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.
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.
As most federal contractors know, the standard FAR clauses grant the government the right to default a contractor for delay. These same clauses, however, protect contractors where the delay is “excusable” and involve “unforeseeable causes beyond the control and without the fault or negligence of the Contractor.” Examples listed in the clauses include, among other things, fires, floods, epidemics, and unusually severe weather.
While the excusable delay for epidemics has taken the spotlight recently due to COVID-19, the ASBCA recently issued a decision offering insight about what unusually severe weather actually entails. In Goodloe Marine, Inc., the ASBCA asserted that unusually severe weather had to be just that—unusually severe. Bad weather alone is not an excusable delay.
The case involved appellant Goodloe’s contract with the United States Corps of Army Engineering to dredge pipeline around the Gulf Intracoastal Waterway near Galveston, Texas. Under the terms of the contract, Goodloe was required to maintain a production rate of 360,000 cubic yards per month (or 12,000 cubic yards per day). Goodloe had 130 calendar days from the notice to proceed to complete performance.
Despite receiving a notice to proceed on October 17, 2018, Goodloe did not begin dredging until December 17, 2018. Goodloe cited poor weather as the cause for the three-week delay and kept internal Quality Control Reports that purported to show weather delays for 30 different days between the notice to proceed and December 29, 2018. The Corps sent Goodloe a show cause notice on February 11, 2019, prompting Goodloe to send more weather information from the same period and commenting that anyone that lived or worked in the area knew the amount of rainfall received was unusual. Goodloe also cited other Corps projects in the region that had been delayed on account of the weather and provided a series of online articles implying these delays were caused by bad weather. Goodloe continued to dredge past the original February 24, 2019 completion date until the Corps terminated Goodloe on March 28, 2019. At the time of Goodloe’s termination, Goodloe had only completed 43% of the work.
Goodloe later submitted a claim to the Corps asserting that it had experienced weather delays and was entitled to a 41.5-day time extension. Following a denial of Goodloe’s claim, Goodloe filed an appeal with the ASBCA alleging it was entitled to additional time. The ASBCA disagreed and determined Goodloe’s delay was unexcused for several reasons.
First, the Board found it significant that Goodloe failed to use its other two dredges to complete the job. Although Goodloe argued that one of its dredges was damaged from a hurricane a year earlier, the Board found it was hardly unforeseeable that this dredge—which was inoperable at the time the work was solicited and commenced—could not be used to complete the work.
Second, even if the additional dredges had been used by Goodloe, the Board determined that Goodloe had not shown that the weather was unusually severe. Without addressing the accuracy or reliability of the weather data Goodloe presented, the ASBCA found that Goodloe failed to present any evidence that the weather was more severe than the norm for that area. As the Board commented, “[m]erely offering evidence of number of rainy, windy, foggy, or low tide days proves nothing if it is not shown to exceed a historical norm.” The Board thus concluded that Goodloe failed to show an excusable delay had occurred.
The lesson from the Goodloe decision is that bad weather is not enough by itself to justify an excusable delay. Delays from previous bad weather may be considered foreseeable in new contracts. And bad weather must be unusual for the region and proven by the contractor that it is unusual before it is considered an excusable delay. Contractors experiencing poor weather on a federal project are wise to check what is considered “normal” weather conditions for the area and figure out how to show the weather during contract performance departed from these conditions.
Now that we are two years into the COVID-19 pandemic in the United States, it should come as no surprise that several cases discussing whether COVID-19 is an excusable delay have made their way through the ASBCA and CBCA dockets. These cases show that although COVID-19 may be treated as an “epidemic” under the right circumstances according to the enumerated excusable delays in the FAR, the boards have no intention of treating the pandemic as a cure-all for contractors facing potential terminations for default.