Contractors interested in the application of FOIA Exemption 4 should take note of the Ninth Circuit’s decision in American Small Business League v. Dep’t of Defense, No. 15-15120 (9th Cir. Jan. 6, 2017). The issue in the case was whether a declaration submitted by a Sikorsky Aircraft Corporation employee was sufficient to show the competitive harm necessary to withhold small business subcontracting data obtained from Sikorsky. The Sikorsky declaration was short, but it identified Sikorsky’s competitors and asserted that its small business subcontracting data could be used to gain a competitive advantage.

Soldiers conduct air assault operations on the deck of the 8th Theater Sustainment Command's Logistical Support Vessel-2, the Harold C. Clinger off the coast of Honolulu, Jan. 11, 2016. The soldiers are assigned to the 25th Infantry Division.
Army photo by Sgt. Jon Heinrich

In a November 2014 order, the District Court found the declaration too vague. It lacked “reasonably specific detail” as to the likelihood of competitive injury. It did not show how information found in the subcontracting plan would be “likely to cause substantial competitive injury.” Proof of competitive harm was based only on the fact that a Sikorsky competitor “could” use Sikorsky’s data to cause harm. In the words of District Judge William Alsup, “[t]hat is not enough to grant summary judgment for the agency.” The District Court ordered the government to produce Sikorsky’s master subcontracting plan, subject only to appeal.

Continue Reading The Ninth Circuit sides with DOD on Sikorsky small business subcontract data

Earlier this year we wrote about the final regulation consolidating most of the Federal Small Business Mentor-Protégé program under one office at the Small Business Administration. See 81 Fed. Reg. 48558 (July 25, 2016). The regulation expands the popular Mentor-Protégé program and should provide significant benefits to many more large and small companies. You can read our original post here.

One of the questions raised in comments on the draft regulation was how the SBA would cope with the expected significant increase in its workload. Accuracy and turn-around time are important elements of the SBA’s review role. In the final regulation, SBA generally addressed those concerns by promising to find new and improved ways to deliver the service. They committed to take one step at a time and scale up as needed.

It has now been five months since the final rule was published. We asked SBA Mentor-Protégé Director Holly Schick for a progress report on the transition. Director Schick says that the SBA has moved steadily if incrementally, to ramp-up the program.

Continue Reading Progress Report: SBA Mentor-Protégé Program rolls out and moves forward

The Supreme Court’s June 2016 decision in Kingdomware Techs., Inc. v. United States, No. 14-916 (June 16, 2016), may significantly impact the meaning of the term “government contract” for years to come.

The case centered on a project for the Department of Veteran Affairs. When VA continually fell behind in achieving its three percent goal for contracting with service-disabled veteran-owned small businesses, Congress enacted the Veterans Benefits, Health Care, and Information Technology Act of 2006. See 38 U.S.C. §§ 8127 & 8128. The Act includes a mandatory set-aside provision that requires competition to be restricted to veteran-owned small businesses if the government contracting officer reasonably expects that at least two such businesses will submit offers and that the “award can be made at a fair and reasonable price that offers best value to the United States.” This is an iteration of the well-known “Rule of Two.”

When it published regulations implementing this statutory requirement, VA took the position that the set-aside requirements in § 8127 “do not apply to [Federal Supply Schedule] task or delivery orders.”  74 Fed. Reg. 64619, 64624 (2009). The Kingdomware case posed a direct challenge to this interpretation.

Continue Reading Kingdomware decision gives new meaning to the words “government contract”

Under a final rule published on July 25, 2016, the U.S. Small Business Administration’s Mentor-Protégé Program is now open to all small businesses. See 81 Fed. Reg. 48558 (July 25, 2016). This significant expansion can be expected to provide real benefits to small businesses, large businesses, and government agencies. The revamped program will no doubt increase the popularity of mentor-protégé agreements among companies seeking federal contracts for goods, services, and construction. With more small-business ventures available to compete, it may also increase the number of contract opportunities actually set aside for small business.

Origin of SBA’s 8(a) Mentor-Protégé Program

The Mentor-Protégé Program was authorized by Congress in 1991 as a pilot program to help certain small businesses compete for Defense Department contracts. By 1998, the SBA was administering a program to help socially and economically disadvantaged small businesses. These businesses were called “8(a) companies” because the program was authorized by section 8(a) of the Small Business Act. Qualified companies acting as mentors provided technical, managerial, and financial assistance to help 8(a) companies compete for federal contracts.

By 2011, roughly 1,000 participating mentor-protégé joint ventures held federal contracts, with about half of those monitored by the SBA. Twelve other participating agencies oversee and administer the other half of existing mentor-protégé participants. Each agency has its own rules and monitoring program. Continue Reading SBA’s new-and-improved Mentor-Protégé Program

Six years from accrual. Three years from discovery. And never longer than ten years.

Despite the statutory language imposing time limits on the government’s pursuit of False Claims Act violations, courts continue to bend over backwards to give the government more time to assert them. The decision in United States ex rel. Sansbury v. LB&B Associates, Inc., No. 07-251 (D.D.C. July 16, 2014) [pdf] allowed the government a total of 14 years from the date of the first alleged false claim.

We hope that the Supreme Court will restore some sanity to the enforcement of the FCA limitations period in its decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497. We discuss the issues in that case in an earlier post. But we still have to wait a while for that. Argument in the Carter case is scheduled for January 13, 2015.

[UPDATE: On May 26, 2015, the Supreme Court reversed the Fourth Circuit’s decision in Carter and held that the Wartime Suspension of Limitations Act is limited to criminal offenses. Kellogg Brown & Root Services, Inc. v. Carter, No 12-1497 (U.S. May 26, 2015) [pdf]. Our discussion of the Carter decision is available here.]

 

The FCA limitations and tolling framework

Sansbury is an unusual case that is based on the intricacies of the FCA’s limitations and relation-back provisions. Before getting into the facts of the case and the holding, here’s a breakdown of those provisions.

According to the text of the False Claims Act (31 U.S.C. § 3731(b)), the limitations period applicable to civil FCA actions is the later of:  (1) 6 years after the date on which the violation is committed; or (2) 3 years after the date when the material facts giving rise to the cause of action are known or reasonably should have been known by the U.S. official responsible for acting on FCA violations (i.e. DOJ official), but in no event more than 10 years after the date on which the violation is committed.

But these may not be real deadlines. Even without the tolling that that may be available under the Wartime Suspension of Limitations Act, the government may get several additional years to make a decision on whether to intervene in a whistleblower’s qui tam suit. If the whistleblower’s original action is timely under § 3731(b), the government’s intervention complaint “relates back” to the date of the initial complaint. Even if the government takes three years to file its intervention complaint, it is deemed to have been filed on the date of the original suit. The relation back provision appears in 31 U.S.C. § 3731(c).

Continue Reading How a 14-year-old case escaped the False Claims Act’s 6-year statute of limitations

Posted by Husch Blackwell Associate David Newman

The Small Business Administration is continuing the task of implementing several regulatory changes required by the National Defense Authorization Act for Fiscal Year 2013 (NDAA) [pdf]. One such change occurred on May 7th when the SBA published an interim final rule (RIN 3245-AG55) [pdf] enacting section 1697 of the NDAA and amending 13 CFR 127.503 [pdf]. The interim final rule removes  the statutory cap on set-aside contracts for Women Owned Small Businesses (WOSB) and Economically Disadvantaged Women Owned Small Businesses (EDWOSBs).

Continue Reading SBA aims at increasing contract awards for Women Owned Small Businesses

Posted by Husch Blackwell Associate David Newman

Congress continues to promote opportunities for small business contractors to do business with the federal government. It also continues to increase the penalties for those taking unfair advantage of small business opportunities. Here is a look at the most recent set of carrots and sticks, which appear in the National Defense Authorization Act for Fiscal Year 2013.

1. Subcontracts with “similarly situated” small businesses

Section 1651 of the 2013 NDAA provides a new exception to the small business subcontracting cap, which restricts small businesses from subcontracting more than 50 percent of the amount paid under a services contract. With the passage of NDAA, the amount paid under any subcontract with a small business concern that has the same small business status as the prime contractor is excluded from the small business subcontracting cap. The term “similarly situated entities” includes service-disabled veteran-owned small businesses, HUBZone small businesses, women-owned small businesses, and economically disadvantaged women-owned small businesses.

This provision also changes the method for calculating the 50-percent subcontracting cap. Previously, the subcontracting limits in FAR 52.219-14 counted only direct labor costs. Under section 1651, “amount paid” under a subcontract, including labor, material, and other direct costs, is used to determine the 50-percent subcontracting cap. This is a strong incentive for small business prime contractors to award subcontracts to similarly situated small businesses. The old formula continues to govern subcontracting limitations for construction contracts, but the NDAA directs the SBA to establish similar limitations on construction contracts.

The penalty for violating the subcontracting cap is the greater of $500,000 or the dollar amount expended over the cap. The “amount expended” clause is a new penalty.

Continue Reading Small business contracting provisions in the Fiscal Year 2013 National Defense Authorization Act

The Veterans Administration can freely acquire goods and services from GSA’s Federal Supply Schedule, and it is not required to set-aside such procurements for veteran-owned small businesses (VOSBs) or service-disabled veteran-owned small businesses (SDVOSBs). Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, the VA is required to set aside procurements for VOSBs or SDVOSBs (if it is possible to do so) before opting to use another procurement method. VA applies the so-called “Rule of Two” by conducting market research to determine whether there are at least two VOSBs or SDVOSBs capable of meeting its requirement at a fair price before selecting a different procurement method.

In Kingdomware Technologies, Inc. v. United States, No. 12-173C (Fed. Cl. Nov. 27, 2012), the Court of Federal Claims found that the 2006 Act does not apply to FSS purchases. Despite multiple GAO decisions holding the opposite, Judge Firestone found that the 2006 Act does not specifically address the relationship between the set-aside requirements and the VA’s use of FSS. Because of this ambiguity, the court looked to the agency’s interpretation and found that the VA has consistently interpreted the 2006 Act as “having no effect on its ability to use the FSS without limitation.” Ultimately, the Court found the VA’s interpretation reasonable, and it granted judgment in favor of the agency.

It is clear that the VA will continue to look to the FSS where practicable, especially for smaller purchases where it will save administrative costs by doing so. While the Kingdomware decision may be seen as further reducing opportunities available to small businesses, especially VOSBs and SDVOSBs, it highlights the advantages of participating in the FSS. Small businesses seeking to remain competitive as a VA contractor especially should consider getting on the FSS as an additional marketing and sales tool.

The SBA has released its Small Business Procurement Scorecards for 2011, and for the second year in a row the results paint a grim picture. In 2011 [pdf], small businesses were awarded an even smaller share of federal contract dollars than they received in 2010—$6.4 billion smaller. Prime contract awards to small businesses in 2011 totaled $91.5 billion, or 21.65 percent of federal agency contract expenditures. The previous year [pdf], small businesses were awarded 22.66 percent of all federal prime contracts, or $97.9 billion. It’s official: federal agencies have failed once again to meet the 23 percent government-wide goal for prime contract awards to small business concerns set by the Small Business Act.

Continue Reading Takeaways from SBA’s 2011 procurement scorecard

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. 22, 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.

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