Georgia Tech Procurement Assistance Center

COFC issues decision on Cost Accounting Standards and ‘offsetting’

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The Boeing Company v. United States, Civil No. 17-1969C (May 29, 2019) reveals the Court of Federal Claims’ (COFC) interpretation of the Cost Accounting Standards (CAS) statute as primarily benefiting the government, and directs contractors challenging the Federal Acquisition Regulation (FAR) 30.606(a)(3)(ii) prohibition on offsetting the impact of simultaneous cost accounting practice changes to raise those challenges in a pre-award protest or risk waiver.  Importantly, the court’s decision could have broad implications, requiring contractors to protest the applicability and interpretation of any extra-contractual FAR provisions—not just those involving the CAS statute—that expound upon a FAR Part 52 contract clause.

Adopting a novel theory rooted in the US Constitution, The Boeing Company (Boeing) filed an action under the Contract Disputes Act (CDA) alleging that the FAR 30.606 offset prohibition is an “illegal exaction” in violation of the CAS statute, which specifically prohibits windfalls to the government resulting from changes to a contractor’s cost accounting practices.  Boeing also claimed that FAR 30.606 was “extra-contractual” and therefore, should not preclude Boeing from offsetting changes that increase costs to the government from those that decrease costs.  The COFC dismissed Boeing’s constitutional claim for lack of subject matter jurisdiction and concluded that Boeing had effectively waived its contract claims upon failing to raise them in a pre-award protest or during negotiations with the government.

Continue reading at:  Arnold & Porter

Small businesses: Why and how to set-up or enhance your ethics and compliance program

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It’s been ten years since the Federal Acquisition Regulation (FAR) was amended to require government contractors to have a business ethics and compliance program – that’s right, it’s a requirement in every government contract and in most subcontracts!  Aside from being a requirement in every contract and a core component of a small business’ “present responsibility” (i.e. eligibility to be a contractor at all), recent developments have made it essential for small business to address compliance now.

In particular, the Department of Justice has issued guidance as to what it expects from an organization’s ethics and compliance programs, and has reiterated that it will not tolerate companies that lack an effective program.  In other words: get caught without one, and that may be the end of your company.  See Holland & Knight’s post about the DOJ Guidance.  The good news is there has been a lull in new FAR and other regulatory requirements under this Administration, so this is a good time to play some catch up.

But let’s face it, many small businesses are not where they should be, and some others are not even close.  So why aren’t small businesses better prepared and how do small businesses move ethics and compliance programs from a perennial back burner issue to the forefront?

Continue reading at:  Holland & Knight’s Government Contracts Blog

 

U.S. Government issues definition of “recruitment fees” in FAR anti-trafficking regulations

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The Department of Defense (“DoD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”) recently issued a final rule amending the Federal Acquisition Regulation (“FAR”) to clarify the FAR’s prohibition on assessing employees with recruitment fees in connection with federal contracts.  The rule provides a final definition of “recruitment fees” and clarifies the FAR’s broad prohibition on federal contractors or subcontractors assessing employees or potential employees with any such fees.  The final rule brings long-awaited clarity to the scope of the prohibition on recruitment fees, as the term has not previously been defined in anti-trafficking regulations.

Keep reading this article at: Arnold & Porter website

Defense dominates experiment in streamlined bidding for innovation

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Streamlined solicitations for innovative commercial products and services, known as commercial solutions openings are beginning to take off in the Defense Department. Even the General Services Administration’s CSO service, which is open to all agencies for a fee, so far has been dominated by Defense users.

CSOs aren’t as well known or broadly used as their procurement-innovation cousin, other transaction authority, which gives agencies the ability to strike contracts outside the Federal Acquisition Regulation for research, prototypes and production to obtain technology from nontraditional defense contractors. Eleven agencies including Defense have OT authority.

GSA’s CSO holds the potential to bring civilian agencies, most of which don’t have OT authority, the ability to reach out to and select suppliers unencumbered by the Federal Acquisition Regulation. So far, civilian agencies haven’t been biting, but Pentagon organizations are, even though they have their own CSO provider.

The very first GSA CSO customer was none other than the Defense Innovation Unit, a once-experimental buying organization that invented CSOs. Originally designed to lure emerging companies to work for the Pentagon by easing the pain of federal procurement processes, the Defense Innovation Unit Experimental, or DIUx, lost the X last summer, when it was designated a permanent outpost for testing defense buying boundaries.

Keep reading this article at: https://www.govexec.com/excellence/management-matters/2019/03/defense-dominates-experiment-streamlined-bidding-innovation/155373/

Subcontractor who failed to follow the FAR finds that ‘fair’ and ‘just’ are not synonymous

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Inscribed over the doors of the U.S. Supreme Court are the words “Equal Justice Under Law.” It’s a reminder that judicial decisions should be just. That doesn’t necessarily mean fair.

In Aspic Engineering and Construction Company v. ECC Centcom Constructors, LLC, U.S. Court of Appeals for the 9th Circuit, Case No. 17-16510 (January 28, 2019), the 9th Circuit overturned an arbitration decision in favor of a local Afghani subcontractor seeking termination costs after it was terminated for convenience by a U.S.-based general contractor.  This, despite the arbitrator’s finding that the subcontract was “clearly drafted to give every advantage to” the general contractor, that the local Afghani subcontractor’s “experience with government contracting [was] not nearly as extensive as that of” the general contractor, and “that the normal business practices and customs of subcontractors in Afghanistan were more ‘primitive’ than those of U.S. subcontractors experienced with U.S. Government work.”

Background

Local Afghani subcontractor Aspic Engineering and Construction Company was awarded two subcontracts by ECC Centcom Constructors, the general contractor, on two projects in Afghanistan overseen by the United States Army Corps of Engineers. The first subcontract involved construction of various buildings in the Badghis province of Afghanistan.  The second subcontract involved the construction various buildings Sheberghan province of Afghanistan.  Both subcontracts included clauses from the Federal Acquisition Regulation (FAR), which were incorporated by reference, and included flow-down provisions obligating Aspic to ECC in the same manner that ECC was obligated to the U.S. government.

Keep reading this article at: https://www.jdsupra.com/legalnews/federal-subcontractor-who-failed-to-43185/

Federal contractor numbering system gets first new managing vendor after 20 years

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A new vendor is taking over management of the vendor verification system run through the General Services Administration, ending a 20-year dynasty for the company that established the Data Universal Numbering System, or DUNS.

Through the Integrated Award Environment, GSA issues each vendor or organization that does business with the government a unique DUNS number. The system has been managed by Dun & Bradstreet since it was created in 1962 and the company has held the contract with GSA since DUNS became part of the Federal Acquisition Regulation in 1998.

After opening the contract to competitive bids last year, GSA announced Monday that a new vendor, Ernst & Young, would be taking over the entity validation system.

The new deal includes a one-year base period, with four one-year options, which, if exercised, would make the contract worth a total of $41.8 million.

With the introduction of a new vendor, GSA is taking the opportunity to reengineer the system. The DUNS number will be phased out over the coming months and replaced by the System for Award Management Managed Identifier, or SAMMI, number.

The standards for how that system will work are currently being hammered out by an interagency working group, a GSA spokesperson told Nextgov.

Keep reading this article at: https://www.nextgov.com/analytics-data/2019/03/federal-contractor-numbering-system-gets-first-new-managing-vendor-after-20-years/155678/

GAO continues to expand the scope of ‘prototypes’ that DoD may buy through OTs

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The most common question heard about the recent boom in the Department of Defense’s spending on other transactions, or OTs, is a simple one:  How can I get in on the action? 

Understandably, OTs – essentially contracts not subject to procurement laws or regulations like the Federal Acquisition Regulation (FAR) – are very enticing to traditional and nontraditional contractors alike.  And opportunities for OTs abound, particularly since Congress, in 2015, codified the DoD’s authority to award OTs for “prototype projects” (previously just a pilot program) and expanded that authority to include OTs for follow-on production efforts.  But there are limits to DoD’s authority, foremost being that, in general, DoD may acquire only “prototypes” through OTs, and must buy all other goods and services through traditional, FAR-based procurement contracts.

So the question of how to access DoD’s surge in OT funding hinges, among other things, on more specific questions:  What exactly is a “prototype”?   And do my offerings fit the bill?

The answers, it seems, are quite a lot and probably yes.  Congress provided very little legislative direction, instead leaving to DoD the decision over just how broad its authority might reach.  Unsurprisingly, it took a broadminded approach to the term “prototype,” and so far the Government Accountability Office (GAO), as legislative oversight, has upheld the DoD’s expanding interpretation.  This continued in ACI Technologies, Inc., B-417011, Jan. 17, 2019, 2019 CPD ¶ 24, where the GAO found the DoD properly awarded a prototype OT for, among other things, training programs, skills development outreach, and the drafting of best practices for fostering commercial development of secure electronic parts.

Specifically at issue in ACI Technologies was a solicitation by the Naval Surface Warfare Center seeking a firm to manage a consortium of contractors in support of the agency’s Strategic & Spectrum Missions Advanced Resilient Trusted Systems (S2MARTS) initiative.  This initiative’s stated goal is to obtain “innovative technological solutions to address current and future security threats in the electromagnetic spectrum (EMS), trusted microelectronics, and strategic missions hardware environments,” which includes “developing a relationship with industry and academia to establish streamlined processes for obtaining innovative, State-of-the-Art (SOTA) technologies” and “establishing an agile and collaborative working relationship amongst the Government and academia/industry.”

Keep reading this article at: https://www.jdsupra.com/legalnews/gao-continues-to-expand-the-scope-of-91815/

For more information about OTs, see the Defense Acquisition University’s OT Guide at: https://aaf.dau.mil/ot-guide/

Arbitration award is ‘irrational’ because it disregards contract’s plain text

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Aspic Engineering and Construction Company (Aspic), a local Afghan subcontractor, entered into multiple subcontracts with ECC Centcom Constructors and ECC International (ECC), the prime contractor, to construct buildings and facilities in Afghanistan.  The subcontracts contained terms and conditions “applicable to all U.S. Government subcontracts,” and mandated that Aspic owed ECC the same obligations that ECC owed to the federal government.  The subcontracts also incorporated multiple Federal Acquisition Regulation (FAR) clauses, including FAR 49.2 through 49.6, which govern the recovery of expenses in the event a contractor is terminated for convenience, i.e., required documentation and procedures.

In 2014, ECC was terminated for convenience, so ECC notified Aspic that it also intended to terminate Aspic’s subcontracts for convenience.  Aspic, in turn, submitted multiple settlement proposals to get paid for its work under the subcontracts.  When ECC denied most of Aspic’s proposals, Aspic filed for arbitration, seeking payment for its costs of partially performing under the subcontracts.  Despite Aspic’s failure to comply with the FAR requirements governing payment for partial work in the event of a termination for convenience, the arbitrator awarded Aspic over $1 million.  The arbitrator concluded that Aspic was not required to strictly comply with the FAR requirements based on several factors, including: (i) the subcontracts were drafted to give every advantage to ECC; (ii) it was not reasonable to expect that Afghan subcontractors would be able to conform to the strict and detailed requirements of general contractors on U.S. Federal projects; (iii) it was not reasonable that the parties had the same expectations; and (iv) there was not a true meeting of the minds.

Keep reading this article at: https://www.jdsupra.com/legalnews/ninth-circuit-finds-arbitration-award-25846/

To view the full text of the court’s decision, courtesy of Bloomberg, click here.

FAR definition of “recruitment fees”: No means no

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On December 20, 2018, the Federal Acquisition Regulation (FAR) was amended to clarify the FAR’s prohibition on assessing employees with recruitment fees in connection with federal contracts.  The rule provides a final definition of “recruitment fees” and clarifies the FAR’s broad prohibition on federal contractors or subcontractors assessing employees or potential employees with any such fees.

The final rule brings long-awaited clarity to the scope of the prohibition on recruitment fees, as the term has not previously been defined in anti-trafficking regulations.  Upon publication of a proposed rule change in January 2015, the FAR Council invited the public to comment on a draft definition of the term “recruitment fees” in a notice-and-comment process.  The final rule, which took effect on January 22, 2019, incorporates a definition that has been revised pursuant to comments received during that rulemaking process. Government contractors will need to take these new rules into account in their compliance efforts in connection with their supply chains.

Background

On January 29, 2015, DoD, GSA, and NASA issued a final rule amending the FAR to strengthen and enhance the human trafficking-related prohibitions applicable to all federal contracts. The final rule implemented Executive Order (E.O.) 13627, “Strengthening Protections Against Trafficking in Persons in Federal Contracts,” and Title XVII of the National Defense Authorization Act for Fiscal Year 2013, entitled “Ending Trafficking in Government Contracting.”  The amended FAR, which applied to all future contracts and orders under existing indefinite-delivery/indefinite quantity contracts, imposed significant responsibilities on federal contractors and subcontractors to prevent human trafficking and forced labor.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=768098

DoD makes immediate change to limitations on subcontracting rule; FAR Council issues proposed rule

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The Department of Defense (DoD) has issued a class deviation that resolves the inconsistency between the Small Business Administration (SBA) regulations and the clause at Federal Acquisition Regulation (FAR) 52.219-14 related to the Limitations on Subcontracting Rule (LOSR).

The FAR Council has also issued a proposed rule to amend FAR 52.219-14 to fully resolve this issue for all small businesses. Government contractors should be aware of these new changes and proposed changes.

Generally, the LOSR prevents small business prime contractors from subcontracting the majority of the work under a prime contract to large businesses. The LOSR is intended to ensure that small businesses get the benefit of the set-aside prime contract. The government does not want a small business to get an award, perform only a small portion of the work, and then subcontract out everything else to large businesses.

Since 2016, SBA small businesses have struggled to comply with the LOSR because the regulations at 13 C.F.R. § 125.6 are inconsistent with the contract clause at FAR 52.219-14.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=777544

See DoD’s Jan. 8, 2019 Class Deviation 2019-O0003 on this subject at: https://www.acq.osd.mil/dpap/policy/policyvault/USA000039-19-DPC_Class_Deviation_2019-O0003.pdf

See the proposed rule here: https://www.govinfo.gov/content/pkg/FR-2018-12-04/pdf/2018-25506.pdf

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