Contractors have the constitutional right to rebut past performance evaluations before they are stigmatized by the government’s assessments in the future. See Old Dominion Dairy Products, Inc. v. Secretary of Defense, 631 F.2d 953 (D.C. Cir. 1980). But full exercise of this right has the potential to conflict with the practical interest in efficient government procurement. The final revisions to the rules governing the process for reporting and appealing past performance evaluations demonstrate that the two ideals are not easily balanced. The Federal Register notice announcing the final revision to FAR 42.1503 can be found at 78 Fed. Reg. 46783 (Aug. 1, 2013) [pdf].
Helpful rules revisions
First the good news. The August 2013 final revisions to the rules requiring the government to evaluate past performance retain the existing requirement to allow contactor rebuttal and appeal. Commenters to the government’s proposal were unanimously against scrapping or substantially modifying the process. As summarized in the discussion of the final rule, commenters insisted that the appeals process “ensures that individual Government rater bias or lack of understanding of the complete program, not just contracting issues, can be brought out and addressed.” According to one commenter, at least 30 percent of past performance evaluation appeals result in substantive changes. The final rule maintains verbatim the language of former FAR 42.1503(b), now located at FAR 42.1503(d).
Metcalf Construction Company and the Navy argued their positions today in the appeal of Metcalf’s $27-million claim on its contract to design and build military housing in Kaneohe Bay, Hawaii. The appeal focuses on the December 9, 2011 decision by Judge Susan G. Braden of the United States Court of Federal Claims, which addresses the liability issues presented by Metcalf’s claim. See Metcalf Constr. Co. v. United States, 102 Fed. Cl. 334 (2011) (Metcalf I). A second decision issued on December 10, 2012 addresses the damages issues presented in the case. Metcalf Constr. Co. v. United States, 107 Fed. Cl. 786 (2012) (Metcalf II). Regardless of how the Federal Circuit resolves the appeal, the case is bad for federal construction contracting.
Duty of good faith and fair dealing
In Metcalf I, the court found that Metcalf could not establish its claim that the Navy breached its duty of good faith and fair dealing. This conclusion is based entirely on the Court’s interpretation of the applicable standard for proving such a claim. In Judge Braden’s view, “a breach of the duty of good faith and fair dealing claim against the Government can only be established by a showing that [the Government] ‘specifically designed to reappropriate the benefits [that] the other party expected to obtain from the transaction, thereby abrogating the government’s obligations under the contract.’” Metcalf I § C.1.b (quoting Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 829 (Fed. Cir. 2010)).
When selecting a photo to use on its popular “Liberty” stamps, the Postal Service unknowingly used a replica of the 128-year old Statue of Liberty. Instead of the original version welcoming the tired, the poor, and the huddled masses in New York harbor, USPS selected the “fresh-faced,” “sultry” and “sexier” 17-year old version summoning merry-makers to the New York-New York Hotel & Casino in Las Vegas, NV. Robert Davidson, sculptor of the Sin City version of Lady Liberty, has thus filed a copyright infringement action in federal court, seeking unspecified damages.
The Contract Disputes Act imposes a six-year statute of limitations on all claims, whether they are asserted by the contractor or by the Government. See 41 U.S.C. § 7103(a)(4)(A). The limitations period begins to run upon accrual of a claim, which is “the date when all events . . . that fix the alleged liability of either the Government or the contractor and permit assertion of the claim . . . were known or should have been known.” FAR 33.201. Because six years must pass before the claim expires, the precise date of accrual is often little more than an academic question. Indeed, there have been relatively few cases applying the CDA limitations period to Government claims. But accrual has recently become a real and sometimes insurmountable obstacle to Government claims. Here is a short summary of the basic concepts that have emerged from the decisions that have addressed the issue.
1. The government has the burden of proving timeliness.
The CDA limitations period is “jurisdictional.” When the government asserts a claim against a contractor, the government has the burden of proving jurisdiction. To do so, the government must establish that the claim was timely asserted. If the government cannot show that the claim was asserted within six years of accrual, the Board or the Court lacks jurisdiction to hear the claim. Raytheon Missile Systems, ASBCA No. 58011 (Jan. 28, 2013) [pdf].
Let’s put the politics of the 2013 government shutdown aside and look at the practical questions. Like the government employees that are affected, contractors want to know if they should come to work. And if they do come to work, will they get paid? Will the options be exercised? Will their contract be terminated for convenience? Since contracting officers and their representatives are unavailable during the shutdown, where do they find the answers?
Here are some federal government resources that address many of the most frequently asked questions:
- The Office of Management & Budget’s Memorandum M-13-22 (Sept. 17, 2013) [pdf]. Although drafted for use by the heads of executive departments and agencies, this memorandum includes an FAQ attachment that addresses many issues of concern to contractors.
- Section 124 of OMB Circular A-11, “Agency Operations in the Absence of Appropriations” [pdf]. In addition to a brief discussion of the Attorney General’s key opinions on the effects of the Antideficiency Act, this document provides guidance to agencies on the preparation and implementation of plans for a government shutdown.
- Congressional Research Service’s September 25, 2013 Report RL34680, entitled “Shutdown of the Federal Government: Causes, Processes, and Effects” [pdf]. This report, prepared for members of Congress, discusses the impacts of government shutdowns, drawing specifically from the 21-day shutdown that took place from December 16, 1995 to January 6, 1996.
- Congressional Research Service’s April 6, 2012 Report R42469, entitled “Government Procurement in Times of Fiscal Uncertainty” [pdf]. This 31-page report addresses the contractual mechanisms implicated by funding shortfalls. It includes 217 footnotes containing references to procurement statutes and FAR clauses on suspension of work and termination for convenience, as well as a discussion of board decisions.
We discuss the impact of the shutdown and contractor strategies for addressing it in a series of entries available here. As to the ultimate question of whether contractors are entitled to payment for their work despite a funding shortfal, the Supreme Court’s decision in Salazar v. Ramah Navajo Chapter, No. 11-551 (U.S. June 18, 2012) is worth a read.
October 10, 2013 Update:
Mail processing and delivery will continue, and the Postal Service’s suppliers will get paid as usual, even if the federal Government shuts down on October 1, 2013. That’s because since 1971, the U.S. Postal Service generates its own revenues and does not rely on Congressional appropriations for daily operations. While mail delivery will continue, a Government shutdown would shutter the USPS Office of Inspector General, its Congressionally-funded watchdog. According to the OIG’s shutdown plan, it will retain only 19 of its 1193 employees during this period.
De-regulation of the U.S. Postal Service’s purchasing policies has stymied the prosecution of defective pricing fraud cases, according to a September 18, 2013 report issued by the USPS Office of Inspector General (OIG). U.S. Attorney’s offices have thus declined to criminally prosecute suppliers for submitting defective cost or pricing data in procurement actions valued at $36 million. The OIG therefore recommends that the Postal Service require suppliers to certify that cost or pricing data are accurate, complete, and current. USPS management, however, disagrees. The Postal Service believes its interests are already fully protected and the disadvantages of imposing a new certification requirement would outweigh any benefits.
Under the OFCCP’s final rule announced on August 27, 2013, federal contractors and subcontractors that meet the applicability criteria will be required to meet new goals for hiring protected veterans and individuals with disabilities. For veterans, the new “benchmark” is based on the percentage of veterans in the civilian labor force (currently 8 percent) or another figure that reflects the contractor’s unique hiring circumstances. 78 Fed. Reg. 58613 (Sept. 24, 2013) [pdf]. For individuals with disabilities [pdf], the “placement goal” is 7 percent, measured by job groups. 78 Fed. Reg. 58681 (Sept. 24, 2013) [pdf].
In addition to requiring contractors to implement and keep records reflecting their compliance with the new percentage benchmarks and goals, here are some key features of the new rule:
- Flowdown of the Equal Opportunity clause. The precise language and appearance of contract clauses that impose the affirmative action requirements on subcontractors are specified.
- Job listing requirements. Contractors will be required to state specifically that they are equal opportunity employers of protected veterans and individuals with disabilities.
- Invitation to self-identify. Job applicants must be given an opportunity to self-identify as a protected veteran or as an individual with disabilities before they are given an offer of employment. OFCCP intends to publish a form for use by contractors in making this inquiry. All employees must be given an opportunity to self-identify as an individual with disabilities within a year after the rule is effective and thereafter at least every five years.
- Data collection. Contractors will be required to document and update quantitative data on the number of veterans and individuals with disabilities that apply for jobs and the number that are hired.
- OFCCP access to records. Contractors are required to allow OFCCP broader access to records needed to verify their compliance. Records would have to be provided on-site or off-site and in any format that OFCCP requests.
The new requirements are expected to go into effect in March 2014. Contractors with a written affirmative action plan in place on the effective date of the new rules will have until the date of their next affirmative action plan year to implement the goal-setting and self-identification requirements.
For more information on the final rule and the specific requirements imposed on federal contractors and subcontractors, Hush Blackwell’s client update is available here. Background on OFCCP’s initiatives for individuals with disabilities is available in these earlier blog entries:
OFCCP’S push for a 7% disabled workforce (Dec. 27, 2011)
Morbid obesity as a disability under the ADA (Oct. 3, 2011)
What is the statute of limitations for qui tam actions brought against a contractor during a time of war? The answer to this question depends not only on whether the Wartime Suspension of Limitations Act applies to actions brought by an individual relator under the qui tam provisions of the False Claims Act, but also on when the United States is “at war.” The Fourth Circuit Court of Appeals addressed both of these questions in U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013).
“At war” does not mean “declared war.”
The Wartime Suspension of Limtations Act was enacted in 1942. It suspends the applicable limitations period for any offense involving fraud against the United States when the country is “at war” or when Congress has enacted a specific authorization for the use of the Armed Forces. The suspension lasts for the duration of the war and until five years after hostilities end. 18 U.S.C. § 3287. Hostilities must be terminated “by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.”
The meaning of “at war” is not specifically outlined in the WSLA, but it is a focal point of the decision in Carter. The relator, a water purification operator at two U.S. military camps in Iraq, asserted that his employer charged the government for work that was not performed. Due to a number of procedural obstacles, the action was filed outside of the six-year limitations period that normally applies to FCA qui tam actions. As a result, the district court dismissed the action as untimely. The relator appealed, asserting that the WSLA tolled the limitations period because the hostilities in Iraq meant that the United States was “at war.” The Fourth Circuit agreed, reasoning that a “formalistic” definition of when the country was “at war” did not reflect the “realities of today.”
The GAO’s decision in BC Peabody Constr. Serv., Inc., B-408023 (May 10, 2013) [pdf] illustrates the importance of establishing prejudice in a bid protest. The protester alleged that it proposed the same subcontractor (Bauer Foundation Corporation) as the awardee proposed on a dike rehabilitation project. Both offerors relied on Bauer for the “cut-off wall,” a critical element of the project. Both proposals showed that Bauer had the required experience for the cut-off wall.
Despite their use of the same subcontractor, the Corps of Engineers nevertheless assigned the awardee and the protester different scores for the cut-off wall element of their proposals. The Corps rated the awardee’s proposal acceptable for both the demonstrated experience and past performance subfactors, but it rated the protester’s proposal unacceptable. The GAO agreed the Corps’s action was procurement error. “Where multiple proposals propose the same contractor, once the agency becomes aware of that subcontractor’s experience . . . it cannot reasonably assign one proposal a higher score than another based on that experience.” GAO nevertheless denied the protest.