As we wrote back in November 2021, the Biden Administration issued Executive Order 14055 reinstating most of the concepts from the Obama Administration era nondisplacement Executive Order 13495. Two months after Biden’s imposed deadline of May 2022, the U.S. Department of Labor finally published proposed regulations on July 15, 2022.

Generally speaking, EO 14055 and the proposed Nondisplacement regulations require successor contractors to make offers of employment to all predecessor contractor Service Contract Act covered employees who worked on the predecessor contract. Predecessor contractors are required to prepare and submit a list of their Service Contract Act covered employees to the contracting officer at least 30 days prior to contract termination. The contracting officer then provides a copy of that list to the successor contractor who then is required to make bona fide job offers to the predecessor’s service employees who worked on the prior contract. The rollout of these new regulations is of the utmost importance to any federal contractor or subcontractor with employees subject to the Service Contract Act. Continue Reading Nondisplacement of Qualified Workers Under Service Contracts – Proposed Regulations Issued

Unlike private parties in a contract, the government has several unique rights that allows it to avoid its contractual obligations in certain circumstances. We have written about the government’s right to terminate contracts for convenience. But the government may also avoid contract liability by invoking the sovereign act doctrine as a defense. This defense is available where government’s obstruction to the contract is considered a public and general act as a sovereign.

Continue Reading ASBCA Finds COVID Mitigation is a Sovereign Act

Contractors and contracting officers are often asked to make tough decisions about issues that arise in the course of a complex government contract. Decisions that change the scope of work, the schedule, or the cost of the work must be documented so that the work can proceed. In a perfect world, the parties would execute a bilateral contract modification that addresses and resolves any potential future disputes.

Continue Reading How a reservation of rights can affect the outcome of a dispute on a government contract

Although the United States military’s role in Afghanistan effectively ended in August 2021, the Government’s fraud watchdog for operations in Afghanistan, the Special Inspector General for Afghanistan Recovery (“SIGAR”), continues to have an active supervisory and oversight role. Continue Reading Recent SIGAR Reports Highlight Ongoing Oversight Role

In a case of first impression, the U.S. Court of Appeals for the Federal Circuit recently ruled in SEKRI, Inc. v. U.S., No. 21-1936 (May 13, 2022), that a non-profit agency that was the sole mandatory source for a specific piece of military kit had standing to file a bid protest over a solicitation even if it had never submitted a proposal to the procuring agency.

The case was filed by Southeastern Kentucky Rehabilitation Industries, Inc. (“SEKRI”) a non-profit organization whose primary purpose is to provide qualified personnel, facilities, and related services for persons with disabilities to help them obtain and maintain competitive employment. Among the products that SEKRI manufactures is an Advanced Tactical Assault Panel (“ATAP”) – “a fighting load carrier to be worn with a parachute harness” that “can be configured . . . to attach 6 or more M4 magazines, two grenades, an Individual First Aid Kit (IFAK) and canteen/general purpose pouches.”

SEKRI is a nonprofit agency qualified as a mandatory source of ATAP under the AbilityOne Program. The AbilityOne Program implements the Javits-Wagner-O’Day Act (“JWOD Act”), which mandates that federal agencies purchase certain pre-approved supplies and services from qualified non-profit agencies that employ blind or severely disabled workers. 41 U.S.C. § 8504(a).

Despite the JWOD Act’s mandatory requirements, the Defense Logistics Agency (“DLA”) issued a Solicitation in 2019 seeking full and open competition to supply ATAPs. SourceAmerica, the committee that oversees the AbilityOne Program, corresponded with DLA and asked DLA to comply with its JWOD Act obligations. DLA refused to alter its full and open competition procurement plans.  SEKRI never submitted a proposal in response to DLA’s Solicitation, but instead filed a bid protest with the U.S. Court of Federal Claims after the solicitation period ended but before DLA issued an award.

The U.S. Court of Federal Claims dismissed SEKRI’s bid protest for lack of standing. The Federal Circuit reversed holding, in relevant part, that SEKRI qualified as a prospective bidder for standing purposes given its status as a mandatory source in the AbilityOne Program:

We hold that SEKRI qualifies as a prospective bidder for standing purposes under the Tucker Act. SEKRI is the designated mandatory source of ATAP in the AbilityOne Program.  SourceAmerica notified DLA early in the solicitation period that SEKRI is the mandatory source of ATAP in the AbilityOne Program. Despite its awareness that SEKRI is the mandatory source, DLA opted to continue the competitive solicitation of bids for ATAP. DLA thus knowingly violated its statutory and regulatory obligation under the JWOD Act and its implementing regulations to procure ATAP from SEKRI using the AbilityOne Program. . . .

It is unreasonable to require mandatory sources such as SEKRI to openly compete in the competitive bidding process given Congress’s intent to take participants in the AbilityOne Program out of the competitive process. In the competitive bidding process, procuring agencies solicit bids because they do not yet know which entity or entities will best be able to supply the product. Not so under the JWOD Act. Entities like SEKRI have established economic interest bona fides because they have been qualified under the AbilityOne Program and are a mandatory source. Congress has established that such entities must be prioritized over other commercial sources, absent special circumstances.

Slip Op. at 13-16 (citations omitted).

The Federal Circuit’s decision effectively opens the courthouse doors for all AbilityOne Program nonprofit agencies to file timely bid protests when a federal agency fails to comply with its mandatory purchasing obligations under the JWOD Act. Federal agencies would be wise to carefully comply with the JWOD Act or else face a potential flood of bid protests that now cannot be easily dismissed for a lack of standing.

On April 26, 2022, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council amended the FAR to include overseas contracts as part of agency small business contracting goals. This would allow small business contracting procedures to apply to overseas procurements. Prior to this rule, FAR 19.000(b) explicitly stated that small business programs did not apply outside the United States and its outlying areas. This new rule from the Councils follows an SBA regulation amendment that sought to apply the Small Business Act to overseas acquisitions—an area that the SBA’s regulations were silent about previously. The primary aim of the Councils’ and SBA’s rule changes are to expand overseas opportunities for small businesses. Continue Reading Set Asides Will Now Apply to Overseas Procurements

In Seventh Dimension, LLC v. United States, No. 21-2275C (May 11, 2022), the Court of Federal Claims provided detailed guidance concerning the question of “whether, and under what circumstances, the government may cancel a Federal Acquisition Regulation (“FAR”) part 15 procurement and start over from scratch.” Seventh Dimension, LLC was, as the court put it, “the last offeror standing in this contractor edition of Survivor” after filing multiple successful protests of an Army procurement. However, Seventh Dimension was unable to reap the benefits of its hard-fought success because the agency ultimately “decided to pull the plug on the show, cancelling the procurement following a two-year process.” Seventh Dimension challenged the agency’s cancellation decision as arbitrary and capricious, and the Court of Federal Claims agreed. Continue Reading When can the government cancel a solicitation? 5 things contractors need to know.

Government contractors facing products liability suits may have a number of unique defenses available them, depending on the government’s role in the alleged act or omission giving rise to the plaintiff’s claimed harm. One such defense is the “government contractor defense.” Despite its name, successfully establishing the defense requires proof of more than just a government contract.

Continue Reading The Government Contractor Defense: 10 Things Contractors Need To Know

Punctual people often live by the maxim: “If you’re early, you’re on time. If you’re on time, you’re late.” When submitting electronic proposals under FAR 52.212-1, those are words to live by. Even if you submit your electronic proposal on time, and even if it reaches government servers before the proposal deadline, it might still be considered late if it gets caught in the agency’s spam folder or email quarantine.

Continue Reading With Electronic Proposals, Sometimes Even On-time Submissions Can Be Late

Contractors are well aware that they cannot rely on the apparent authority of government officials. Under Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947), only an authorized contracting officer may bind the government. But what about the apparent authority of contractor representatives? That was the question presented for consideration in Aspen Consulting, LLC v. Secretary of the Army, No. 2021-1381 (Fed. Cir. 2022).

Aspen Consulting won a contract to outfit Army health and dental clinics at Rose Barracks in Vilseck, Germany. The contract provided for payments to be made by electronic funds transfer to an Aspen company account at Bank of America. It did so by incorporating FAR 52.232-33 (Oct. 2003), which required the government to make payment to the account that Aspen identified in the Central Contractor Registration database. Aspen’s Bank of America account was listed in its CCR file.

During the first year of Aspen’s performance, the government released twelve progress payments to the Bank of America account. For reasons that do not appear in the opinion, an Aspen vice-president and operations manager sent the contracting officer an email requesting that the government make future payments to another company-owned account at Commerzbank. The government honored this request, making two progress payments totaling more than $264,000 to the account at Commerzbank.

Aspen’s owners soon advised the contracting officer that its vice-president was not authorized to make a change in the payment instructions. Aspen filed a claim for breach of contract to recover the two progress payments, asserting that the government had breached the contract by failing to send progress payments to the Bank of America account.

The Armed Services Board of Contract Appeals denied Aspen’s claim. The Board concluded that the Army did not breach its payment obligation because the vice-president who sent the email instructions had apparent authority to bind the company. Under the circumstances, the Board concluded that it was reasonable to honor the vice-president’s email request. The duty to resolve the conflict between the payment instructions in the CCR file and those in the vice-president’s email fell on Aspen, not the Army.

In a February 2022 opinion, the Federal Circuit reversed. According to the court, whether or not the Aspen vice-president had apparent authority to change the payment instruction does not matter. The contract provided for payment to be made to the account at Bank of America, which was identified in Aspen’s CCR file. Changes in the payment instructions would need to have been made by updating the CCR file. Since the CCR file had not been changed, there had been no change in the account designated for payment. The Army’s failure to make payment to the account designated in the CCR file was a breach of contract. Aspen’s entitlement to damages arising from the breach will be addressed on remand.

Aspen Consulting does not spell the end of apparent authority in government contracting. There are still circumstances when the government may reasonably rely on the apparent authority of contractor representatives. It also does not make it impossible for the government and contractor representatives to communicate by email or even to use email to modify contract requirements. But it sure makes doing so more difficult.