Here we go again.  Back in March, I discussed the impact of the brief government shutdowns in January and February and risks associated with what could have been (had the stand-off gone on much longer).

Today, news from the White House and Capitol Hill raises concerns over another possible shutdown in September (when the government will run out of money without action by Congress and the President).

In light of this uncertainty, I thought it made sense to again share practical steps that contractors can take to get prepared.  That includes creating a plan for how to address existing contractual obligations without assuming unnecessary risks in the event that the government does, in fact, shut down (again).  It is far better to think about and address these issues in advance, rather than face the real time pressure of a last minute budget deal (or failed deal).

Let’s start with the bad news:  Your government contract (like almost every other procurement contract) will very likely be impacted by a shutdown.  The Anti-Deficiency Act prohibits Federal agencies from exceeding appropriation limits unless the contract falls into a narrow exception.  For contractors, that means a Stop Work Order.  Remember that the risk of continuing performance in the event that funding is not available may fall on your company.

Now, some good news:  By thinking ahead and planning in advance, you can mitigate risks and place your business in better position to weather the storm.  Here are a few practical pointers aimed at doing just that:

  • Review Your Contract.  Understanding how the government funds your contract will shed light on how it likely will be treated by the agency in the event of a shutdown.  According to the Office of Management and Budget, most “routine ongoing activities” will not be authorized to continue during a lapse in appropriation.
  • Communicate with the Contracting Officer.  Just like your business, the agency is also likely working on a plan on how to administer on-going contracts during a shutdown.  A mutual understating with the CO will go a long way towards avoiding disputes when the work inevitably ramps back up.
  • Develop Contingency Plans.  Work internally to create a contract specific contingency plan to mitigate risk in the event of a funding issue.  These will vary greatly depending upon the specifics of each procurement, so bringing in outside consulting and expertise to set up an individualized plan may reap benefits, particularly for more complex work.

Of note:  these tips – and the last one in particular – are not limited to government shutdown concerns alone.  Any government contract can experience unanticipated delays or even a long-term suspension of work.  Thinking ahead and creating a plan is the best way for contractors to avoid assuming unnecessary performance risks.

I recently had the opportunity to present an online CLE for LawLine on Risk Management in Government Contracting. This is my second time presenting a course for LawLine (I previously taught a course on Small Business Compliance).

Risk Management is a broad topic that can mean different things to different people. In this course, I decided to focus on practical steps that contractors can take to develop a corporate Culture of Compliance. There is little value in limiting compliance training to only the upper leadership – employees at all levels must become ethics and compliance watchdogs.

I recommend developing a compliance program in four steps (that not coincidentally track the requirements of FAR 52.203-13):

  • Implement a Contractor Code of Business Ethics and Conduct
  • Establish a Regular and Robust Training Program for All Employees
  • Institute an Internal Control System
  • Understand the Difference between Reportable and Non-Reportable Evidence

To be effective, none of these steps are “one and done.”  It will not do much good to draft a Code of Business Ethics and Conduct, only to put it in a drawer to collect dust.  Your Code should be a living document that your employees read, understand, and utilize often.

In addition to these broad strokes, the course also delves into a few hot button issues relevant to today’s enforcement environment.  Most prominently, I discussed the requirements of FAR 52.204-21 and Cybersecurity best practices.  It may not have fully hit yet – but I think firms that lag behind in this area will soon find themselves on the wrong side of government enforcement actions.

If you have any questions about this Risk Management presentation, or have other questions you’d like to discuss, I’m happy to connect with you off-line.  I’m available by phone (202-696-1460) and email (nsolosky@foxrothschild.com).

In today’s Federal marketplace, it is very common to see solicitations that give the Agency the option of entering into discussions with offerors.  The primary objective of discussions is to maximize competition and, in turn, the Agency’s ability to obtain the best possible value.

Once it makes the decision to enter into discussions, the Agency must do so in good faith and with all offerors remaining in the competition.  Further, the discussions themselves must be “meaningful” – a fairly subjective standard that (predictably) often works its way into bid protests.

In a nutshell, to be meaningful, discussions must identify proposal deficiencies and significant weaknesses that reasonably could be addressed in order to materially enhance the offeror’s potential for award.  The discussions also need to be sufficiently detailed to lead the offeror to the areas of its proposal that require revision or amplification.  Discussions should not be misleading or prompt the offeror to engage in a way that will not address the Agency’s actual concerns.

All of that said, the Agency is not required to hold the offeror’s hand (so to speak) to conduct meaningful discussions.  The Agency is not required to hold all-encompassing discussions, or to discuss every aspect of a proposal that receives less than the maximum score.  The Agency also need not advise of minor or insignificant weaknesses, even if those weaknesses are later used to differentiate between closely ranked offers.

Federal Acquisition Regulation (FAR) 15.306 is a good beginning resource for learning more about the Agency’s requirements during discussions.

As I mentioned above, discussions tend to be a fertile ground for bid protests because of the ample opportunity for disparate treatment between offerors – intentionally or otherwise.  Understanding the how the Agency should conduct discussions opens the door to potentially winning bid protest arguments.

For example, in a recent decision, GAO sustained a protest alleging that the Agency failed to conduct meaningful discussions.  Specifically, the protester argued the Agency did not do enough to shed light on how certain solicitation requirements would be applied during the evaluation process.

GAO agreed with the protester and even took it one step further – concluding that not only were the discussions not meaningful, they actually mislead the offeror.  That is, the Agency’s discussions led the offeror to believe that it needed to amplify certain past performance experience included in its proposal when, in fact, the Agency did not consider that experience relevant to begin with.

Today’s takeaway is that contractors disappointed with an award decision should take a long look at the way the Agency conducted discussions before walking away.  If there is a legitimate question as to whether the discussions were conducted in a fair and meaningful way, it could form a strong basis for a bid protest.

Two pieces of advice I often provide to government contractors are:

1.When responding to a solicitation, give the government precisely what it asks for – right down to the letter.  This includes providing the information in the correct section of your proposal.  The agency will not play hide-and-seek; and

2.  If you think there is something askew with a procurement or award decision – act fast.  There are lots of different deadlines enforced by GAO, but they all come and go very quickly.  A contractor typically must act within 10 days of when it knows (or should have known) of a protestable issue.  An even shorter timeline (5 days) applies in order to obtain an often essential stay of contract award and/or performance.

These concepts converge when it comes to bid protests related to defective solicitation terms.  GAO Bid Protest Rule 21.2(a)(1) states that a protest alleging improprieties or errors on a solicitation that are apparent on the face of the solicitation must be filed prior to bid opening or the closing date for the receipt of initial proposals.

In other words, a contractor cannot adopt a wait-and-see approach.  The protest must be filed before the contractor submits its bid or proposal.

In a recent GAO decision, a contractor gambled on waiting and ultimately lost the protest and a chance at the contract award.  The procurement at issue involved an Army contract for LED lighting.  The protester believed that its proposal was lower-priced that the awardee’s proposal and exceeded the solicitation requirements.

The Army rejected the protester’s proposal as non-responsive.  The solicitation included three categories of lights.  CLINS 1 and 2 required “type two” LED lights while CLIN 3 required “type three.”  All lights were also required to have a minimum glare rating of “two.”  According to the agency, the protester’s proposal included “type three” lights for all CLINS and a glare rating of “three.”

The protester did not dispute that its proposal differed from the solicitation requirements, but argued that the requirements were unclear and unreasonably restrictive.  With ever getting to the merits of these arguments, GAO denied the protest as an untimely challenge to the solicitation:   “To the extent that the protester now argues that it was unreasonable for the agency to have a minimum requirement for the type of light to be procured, or that the [solicitation’s] technical specifications were unclear, these arguments allege improprieties in the solicitation that, in order to be timely, were required to be raised prior to the closing time for receipt of quotations.  Accordingly, these allegations are untimely and will not be considered.”

At the end of the day, it did not matter whether (or not) the LED lights offered by the proposal were “better.”  The contractor did not follow the solicitation to the letter and lost as a result.

The lesson here for contractors is an easy one.  Address any solicitation uncertainties early and to your complete satisfaction.  Most issues can be addressed through Q&A or other pre-bid closing communications.  If problems are resolved, proceed and comply with the solicitation as-written.  If a defect remains even after your best efforts, the only solution is a bid protest filed before the closing date for proposals.

Please see the following link for Fox Rothschild LLP’s Federal Contractors’ Guide to Small Business Administration Set-Aside Contracts, Size Standards, Size Protests, and Affiliation. 

http://www.foxrothschild.com/douglas-p-hibshman/publications/federal-contractors-guide-to-small-business-administration-set-aside-contracts-size-standards-size-protests-and-affiliation/

The federal government sets aside a significant portion of its procurement dollars each year for purchasing goods and services from small businesses.  Small business set-aside procurements and small business contract awards (“Set-Aside Procurements” and “Set-Aside Contracts,” respectively) provide substantial opportunities for a certified small business concern (SBC) to compete for and perform federal contract work. However, SBCs awarded Set-Aside Contracts are frequently subjected to size protests filed with the U.S. Small Business Administration (SBA) by disappointed competitors looking to challenge the awardee’s size, and if successful, to disqualify the awardee from the procurement.

This guide educates federal contractors on the following issues and concepts:

  • SBA Set-Aside Procurements, Set-Aside Contracts, and Size Standards;
  • The parameters and purposes for SBA size protests, how they are filed, and how contractors can avoid and defend against such protests; and
  • The parameters of SBA affiliation, which contractors can use to their advantage to challenge Large Businesses masquerading as small business concerns, and, as importantly, must understand to protect themselves from being adversely affected by a finding of affiliation at the hands of a size protest.

Doug Hibshman is a partner in the firm’s Federal Government Contracts & Procurement; Construction; Litigation; Privacy & Data Security; Mergers & Acquisitions; White-Collar Compliance & Defense; Health Law; and Architecture, Engineering & Design Professional Firms practice groups.  He represents small, medium, and large clients in the defense, health care, engineering, information technology, construction, manufacturing, and services industries with all manner of complex contract, compliance, and litigation issues.  Doug routinely advises and represents clients on all manner of issues related to the SBA small business regulations, to include size protests, size protest appeals, and SBA affiliation mitigation efforts.   

51111658 - don't wait cartoon alarm clock
51111658 - don't wait cartoon alarm clock

Do contractors need to wait for a project to be complete to file a delay claim? The answer is a resounding NO! There is no reason for a contractor to finance a government-caused delay for any longer than absolutely necessary.

The Civilian Board of Contract Appeals (CBCA) recently drove this point home in CTA I, LLC v. Department of Veterans Affairs, CBCA 5826 (2018). In that case, CTA filed an Appeal in August 2017 seeking approximately $2 million in delay, inefficiency, and other costs for impacts occurring between notice to proceed and September 30, 2016. To date, the project is still not complete and the contractor is showing a contract completion date of November 2018, which is over three years late.

Near the close of discovery, the VA moved to stay the Appeal until contract completion on the grounds that until the contract is complete, the full delay impact is unknown.

The CBCA rejected the VA’s motion to stay, noting:

CTA is entitled to try to prove at this juncture that the VA caused compensable delay to activities on the critical path up to and including September 30, 2016, thereby delaying the future completion date. CTA need not wait until contract completion to litigate its delay claim for that completed, discrete period. Indeed, the very thing that defines work on the critical path is that the work has no leeway and must be performed on schedule; otherwise, the entire project will be delayed.

The CBCA further noted that the Suspension of Work clause requires contractors to submit delay claims “as soon as practicable.” Nothing in the FAR requires contractors to wait until contract completion to file a delay claim.

Takeaway:

If a contractor encounters a delay impact, it need not wait until contract completion to submit a delay claim. The process of litigating a delay claim to judgment is surprisingly lengthy and it is often in the contractor’s best interested to get the process started. An added benefit of filing your claim during contract performance is the early accrual of Contract Disputes Act (CDA) interest, which begins to accrue the date your claim is filed.  Although the current CDA interest rate of 2.625% is relatively low, given the size of the claim and the length of the dispute, CDA interest can grow to be quite substantial.

Here we go again.  Back in March, I discussed the impact of the brief government shutdown and risks associated with what could have been (had the stand-off gone on much longer).

Today, news from the White House and Capitol Hill raised concerns over another possible shutdown in September (when the government will run out of money without action by Congress and the President).

In light of this uncertainty, I thought it made sense to again share practical steps that contractors can take to get prepared.  That includes creating a plan for how to address existing contractual obligations without assuming unnecessary risks in the event that the government does, in fact, shut down (again).  It is far better to think about and address these issues in advance, rather than face the real time pressure of a last minute budget deal (or failed deal).

Let’s start with the bad news:  your government contract (like almost every other procurement contract) will very likely be impacted by a shutdown.  The Anti-Deficiency Act prohibits Federal agencies from exceeding appropriation limits unless the contract falls into a narrow exception.  For contractors, that means a Stop Work Order.  Remember that the risk of continuing performance in the event that funding is not available may fall on your company.

Now, some good news.  By thinking ahead and planning in advance, you can mitigate that risk and place your business in better position to weather the storm.  Here are a few practical pointers aimed at doing just that:

  • Review Your Contract.  Understanding how the government funds your contract will shed light on how it likely will be treated by the agency in the event of a shutdown.  According to the Office of Management and Budget, most “routine ongoing activities” will not be authorized to continue during a lapse in appropriation.
  • Communicate with the Contracting Officer.  Just like your business, the agency is also likely working on a plan on how to administer on-going contracts during a shutdown.  A mutual understating with the CO will go a long way towards avoiding disputes when the work inevitably ramps back up.
  • Develop Contingency Plans.  Work internally to create a contract specific contingency plan to mitigate risk in the event of a funding issue.  These will vary greatly depending upon the specifics of each procurement, so bringing in outside consulting and expertise to set up an individualized plan may reap benefits, particularly for more complex work.

Of note:  these tips – and the last one in particular – are not limited to government shutdown concerns alone.  Any government contract can experience unanticipated delays or even a long-term suspension of work.  Thinking ahead and creating a plan is the best way for contractors to avoid assuming unnecessary performance risks.

For contractors, defending (and overcoming) bid protests that challenge contract awards based on alleged Organizational Conflicts of Interest (OCI) may hinge on what a contractor does at the very beginning of the procurement process.  Whether the contractor revealed, acknowledged, addressed, and documented potential OCI with the Contracting Officer (CO) could determine the fate of the protest (and, in turn, the contract award).

In a recent decision, GAO sustained a protest asserting that the Department of Health and Human Services (HHS) failed to meaningfully consider the threat of OCI posed by the awardee.

In the opinion, GAO details several material points that all contractors should consider:

  1.  The awardee disclosed to the CO that its parent company might pose an OCI, but the awardee did not believe there was a conflict.
  2. The CO did not address this potential OCI in the pre-award OCI memorandum.
  3. GAO rejected the agency’s argument that the CO did not need to consider the OCI issue presented because the agency had considered and dismissed a similar conflict in a different jurisdiction.

Based on these points, GAO offers a bright line principle that operates in accordance with the FAR:  GAO will not substitute its judgment for the agency’s, provided that the agency gives meaningful consideration to whether a significant conflict of interest exists.  In other words, GAO is saying that if there is no meaningful consideration of potential OCI, as in this case, GAO may sustain a protest on that fact alone.

There are a couple of take-away lessons for contractors:

  • Contractors must always actively search for potential OCI during every procurement.
  • Contractors should take an active role in informing the CO about potential OCI and ensure that the CO adequately documents any potential issues.
  • Contractors cannot rely on OCI waivers in other contracts to determine whether their potential OCI might give rise to a successful protest.

So next time you have a potential OCI issue, do not count on the CO to document the issue properly. Instead, insist that the CO consider the OCI, determine that it is not an issue, and document that process.

The Contract Disputes Act (CDA) provides a remedy for contractors seeking to recover additional time or costs on a government contract (as part of a Claim or Request for Equitable Adjustment).  But when the basis for recovery is tied up in a contract modification, contractors must beware the agency’s standard waiver language – or risk losing the battle before it even begins.

The government utilizes contract modifications to implement any number of contract changes, ranging from minor adjustments to major alterations.  Modifications come in two general varieties:  Unilateral (the government directs the contractor to perform without negotiation) and Bilateral (the government and the contractor agree and both sign off on the change).

Bilateral changes can present a major stumbling block when the government and the contractor are on different pages when it comes to the terms of the change.

Bilateral changes very often include waiver language releasing the agency from any future claims for compensation (time / costs) arising out of the change that are not included in the modification.  Contractors must therefore be conscious of: (1) the compensation included in the modification and (2) whether that compensation makes the contractor whole.

If the contractor believes the terms of the modification fall short, it must specifically reserve the right to pursue damages at a later date before signing.

The importance of modification waiver language was highlighted in a recent Court of Federal Claims (COFC) case involving alleged delay damages on a U.S. Army contract related to the construction of water bottling facilities in the Middle East during the Iraq War.

As one part of the multifaceted claim, the contractor sought to recover based on alleged government-caused delays to the completion of a bottling plant.  The plant was the subject of two separate contract modifications – but the contractor argued that the modifications did not address the specific issue of delay (and, therefore, that it retained the right to seek the costs associated with the delay as part of the appeal).

The government, on the other hand, argued that the delay was incorporated as part of the second modification and therefore released by the contractor through the modification’s standard waiver language (under the legal theory of accord and satisfaction).  The Court sided with the government – specifically relying on the contractor’s failure to include a reservation of rights before signing the second modification.

The takeaway for contractors is clear:  Read and understand your modifications – and if there are any discrepancies, be crystal clear about reserving the right to seek compensation at a later date before you sign.

If you are interested in an overview of the unique framework of laws, regulations, and rules that govern the interpretation of government contracts, I invite you to join me for a live webinar on Monday, December 18.

More information on registration and attending the webinar can be found here.

During the webinar, I will discuss the unique interaction between your business and the Federal government when it comes to contracting in the public sector.  A marked departure from private contracting, businesses must understand how government contracts are formed and administered in order to successfully play the game.  Contractors that fail to understand the rules run the risk of losing out on contract awards or dealing with the often severe consequences of unsuccessful performance.

Additionally, the webinar will cover how government contractors are required to engage with the government when a dispute arises.  We will examine common causes of contract changes, the dispute resolution process (REAs, Claims, and more), and even the procedure for protesting erroneous contract award decisions.

Even if you are not able to attend the webinar, I’m happy to answer any questions related to this (or any other) topic.  You can reach me at nsolosky@foxrothschild.com or (202) 696-1460.