a limited liability company consisting of URS Washington Division; Babcock & Wilcox Technical Services Group, Inc.; Bechtel National, Inc.; CH2M Hill Constructors, Inc.; and AREVA Federal Services, LLC. So even though the decision in the case is not publicly available, there are at least some clients who are happy. There are also some happy attorneys. We represented the successful contractor.

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Read All About It -- Your Total Compensation
POSTED ON MARCH 30, 2009 BY KENNETH B. WECKSTEIN &
SHLOMO D. KATZ

The idea of AIG executives receiving big bonuses did not sit well with the public, Congress or the President. The uproar subsided a little when we learned that the bonuses had been agreed to in prior contracts and the Government knew of the bonuses when it was bailing out AIG. Still, that was little comfort to the AIG executives who received hate mail and resigned from their jobs. Could the same publicity be coming to your neighborhood Government contractor?

Federal Acquisition Regulation Case 2009-009 purports to implement section 1512(c) of the American Recovery and Reinvestment Act of 2009. It would require certain non-publicly held companies to report the names and total compensation of each of the five most highly compensated officers of the Contractor for calendar years in which they receive more than 80% of their revenues from "Federal contracts (and subcontracts), loans, grants (and subgrants) and cooperative agreements" and those revenues exceed $25 million. Under the proposed regulation, "the Contractor shall report the ... information, using the online reporting tool available at www.FederalReporting.gov."

Do you want to see your compensation information in print? If not, you might want to let the regulators know.

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President Obama's March 24, 2009 Press Conference
POSTED ON MARCH 25, 2009 BY KENNETH B. WECKSTEIN

At his March 24, 2009 press conference, the President said: "And there is uniform acknowledgment that the procurement system right now doesn't work. That's not just my opinion. That's John McCain's opinion. That's Carl Levin's opinion." The President also referred to "cost overruns of 30 percent or 40 percent or 50 percent...."

Government contractors and government misspending are easy targets, but we jump to conclusions when we say the procurement system doesn't work. The Government buys trillions of dollars of goods and services without overspending and without incident. Of course, there is some overspending and fraud. And, we always should review the procurement system and make adjustments to try to reduce fraud and misspending. But the procurement system does work. And, the reforms that the President is championing -- fixed-price contracts and competitive contracts -- already are integral parts of the procurement system.

No one wants cost overruns. But if you budget $1000 to do a $10,000 job, don't be surprised if there is an overrun. Or, if you tell a contractor to follow one set of specifications and later make changes to those specifications, don't act shocked if the cost of the work escalates. The way to avoid cost overruns is to know what you are buying before you buy it and clearly define what you want your contractors to do.

It is easy to be against fraud, waste and abuse, but when we say that the procurement system is a hotbed of fraud, waste and abuse, we overstate and simplify the problem. We also suggest that there are villains. That ignores the fact that the vast majority of contractors and Government workers who make the procurement system work are honest, conscientious and getting the job done. Hopefully, the President understands that.

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Fighting FOIA Disclosure of Confidential Information
POSTED ON MARCH 19, 2009 BY KENNETH B. WECKSTEIN &
HOWARD A. WOLF-RODDA

Anyone can submit a request under the Freedom of Information Act that asks for your confidential records that are in the possession of the Government. But, you have the right to oppose those requests. A company recently did just that when the Government was planning to release a contractor's emails attacking a competitor's qualifications. The company did not want its competitor to know that it had made negative comments about the competitor. The company filed a reverse-FOIA suit and won.

Your company may be able to oppose FOIA disclosures of its business sensitive information. You need to make sure you mark your information with the proper legends and notices, and promptly respond when the Government tells you it has a FOIA request for your records. See our website for information on the reverse-FOIA case, Tybrin Corp. v. United States.

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US Government Contracting Reforms
POSTED ON MARCH 6, 2009 BY KENNETH B. WECKSTEIN

Today marks the launch of our Government Contracts blog. It coincides, more or less, with President Obama's March 4, 2009 memo launching his Government Contracting initiatives. On their face, the initiatives are nothing new. They really just ask the Office of Management and Budget to develop some guidance on various contracting topics. Still, the President has given us a good idea of his preferences. He doesn't like sole source contracts. He likes competition. He doesn't like cost-reimbursement contracts. He likes fixed-priced contracts. He wants to stimulate the economy by increasing the size of government. He plans to shift work that has been performed by private contractors to the government. Is some of this pay-back to Federal employee unions? Maybe. Will contractors sit still while their work is shifted to Federal employees? Unlikely.

The impact of the proposed government contracting reforms will unfold in the coming months. I invite you to visit this blog regularly to keep abreast of developments, analysis and perspectives.

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