Submitted by Husch Blackwell Associate Kayt Kopen
Federal contractors will soon need to update their Equal Employment Opportunity policies and their Affirmative Action Plans. According to an announcement by DOL’s Office of Federal Contract Compliance Programs, federal contracts and subcontracts awarded or modified after April 8, 2015, must include new contract language prohibiting discrimination …
Contractors receive about $50 billion a year through GSA multiple award schedule contracts. With that level of spending, it is easy to see why GSA has adopted policies and procedures that allow it to secure the best possible pricing for each one of its schedule contracts.
Initially, GSA uses discounts, terms, and conditions that contractors offer to other customers to negotiate “most favored customer” pricing.
But negotiated prices stated in a schedule contract are not necessarily fixed for the entire term of the contract. The contractor remains subject to the Price Reductions Clause (GSAR 552.238-81; formerly GSAR 552.238-75), which imposes a duty to report certain changes in its commercial pricing terms. Under some circumstances, the PRC allows a downward adjustment in the contractor’s fixed prices.
Two triggers for adjustments under the PRC
Two types of events will trigger the Price Reduction Clause. The first is relatively straightforward: GSA and the contractor base the federal supply schedule pricing on a commercial price list, catalog, schedule, or similar document. The contractor later reduces the list price or otherwise revises the price list or offers more favorable pricing, discounts, or terms to another customer. When that occurs, the contractor must offer the same reduced price, discount, or better terms to the government.
The second situation is a bit trickier. The PRC is triggered when the contractor makes a pricing change that disturbs the relationship between the government’s pricing and the pricing offered to the customer or customers whose pricing terms are established as the “basis of award.”
The need for strong security measures to protect sensitive government data from hackers has never been more intense. In November alone, the federal government suffered at least four breaches of government information systems, including cyber-attacks on the U.S. Postal Service, the State Department, NOAA, and the White House. What is not discussed in the news reports is the fact that the much of the burden of securing government data falls on government contractors.
The federal government has struggled to adopt a unified and mandatory approach to contractor data security. Each agency has taken a separate approach to adopting cybersecurity requirements, for example DoD recently adopted a new set of regulations governing unclassified “controlled technical information.” Many contractors find the current requirements confusing and at times conflicting between agencies.
In an effort to address this problem, the Department of Commerce National Institute of Standards and Technology has released a draft version of NIST Special Publication 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations [pdf].
The new NIST guidance is directed at contractors that already have information technology infrastructure and associated security policies and practices in place. The final version of Special Publication 800-171 will attempt to synthesize the federal government’s recommendations to ensure the confidentiality of sensitive federal information stored on contractor computers and information systems. Special Publication 800-171 is part of a three-part plan that will ultimately make these recommendations mandatory. The other parts include a rule proposed by the National Archives and Records Administration—currently under review by OMB—and the eventual adoption of a FAR clause that will apply the requirements of the NARA rule and Special Publication 800-171 to all federal contracts.
The docket of the Armed Services Board of Contract Appeals continued its steady growth last year, according to the Board’s FY 2014 statistical report. In fact, the 1,066 appeals pending on the date of the report is slightly more than twice the number pending on the same date in 2009.
The Board closed more …
Cases at the Armed Services Board of Contract Appeals often require scientific or other technical evidence that is best explained by an expert witness. Though it conducts no jury trials and the rules do not expressly require it, the board generally considers itself the gatekeeper of junk scientific evidence. The board regularly considers motions challenging the admissibility of expert testimony. It also regularly grants them.
In the appropriate case, a pretrial motion to exclude an expert’s testimony can be an effective tool. Here we address the most common grounds for challenges to expert testimony at the ASBCA.
Expert testimony must be reliable.
The basic test for the admissibility of expert testimony in federal courts is set forth in Rule 702 of the Federal Rules of Evidence, which codifies the Supreme Court’s decisions in Daubert v. Merell Dow Pharmaceuticals, 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). Under Rule 702, expert testimony must not only be helpful, it must be based on sufficient facts or data, and be the product of reliable principles and methods.
Parties in litigation at the ASBCA are not exempt from the reliability requirement. The board frequently refers to the standards set forth in Rule 702 as a prerequisite to the consideration of expert testimony. Even without a jury, the board will exclude expert testimony that the board finds unreliable. Board rules are generally more flexible than the federal rules when it comes to the admissibility of evidence, but an expert’s opinion must be sufficiently reliable for the board to consider it. Universal Yacht Services, Inc., ASBCA No. 53951, 04-2 BCA ¶ 32648 (May 24, 2004) [pdf].
[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.]
Whether the Wartime Suspension of Limitations Act tolls the six-year statute of limitations for civil claims under the False Claims Act will soon be addressed by the Supreme Court. In Kellogg Brown & Root Services, Inc. v. United States ex rel Benjamin Carter, No. 12-1497 (July 1, 2014), the Court will have the opportunity to address several important questions about the application of the WSLA. Should it apply to civil claims or be limited to criminal actions? Does the tolling specified in the WSLA require a formal declaration of war? And does the WSLA apply to a qui tam claim in which the United States declines to intervene?
[Note: The case also asks the Court to address whether the FCA’s “first-to-file” bar applies to cases filed after the first case is dismissed. We’ll look at that question in another post.]
The case comes to the Supreme Court following the Fourth Circuit’s decision in U.S. ex rel Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013). In that case, the Fourth Circuit held that the WSLA tolled all civil actions—including civil FCA claims brought by qui tam relators—until the President or Congress declared a “termination of hostilities.” The Supreme Court accepted Halliburton’s petition for certiorari and will hear the case in 2015.
We believe the Fourth Circuit’s opinion represents a significant expansion of the WSLA. As Judge Agee points out in his dissenting opinion, a particularly troublesome aspect of the Fourth Circuit’s decision is its application of the WSLA to civil qui tam actions in which the United States has not intervened. The underlying purpose of the WSLA is to allow the law enforcement arm of the United States government to focus on its “duties, including the enforcement of the espionage, sabotage, and other laws’” in times of war. Id. (citing Bridges v. United States, 346 U.S. 209, 219 n. 18 (1953)). In a qui tam action initiated by a private citizen, the rationale for tolling the limitations period is diminished.
In its May 2014 report [pdf], the GAO found that the total number of contractor suspension and debarment actions continues to rise, more than doubling from 1,836 in FY 2009 to 4,812 in FY 2013. At a high level, the increase in suspension and debarments tracks the dramatic rise in federal contract spending. Looking at the data more closely suggests that all is not doom and gloom. Between 2012 and 2013, suspension actions increased by less than six percent. There were fewer debarments in 2013 than there were in 2012, and the decrease in some agencies is significant.
The 2014 annual report published by the Interagency Suspension and Debarment Committee [pdf] reflects these figures. According to this report, there were 836 suspensions and 1,722 debarments in FY 2012. There were 883 suspensions and 1,715 debarments in FY 2013. The number of suspension actions increased by less than six percent and the number of debarments decreased slightly from 2012 to 2013. The percentage of proposed debarments that became actual debarments also decreased.
The Severin doctrine restricts the ability of prime contractors to hold the government responsible for costs incurred by subcontractors. It is often of limited practical effect because it can usually be avoided by contract. Liquidation agreements, sponsorship agreements, pass-through agreements, and other similar agreements often include a conditional release that limits the subcontractor’s recovery to the amount that the prime contractor recovers from the government. With this protection, prime contractors are often willing to pursue subcontractor claims on a pass-through basis.
As we discussed in part one of this post, the Severin doctrine is nevertheless a recurring issue in federal contracts. Here we address two recent cases that explore the application of the Severin doctrine when the rights of the prime contractor and subcontractor are not expressed in a written agreement.
No subcontract at all
The decision in Parsons-UXB Joint Venture, ASBCA No. 56481, 13-1 BCA ¶ 35,378 (Aug. 1, 2013) [pdf] addresses the application of the Severin doctrine when there is no written subcontract. Parsons and UXB formed a joint venture to complete a Navy project to restore the Hawaiian island of Kaho’olawe, which had been used as a weapons range. The JV was “unpopulated,” meaning that employees of Parsons and UXB did all the work even though the JV formally held the contract. There were no subcontracts in place between the JV and either Parsons or UXB. When a dispute developed over costs incurred on the project and the JV brought the case to the Armed Services Board, the Navy cited the Severin doctrine. Without a subcontract, the Navy asserted that the JV could not be liable for costs incurred by Parsons or UXB and therefore could not pursue claims on their behalf.
No one will argue against the need to improve cybersecurity. We should limit the vulnerability of critical infrastructure and preserve the confidentiality of military technology, private company trade secrets, and individual medical records.
But there is a significant cost to upgrade IT systems in order to achieve this goal. The federal government will pay more to contractors who can meet heightened cybersecurity standards. If cybersecurity standards are too restrictive, qualified contractors will be driven away from federal contracting. At a minimum, new cybersecurity standards will mean more grounds for bid protests, which are the focus of this post.
First, the background
Executive Order No. 13636 (Feb. 12, 2013) [pdf] called for agencies to publish guidance on mitigating cybersecurity threats in federal procurement. In November 2013, DOD and GSA released a joint report recommending that compliance with an established cybersecurity protocol be a precondition to the award of information and communication technology (“ICT”) contracts. See Improving Cybersecurity and Resilience through Acquisition, Final Report of the Department of Defense and General Services Administration (Nov. 2013) [pdf].
The National Institute for Standards and Technology (“NIST”) released its voluntary framework for improving cybersecurity for critical infrastructure in February 2014. See Framework for Improving Critical Infrastructure Cybersecurity, Version 1.0 (Feb. 12, 2014) [pdf]. The NIST Framework is a tool for organizations seeking to measure and improve their cybersecurity programs against an ideal. The Framework encourages organizations to improve their cybersecurity programs “when such a change would reduce cybersecurity risk and be cost effective.” Compliance is not yet mandatory, but legislation incentivizing or requiring compliance should be expected.
These are by no means the first cybersecurity standards for federal contractors, but they would broaden and increase existing requirements. As they are implemented, cybersecurity requirements will certainly lead to an increase in pre- and post-award bid protests for ICT contracts. We see them principally in three areas.
Submitted by Russell Orban
The Consolidated Appropriations Act, 2014, Public Law No. 113-76 (Jan. 17, 2014) funds the federal government until September 30, 2014. This legislation followed the groundbreaking Bipartisan Budget Act of 2013, Public Law No. 113-67 (Dec. 26, 2013). Together, these laws reflect a significant departure from the recent past. Normally, the budget agreement sets the boundaries for federal government spending in the upcoming fiscal year and the details are then supplied by the Appropriations Committees. The Bipartisan Budget Act set levels for both FY2014 and FY2015—the period from October 1, 2013 to September 30, 2015. This gives Congress a head start on its spending process for FY2015 and will postpone budget-deficit skirmishes until after the next election. Many important things remain undecided, but it is encouraging that Congress has found some common ground.
During the budget process, the House and Senate decide how much the federal government will spend in an upcoming year. Targets are based on Presidential requests and Congressional committees’ advice about agency needs. Allocations are made to each appropriation subcommittee, and Congress has four or five months to agree on how to spend the allotted money. The President’s role in the process comes from his power to veto appropriations bills.
Without a budget, no appropriations guidelines were set and gridlock ensued. Disagreements over spending cuts, raising revenues and allocating money resulted in stalemate, automatic sequestration cuts, and a government shutdown.
Since that time, both sides have worked out a compromise that spends less than the President requested but more than what originally passed. Here are some thoughts on what the two laws do and what they don’t do:
What the Budget Act and the Consolidated Appropriations Act do—
