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As most federal government contractors know, the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–33, can be a trap for the unscrupulous. The penalties associated with FCA violations can be steep, and the myriad other consequences (including debarment) can create an existential crisis. Government contractors would do well to pay attention to the FCA’s latest developments.

The Supreme Court will soon rule on a very consequential aspect of the FCA. At the outset, a brief overview of how an FCA claim works is in order. There are three different ways that an FCA claim can be adjudicated. First, the federal government itself (by way of the Attorney General) can bring a suit against a violator. Second, a private plaintiff (known as a “relator”) may bring a qui tam lawsuit in the name of the United States against a violator. Third, an individual may bring an action against an employer who has retaliated against him for helping with an FCA investigation or case. The Supreme Court’s forthcoming ruling will pertain to the second adjudicative mechanism—the relator’s qui tam suit against the violator.

When a relator brings a qui tam action, he must do so by filing a complaint under seal (i.e., not available to the general public) and serving it on the United States (i.e., the Attorney General). While the suit is under seal, the United States may investigate and decide whether to intervene as a party. If the United States intervenes, then it assumes “primary responsibility for prosecuting the action.” 31 U.S.C. § 3730(c)(1). If the United States does not intervene, the relator may proceed with the action on behalf of the government. Id. § 3730(c)(3).

Importantly, the FCA has a statute of limitations for bringing a claim against a violator:

  • (b) A civil action under section 3730 may not be brought—
    • (1) more than 6 years after the date on which the violation of section 3729 is committed, or
    • (2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

31 U.S.C. § 3731(b). For several years, courts of appeal have been divided on key questions related to the application of these limitations periods in a qui tam action. First, does the limitations period of (b)(2) listed above apply when the United States decides not to intervene in a qui tam action? And second, if (b)(2) does apply even when the United States does not intervene, on whose knowledge does the limitations depend—the relator’s or a United States official’s? These are important questions because, as is clear from the law’s text, the answers could significantly extend the time a relator has to bring a qui tam action.

Not surprisingly, courts of appeal are split on these questions. The Fourth and Tenth Circuit Courts of Appeal have held that applying section (b)(2) to a case where the United States does not intervene would be absurd because otherwise the timeliness of the action would depend on the knowledge of a non-party. See United States ex rel. Sanders v. N. Am. Bus. Indus., Inc., 546 F.3d 288 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702 (10th Cir. 2006). In other words, those courts would not apply (b)(2) at all to a situation in which the United States declined to intervene.

The Third and Ninth Circuit Courts of Appeal have held that (b)(2) does apply to a case where the United States does not intervene—and, what is more, they have held that the 3-year limitations period depends on the relator’s knowledge of the material facts, not the United States’. See United States ex rel. Malloy v. Telephonics Corp., 68 F. App’x 270 (3d Cir. 2003); United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996).

This past year, the Eleventh Circuit Court of Appeal took a different tack than its sister circuits. In United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081 (11th Cir. 2018), the court held that (b)(2) does apply to a case where the United States does not intervene, but also held that the 3-year limitations period depends on when a United States official knew of the underlying material facts.

Needless to say, the current state of the law is in chaos. It is no surprise that in November 2018, the U.S. Supreme Court granted certiorari and will settle these important statute of limitations questions once and for all. Expect a decision sometime this summer.

Effective February 25, 2019, all small (between 0.55 and 55 pounds) unmanned aircraft systems (UAS) are required to display the Federal Aviation Administration (FAA) registration number on the external surface of the aircraft. This is according to the FAA interim final rule: External Marking Requirement for Small Unmanned Aircraft, published on February 13, 2019. FAA previously allowed such registration numbers to be displayed internally.

Background

The FAA requires registration of small UAS. Upon registration, pursuant to 14 C.F.R. Part 48, the FAA provides UAS owners with a FAA registration number that must be displayed on the aircraft and maintained in legible condition upon visual inspection. See also Registration and Marking Requirements for Small Unmanned Aircraft, 80 Fed. Reg. 78593 (December 16, 2015). Previously, the FAA allowed registration numbers to be affixed to or displayed on UAS within an enclosed compartment, such as a battery compartment, so long as the number is “readily accessible”, without the use of tools. In 2016-2017, the law enforcement community expressed concerns that without an external display of registration devices, first responders could be subjected to a heightened risk of a concealed explosive device. The FAA agreed to impose the external display requirement but postponed doing so because of pending litigation involving the FAA’s Part 48 registration requirements. Congress removed that impediment, however, in December 2017 in the National Defense Authorization Act for Fiscal Year 2018 which affirmed the small UAS registration rules. The FAA issued the interim final rule last week with a remarkably brief period before the effective date to avoid any increased risk during a comment period as a result of “attention drawn to the vulnerability.”

Penalties for FAA violations can be wide-ranging based on the severity of the offense involved.

Request for Comments

The FAA is soliciting comments containing relevant information, data or views on the interim final rule. Comments must be received on or before March 15, 2019 and should include the docket number: “FAA –2018–1084.”

New Proposed Rulemaking for Operations Over People

In addition to the new external display requirements, on February 13, 2019, the FAA also published a notice of proposed rulemaking (NOPR) for Operation of Small Unmanned Aircraft Systems Over People. The proposed rule would, among other things, allow operations of small UAS over people [under certain conditions] and operations of small UAS at night without obtaining a waiver. Comments must be received on or before April 15, 2019 and should include the docket number: “FAA–2018–1087.”

For further details about the new requirements and notice of proposed rulemaking, contact one of the Stinson Leonard Street’s Unmanned Aircraft Systems and Autonomous Vehicles attorneys.

A group of U.S. government contractors are being accused of entering into illegal no-poaching agreements with each other. On February 7, a putative class consisting of current and former employees filed suit against Booz Allen Hamilton, CACI, and Mission Essential alleging antitrust violations. See Hunter v. Booz Allen Hamilton Holding Corp., No. 2:19-CV-411 (S.D. Ohio). The plaintiffs, who all worked at the Joint Intelligence Operations Center Europe Analytic Center in Molesworth, England, claim their employers agreed not to hire each other’s employees, in violation of U.S. antitrust laws including the Sherman Act and Clayton Act.

The terms of the government contracts required the contractors’ employees to be U.S. citizens with top-secret security clearances. According to plaintiffs, due to the relative scarcity of prospective employees matching these criteria who were also willing to move to England, such workers were in high demand and generally able to move freely between defendants to increase their compensation. Plaintiffs allege defendants made the no-poach deal to fix and maintain compensation for skilled labor at artificially low levels.

The lawsuit alleges these actions had the effect of eliminating competition for skilled labor, restricting employee mobility, and suppressing wages for the purpose of increasing profits. According to the Complaint, due to the high cost of moving back to the United States and the lack of employment opportunities in England outside the intelligence contracting world, workers “were essentially defendants’ captives.”

Plaintiffs seek a finding that the defendants’ actions are per se violations of the Sherman Act. Plaintiffs are likely to rely heavily on an October 2016 joint publication issued by the US Department of Justice and Federal Trade Commission, Antitrust Guidance for Human Resources Professionals, which states that “an agreement among competing employers to limit or fix the terms of employment for potential hires may violate antitrust laws if the agreement constrains individual firm decision-making with regard to wages, salaries, or benefits; terms of employment; or even job opportunities.” According to the publication, naked wage-fixing or no-poaching agreements among employers are per se illegal under the antitrust laws.

However, Plaintiffs in this case may have a steep hill to climb. In a recent filing in a separate class action, the U.S. Department of Justice (“DOJ”) cast doubt on employers’ ability to rely on the 2016 publication. The DOJ argued that no-poach deals that are part of a broader business relationship or collaboration between the companies may warrant the rule of reason analysis, which requires that plaintiffs prove the harm done by anti-competitive conduct outweighs any pro-competitive results.

Before entering into any agreements related to no-poach, no-solicit, no-hire or other restrictions between employers, government contractors should consult with counsel to ensure their agreements and practices do not violate antitrust laws. Restrictive agreements should be carefully crafted and limited so the restraint aligns with the legitimate needs of the employer.

For further information about E.O. 13858 and how the new requirements may impact your business, contact one of the members of Stinson Leonard Street’s Government Contracts and Investigations Practice Group.

 

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.