According to Shakespeare, “What’s done cannot be undone.” This may not be true with respect to many of the regulations implementing President Obama’s Executive Orders.

Let’s look at the fate of the rules implementing Executive Order 13673 (July 2014), formally called “Fair Pay and Safe Workplaces.” The DOL guidance and the FAR provisions implementing this Order were commonly referred to as “the blacklisting rules.”

The final blacklisting rules were published on August 25, 2016. Industry moved quickly to challenge them. An October 24, 2016 preliminary injunction issued by United States District Judge Marcia Crone stopped most of them from going into effect. Judge Crone’s order cites two constitutional problems with the blacklisting rules. First, they likely violate contractors’ due process rights because they require contractors to report mere allegations of labor law violations without the benefit of judicial or quasi-judicial safeguards to contest them. Second, they likely violate contractors’ First Amendment rights because they require contractors to “to report that they have violated one or more labor laws and to identify publicly the ‘labor law violated’ along with the case number and agency that has allegedly so found” even when there had been no adjudication. Continue Reading The fate of “Fair Pay and Safe Workplaces” under President Trump

GAO’s recent decision in HP Enterprise Services, LLC illustrates the challenges resulting from the recent changes to GAO’s task order protest jurisdiction. It also provides a useful overview of the current scope of GAO’s jurisdiction over such protests.  HP Enterprise Services, LLC—Reconsideration, B-413382.3 (January 26, 2017).

Here is a bit of background on the recent jurisdictional changes that led to the decision. GAO lost its jurisdiction over protests of civilian task and delivery orders valued at over $10 million on September 30, 2016. This was the “sunset date” established in the 2008 National Defense Authorization Act. GAO’s jurisdiction over such protests for military agencies or departments, or for protests alleging increased scope, period, or maximum value of the underlying contract, remained undisturbed in 2016.

For approximately three months, contractors had no forum (and therefore, no remedy) for protests of civilian task orders valued over $10 million. That changed on December 14, 2016, when the Government Accountability Office Civilian Task and Delivery Order Protest Authority Act of 2016 became law. See Public Law No. 114-779 (Dec. 14, 2016). This law restored GAO’s civilian task order protest jurisdiction to its pre-October 1, 2016 scope.

Less than two weeks later, the scope of GAO’s jurisdiction over task order protests changed yet again. On December 23, 2016, the 2017 National Defense Authorization Act became law. See Public Law No. 114-328 (Dec. 23, 2016). Although major changes aimed at limiting federal bid protests had been under discussion, most of the limiting provisions were not adopted. The 2017 NDAA did not change the $10 million threshold for protests of civilian agency task order awards. But it increased GAO’s jurisdictional threshold for military agency task order protests from $10 million to $25 million. Protests asserting that a task order award was improper because it exceeded the scope, the performance period, or the maximum value of the underlying contract can be filed without regard to the threshold.

HP gets caught in a jurisdictional trap

Like many government contractors, HP Enterprise Services was ensnared in these changes. On July 11, 2016, HP protested the award of a task order to CACI, Inc. The task order was issued by GSA, but it required the delivery of IT support services to DoD. GSA took corrective action soon thereafter, and the protest was dismissed as academic. Continue Reading When can a contractor protest a task order at GAO?

https://www.transportation.gov/fastlane/enbridge-updateIn a Presidential Memorandum issued January 24, 2017, President Trump directed the Secretary of Commerce to develop a plan within 180 days to require that pipelines in the United States use materials and equipment produced in the United States “to the maximum extent possible and to the extent permitted by law.” The plan will extend to newly constructed pipelines as well as to those that are “retrofitted, repaired and expanded . . . inside the borders of the United States.”

With respect to iron or steel products, the Memorandum makes it clear that all stages of the manufacturing process must occur in the United States. The Memorandum states:

“Produced in the United States” shall mean:

(i)        With regard to iron or steel products, that all manufacturing processes for such iron or steel products, from the initial melting stage through the application of coatings, occurred in the United States.

(ii)       Steel or iron material or products manufactured abroad from semi-finished steel or iron from the United States are not “produced in the United States” for purposes of this memorandum.

(iii)      Steel or iron material or products manufactured in the United States from semi-finished steel or iron of foreign origin are not “produced in the United States” for purposes of this memorandum.

The notions that iron and steel products must be manufactured in the United States and that all of the manufacturing processes must occur in the United States are not new. Substantially similar requirements are used in the “Buy America” provision of the Surface Transportation Assistance Act of 1982. See 49 U.S.C. § 5323(j)The Federal Transit Administration and the Federal Highway Administration have used this approach for state and local highway and transit projects funded wholly or partially with federal funds. See, e.g., 49 C.F.R. § 661.5. Continue Reading President Trump mandates “Buy American” for construction of US pipelines

U.S. Air Force and Honduran doctors work together to remove a diseased gallbladder from a patient at the Doctor Salvador Paredes Hospital in Trujillo, Honduras, July 2, 2015.The 2017 National Defense Authorization Act, Pub. L. No. 114-328 (Dec. 23, 2016), introduces major changes to the Defense Department healthcare program known as TRICARE. By this time next year, we’ll see a new program to contain the cost of prescription drugs at retail pharmacies, contractual incentives for improving the quality of healthcare and reducing “per-capita cost,” and the first major step toward privatizing the delivery of healthcare to military members. Here are the key statutory provisions:

  • Access to private health care providers. Section 701 of the 2017 NDAA establishes TRICARE Select as a new self-managed, preferred provider network option for eligible beneficiaries. TRICARE Select will essentially replace the current TRICARE Extra and TRICARE Standard plans. As of January 1, 2018, all TRICARE Standard and TRICARE Extra beneficiaries will need to be enrolled in either TRICARE Prime or TRICARE Select. The Standard and Extra plans will terminate on that date. Beneficiaries under the new Select plan will have unrestricted freedom of choice in selecting their health care providers.
  • Prior authorization requirements. Section 701 of the 2017 NDAA prohibits managed care support contractors from requiring primary or specialty care providers to obtain prior authorization before referring a patient to a specialty care provider within the contractor’s network.
  • Value-based incentive program for TRICARE contracts. Section 705(a) of the 2017 NDAA requires a “value-based incentive program” to be incorporated into any TRICARE contract for the provision of health care services. These new contractual incentives would encourage health care providers to improve the quality of health care, the health of covered beneficiaries, and the experience of covered beneficiaries. One of the specific elements to be addressed in the contracts and forthcoming contract modifications is lowering the “per-capita cost” of health care. Section 705(c) sets a January 1, 2018 deadline for the program to be implemented. Contracts awarded before the deadline will be modified.
  • Procurement authority. Section 705(b) of the 2017 NDAA requires responsibility for the solicitation and award of “managed care support contracts” to be transferred from the Defense Health Agency to the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics.
  • Privatization of health care services. Section 706 of the 2017 NDAA sets a deadline of January 1, 2018 for DOD to establish “military-civilian integrated health delivery systems” through partnerships with private sector health systems. It calls military treatment facilities and HMOs or other private sector health care providers to enter into contracts or memoranda of understanding that would allow TRICARE members to receive health care services at private sector providers. Section 717 authorizes veterans to receive health care at military treatment facilities.
  • Manufacturer rebates at retail pharmacies. Section 743 gives the Secretary of Defense authority to conduct a pilot program that would allow DOD to capture manufacturer rebates that are payable when TRICARE members have prescriptions filled at retail pharmacies. Under the pilot program, manufacturers would have to pay rebates such that medications are available to TRICARE beneficiaries at the “lowest rate available,” including rates charged to the mail order pharmacy. The pilot program would begin no later than October 1, 2017 and end by September 30, 2018.

More on DOD healthcare contracting—

Incumbency as a factor in the award of TRICARE’s $58 billion managed care support contracts (Nov. 27, 2016)

OFCCP’s five-year moratorium on enforcement actions against TRICARE providers (Apr. 14, 2014)

TRICARE hospitals and pharmacies are not subcontractors (Jan. 9, 2012)

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

GAO has published its decision denying multiple protests of the Defense Health Agency’s decision to award the T-2017 managed care support contracts to Humana Government Business, Inc. and Health Net Federal Services, LLC. Humana won the TRICARE contract for the east region with a total evaluated price of $40.7 billion. Health Net won the west region contract with a total evaluated price of $17.7 billion.

The Atlanta Opera's 2011/2012 performance of The Golden Ticket
Photo: The Atlanta Opera

One of the key issues addressed in GAO’s decision was the challenge to Humana’s past performance rating. Anthem subsidiary WellPoint Military Care Corporation argued that DHA placed so much weight on prior experience as a TRICARE prime contractor that incumbency amounted to an unstated evaluation criterion. In WellPoint’s view, incumbency was the “golden ticket to attaining the highest Substantial Confidence rating.”

GAO found no merit to WellPoint’s argument. There was nothing in the record to suggest that DHA treated incumbency as an unstated evaluation criterion. Indeed, DHA considered WellPoint’s own past performance superior to that of two other incumbent TRICARE contractors—Health Net and UnitedHealth Military & Veterans Services, LLC.

GAO also rejected the legal basis for WellPoint’s argument. While incumbency is not necessarily a golden ticket, GAO also found that it was reasonable to give credit to Humana for its prior experience managing a large TRICARE regional contract. In GAO’s view, “it is not unreasonable for an agency to place particular emphasis on a firm’s performance as an incumbent contractor, since such performance may be reasonably viewed as a more accurate indication of likely future performance . . . .”

Incumbency is not necessarily a golden ticket, but it certainly can’t hurt.

Continue Reading Is incumbency a golden ticket to strong past performance? TRICARE’s $58 billion managed care support contracts

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”

The FAR Council and the Department of Labor have published the final versions of their respective final rule and DOL guidance implementing the President’s July 2014 Executive Order entitled “Fair Pay and Safe Workplaces”—EO 13673.

Detractors frequently refer to EO 13673 as the “Blacklisting” or “Bad Actors” Executive Order. The order and the new regulations purport to promote efficiency in government procurement by ensuring that federal agencies contract only with “responsible” contractors that comply with federal and state workplace protection laws.

This objective is already a well-established requirement of the government’s procurement rules. The regulations impose additional administrative burdens on current and future contractors, adding an element of uncertainty to future contract award decisions, but only achieving marginal improvements in workplace law compliance. Continue Reading Fair Pay and Safe Workplaces—the final rules implementing Executive Order 13673

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