The Department of Labor has announced that new regulations addressing Nondisplacement of Qualified Workers Under Service Contracts will go into effect on January 18, 2013. (See 77 Fed. Reg. 75780 (Dec. 21, 2012) [pdf].) DOL issued the final regulations in August 2012 after receiving comments on proposed rules published in June. Our comments on the impact of the proposed rules appear here.

The DOL’s action means that all Service Contract Act contracts over the simplified acquisition threshold awarded on or after January 18, 2013 will include a contract clause requiring prime contractors and subcontractors to make good faith offers of employment to SCA-covered employees employed under the predecessor contract.

Here are some of the highlights of the new regulations and the new contract clause:

While dozing over some catalogs that had arrived in the mail, I was visited by three Postal Service ghosts:  the Ghosts of Postal Past, Postal Present, and Postal Future.

The Ghost of Postal Past

The Ghost of Postal Past was a merry ole soul, though not even that old. He presented himself to me as he was in Fiscal Year 2006 – just six years ago. Back then, he was quite large. He had 673 processing facilities, 36,721 retail and delivery facilities, and a total volume of 213 billion pieces of mail. He had revenues of nearly $73 billion – almost $3 billion more than the year before. This had been his fourth consecutive year of positive net income, and the seventh consecutive year of increasing total factor productivity.

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…

Contributed by Husch Blackwell Associate Thomas J. Rath

It makes sense to require contractors seeking reimbursement of costs they incur in the performance of a government contract to show that the costs were reasonable. According to the latest decision addressing KBR’s effort to recoup costs incurred to support the United States military in Iraq, the rule is no different for work performed in a warzone. Without additional proof of reasonableness, the Court of Federal Claims concluded that $37 million may be too much for a dining facility needed to feed and protect 6,000 American soldiers. See Kellogg Brown & Root Services, Inc. v. United States, Nos. 09-428C & 09-578C (Fed. Cl. Sept. 27, 2012).

The decision arises from KBR’s claims for costs incurred to construct and operate a reinforced concrete dining facility needed to feed and protect 6,000 soldiers in Mosul, Iraq. Though KBR’s contract was awarded on a cost-reimbursement basis, KBR awarded a fixed-price subcontract for the work to ABC International Group. Army representatives urged KBR to begin work on the new facility quickly, citing the need for “force protection.” Responding to this pressure, KBR accepted a proposal from ABC that doubled the expected monthly cost of labor without seeking competing bids. KBR concluded the increase was reasonable because the work would be conducted amid “violence and the beheading of hostages by terrorists [which] caused a drastic increase in the cost of labor and a severe shortage of available staff.” By the end of the contract, the government asserted that KBR had paid over $12 million more to ABC for labor than it should have.

Just in time for Thanksgiving, the federal government has withdrawn its False Claim Act suit against KBR alleging $100 million in improper charges for private security costs under KBR’s LOGCAP III contract. We criticized the court’s August 3, 2011 decision denying KBR’s motion to dismiss the case last summer. While KBR has good reason…

Does an unproven allegation of fraud or an improper termination for default limit a contractor’s ability to seek and obtain new contracts? Not automatically. According to the decision in Afghan American Army Services Corp. v. United States, No. 11-520C (Fed. Cl. Oct. 15, 2012) [pdf], contracting officials are required to conduct their own investigation and get the facts right before determining that a contractor is not responsible. Relying on unsupported conclusions of other government officials to justify a determination of non-responsibility is arbitrary and capricious.

The Army disqualified AAA from receiving a contract for trucking services in Afghanistan because AAA was deemed non-responsible. The determinative factor in the decision was a proposed debarment containing allegations that AAA had forged documents relating to an earlier trucking services contract. AAA had not previously been notified of the allegations and was not given an opportunity to rebut them. Rather than investigating the facts herself, the contracting officer simply assumed that AAA had violated criminal forgery statutes and had failed to take any corrective action.

Contractors are entitled to recover consultant and attorney costs reasonably incurred in preparing, pricing, and negotiating a change order under federal government contracts, including U.S. Postal Service contracts. That’s the holding in Tip Top Constr., Inc. v. Donahoe, 695 F.3d 1276 (Fed. Cir. 2012). The court overturned a Postal Service Board of Contract Appeals decision that had erroneously limited the contractor’s recovery of these costs. End result: if an agency changes your contract (whether by unilateral direction or constructive change), your request for an equitable price adjustment may include reasonable consultant and attorney costs.

There is no doubt that contractors have the power to challenge an erroneous assessment of their performance on a government contract. FAR 42.1503 requires the government to issue past performance reviews in draft. Contractors are entitled to rebut any inaccuracies in the draft. Even if the government declines to make a requested change, contractors are entitled to have their comments included in the final report. Under the FAR disputes clause, contractors may submit a claim challenging a faulty past performance assessment. Denial of such a claim can be appealed to a Board of Contract Appeals or the United States Court of Federal Claims.

Of course getting a court decision reversing a poor past performance assessment presents a number of hurdles. One such hurdle is the requirement that a contractor submit a “claim” and that the contracting officer issue a final decision denying it. Without a claim and a final decision or sufficient passage of time to establish a “deemed denial,” there would be no jurisdiction allowing a Board or the Court to consider a contractor challenge to a poor past performance assessment.

But what happens when a negative past performance assessment is linked to unresolved disputes over delays, change orders, or government backcharges? Wouldn’t a resolution in the contractor’s favor necessarily require a reassessment of the contractor’s performance? As a matter of common sense, yes. Unfortunately common sense doesn’t create Contract Disputes Act jurisdiction. The recent decision in Extreme Coatings, Inc. v. United States, No. 11-895C (Fed. Cl. Oct. 3, 2012), concludes that a claim involving affirmative contractor claims or government counterclaims does not meet the jurisdictional requirement for a claim challenging past performance.

The Postal Service spent $2.8 billion on 16,993 Highway Contract Route (HCR) contracts in 2011, according to a newly released audit report by the U.S. Postal Service Office of Inspector General (OIG).  The OIG conducted the audit to assess the integrity of data in the Transportation Contract Support System (TCSS). OIG found the TCSS data is accurate. In a spot-check of 196 sampled contracts, OIG did not find a single data error. But there was one area of disagreement with management. OIG contended that 94% of the sampled contracts did not have proper funding approval documentation prior to contract award. Postal management disagreed with this conclusion, saying that advance funding approval was obtained through other methods.