Posted on May 06, 2012 by Brian P. Waagner

The latest on executive compensation reporting under FAR 52.204-10

BriefcaseThe Contractor’s Perspective is up to three entries on the application of FAR 52.204-10, which requires some federal contractors and first-tier subcontractors to report the compensation of their top-five highest paid executives. Even though it has been almost two years since the requirement first appeared in the FAR, the topic still generates a lot of interest and a lot of questions. Here are answers to some of the questions we received in the executive compensation reporting segment of our recent webinar on Transparency in Government Contracting, sponsored by L2 Federal Resources. We hope you find them useful.

Question: Does FAR 52.204-10 apply only to new contracts or does it also apply retroactively to existing contracts?

Answer: Even though the statutory requirement for reporting executive compensation became law in April 2008 when President Bush signed the Government Funding Transparency Act of 2008, the contractual requirement didn’t go into effect until July 8, 2010, when the FAR Councils published FAR 52.204-10 as an “interim rule.” According to the text of the interim rule, FAR 52.204-10 is required in all contracts over $25,000 that are awarded after July 8, 2010. It does not apply to contracts awarded before on or before July 8, 2010.

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Posted on April 24, 2012 by David P. Hendel

Postal Service breaches oral contract: owes contractor lost profit and wages

Oral contracts do exist, and the U.S. Postal Service cannot force you to sign a contract with different terms than previously agreed upon. That’s the take-way from a recent decision issued by the Postal Service Board of Contract Appeals (PSBCA) in a case called Sharon Roedel, PSBCA No. 6347, 6348, April 10, 2012.  The PSBCA found that the Postal Service breached an oral contract it had with Roedel, and that USPS owed her the profits and wages she would have earned under the six-month emergency contract. 

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Posted on April 19, 2012 by Steven J. Weber

Proposed limits on reimbursement of foreign contractor excise tax

The James Zadroga 9/11 Health and Compensation Act of 2010, Public Law No. 111-347 (Jan. 2, 2011) [pdf] establishes a program to provide health evaluations and medical treatment to emergency responders and other individuals directly impacted by the September 11, 2001 terrorist attacks on the World Trade Center. Funds for the program are to be generated by a two percent excise tax on any “specified Federal procurement payment” received by a “foreign person.” 26 U.S.C. § 5000C. 

In addition to imposing the tax, the Act requires federal agencies to make sure that taxes paid under this law are not "reimbursed."

The FAR Councils published a proposed rule implementing this requirement on February 22, 2011. See 77 Fed. Reg. 10461 (Feb. 22, 2011). The proposed rule changes amend FAR 31.205-41 “to inform the Government and contractors that costs of the 2 percent tax are not allowable.” It also proposes changes to four FAR contract clauses “to provide that the costs for the 2 percent tax are not included in foreign fixed-price contracts . . . .”

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Posted on April 16, 2012 by Daniel J. Donohue

New DCAA guidance on Contractor Business Systems

DCAA’s March 28, 2012 memorandum [pdf] summarizes DCAA’s approach to the new DFARS Contractor Business Systems rules. As we discussed in our earlier entries, the DFARS regulations and clauses call for a determination of the adequacy of a contractor’s business systems—accounting, estimating, purchasing, material management—and allow a contracting officer to withhold five percent of contract payments if a system has a “significant deficiency.”

Cash Register

The accounting systems clause, DFARS 252.242-7006, and the other business systems clauses say that it is the contracting officer who will decide whether the contractor’s accounting or other system has a “significant deficiency.” The question is the extent to which DCAA’s auditors will influence the contracting officer in this determination. DCAA’s Memorandum provides some insight on this point.

DCAA’s memorandum says that DCAA will “opine on the contractor’s compliance with the system criteria in DFARS” but that the contracting officer decides whether a deficiency is a “significant deficiency.” The DFARS clauses define a significant deficiency as a “shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes.”

In the past, DCAA’s approach to the adequacy of a contractor’s accounting system had been to label almost any deficiency “significant.” DCAA audits had rated accounting systems as either “acceptable” or “unacceptable.” DCAA once had a middle rating of “acceptable with deficiencies,” but DCAA eliminated that rating several years ago. That change resulted in a situation in which almost any deficiency was significant and therefore llimiting the availability of “acceptable” ratings. Indeed, even minor deficiencies were deemed significant. Since the rating “acceptable with deficiencies” was eliminated, at least some DCAA auditors reasoned that a system with any deficiencies at all could not be rated acceptable.

When DCAA “opine(s) on the contractor’s compliance with the system criteria in DFARS,” the question is whether the DCAA will comment upon the ultimate question:  Whether the contractor’s business system has a “significant deficiency.” As a practical matter, DCAA's opinion on this question may limit the contracting officer’s ability to make the determination. We encourage readers who have recently undergone DCAA system audits to share their comments on DCAA’s approach.

Posted on April 16, 2012 by David P. Hendel

Postal Service Contracting: What Every Contractor Should Know

Doing business with the U.S. Postal Service has always been different than contracting with other federal agencies and commercial entities. As an independent agency, the Postal Service is exempt from most federal procurement laws and regulations. That's why our firm is presenting a full-day seminar on "Postal Service Contracting: What Every Contractor Should Know," at the Westin Tysons Corner hotel on Thursday, May 10, 2012. Click here to learn more or click here to register.

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Posted on April 15, 2012 by Daniel J. Donohue

Statutory noncompliance does not always violate the False Claims Act

What happens when a government contractor who thinks its contract performance complied with applicable statute or regulation later learns that it actually was out of compliance?  Are its invoices for that performance false claims that violate the False Claims Act?

The answer depends on whether the contractor acted “knowingly.”  A March 30, 2012 decision of the Fourth Circuit Court of Appeals highlights the fact that proving a False Claims Act violation requires not only the submission of a claim that is false, but also that the false claim was submitted “knowingly”—the contractor knew the claim was false or acted with deliberate ignorance or reckless disregard for the truth or falsity of the claim. United States ex rel. Drakeford v. Tuomey Healthcare System Inc., No. 10-1819 (4th Cir. Mar. 30, 2012) [pdf].

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Posted on March 26, 2012 by Michael A. Gatje

Breaking down the Army's $7 billion RFP for renewable energy

The draft RFP issued by the Army Energy Initiatives Task Force is a significant step in the Army’s plan to develop large-scale renewable energy projects. It presents as much as $7 billion in new opportunities to the alternative energy market and reflects a growing synergy between the defense and energy industries. Here we highlight some of the key provisions in the draft RFP, including some that are unique to contracts with the federal government.

Wind Farm

The Draft RFP

The draft RFP was issued by the Army Energy Initiatives Task Force. It contemplates a multiple-award indefinite delivery-indefinite quantity contract under which the Army could purchase up to $7 billion worth of renewable and alternative energy over 10 years—a base period of 3 years with 7 option years. Through competition with the IDIQ contract holders, the Army would issue individual firm-fixed-price task orders to purchase electricity through Power Purchase Agreements based on a fixed rate per unit of energy (e.g. $/kWh). The PPAs would be allocated across four renewable technologies:  solar (1.5 billion kWh); wind (9 billion kWh); biomass (19 billion kWh); and geothermal (8 billion kWh).

Depending on the requirements of a particular task order, bidders could be responsible for constructing the energy generating systems and guaranteeing a certain level of renewable energy output by a specific date. Failing to meet the specified date could subject the contractor to liquidated damages for the output shortfall on a price-per-MWh basis.

Maintenance of the energy generation systems would be the contractor’s responsibility, as would achieving certain output performance levels over the course of the PPA. For variable energy production technologies (i.e. solar and wind), contractors would have to maintain performance levels that are in the top 25 percent of the industry in the United States. For continuous energy production technologies (i.e. geothermal and biomass), contractors would be required to provide replacement energy at no cost when their systems fail to meet the minimum production requirements.

To offset the construction and maintenance costs, bidders would be required to take advantage of all available utility incentive programs.  The government would retain ownership of any renewable energy credits associated with the energy generated under the task order.

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Posted on March 05, 2012 by Matt Gaziano

Actions speak louder than words in contract performance

Coast Guard Challenger 604Courts often look at a party's conduct for help in interpreting ambiguous contract terms. But this concept has broader application. Actions and positions that one side takes before a dispute arises may actually override a clear contract requirement. The Civilian Board of Contract Appeals' recent decision in TKC Aerospace, Inc. v. Department of Homeland Security, CBCA No. 2119 (Jan. 31, 2012) [pdf] illustrates the point. The Board's opinion identifies the contractor's response to a problem during performance as the key factor in resolving the case.

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Posted on February 27, 2012 by Brian P. Waagner

Six things to know about the DFARS Contractor Business Systems rules

Final revisions to the new DFARS rules on Contractor Business Systems were published February 24, 2012. DoD's summary of the comments on the interim rule and a list of the changes to the interim rule are available at 77 Fed. Reg. 11355 (Feb. 24, 2012) [pdf]. Here are six of the key points contractors need to know about the final rules.

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Posted on February 15, 2012 by Claude P. Goddard

Clarifying the standard of proof for bait-and-switch protests at the Court of Federal Claims

The Court of Federal Claims has issued an important decision establishing that offerors will be held accountable for making inaccurate representations in proposals. According to the Court's decision in GTA Containers, Inc. v. United States, No. 11-606C (Fed. Cl. Feb. 6, 2012) [pdf], proof that an offeror made a misrepresentation in its proposal is sufficient to sustain a bait-and-switch protest if the agency relied on the misrepresentation.

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