Georgia Tech Procurement Assistance Center

How the Navy SEALs wound up buying 450 counterfeit radio antennas

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Last spring, the Pentagon spent more than $165,000 on a set of sophisticated radio antennas for a contingent of elite Navy SEALs.  Unfortunately, they were cheap knockoffs, courtesy of a California vendor apparently looking to secure some extra profit.

A search warrant application recently filed by the Defense Department provides a glimpse into how the alleged scam worked.

In April 2019, the Naval Special Warfare Command solicited bids to buy 450 VHF/UHF antennas for use by members of the Navy SEALs.  The request required the body-worn antennas come from New York-based manufacturer Mastodon Design, and that the supplier qualify as a small business.

The government used to purchase the antennas directly from Mastodon.  However, it no longer could because after Mastodon’s sale to a large multinational defense contractor, the once-boutique company no longer qualified as a small business.  This meant the Navy would have to buy Mastodon’s antennas through an authorized small distributor or reseller.

On May 1, the sales team at Mastodon got an email from the procurement department of a California company called Vizocom.  It said the company was bidding on a Navy contract and wanted to know how much 450 Mastodon antennas would cost.  Mastodon quoted a price: $165,109.50.

Vizocom then submitted its bid to the Navy for the exact same amount.  A source with direct knowledge of the situation told Quartz it was highly unusual that Vizocom wouldn’t want to make any money on the deal.  At this price, the Navy awarded Vizocom the contract.

The company, however, would never actually place the order with Mastodon.  Instead, it would import low-cost antennas from China and pass them off as from Mastodon using fake serial numbers and spec sheets, according to the search warrant application and sources with knowledge of the deal.

Continue reading at:  Yahoo Finance

Big changes to the Buy American Act are coming—will they matter?

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On July 15, 2019, President Trump signed Executive Order 13881 addressing domestic preferences in government procurement.  Unlike Executive Order 13788 (April 18, 2017) and Executive Order 13858 (Jan. 31, 2019), which had no substantive effect on existing domestic preference statutes and regulations, this one does.

EO 13881 calls for the FAR Council to make two significant changes to FAR clauses implementing the Buy American Act.  The first increases the domestic content requirements for items to comply with the Buy American Act.  The second increases the price preference for domestic products.

Continue reading at:  The Contractor’s Perspective

The two-part manufacturing test under the Buy American Act

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Congress enacted the Buy American Act (“BAA”) during the Great Depression, in order to protect American industry from foreign competition on federal procurement contracts.  While the BAA is simplistic in its policy goal of promoting domestic purchasing, government contractors and subcontractors are often faced with complex and confusing rules for compliance.

The operative language of the BAA provides:

Only unmanufactured articles, materials, and supplies that have been mined or produced in the United States, and only manufactured articles, materials, and supplies that have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, shall be acquired for public use unless the head of the department or independent establishment concerned determines their acquisition to be inconsistent with the public interest or their cost to be unreasonable.

The Government flows down BAA requirements to government contractors in the form of standardized clauses contained in the Federal Acquisition Regulation (“FAR”) and Defense Federal Acquisition Regulation Supplement (“DFARS”).

The key to understanding the BAA is determining whether the solicited goods or “end products” are domestic, i.e. were mined, produced, or substantially manufactured in the United States.

Continue reading at:  Seyfarth Shaw

How does recent “Buy American” executive order affect government contractors?

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On July 15, 2019, President Trump issued an Executive Order, “Maximizing Use of American- Made Goods, Products, and Materials.”  The Executive Order builds on two prior “Buy American” Executive Orders and recommends two changes to current regulations implementing the Buy American Act of 1933.  This alert summarizes the changes proposed in the Executive Order (known as “Buy American III”) and how they may affect a government contractor’s supply chain.

The Buy American Act does not apply to every procurement, but when it does apply, it mandates that federal agencies purchase domestic products.  The Federal Acquisition Regulation (“FAR”) implements this mandate by requiring the use of “domestic end products” and defining what percentage of domestic content a domestic end item must contain.  The Buy American Act contains a number of exceptions implemented in the FAR, including an exception when the cost of acquiring a domestic end product is unreasonable.

We predicted in an earlier publication that these two aspects of current Buy American Act regulations—the domestic content requirement and the determination of whether a domestic end product’s cost is “unreasonable”—were particularly susceptible to revision under President Trump’s “Buy American” agenda.  One year later, these are precisely the provisions the new Executive Order seeks to revise.  Below, we provide key takeaways from the Executive Order, followed by an in-depth analysis of the Executive Order’s potential affect on current Buy American Act compliance requirements.

Bottom Line Up Front: Key Takeaways From The New Executive Order: 

  1. For manufactured products other than steel or iron products, the Executive Order does not present a drastic change: it requires manufacturers to increase a product’s domestic content from 51% to 55% in order to qualify as a “domestic end product.”
  2. For steel and iron manufactured products, the Executive Order does propose a significant change, increasing domestic content from 51% to 95% in order to qualify as a “domestic end product.”  It is unclear whether the Executive Order extends its proposed changes to “domestic construction materials.”  If so, this change could be particularly significant for construction contractors on civilian agency construction sites.
  3. The Executive Order’s proposed change to domestic content requirements will not affect manufactured products that qualify as commercially available off-the-shelf (“COTS”) items, as the FAR exempts COTS items from domestic content requirements.
  4. The Executive Order increases the “price penalty” against foreign end products from 6% to 20% (or from 12% to 30% for small business competition) which will reduce federal agency use of the “unreasonable cost” waiver and thereby increase procurement of domestic products.
  5. The change to the “unreasonable cost” exception does not affect DoD acquisitions, as DoD previously implemented a separate—and more severe— price penalty for foreign products.
  6. The proposed changes must be considered by the FAR Council within 180 days, but the Executive Order does not mandate subsequent rulemaking until (1) notice and comment, and (2) the FAR council determines that any proposed changes are appropriate and consistent with the law and the national security interests of the United States.

Continue reading at:  K&L Gates

Latest Executive Order proposes major changes to Buy American rules

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For the third time since he entered the White House, President Trump has issued an Executive Order aimed at maximizing the Government’s procurement of American-made products.  While the two previous “Buy American” Orders were primarily aimed at enforcing existing Buy American rules, the latest Executive Order proposes significant changes to the Federal Acquisition Regulation (FAR) rules on Buy American preferences—rules that have been in place for more than 60 years, and have guided how contractors manufacture products and source components to comply with the Buy American Act.  As a result, the impacts of this latest Order on government contractors subject to the Buy American Act and their existing supply chains could be significant.

The latest Executive Order on “Maximizing Use of American-Made Goods, Products, and Materials” comes on the heels of two prior Executive Orders aimed at enforcing the “Buy American” policy: EO 13788, “Buy American and Hire American” issued in January 2017, which directed federal agencies to strengthen enforcement of existing Buy American laws and close “loopholes” to maximize the procurement of American-made products in Federal procurements; and EO 13858, “Strengthening Buy-American Preferences for Infrastructure Projects,” issued in January 2019, which called for maximizing the procurement of American-made products in federally-funded infrastructure projects.  The President’s newest Order—billed by White House Director of Trade and Industrial Policy Peter Navarro as the President’s “third pillar to his Buy American platform”—goes further than merely enforcing existing rules, and instead calls for significant changes in two key aspects of the FAR rules on Buy American preferences.

Continue reading at:  Wiley Rein

Trump executive order extends Buy American policy

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President Donald Trump on Jan. 31 signed an executive order asking federal agencies to promote the purchase of American-made materials by contractors working on infrastructure projects that receive federal grants or loans.

Within 90 days, agencies covered by the order must submit their plan as to how they will encourage contractors on such projects to buy domestically-produced products including iron, aluminum, steel and cement. Within 120 days, agencies must also report any “tools, techniques, terms, or conditions” that they have used or believe they should use to promote the agenda outlined in the executive order.

Agency heads were also asked to consider in their reports whether a Buy American mandate on projects that receive federal financial assistance would be feasible.

Keep reading this article at: https://www.constructiondive.com/news/trump-executive-order-extends-buy-american-policy/547507/

 

GAO says strict compliance with Buy American Act exception requirements not necessary

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The Situation: The Government Accountability Office (GAO) recently held that a bid need not contain all of the information listed in the Federal Acquisition Regulation (FAR clause 52.225-9) to qualify for the “unreasonable cost” exception to the Buy American Act (BAA).

The Result: The decision requires agencies to analyze the contents of a bid, rather than mechanically rejecting it on a technicality.

Looking Ahead: A company can protest a rejected bid so long as the missing information would not allow the bidder to later alter its price or relative standing.

The GAO recently sustained a protest finding that it was unreasonable for the Department of Energy (DOE) to reject a bid simply because it failed to strictly comply with all of the requirements for an exception to the BAA. In Addison Constr. Co., B-416525 (Sept. 4, 2018), Addison Construction Company submitted a bid to construct a capacitor bank for DOE in Arizona. Addison’s bid informed DOE that a portion of the construction materials used would be foreign, not domestic. Addison’s bid requested an exception to the BAA pursuant to FAR clause 52.225-9, available when the cost of domestic construction material is “unreasonable” (i.e., it exceeds the cost of foreign material by more than six percent).

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=760680

GAO says strict bid compliance with Buy American Act exception requirements not necessary

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The GAO recently sustained a protest finding that it was unreasonable for the Department of Energy (DOE) to reject a bid simply because it failed to strictly comply with all of the requirements for an exception to the BAA.

In Addison Constr. Co., B-416525, Addison Construction Company submitted a bid to construct a capacitor bank for DOE in Arizona. Addison’s bid informed DOE that a portion of the construction materials used would be foreign, not domestic. Addison’s bid requested an exception to the BAA pursuant to FAR clause 52.225-9, available when the cost of domestic construction material is “unreasonable” (i.e., it exceeds the cost of foreign material by more than six percent).

Under FAR clause 52.225-9, a contractor seeking an exception to the BAA construction materials requirement on the basis of unreasonable cost must include the following with its bid: price, quantity, unit of measure, and a description of the foreign and domestic materials at issue, along with a detailed justification for the use of foreign construction materials, a “reasonable survey of the market,” and a completed price comparison table in the format provided in FAR clause 52.225-9(d). In addition, the clause requires the contractor to provide the time of delivery or availability of the materials, the location of the construction project, specific supplier information (including the name, address, and telephone number for the supplier, and a copy of the supplier’s response or a summary thereof), and “other applicable supporting information.”

Keep reading this article at: https://www.lexology.com/library/detail.aspx?g=5c1472f9-6d91-4b8e-8983-ca1b544bf880 

Trade Agreements Act enforcement loses a couple more teeth

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Two recent judicial decisions involving the Trade Agreements Act (TAA) build on a trend reflecting a more favorable enforcement climate for contractors grappling with domestic preference regimes.

Earlier this year, the U.S. District Court for the District of Columbia dismissed a qui tam action that alleged fraud in connection with country of origin requirements imposed by the TAA. United States ex rel. Folliard v. Comstor Corp., 308 F.Supp.3d 56 (D.D.C. 2018) (finding the relator failed to adequately plead that the alleged TAA noncompliance was “material” to the Government’s payment decision). The decision marked a welcome early defeat of a False Claims Act case based on the enhanced materiality and scienter requirements of the Escobar decision (more here).

Two recent federal court decisions appear to extend the trend of taking some of the bite out of TAA enforcement, and potential exposure for alleged noncompliance.

Despite this welcome news, domestic preference programs remain a key legal obligation for government contractors (and an area likely to remain under scrutiny with the Administration’s professed focus on Buy American and Hire American initiatives).

Keep reading this article at: https://governmentcontractsnavigator.com/2018/09/17/trade-agreements-act-enforcement-loses-a-couple-more-teeth/

False Claims Act decisions provide insights into Buy American Act and Trade Agreements Act compliance

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Due to the government’s increased focus on domestic preference requirements – for example, through President Trump’s formal policy and action plan for agencies to “scrupulously monitor, enforce, and comply” with the so-called “Buy American Laws,” and Congress’s proposed legislation to make certain Buy American requirements more robust – contractors should not be surprised if there is a corresponding increase in related False Claims Act (FCA) activity.

Notwithstanding, based on a review of recent FCA decisions, whe courts generally have been skeptical of attempts by relators to allege FCA liability regarding a purported Buy American Act (BAA) or Trade Agreements Act (TAA) violation.

These decisions and several key takeaways that will help contractors avoid (and defeat) such FCA lawsuits are discussed in an article that can be downloaded here: https://www.cov.com/-/media/files/corporate/publications/2018/06/seven_takeaways_from_recent_fca_decisions_on_domestic_preference_requirements.pdf?_ga=2.118195274.232753034.1530642563-1639006631.1522784552

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