Recent Developments in Federal Procurement 2008-2009

1. Recent Developments in Federal Procurement2008-2009

2. Agenda • Statutes and Regulations • Cost/Accounting/Audit Matters • Performance Issues • Ethics and Compliance

3. Statues & Regulations • American Recovery & Investment Act (P.L. 111-5) • Whistleblower Protection: Section 1553 • Categories of Disclosure • Gross Mismanagement • Gross Waste of Funds • Danger to Public Health or Safety • Abuse of Authority related to Funds • Violation of Law, Rule or Regulation • Disclosures made in “Ordinary Course of Employee’s Duties” • Remedies for Reprisals Broad: • No cap on damages • Attorney fees and costs • Back pay/reinstatement • No statute of limitations? 4 years?

4. Statutes & Regulations (con’d) • Presidential Memo dated March 4, 2009 “Government Contracting”: • Critical of current government contracting practices • Too many sole source contracts; need more competition • Government “outsourcing” a concern • Overuse of cost reimbursement contracting • Excessive cost overruns on large programs • Directs OMB, DOD, NASA, GSA & OPM to write regs to: • ID contracts that are wasteful and inefficient • Create processes to take corrective action • Maximize full and open competition • Control contract types to minimize risk • Assess capability of acquisition workforce • Clarify when outsourcing is appropriate

5. Cost/Accounting/Audit Matters • Teknowledge Corp v. U.S., 85 Fed. Cl. 235 (January 7, 2009) • CFC decision dealing with: • CAS 420 • FAR 31.205-18 • Disallowed costs of IR&D associated with creating a new software product • Court held costs did not “benefit” the government • Unclear from decision where costs were incurred • Possible misapplication of CAS and applicable cost principle

6. Cost/Accounting/Audit Matters (con’d) • DCAA Audit Guidance • “Denial of Access to Records” (08-PAS-42(R)) • Instructs auditors to obtain “timely” access to: • Records • “Contractor personnel” • From persons responsible for the records and not “liaison” designated by contractor • Failure to grant access must be reported • DOD IG may be contacted • Seek subpoena • Suspend payments pending access • Issue Form 1 Aggressive Posture Resulting from GAO criticism?

7. Cost/Accounting/Audit Matters (con’d) • DCAA Audit Guidance • “Adequacy of Internal Control System” (08 PAS-043 (R)) • Must report any “material internal control” weakness. Results in “material deficiency” • If reported and system found inadequate could bar award of cost-reimbursement contracts (FAR 16.301-3) • Laudes Corp. v. U.S., 84 Fed. Cl. 298 (October 16, 2008) • Held: No CFC jurisdiction over $10M claim against U.S. under contract awarded by Coalition Provisional Authority to provide support to Baghdad Police Academy • Critical fact: funds came from Development Funds for Iraq not U.S. appropriated funds • Contractor must seek recovery from Iraqi government

8. Performance Issues • Government Marketing Group (GMG) v. Dept. of Justice, 2008 CIVBCA LEXIS 80, CBCA 71 (April 2, 2008) • Parties agreed to terminate the contract for convenience and signed settlement agreement with following language: “The parties agree that this modification shall settle all outstanding issues relating to this contract. In consideration of the modification set forth herein, the parties mutually release each other from any and all known or unknown liability relating to this contract.” • 8 months later government issued CO final decision stating that GMG owed it $791,136.00 • GMG raised release language as defense • Board held for GMG: release bars either parties’ claims prior to date of release

9. Performance Issues (con’d) • General Dynamics C4 Systems, Inc., 2009 ASBCALEXIS 31 (ASBCA 54,988, May 8, 2009) • Government sent delivery orders under IDIQ contract via email; • Contractor stated electronic delivery ok only if specified in the schedule; schedule did not specify • ASBCA found in contractor’s favor; all DO’s repriced under constructive change theory • Board equated DO’s to option exercises and stated they must be issued in strict accordance with the contract. Message of GMG & GD decisions: Readthecontractandfollowit.

10. Performance Issues (con’d) • Metrotop Plaza Assoc. v. U.S., 82 Fed. Cl. 598 (July 24, 2008) • Dispute arose; attempts to settle failed • Contractor submits claim to CO who never responded to claim • Contractor filed suit in CFC and appealed CO’s failure to respond as a “deemed denial” of its claim • Government moved to dismiss asserting that it had never received contractor’s claim • Contractor couldn’t prove that claim was submitted • Court dismissed this part of suit – no evidence of delivery Always send claim by a verifiable method!

11. Performance Issues (con’d) • General Injectables & Vaccines, Inc. v. Gates, 527 F.3rd 1375 (Fed. Cir. 2008) • Interprets FAR 52.212-4 (f) – excusable delays under commercial contracts • Subcontractor’s failure to perform caused prime contractor failure to deliver vaccine • Court affirmed previous decision that unexcused subcontractor’s failure to perform can be basis for prime contractor default • To be excused, failure must be without fault of and beyondreasonablecontrolofcontractorandsubcontractor

12. Performance Issues (con’d) • Phillips/May Corp. v. U.S., 524 F.3rd 1264 (Fed. Cir. 2008) • Contractor had 10 claims against the Navy; appealed 9 to the ASBCA and reached a settlement; filed suit in the CFC on the 10th claim • CFC dismissed 10th claim using the doctrine of “claim preclusion” • All claims arose under same contract • Same parties and underlying facts • No reason why 10th claim couldn’t have been filed with ASBCA • Fed. Circuit affirmed CFC decision “Split claims at your peril”

13. Ethics and Compliance • FAR Mandatory Disclosure Rule • Became effective 12 December 2008 • Two parts: • “look back” provisions • Contract clause (FAR 52.203-13) • Disclosure to government required if “credible evidence” of: • Violations of Title 18 (“fraud”) • Significant overpayments [“Look Back” only] • Violations of the False Claims Act • Failure to Disclose – Debarment and Suspension • Other requirements: • Subcontract flow down clause • Compliance and ethics control mechanisms • Many FAR terms unclear and undefined. – Stay Tuned!

14. Ethics and Compliance (con’d) • U.S. Office of Government Ethics Post-Employment Restrictions Guidance • June 25, 2008, 5 C.F.R. Part 2641 • Final regulations applicable to 18 U.S.C. 207 • “representational prohibitions” • Criminal sanctions if violated • Guidance: • Reorganized explanations and examples • Expanded definitions section • Additional terms explained • “Tricky” - many significant differences in law and regs depending on rank and seniority of government official