After nearly a decade of litigation, justice was finally meted out in an extreme case of Government over-reach against a government contractor. The Government had sought to recover over $1.6 million from a government contractor whose subcontractor had underpaid a handful of employees by $9,900.

When all was said and done, a federal appellate court finally rejected the Government’s legal theory as essentially frivolous and ordered it to pay the contractor’s attorney fees, estimated at roughly $500,000.  When the Government expressed concern that this would have a “chilling effect” on its efforts to vigorously enforce the False Claims Act, the court stated: “One should hope so.”  The case is called U.S. ex rel. Wall v. Circle C Constr., LLC, No. 16-6169, (6th Cir. Aug. 18, 2017).

The story starts when the prime contractor, Circle C Construction, won a contract to construct buildings at the Fort Campbell military base. Circle C hired a subcontractor, Phase Tech, to perform the electrical work. The prime contract required compliance with the Davis-Bacon Act, which is similar to the Service Contract Act but applies to construction work. Like the Service Contract Act, the Davis Bacon Act requires the prime contractor and all subcontractors to pay construction workers the prevailing wages and benefits set by the Department of Labor. The Davis-Bacon Act also requires that the contractor submit certified payrolls as a condition of contract payment.

While Circle C did not have a written contract with its subcontractor Phase Tech, it did provide Phase Tech with the Wage Determinations from its prime contract. But Circle C did not verify whether Phase Tech was in compliance with the Davis Bacon Act. Phase Tech did not submit payroll certifications for two years after the project commenced, and later contended it was not aware it had to do so.

Eventually, one of Phase Tech’s employees brought a qui tam False Claims Act action against both Phase Tech and Circle C based on the under-payment of wages. Phase Tech settled the case by agreeing to pay $15,000, leaving Circle C as the remaining defendant. The Government agreed to take over the case from the employee and pursued the claim against Circle C.

Initially, the case did not go well for Circle C. The federal trial court hearing the case granted plaintiff’s motion for summary judgment and damages of $555,000 (the entire cost of the electrical scope of work on the project), which was trebled to a total award of $1.66 million against Circle C.

Continue Reading Government ordered to pay contractor’s attorney’s fees in False Claims Act case

Let’s put the politics of the 2013 government shutdown aside and look at the practical questions. Like the government employees that are affected, contractors want to know if they should come to work. And if they do come to work, will they get paid? Will the options be exercised? Will their contract be terminated for convenience? Since contracting officers and their representatives are unavailable during the shutdown, where do they find the answers?

Here are some federal government resources that address many of the most frequently asked questions:

We discuss the impact of the shutdown and contractor strategies for addressing it in a series of entries available here. As to the ultimate question of whether contractors are entitled to payment for their work despite a funding shortfal, the Supreme Court’s decision in Salazar v. Ramah Navajo Chapter, No. 11-551 (U.S. June 18, 2012) is worth a read.

October 10, 2013 Update:
 

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.

Continue Reading The correlation between contractor claims and past performance

Does the following scenario sound familiar?  The government adds work, changes the scope of work, or changes the conditions you face during performance.  You dutifully and diligently perform, but you don’t get paid for the extra work.  You submit various requests to get paid, but nothing seems to happen.  Perhaps the agency responds that you are not entitled to a price adjustment.  If you want to end the run-around, you have a powerful mechanism that will do so:  filing a claim pursuant to the Contract Disputes Act (41 U.S.C. § 601 et seq.) and the “Claims and Disputes” clause of your contract.  Here’s how.

Continue Reading Having Trouble Getting Paid? File a Claim – Here’s How

Unless Congress takes action by March 4, 2011, most federal agencies will be required to cease operations, presenting significant challenges for contractors. Whether you’re optimistic or pessimistic about the prospects of a political solution that would avoid the looming government shutdown, preparing for it is a necessity. News reports on the issue are interesting, but they don’t do much in the way of developing a strategy for handling a shutdown. Here is a look at some of the key questions presented, with answers based on decisions that came out of the now infamous 1995 government shutdown.

Continue Reading Surviving a Government Shutdown

Even a dog knows the difference between being accidentally stepped on and intentionally kicked.  Having your contract terminated by the government is similar. If it happens because circumstances have changed, it’s like being accidentally stepped on. You don’t like it, but you know it wasn’t intentionally done to harm you. But if your contract is terminated solely because the agency seeks a better price—that is an intentional kick to the gut. Does the law recognize the difference between these two scenarios? Read on.

Continue Reading Can the government terminate your contract to get a better price?