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

April 12, 2019 By Nancy Cleveland

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/

Filed Under: Contracting Tips Tagged With: ACE, actual cost, Afghanistan, Army Corps of Engineers, Court of Appeals, FAR, flow down clause, subcontracting, Supreme Court, termination for convenience, U.S. Court of Appeals

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

March 8, 2019 By Nancy Cleveland

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.

Filed Under: Contracting News Tagged With: arbitration, contract clauses, FAR, flow down clause, meeting of the minds, subcontracting, termination for convenience

Who is a subcontractor under a federal government contract?

February 7, 2019 By Nancy Cleveland

If you are a a vendor or supplier, are you a “subcontractor” under a federal government contract?

Sometimes the answer is easy — e.g., you are a subcontractor when a prime contractor contracts directly with a vendor or supplier (hereinafter “vendor”) to perform a federal contract.

But the lines become less clear when a prime contractor does not inform the vendor that the subcontract is being entered into in furtherance of a federal government contract or where the vendor supplies goods that the prime contractor uses to perform commercial and government contracts.

Subcontractor status is important to prime and subcontractors. A federal prime contractor is required to flow-down multiple Federal Acquisition Regulation (FAR) clauses to its subcontractors.

Keep reading this article at: https://governmentcontractsnavigator.com/2019/01/28/who-is-a-subcontractor-under-a-federal-government-contract/

Filed Under: Contracting Tips Tagged With: contract clauses, FAR, flow down clause, subcontractor, vendor

Congress aims to redefine ‘subcontract’

June 25, 2018 By Nancy Cleveland

If an agreement qualifies as a “subcontract” under a government contract, then it may be subject to certain flow-down, compliance, and reporting requirements.  These requirements are intended to protect the government’s interests, and have significant ramifications for contractors, e.g., increasing transaction costs, expanding potential areas of exposure.

These compliance obligations and risks can even deter some companies from performing under government contracts, especially those companies offering commercial items.

Currently, there is no uniform definition of “subcontract” in the applicable procurement regulations or in the procurement chapters under Titles 10 and 41 of the U.S. Code.  Indeed, there are more than twenty varying definitions of “subcontract” in the FAR and DFARS, with many clauses failing to specify which definition applies.  Now Congress is looking to address this lack of uniformity through the FY 2019 National Defense Authorization Act (NDAA).

Keep reading this article at: https://www.insidegovernmentcontracts.com/2018/06/congress-aims-to-redefine-the-subcontract/

Filed Under: Contracting News Tagged With: Congress, FAR, flow down clause, NDAA, rulemaking, Section 809 Panel, subcontracting

Deadlines approach for government contractors on cybersecurity compliance

October 27, 2017 By Nancy Cleveland

Government contractors are subject to cybersecurity requirements, found in the Federal Acquisition Regulation (FAR) and each agency’s supplement to the FAR, and some important deadlines are fast approaching. Set forth below is a high-level overview of cybersecurity requirements found in the FAR and the Department of Defense (DoD) FAR Supplement (DFARS).

The FAR requires government contractors that handle “federal contract information” to comply with 15 requirements for safeguarding that information. These requirements are similar to certain requirements found in NIST SP 800-171.

Under the FAR, “federal contract information” is defined as:

information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government, but not including information provided by the Government to the public (such as on public Web sites) or simple transactional information, such as necessary to process payments.

This is a broad category of information, and some commentators have suggested that it would apply to “virtually all” federal contracts.

Keep reading this article at: https://www.jdsupra.com/legalnews/deadlines-approach-for-government-74231/

Filed Under: Contracting Tips Tagged With: contract clauses, controlled unclassified information, CUI, cyber, cyber incidents, cybersecurity, DFARS, DoD, False Claims Act, FAR, FCI, flow down clause, NIST

What’s that cybersecurity FAR clause doing in my contract?

July 11, 2017 By Nancy Cleveland

Many contractors we talk to believe that cybersecurity requirements are exclusively a concern of contractors working with DoD or with highly-classified, top secret projects. While perhaps true to some degree in the past, that belief is now outdated. In recent years, the federal government has steadily expanded the reach of cybersecurity requirements imposed on contractors and contracts of all shapes and sizes, and that trend is expected to continue.

As an example, one year ago this month the government implemented a new FAR clause, FAR 52.204-21, entitled “Basic Safeguarding of Covered Contractor Information Systems.” This clause, which went into effect on May 16, 2016, brings basic cybersecurity requirements to many federal contracts. The clause is supposed to be inserted in every solicitation and contract where a contractor or subcontractor at any tier may have federal contract information (FCI) residing in or transitioning through its information system.

FCI is broadly defined as “information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government, but not including information provided by the Government to the public.”

Prime contractors are also expected to flow down the clause to subcontracts at all tiers that may have FCI in their systems, including subcontracts for commercial items (but not subcontracts for commercial off-the-shelf items).

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=602460

Note: Georgia Tech is sponsoring a free cybersecurity briefing on Aug. 9, 2017.  For details, visit: http://gtpac.org/2017/06/30/georgia-tech-sponsors-cybersecurity-briefing-in-august-for-manufacturers/

Filed Under: Contracting Tips Tagged With: contract clauses, cyber, cybersecurity, DoD, FAR, FCI, flow down clause

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