Helping individuals, companies, and organizations understand key legal and practical considerations for promoting compliance and making better business decisions in these types of federal, state, and local government contracting matters MORE

Over the past few months, the threat of a partial government shutdown became real. The initial shutdown broke the record for the longest shutdown in U.S. history – it lasted 35 days.  It was resolved by continuing resolution, but the threat returned when the resolution was approaching its end. The threat for this fiscal year was resolved by a bill to fund the government through to September 30, 2019.  However, after the President signed that bill into law, on Friday, February 15, 2019, he declared a national emergency under the National Emergencies Act to address “the crisis at our Southern border and stop crime and drugs from flooding into our Nation.”  The Administration has identified up to $8.1 billion in funds to reprogram in order to fund border wall projects.  According to the White House, “Projects are being planned for FY 2019 and beyond.”

This means that the President will be directing the affected agencies, including the Department of Defense and the Department of Homeland Security, to divert funds that were appropriated for specific programs and contracts and use them to fund activities under this emergency action.  Lawsuits challenging the President’s authority to take this action have already been filed and more are expected.

What does this mean for government contractors?

This means that government contractors are not out of the woods as these funding decisions and actions may have ripple effects across a variety of government programs and contracts, including their own.  For example, in order to fund the specific programs and contracts needed to address the President’s declared emergency, the Executive branch’s management and budget arm–the U.S. Office of Management and Budget–will be directing specific executive agencies to assess and take actions to free up funds that are currently intended for other activities and contracting actions. The agencies involved in these activities will have to determine which specific programs and funds to use to accomplish these objectives.  This could result in agency decisions to reprogram  money from a planned or ongoing procurement or contract so that it funds a different procurement or contract.

Moving funds out of a procurement could result in the delay or even cancellation of that procurement. Diverting funds from a given program could cause an agency not to exercise an upcoming option under the existing contract. Where incrementally funded contracts are involved, such changes could result in the agency’s deciding to provide no further funding for that contract.  In certain cases, the agency could opt to reduce the scope or even terminate a pending contract to make funds available.

With regard to contracting actions to address the emergency, the agency could solicit and enter into contracts with partial or no funding, and provisions that subject the contract to funding limitations, e.g., clauses restricting contracting based on the availability of funds, limitation of funds, or some other restraint.  These procurements may also may be subject to  court or administrative challenges.

What should you do now?

  • As a contractor, take stock of your contracts and procurements, and assess your potential contractual and extra-contractual risks and options.
  • Evaluate your contracts to determine such things as whether and to what extent your contracts are funded now, or if they will need funding in the future.
  • Take stock of your contractual obligations and potential provisions for seeking and obtaining relief
  • If you have employees or subcontracts that might be impacted, assess these agreements and contracts for risks and options as well
  • If you do receive notice to stop work, or directions that impact your contract’s scope, funding, period or method of performance, or schedule–even if it is a notice of a termination for convenience–you may have rights and potential remedies
  • If you are involved in a pending or future procurement, consider your options for circumscribing your risks. Additionally, be on the lookout for agency or outside actions that may adversely impact the procurement or your rights under it.

As a government contractor you may have rights and remedies in these situations.  It is important to consult with counsel as early in the process as possible to assess your range of rights, options and potential remedies.

For further information concerning the potential impacts of the National Emergency on your business, contact one of the members of Stinson Leonard Street’s Government Contracts and Investigations Practice Group.

On February 1, 2019, the U.S. Army Corps of Engineers (USACE) rolled out a program seeking pitches from private industry for possible public-private partnership projects. The USACE, looking to add efficiency and value to infrastructure projects, announced in the Federal Register a 60-day period for the submission of information on conceptual Public-Private Partnership (P3) delivery of specific USACE Civil Works projects.

The pitch program derives from President Donald J. Trump’s initiative on building U.S. infrastructure and the direction provided by Congress in the Fiscal 2018 Appropriations Act Conference Report, and the establishment of a Public-Private Partnership (P3) pilot program. Interested parties must submit their proposed projects to the USACE Headquarters, on or before midnight on April 2 to be eligible for consideration.

The USACE screening criteria require proposed P3 candidates to: (1) have construction costs in excess of $50 million; of non-federal sponsor support; (2) involve a design, build, finance, operation and maintenance (DBFOM) or some combination for federally authorized projects; (3) accelerate project delivery; and (4) have the ability to generate revenue or leverage non-federal funding sources.

Selection from the proposed project pool will be based on: (1) return on federal investment—calculated by annualizing the total project benefits and Federal costs utilizing the current discount rate, and applying the formula: (Benefits − Federal Costs)/(Federal Costs); (2) replicable—meaning the “proposed P3 structure or underlying concepts may be applied to other prospective projects;” (3) reliable funding sources “for the design, construction, operation and maintenance of Federally authorized water resource projects are identified;” and (4) risk allocation that “effectively allocates delivery and performance risk to non-Federal entities and minimizes Federal direct and contingent liabilities associated with the project.”

The P3 concept continues to gain more and more momentum as a preferred delivery platform for public infrastructure projects. The pilot program aims to identify “new delivery methods that can significantly reduce the cost and time of project delivery,” and is “part of the Revolutionize USACE Civil Works initiative which is transforming how USACE delivers infrastructure for the nation through authorized Civil Works projects and permitting of infrastructure projects.”

The USACE Director of Civil Works, Mr. James C. Dalton, hopes that “P3 [will] . . . accelerate project delivery and lower project costs” and the program seeks to “identify as many as ten P3 pilot projects.”

The complete screening and selection protocol is available in the Federal Register notice and can be found here.

When pursuing a government contracting opportunity, it’s always important to read and understand the solicitation’s description of the contract requirements your proposal must address. In this context, as in most others, language matters. Indeed, as the recent Government Accountability Office (GAO) decision in The Lioce Group, B-416896 (January 7, 2019), reminds us, the language the procuring agency uses to describe its requirements can have a profound impact on who wins the award—and what the government purchases under the resulting contract.

The protest involved a request for quotations (RFQ) posted by the National Labor Relations Board (NLRB) to vendors holding a certain special item number (SIN) under GSA Federal Supply Schedule (FSS) No. 36-office, imaging and document solutions. The RFQ contemplated the issuance of a fixed-price task order for the lease and maintenance, to include copier supplies, of copier devices to be utilized at NLRB offices nationwide. Award of the order was to be made on a lowest-priced, technically acceptable basis, with quotations evaluated based on the following factors: technical, past performance, and price.

With respect to the technical factor, the RFQ required the vendor to “demonstrate its understanding of the requirements and provide a concise, detailed and thorough response of their capability to fulfilling the requirement[s] in the Statement of Work [SOW].” It also provided that technical capability would be evaluated on a Go/No-Go basis in response to the requirements stated in the SOW of the solicitation.” The RFQ also instructed vendors to submit a fixed price to support the requirement and warned that “quotes containing exceptions, qualifications, conditions, assumptions or any other deviations from the solicitation would be considered non-responsive and rejected by the Government and not considered for award.”

The RFQ’s SOW contained a sizable list of specifications describing the functions the copier devices would be required to perform. As relevant to the protest, the SOW also stated: “The ability to deliver output, securely and encrypted, to one or more endpoints (such as Blob Storage, File System Storage, OneDrive, SharePoint) in the Microsoft Azure Cloud or Azure Government Cloud is highly desirable.” This functionality was referred to by the agency and The Lioce Group as a “scanning to the cloud” capability.

The NLRB reviewed the eight quotes received from vendors, asked clarification questions to all vendors, then considered their responses as part of its technical evaluation. While Lioce quoted a lower price than the awardee, Xerox, the technical evaluation board rated its quotation as technically unacceptable because it did not provide pricing for the scanning to the cloud capability, which the agency asserted was a mandatory requirement. Upon learning of the NLRB’s determination, Lioce protested, first to the agency, then to the GAO.

In its protest, Lioce contended that the agency’s evaluation of its proposal as technically unacceptable was unreasonable and inconsistent with the RFQ’s evaluation criteria because it was based on Lioce’s lack of pricing for the scanning to the cloud capability, which was not a mandatory requirement. The agency responded by asserting that scanning to the cloud was indeed a mandatory requirement, and Lioce had taken exception to it by not providing the pricing.

The GAO agreed with Lioce, finding that the agency’s evaluation of Lioce’s quotation was based upon an unreasonable interpretation of the solicitation. Faced with disputes as to what a solicitation requires, the GAO examines the plain language of the solicitation and reads the solicitation as a whole and in a manner that gives effect to all provisions; to be reasonable, and therefore valid, an interpretation must be consistent with such a reading. In this case, the GAO determined the agency’s interpretation of the solicitation to be unreasonable based upon the plain language of the RFQ, the context in which the disputed provision appears, and the permissive language used by the agency in the Q&As.

With respect to the plain language of the RFQ, it states that the ability to deliver output in the cloud is “highly desirable.” As the GAO notes, the common dictionary definition of “desirable” refers to “having pleasing qualities or properties,” or “worth seeking or doing as advantageous, beneficial, or wise.” Thus, on its face, the RFQ’s plain language does not impose a requirement to provide a scanning to the cloud capability. Nor did the agency cite any precedent for its contention that a function described as highly desirable may be interpreted as imposing a mandatory term or condition in a lowest-priced, technically acceptable procurement.

When considered in light of the rest of the RFQ, the use of the term “desirable” instead of “shall” or “must” further undercut the agency’s interpretation. Elsewhere in the RFP, the terms shall or must were used dozens of times to describe functions which neither party dispute are mandatory requirements. The GAO concluded that the agency’s recurring use of these clearly compulsory words reasonably indicates that a function instead described as “desirable” was merely preferred.

Despite the agency’s assertions to the contrary, the GAO held that the Q&As did not clarify, or otherwise state, that the scanning to the cloud capability was a required term. Indeed, the Q&A exchange on which the NLRB relied describes the capability as “recommended” and a “preference.” Such permissive language simply does not indicate that the scanning to the cloud capability is mandatory. As the GAO noted, the agency may have intended the Q&A to make clear its interpretation of the RFQ when responding to vendors’ questions, but it failed to do so and its reliance on the Q&As was, therefore, unavailing.

For these reasons, the GAO found that nothing in the RFQ, as amended, reasonably put vendors on notice that a quotation failing to provide pricing information for a scanning to the cloud capability would be found technically unacceptable—and that the agency lacked a reasonable basis for finding Lioce’s quotation technically unacceptable.

Contractors confronting evaluation results that appear to misconstrue the solicitation requirements should follow the GAO’s approach in this decision: consider the plain language in question, how it compares to the rest of the solicitation language, and any potential amendments in the Q&A. If these three factors are aligned like they were in Lioce, you should have a strong protest ground.

Seeking to avoid an “absurd result,” the highest state court in Wyoming has ruled that the Jackson Hole Airport cannot refuse to produce airport-related documents by claiming that the airport is not subject to the state’s open records law: the Wyoming Public Records Act (WPRA). This decision is important for airports, governments that own airports, airlines, fixed base operators (FBOs), general aviation, pilots, aircraft owners, concessions, commercial passengers, cargo shippers and other persons and entities that use or do business with airports because it highlights the fact that publicly owned airports are subject to and must comply with state open records laws.

In a unanimous decision issued January 15, 2019, the Wyoming Supreme Court reversed a lower court’s ruling that the WPRA (which is similar to the federal Freedom of Information Act) did not apply to the airport’s board.1 This decision is consistent with the fact that most airports throughout the United States—which are owned and operated by states, counties, municipalities and other local governmental entities—are subject to their respective state’s open records laws.

The Wyoming case was filed by a party that had sought unsuccessfully to operate a second FBO facility at the airport, and had asked the airport for documents—including emails, a consultant’s report and other materials—relating to the airport’s decision to purchase the assets of the sole privately owned FBO and thereafter serve as the airport’s sole FBO. The airport denied that it was subject to  the WPRA, despite its status as a public entity.

The lower court rejected the plaintiff’s “Petition for Access to Records,” finding that the airport was governed solely by the more restrictive Special District Public Records and Meetings Act (Special District Act) and not the more expansive WPRA. In reversing the lower court, the state supreme court construed the WPRA broadly to encompass documents relating to the airport’s decision-making. The WPRA broadly defines the records subject to its disclosure requirements to include “any information in a physical form created, accepted, or obtained by the state or any agency, institution or political subdivision of the state in furtherance of its official function and transaction of public business which is not privileged or confidential by law.”2 The lower court ruled that the airport was not subject to the more comprehensive WPRA because its board was neither a state entity nor a political subdivision. However, the state supreme court faulted the lower court for interpreting “the term political subdivision too narrowly” and giving it “a meaning that is not in keeping with the WPRA’s purpose or its definition of the term.”

The state supreme court emphasized that the term “political subdivision” used in the WPRA is broader than a “county, city, township or school district.” Rather, the state supreme court ruling continues, the legislature intended for the WPRA to be construed “liberally in favor of public record disclosure,” and that the phrase “special district within the state” in the definition of “political subdivision” (§ 16-4-201(a)(iv)) must have a “broader, more general meaning,” which includes the airport board, because it “was indisputably created to perform a public function.”

In addition, the state supreme court interpreted the WPRA “as applicable to the Board is in keeping with the Act’s purpose of maintaining an open and accountable government.,” It also is “in keeping with the records at which the Act’s disclosure are directed, those ‘created, accepted, or obtained’ in the ‘transaction of public business.'” § 16-4-201(a)(v). The state supreme court emphasized that its ruling “avoids the absurd result that would follow if we were to interpret the WPRA as inapplicable to the Board.”

The state supreme court also found meritless the argument that the categories of documents listed in the more narrow Special District Act were the only records the airport must retain. The state supreme court stated that the state’s “record retention statutes were in place when the legislature enacted the Special District Act in 2010, and the [newer] Act contains no language suggesting that the legislature intended it to eliminate or replace the preexisting record retention requirements.” The state supreme court added that the state legislature intended “that certain documents should be readily available for public review….” The state supreme court further stated that when it reads “the Special District Act as a whole and in harmony with the other laws applicable to the covered entities,” the court “must conclude that it does not establish or limit the covered entities’ record retention requirements.”

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  1. Wyoming Jet Center, LLC v. Jackson Hole Airport Board, S-18-0154
  2. Wyo. Stat. Ann. § 16-4-201(a)(v)

For anyone who’s ever doubted or downplayed the importance of avoiding organizational conflicts of interest (OCIs), a recent settlement announced by the Department of Justice in Colorado should serve as a wake-up call.

Last month, the U.S. Attorney for the District of Colorado announced that Progressive Technology Federal Systems, Inc. (PTFS) and its President and CEO, John Yokley, had entered into a $110,000 settlement to resolve allegations of false claims. The allegations concerned a contract awarded to PTFS by the National Institutes of Health’s Information Technology Acquisition and Assessment Center (NITAAC). NITAAC administers three Government-Wide Acquisition Contracts (GWACs) for information technology (IT) regularly used by federal agencies to acquire information technology.

The subject contract was awarded by NITAAC on behalf of the Army and the Air Force. According to the United States, Mr. Yokley participated in preparing project specifications for a contemplated contract in 2014. When NITAAC issued a solicitation seeking proposals for that contract, PTFS responded with a proposal to take on the contract. Unfortunately, PTFS stated in its proposal that it had no OCI relating to the contract. This statement was false because it ignored the fact that Mr. Yokley had provided input on project specifications that were included in the solicitation and contract, which created a “biased ground rules” OCI under Federal acquisition Regulation (FAR) 9.505-2. In addition, the contract required security clearances, and PTFS falsely stated in its proposal that an individual who would participate in the project as a key “Subject Matter Expert” had an active Top Secret clearance.

Presumably in part because of these proposal statements, PTFS was awarded the contract. But the real facts were discovered and NITAAC terminated the funding before PTFS could invoice more than $30,000.  The United States alleged that PTFS’ conduct violated the False Claims Act (FCA).

In entering into this civil settlement, PTFS and Mr. Yokley did not admit liability.  Under the agreement, however, PTFS paid $65,000, and Mr. Yokley paid $45,000, to resolve the allegations. It is important to remember that the settled claims are only allegations—and also that there is always another side of the story and often complicating factors.

Still, the case serves as an important reminder that OCI issues should not be taken lightly by contractors because they are taken very seriously by the Government. In addition to the United States Attorney’s Office, the National Reconnaissance Office’s Office of the Inspector General, Defense Criminal Investigative Services, and the Air Force Office of Special Investigations were all involved in uncovering and responding to the alleged FCA violation here. In order to avoid such an outcome, contractors should carefully consider all the relevant facts in light of the FAR OCI rules before they claim in a proposal that no OCI exists.