Georgia Tech Procurement Assistance Center

Government contracts and the ‘Chevron Deference’

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Under Chevron U.S.A. v. NRDC and its progeny, courts show great deference to administrative agencies’ interpretations of statutes and regulations.  However, it does not necessarily follow that courts will provide that same deference to agencies’ interpretations of government contracts.

Last week, in a statement respecting the denial of certiorari in Scenic America, Inc. v. Dept. of Transportation, Supreme Court Justice Neil Gorsuch pointed out this distinction and raised an issue that merits further judicial attention.

Chevron holds that as long as an agency presents a “reasonable” interpretation of a statute, a court will typically side with the agency’s interpretation.  The Supreme Court has extended the Chevron doctrine to agencies’ interpretations of their own regulations.  See, e.g., Auer v. Robbins, 519 U.S. 452 (1997).  The Supreme Court has also placed important limitations on the Chevron doctrine, refusing to give deference when it is clear that Congress did not intend to delegate such authority to the agency.  See, e.g., King v. Burwell, 135 S. Ct. 2480 (2015).

However, the Supreme Court has never considered the applicability of Chevron to agencies’ interpretation of government contracts.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2017/10/government-contracts-chevron-deference-justice-gorsuch-weighs/

Former head of CVE urges VA to implement VOSB contracting preference

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For too long, the U.S. Department of Veterans Affairs (VA) has circumvented a policy known as VETS First, refusing to give preference to veteran-owned small businesses despite being directed to by Congress, the Government Accountability Office (GAO) and the U.S. Supreme Court.

This refusal hurts not only veteran-owned small businesses, but the millions of veterans who depend on the VA.

In 2006, Congress passed The Veterans Benefits, Health Care and Information Technology Act, which among other things established the VETS First program. But the VA, under administrations controlled by both parties, never followed through. On several occasions, the GAO has ruled that the VA has failed to follow the law. And still, it does nothing.

Keep reading this article at: http://thehill.com/blogs/pundits-blog/the-military/349692-the-va-must-do-its-duty-to-help-veteran-owned-small

SBA and GSA, OFPP not seeing eye-to-eye on ‘rule of two’ application

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SBA logoA major dispute is brewing in the small business community. Just four months after the Supreme Court’s June 16, 2016 unanimous decision on the Kingdomware case, the Small Business Administration (SBA) is taking a stand on the “rule of two” that is stressing out industry and agencies alike.

As a quick reminder, the nation’s highest court ruled in the Kingdomware case that the Veterans Affairs Department (VA) must continue to apply the “rule of two” for veteran-owned small businesses even if the agency surpassed its annual prime contracting goal. The “rule of two” states if an agency can find two or more qualified small businesses during market research of a contract under the Simplified Acquisition Threshold (SAT) — between $3,500 and $150,000 — it must set aside the solicitation.

Now the SBA is expanding that Supreme Court ruling to apply to all task and delivery orders under SAT if the request for proposals comes under the General Services Administration’s Schedules.

Keep reading this article at: http://federalnewsradio.com/reporters-notebook-jason-miller/2016/12/sba-gsa-ofpp-not-seeing-eye-eye-rule-two-application/

Here is a copy of the SBA’s memo telling its PCRs that the should apply small business preferences to all task orders and all delivery orders because they are considered contracts pursuant to the Kingdomware decision: http://www.wifcon.com/dgc_memo.pdf

Supreme Court hears argument over False Claims Act’s seal requirement

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Supreme CourtWeek before last, the United States Supreme Court heard argument in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby over the False Claim Act’s (FCA) “seal requirement.”  The controversy highlights an important statutory tool for government contractors who face allegations of making false claims for payment.  It also provides important lessons for those seeking to bring such allegations.

Under the FCA, a qui tam complaint must be filed under seal and remain under that seal for sixty days.  31 U.S.C. § 3730(b)(2).  During those sixty days, the Government can intervene in the case or request an extension of time.  Meanwhile, the plaintiff may not disclose the existence of the suit to the public.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2016/11/supreme-court-hears-argument-false-claims-acts-seal-requirement/

 

 

Helping veteran-owned firms get their share of government contracts

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veterans-dayShould veteran-owned enterprises be optimistic as we head into 2017? “Yes, 2017 should be a great year for government contracts for veteran-owned businesses and veteran-owned small businesses (VOBs and VOSBs),” says Matthew Pavelek, vice president of membership at the National Veteran-Owned Business Association (NaVOBA). His organization’s mission is to create opportunities for all of America’s veteran-owned businesses. The association’s members include both VOBs and corporations.

Pavelek says the June 2016 U.S. Supreme Court decision in Kingdomware Technologies, Inc. vs. United States was positive news for VOBs. The Supreme Court decided that the U.S. Department of Veterans Affairs must set aside more contracts to be filled by veteran-owned small businesses.

The court unanimously decided that the department has not fulfilled its obligation to steer more business to small companies owned by veterans or service-disabled veterans simply by meeting its annual contract targets. The decision, say experts, is likely to assist more VOBs compete for the billions of dollars in contracts that the VA awards.

Keep reading this article at: http://m.americancityandcounty.com/federal/veteran-s-day-helping-veteran-owned-firms-get-their-share-government-contracts

SBA to interpret Supreme Court contractor ruling for small business

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SBA logo smallThe June 16 Supreme Court decision requiring the Veterans Affairs Department to expand set-asides for veteran-owned small businesses could affect broader procurement regulations across government, says the Small Business Administration’s John Shoraka, associate administrator of SBA’s Office of Government Contracting and Business Development.  He recently told Government Executive at a contractors networking event that “the path forward is that we have to interpret how the decision impacts the Small Business Act.”

The court’s decision in Kingdomware Technologies Inc. v. the United States determined that the so-called “rule of two” requirement that the VA consider at least two bidding contractor firms (and apply a set-aside to the one that qualifies) must apply to supply orders as well as contracts.

“There was a perception that a [pre-existing GSA Schedule] order was not a contract, so the rule didn’t apply,” Shoraka told the audience. “But the Supreme Court says it is a contract, so now we know,” and the department must pick the veteran-owned small business assuming it offers a reasonable price.

Keep reading this article at: http://www.govexec.com/contracting/2016/06/sba-interpret-supreme-court-contractor-ruling-small-business/129477

VA issues interim procurement guidance in wake of Supreme Court decision

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VA-LogoIn reaction to the June 16, 2016 U.S. Supreme Court reversal of a lower court decision on the Veteran-Owned Small Business (VOSB) contracting program at the Department of Veterans Affairs (Kingdomware Technologies, Inc. v. United States), the VA has issued guidance to its acquisition team to ensure that procurements for VOSBs and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) are set-aside whenever a contracting officer has a reasonable expectation, based on market research, that two or more eligible firms are likely to submit competitive offers at a fair and reasonable price.

In the past, the VA had not implemented this rule, known as the “Rule of Two,” for orders placed against GSA and VA Schedule contracts.   The Supreme Court ruled that no exemption from the Rule of Two exists for such orders.  The Court also found that VOSB and SDVOSB set-asides should continue to be made even if and when the VA meets its goals for awards to VOSBs and SDVOSBs.

In announcing the new guidance, the VA’s Office of Acquisition and Logistics said that “additional policy and guidance will be provided via a Procurement Policy Memorandum and Class Deviation to be issued at a later date.”

Highlights of the interim guidance issued by the VA on June 22 include:

  • The VA’s Contracting Officers are to include a requirement in all solicitations that for evaluation purposes, only VA verified SDVOSBs or VOSBs in the VA’s VIP database at the time of contract award will be considered for award.  Non-VIP verified firms will be considered non-responsive and ineligible for award.
  • VA Contracting Officers are instructed to conduct and review the market research to ensure compliance with the Rule of Two, whether or not an initial decision was made to set-aside the acquisition to SDVOSBs or VOSBs.
  • For VA contracting requirements currently in the solicitation/evaluation phase, a review of the original market research is to be accomplished to confirm whether or not the Rule of Two was appropriately considered and whether offers are likely to be received from two or more qualified, capable and verified SDVOSBs or VOSBs at a fair and reasonable price. If the review results in a finding that there are two or more SDVOSBs or VOSBs, an amendment is to be be issued canceling the solicitation.
  • Where a notice to proceed has not yet been issued, VA Contracting Officers are directed to coordinate with the Head of the Contracting Activity, the Office of General Counsel and the Office of Small and Disadvantaged Business Utilization and “be prepared to proceed with issuing the notice to proceed if issued within 30 days of this guidance.”

Details on these changes can be found at: http://www.va.gov/oal/business/pps/flash16-16.asp

Supreme Court on False Claims Act: Implied certification OK, but materiality is no gimme

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Two weeks ago, in Universal Health Services Inc. v. U.S. ex rel. Escobar, the Supreme Court unanimously affirmed the viability of the “implied false certification” theory of False Claims Act liability, at least in certain circumstances.  Writing for a unanimous Court, Justice Thomas explained that a defendant can face FCA liability under an implied certification theory where two conditions are satisfied:

  1. The claim asserts a request for payment and makes specific representations about the goods or services provided, and
  2. The failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.

Supreme CourtThis portion of the ruling was not unexpected given the overwhelming acceptance of implied certification among the Circuit courts. But, more importantly, out of concern that the statute be applied too broadly, the Court also explained at length that the “materiality” standard in the statute is a “demanding” one, and set a high bar for the Government and relators to demonstrate materiality of the alleged non-compliance.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2016/06/supreme-court-implied-certification-ok-but-materiality-is-no-gimme/

Supreme Court unanimously rules in favor of VOSBs in case involving the VA’s use of GSA Schedule contracts

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Supreme CourtToday – June 16, 2016 – the U.S. Supreme Court ruled in favor of the interests of Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) who challenged the practice of the Veterans Administration (VA) to not apply the veteran business preference to orders placed against GSA Schedule contracts.

According to government contract legal expert Steven Koprince, “The Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016) means that the VA will be required to truly put ‘Veterans First’ in all of its procurement actions – which is what Kingdomware, and many veterans’ advocates, have fought for all along.”

The issues involved in the Kingdomware case date back to 2006 when Congress first required the VA to restrict contract competitions to veteran-owned small businesses as long as there were at least two qualified VOSBs available to perform the work.  This is known as the “Rule of Two.”  In practice, the VA determined that this rule did not apply to orders the agency placed through GSA Schedules.  The Government Accountability Office (GAO) decided that the VA’s practices violated the law, but the VA refused to make any changes in its GSA Schedule purchasing.  Finally, in 2011, a SDVOSB company by the name of Kingdomware Technologies took the VA to court, but the U.S. Court of Federal Claims ruled against the GAO and in the VA’s favor.  Kingdomware appealed, but lost at the U.S. Court of Appeals in 2014.  One year ago, the U.S. Supreme Court agreed to hear Kingdomware’s case.

It’s been a long path to travel, but VOSBs and SDVOSBs can celebrate the unanimous decision handed down by the Supreme Court on June 16th.  The Court’s directive to the VA is clear – the written decision states that the Rule of Two “is mandatory, not discretionary.”  The Court goes on to state that the law in this case “unambiguously requires the Department [the VA] to use the ‘Rule of Two’ before applying other procedures.”

Koprince sums up the impact of the Supreme Court’s decision this way: “I expect that the Kingdomware decision will prove a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies.  The long battle is over – and SDVOSBs and VOSBs have won.”

Read the text of the Supreme Court decision here: http://www.supremecourt.gov/opinions/15pdf/14-916_6j37.pdf

Read Steven Koprince’s detailed analysis of the decision here: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/victory-sdvosbs-win-in-kingdomware-supreme-court-decision/

Read earlier articles about this case here:

Government contractors could lose key protection, attorneys warn

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Supreme CourtUnless overturned by the U.S. Supreme Court, a federal ruling threatens to erode a basic protection enjoyed by businesses that contract with the government, according to veteran litigators with national law firm LeClairRyan.

“The plain language of a contract has always meant precisely what it says, not what the government claims it means,” said Thomas A. Coulter, a shareholder in LeClairRyan’s Alexandria and Richmond, Va., offices. “And yet this fundamental principle of contract law could suffer lasting damage — with potentially far-reaching implications for contractors — if the High Court declines to examine, and ultimately reject, the Air Force’s treatment of our client, Distributed Solutions, Inc.”

LeClairRyan submitted a brief on March 10 asking the Supreme Court to take up the case of Distributed Solutions Inc. v. Deborah Lee James, Secretary of the Air Force (15-1157). The contract dispute hinges on whether the Air Force had a perpetual right to use Distributed Solutions’ proprietary software required to successfully run the multi-million dollar purchasing and contract management support system for over 3,500 Air Force activities that operate using Non-Appropriated Funds.

During the course of negotiations, the government drafted and agreed to clearly worded language indicating that its usage rights for the software were valid only for the life of the five-year contract, Coulter explained. However, toward the end of the contract, the government claimed the right to use the software perpetually — with no obligation to pay licensing fees after the contract had ended.

“The meaning of the phrase ‘[t]his modification [which contained the government’s right to use the software] is valid for the entire life of the contract’– language the Government drafted — is clear and unambiguous,” the attorney said, “Despite acknowledging the clarity of its own language, the government later claimed that the language did not mean what it clearly said.”

Distributed Solutions filed an unsuccessful claim with the Air Force. A review board denied the company’s appeal in August 2014. In the review board’s judgment, Distributed Solutions should have avoided the dispute by better explaining its interpretation of the provision in question. The Federal Circuit upheld this view, which runs counter to time-honored legal principles in contract law, said Stephen M. Faraci, a shareholder in LeClairRyan’s Richmond office.

Unless corrected, these judgments could have far-reaching implications for contractors, the attorney said. “Bear in mind, this language was drafted by the government itself,” Faraci noted. “So does this mean that, moving forward, parties contracting with the government will need to inquire about the meaning of language drafted by the government, regardless of the language’s clarity, to avoid the risk that the government later will reverse itself?”

This new expectation for contractors to question the meaning of clear and unambiguous wording will be particularly onerous to small businesses, which are a significant source of innovation for government operations, according to Coulter.  Such an expectation could deter small businesses from entering into government contracts to avoid the expense of employing attorneys to negotiate each word of the contract in order to ensure they can hold the government to its contractual obligations, he said.

Given that government contracts are already voluminous and complex, often with multiple modification provisions, such an expectation would be unprecedented, unworkable and unwise, added Joseph M. Rainsbury, counsel in LeClairRyan’s Roanokeoffice. “Plain contractual language speaks for itself and has always been sufficient, legally,” he said. “Contractors such as Distributed Solutions should not be expected to read between the lines or to inform the government about their interpretations of clearly worded provisions.”

“Should the judgment stand, contractors with proprietary software will have significant concerns about the business costs/risks of developing counteracting contracting language needed to prevent the government from later arbitrarily reinterpreting the intent of plain language that they have previously agreed to,” said Daniel E. Carr, Founder and CEO of Distributed Solutions, which is a small business. “This is particularly true if software innovation is at the core of what the company is and does,” Carr said. “If a company implements for the government an innovative proprietary solution, it simply must know that this will not involve the sudden, unexpected and unfair loss of its precious intellectual property. This kind of overreach might be commonplace around the world, but it is not supposed to happen in the United States.”

Source: http://www.prnewswire.com/news-releases/government-contractors-could-lose-key-protection-attorneys-warn-300250693.html

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