Loading...

Follow Federal Construction Contracting Blog on Feedspot

Continue with Google
Continue with Facebook
or

Valid

My partner Tim Furin and I attended the FY2020 DOD & Federal Agency Program Briefings this week on March 12 in Herndon, Virginia. The Briefings are part of the Society of American Military Engineers (SAME) Capital Week. The program provides SAME members a chance to hear about the projected upcoming fiscal year’s engineering, construction, and environmental programs from contracting representatives, and Senior Executive Service leaders from the engineering components of the military services and select federal agencies. Representatives from the United States Army Corps of Engineers (USACE), Army, Navy, Air Force, General Services Administration (GSA), Departments of State and Energy, as well as the U.S. Customs and Border Protection and U.S. Forest Service all made presentations. The presentations are available on SAME’s Capital Week website.

The Briefings provided useful insight and details into the various agencies’ plans and priorities for the upcoming year and their long term programs, as well as goals for changing and improving operating procedures and culture. For example, Army and USACE presenters highlighted two important upcoming rule changes, subcontractor and joint venture CPAR ratings and the inclusion of Request for Equitable Adjustment (REA) performance history in solicitations. The CPAR ratings will allow for the use of past performance ratings of subcontractors and for each partner of a joint venture when awarding certain DOD contracts. This will ensure contractors and subcontractors receive the credit they deserve for work performed. The inclusion of REA performance history in solicitations will require federal agencies to publish their policy and procedures on equitable adjustments, on any small federal construction contract out for bid, and require agencies to report on the time it takes to process these change orders. The REA rule provides prospective federal construction contractors with the information they need to factor the risk and resulting cost of delayed payment for changes into their bids and offers.

Increased American investments in construction projects in Europe and the Middle East, including Israel, Poland, and Romania were also discussed, as well as the Foreign Military Sales program. We have seen this first hand at Cohen Seglias as several clients are performing and submitting proposals for, contracts in Israel, Poland, and Afghanistan. Upcoming Industry Days for construction projects in Kuwait and Israel were also announced. Interestingly, the Department of Energy (DOE) stressed the desire for more competition for its contracts and hopes that more contractors get involved in and bid on their capital construction projects (as primes, JV partners, or subcontractors), especially traditional construction contractors, as DOE’s projects require conventional construction services as well.

Across the Briefings, there was a theme of improving and emphasizing Government-Industry partnering on construction projects and an emphasis on more, and better, design-build projects that will allow for the implementation of more contractor innovation. Finally, the importance of pushing decision-making down to “the field” on construction projects was a point that was reiterated.

The above is just a few highlights from a great day of interesting and informative presentations and networking. We will post more detailed articles on these topics in the near future. But should you have any questions about the DOD Briefings or any of these issues, please don’t hesitate to reach out to us.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

For federal construction contractors, payment and performance bond obligations in construction contracts with the federal government that exceed $150,000 should, typically, come as no surprise. However, what requirements should contractors expect from a contract that is ambiguous as to whether it is a construction contract, yet calls for construction-related services, but lacks explicit bonding requirement terms? Can bonding requirements be “read-in” to the contract? When should contractors raise such questions? This past November, the Federal Circuit addressed those questions in K-Con, Inc. v. Secretary of the Army, 908 F.3d 719 (Fed. Cir. 2018). This decision provides instrumental lessons contractors should keep in mind before submitting offers for projects that include construction-related services.

In September 2013, pursuant to solicitations issued under the General Services Administration eBuy system, the Army awarded K-Con, Inc. (K-Con) two task orders for pre-engineered metal buildings. Each contract was valued at over $150,000, and the contracting officer used the Standard Form 1449 Solicitation/Contract/Order for Commercial Items. Neither contract included express bonding requirements, nor FAR 52.228-15, which mandates payment and performance bonds in construction contracts exceeding $150,000. However, both contracts did include numerous construction-related tasks in the statement of work, required compliance with the Davis-Bacon Act, and contained CLINs that called for “construction of a new pre-fabricated metal building,” and “construct Telecom Hut D.” Therefore, it was unclear as to whether the contracts were commercial item contracts or construction contracts, and consequently, whether or not bonding requirements should have been included.

Despite this ambiguity, K-Con did not seek clarification before submitting its offers and assumed that it would not be required to obtain payment or performance bonds if awarded the contracts. However, shortly after the Army awarded the contracts to K-Con, it mandated that K-Con obtain both payment and performance bonds before it would issue a notice to proceed. It took K-Con two years to obtain the bonds, and at that time, the Army modified the contracts to compensate K-Con for the costs of the bonding fees. Several months later, K-Con submitted a request for equitable adjustment seeking compensation for its increased costs and labor incurred during the two years that it sought the bonds. The contracting officer ultimately denied the request in a final decision, and K-Con appealed to the Armed Services Board of Contract Appeals (ASBCA). Agreeing with the Army, the ASBCA found that the contracts were construction contracts in excess of $150,000, and, therefore, FAR 52. 228-15 was incorporated by operation of law. Consequently, K-Con was not entitled to additional costs associated with obtaining the payment and performance bonds.

K-Con appealed the ASBCA’s decision to the Federal Circuit, arguing that the contracts were commercial items contracts, not construction contracts, and therefore, were not required to have bonding requirements therein. It further argued that even if the contracts were construction contracts, FAR 52.228-15 should not be included by operation of law.

The first key takeaway for contractors in the K-Con decision is the Federal Circuit held that because the solicitations were patently ambiguous as to whether they were commercial items contracts or construction contracts, K-Con had an affirmative duty to inquire into this ambiguity before submitting an offer. Because it failed to do so, K-Con could not subsequently argue that its interpretation, over the Army’s, was correct. In other words, because the use of the commercial items solicitation form was facially inconsistent with the construction-related terms of the contracts, due to its failure to clarify this inconsistency, K-Con was precluded from arguing that the contracts were commercial items contracts as opposed to construction contracts. This is a keen reminder to contractors that it is imperative to seek clarification regarding ambiguous terms before submitting offers. Otherwise, contractors risk being bound by the government’s interpretation of the ambiguity and the resulting associated requirements.

The second key takeaway in K-Con is that the Federal Circuit held payment and performance bonding requirements found in FAR 52.228-15 were incorporated into the contracts by operation of law pursuant to the Christian doctrine. According to the Christian doctrine, clauses that are left out of a contract will be deemed incorporated if they are (1) mandatory, and (2) express a significant or deeply ingrained strand of public policy. The Federal Circuit found that bonding requirements are mandatory in construction contracts under both the Miller Act and the FAR. The Miller Act was first enacted in 1935, and the long legislative history thereafter consistently reflects Congress’ intent to both protect payment for subcontractors and suppliers who otherwise cannot obtain a mechanics lien on government property, as well as protect the government by ensuring contracts will be completed at no further cost if a contractor defaults. Consequently, payment and performance bonds in construction contracts are significant and deeply ingrained in public policy. Therefore, FAR 52.228-15 will be read into construction contracts where an agency otherwise fails to incorporate it.

In sum, Contractors should not assume that the absence of bonding requirements in a contract means that the contractor will not be obligated to obtain them later. K-Con is a warning that when in doubt as to what requirements a contract may or may not impose, it is essential to seek timely clarification from the agency.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

On December 3, 2018, the Department of Defense (DoD) issued a deviation from the FAR’s self-performance requirements, which applies to subcontracting limitations on contracts set aside for small businesses. Although the changes to subcontracting limitations were mandated by the 2013 National Defense Authorization Act (yes, 2013), implementation has been slow and piecemeal. The Small Business Administration (SBA) did not implement the changes until June 2016, and although the FAR Council recently issued a proposed rule that would bring the FAR into compliance, the FAR has not officially caught up. In the meantime, the discrepancy between the FAR and the SBA regulations has caused headaches for contractors who must decide whether to comply with the FAR, the SBA regulations, or both. The DoD’s deviation will bridge the gap for all DoD contracts until the FAR catches up.

The deviation, like the SBA regulations, contains two particularly notable features. First, it dramatically simplifies the self-performance requirements, giving contractors greater certainty when attempting to ensure compliance. The existing requirements in the FAR can be confusing because, like the old SBA regulations, they vary subtly depending upon the type of small business and the type of good or service being procured. For example, in an 8(a) set-aside for a services contract (except construction), 50% of the cost of personnel on the contract must be spent on the contractor’s employees. By contrast, a HUBZone set-aside for the same type of contract has the same requirement, but with the caveat that amounts paid to employees of other qualified HUBZone small businesses count toward the contractor’s requirement.

Like the SBA regulations, the DoD deviation simplifies the self-performance requirements in a couple of ways. First, although it maintains differences based on the type of good or service being procured, the deviation eliminates the differences based on the type of small business. So, for example, all procurements for services that are set aside for small businesses will have the same requirement regardless of which small business program is at issue.

Furthermore, the deviation makes a subtle but important conceptual shift from self-performance requirements to limitations on subcontracting. Instead of focusing on different variations on the cost of performance (e.g., cost of personnel, cost of manufacturing goods, etc.), the deviation restricts the percentage of the total award that can be passed on to subcontractors. For example, under a contract for services (except construction) that is set aside for any type of small business, the prime contractor cannot spend more than 50% of the amount awarded by the Government on subcontractors. For general construction set-asides, the prime contractor cannot spend more than 85% of the amount awarded by the Government (excluding the cost of materials) on subcontractors. Again, these apply regardless of which type of small business program is at issue.

The second notable change to the self-performance requirements under the DoD deviation is that subcontracts with “similarly situated entities” are not counted toward the subcontracting limit. In other words, similarly situated entities are treated as if the prime contractor is performing the work. To be considered a “similarly situated entity,” a subcontractor must:

  1. Be a first-tier subcontractor
  2. Have the same small business program status as the prime contractor
  3. Be considered small for the NAICS code the prime contractor assigned to the subcontract

This allowance for subcontracts with similarly-situated entities should give prime contractors greater flexibility to take on larger projects without compromising the goal of ensuring that funds designated for small businesses end up in the hands of small businesses.

In sum, the DoD’s recent deviation from the FAR will bring its contracts in line with the SBA regulations and the 2013 NDAA. In addition to eliminating confusion about differences between the FAR and SBA regulations, it greatly simplifies small business contractors’ compliance obligations and provides them greater flexibility in meeting those obligations.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

On November 27, 2018, the U.S. General Services Administration (GSA) announced that it will consolidate the GSA’s 24 Multiple Award Schedules (MAS) into a single schedule for products and services. The GSA stated that the changes were intended to “modernize federal acquisition” and “make the government buying and selling experience easy, efficient, and modern.”

Through the MAS, also referred to as the GSA Schedules and Federal Supply Schedules, the GSA establishes long-term, government-wide contracts with commercial firms. Approximately $31 billion is spent through MAS each year on a wide variety of supplies and services. Prior to the announced changes, the GSA maintained 24 separate MAS organized by industry or service ranging from IT Procurement (Schedule 70) to Sports Equipment, Signs and Trophies (Schedule 78). Under that preexisting framework, a vendor selling a variety of supplies and/or services to the government was often required to participate in multiple schedules that each included their own terms and conditions. As a result of the announced changes, and the corresponding consolidation of all MAS into a single schedule, all contractors will be able to sell their products and services through a single program with a uniform set of terms and conditions.

The GSA has not yet issued a definitive timeline for the implementation of the announced consolidation but indicated that it intends to use a phased approach over a two-year period. During the first phase, slated to be implemented in 2019, contractors will be able to sell through their existing MAS contracts, while newly executed contracts will be established using the new consolidated schedule. During the second phase, all contracts, including those established under the prior system, will be moved onto the consolidated schedule.

The phased implementation should be beneficial to both MAS buyers and sellers, as there are a number of outstanding questions that must be resolved, particularly before phase two of the consolidated is implemented. For contractors with existing MAS contracts, it is not yet clear what terms and conditions will apply when the existing MAS contracts are moved into the consolidated schedule. Similarly, it is not clear how the expiration dates for each existing contract will apply under the consolidated MAS. For companies that are certified as small or disadvantaged businesses, questions remain about the need to recertify to obtain a new MAS contract or transition an existing MAS contract into the consolidated system.

We will provide updates as additional details are announced.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

When an agency decides to set aside an acquisition for participation only by small businesses, certain subcontracting limitations apply to the small business awardee. For construction contracts, the small business contractor cannot pay subcontractors more than 85% of the amount they receive from the agency. For service and supply contracts, the small business contractor cannot pay more than 50% of the amount paid to it by the agency to other entities that are not similarly situated. Work performed by similarly situated entities is not considered in determining if the limitation on subcontracting is violated. A similarly situated entity is defined as a small business subcontractor that is a participant of the same small business program as the prime contractor and is small for the NAICS code assigned by the prime contractor to the subcontract.

There is a lot of confusion regarding the current state of the law when it comes to limitations on subcontracting. This is largely because the FAR’s limitations on subcontracting provisions have not been updated to correspond with the statutory changes that were made by Congress in the FY 2013 NDAA. The FY 2013 NDAA changed the way that compliance with the limitations on subcontracting provisions is calculated, shifting from formulas that were based on the cost of contract performance (cost of personnel and cost of manufacturing) to formulas that are based on the amount paid by the agency. This confusion is compounded by the fact that the SBA’s new regulation, which incorporates and implements the statutory changes, went into effect on June 30, 2016.

In a recent bid protest, the GAO had an opportunity to address the limitations on subcontracting issue head on but instead elected to deny the protest, as being a matter of contract administration, without first clarifying whether the FAR or the SBA regulation governs. In that case, the GAO issued a decision suggesting that the changes implemented by the SBA regulation took precedence over the FAR despite the fact that the service contract in question contained FAR 52.219-14, which expressly points to the total cost of contract performance and not the total amount paid by the agency. Specifically, when discussing the awardee’s Management Approach, the GAO noted, “[t]he agency explains that since the value of the contract awarded to OSC was $44,290,359, OSC’s proposal indicated that it would perform 56.5 percent of the required effort with its own employees, which is compliant with the limitations on subcontracting clause.” This language clearly shows that both the agency and the GAO applied the new limitations on subcontracting formula, which considers the amount paid by the agency, instead of the old formula, which considers the cost of personnel. Synaptak Corporation, Inc., B-415917.5, B-415917.6, Sept. 24, 2018.

The entire GAO decision can be found here.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

By law, a GAO protest must be filed by an interested party. An interested party is an actual or prospective bidder or offeror whose direct economic interest would be impacted by the award of a contract or by the failure to award a contract. Before bid opening or the closing date for receipt of proposals, a protestor must be a prospective bidder or offeror with a direct economic interest in the procurement. This generally means that a bidder or offeror has expressed an interest in competing and is capable of performing the type of work that the solicitation requires. After bid opening or the submission of proposals, a protestor must be an actual bidder or offeror with a direct economic interest in the procurement. This generally means a bidder or offeror who would be in line for award if the protest were sustained. A protestor who cannot receive an award if it prevails on the merits of its protest is not an interested party. In some cases, a high-priced bidder might be able to demonstrate that all lower-priced bidders are ineligible for award, thus becoming the next-in-line for award. In a “best value” negotiated procurement, the GAO determines whether a protestor is an interested party by examining the probable result if the protest is successful. This means that an actual offeror, who is not in line for award, is an interested party if it would regain the opportunity to compete if the protest is sustained.

After establishing that it is an interested party, a protestor must also demonstrate prejudice to prevail on the merits of its bid protest. To meet this requirement, a protestor must show that if not for the agency error, there existed “a substantial chance” that the offeror would have been awarded the contract. The GAO will typically resolve any doubts regarding prejudice in favor of the protestor since a reasonable possibility of prejudice is a sufficient basis for sustaining a protest.

A recent GAO decision highlights the distinction between jurisdiction and prejudice. More specifically, this decision shows how a protester, who is not in line for award, can still be an interested party for jurisdictional purposes even if the same facts clearly establish that the protester was not prejudiced by the agency’s actions.

In Olympus Building Services, Inc. (Olympus), the GAO denied a protest filed by Olympus concluding that the protester was not prejudiced by the agency’s evaluation because its proposal was not among the highest-rated for the most important non-price factors. In that case, Olympus protested the award of a custodial services contract by the Department of Agriculture alleging that the agency misevaluated the solicitation’s non-price factors of its proposal and the proposal of the awardee. The GAO found that the Department of Agriculture properly evaluated the individual non-price factors, but erred in its overall evaluation of the proposals because it treated all of the non-price factors as being equal while the solicitation listed them in descending order of importance. The GAO concluded, however, that Olympus did not suffer prejudice because its higher-priced proposal was rated lower than the awardee’s proposal in four of the eight non-price factors (including the two most important factors). Additionally, Olympus was rated lower than the second-in-line offeror in four of the eight non-price factors (including the most important factor). As such, the GAO found that Olympus was not prejudiced by the agency’s error because there wasn’t a substantial chance that Olympus would have been awarded the contract if the error were corrected. Although the GAO never specifically addresses the jurisdictional issue, this opinion does an excellent job of showing the difference between what it means to be in-line for award as it relates to jurisdiction; i.e. regaining the opportunity to compete, versus in-line for award as it relates to prejudice. Olympus Building Services, Inc., B-416599.3, Oct. 24, 2018.

The entire GAO decision can be found here.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

A bid protest must allege a violation of a procurement statute or regulation. Although most protests challenge the award or proposed award of a contract, the GAO will also consider protests involving defective solicitations and other unreasonable agency actions like the cancellation of a solicitation. In certain cases, the GAO will consider protests involving the termination of a contract where the protest alleges that the government’s termination was based upon improprieties associated with the contract award (this is sometimes called a “reverse protest”). Additionally, the GAO will consider protests concerning (1) awards of subcontracts by or for a Federal agency, (2) sales by a Federal agency, or (3) procurement actions by government entities that do not fall within the strict definition of Federal agencies, if the agency or entity involved has agreed in writing to allow the GAO to decide the dispute.

In a recent decision, the GAO dismissed a bid protest filed by LS3 Inc. because the protester did not identify any statute or regulation that the agency violated. In that case, the protester alleged that the Department of Labor unreasonably delayed completing its corrective action in response to a previous protest filed by LS3 Inc. The protester argued that the agency’s corrective action was unreasonably delayed however, it did not identify any violation of a procurement law or regulation by the agency. The GAO dismissed the protest because the protester failed to allege any improper agency action and could point to no rule requiring an agency to complete corrective action by any set time. The case reaffirms long-standing GAO precedent that a protester must have a cognizable basis for its protest. LS3 Inc., B-415635.2, Nov. 2, 2018.

The entire GAO decision can be found here.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The Department of Defense (DoD) enhanced post-award debriefing requirements, contained in Section 818 of the National Defense Authorization Act for Fiscal Year 2018 (NDAA), have been a large topic of conversation this past year. In January 2018, our Government Contracts team detailed the specifics of these new requirements, which includes, among other things, the mandatory question and answer period for debriefings. On March 22, 2018, DoD issued a class deviation letter titled “Enhanced Post-award Debriefing Rights,” (Enhanced Debriefing Rules) which implements the question and answer period requirements. Notably, however, the Enhanced Debriefing Rules do not address the other new requirements in Section 818 of the NDAA, such as those involving the release, under certain circumstances, of redacted source selection award determinations.

The DoD’s Enhanced Debriefing Rules provide that “in accordance with [FAR] 15.506(d), contracting officers shall include in the debriefing information provided to unsuccessful offerors an opportunity to submit additional questions related to the debriefing within two business days after receiving the debriefing.” If an offeror timely submits additional questions, the agency must provide written responses within five days, and the debriefing is not concluded until the agency delivers the written responses. Additionally, the Enhanced Debriefing Rules state that the agency will suspend performance or terminate an awarded contract when a protest is filed at the GAO five days after a debriefing date and no additional questions are raised, or five days after the agency provides written responses to an unsuccessful offeror’s submitted questions related to the debriefing.

The new timelines initially appeared to be pretty straightforward. However, as evidenced by the GAO’s recent decision, State Women Corp., B-416510, July 12, 2018, 2018 CPD ¶ 240, certain questions remained to be answered. State Women Corporation (SWC), an unsuccessful offeror for a two-phase design-build procurement administered by the United States Army Corps of Engineers (USACE) under FAR parts 15 and 36, received a written debriefing letter on May 28, 2018. In that letter, the contracting officer informed SWC that pursuant to the Enhanced Debriefing Rules, SWC had two days to submit additional questions related to the debriefing. SWC took advantage of this opportunity and timely submitted additional questions. On June 1, 2018, USACE provided SWC a written response to those questions and indicated that “the debrief is hereby concluded.” However, rather than file a protest at the GAO, SWC submitted additional follow up questions to USACE several days later. Interestingly, USACE responded to this second set of debriefing questions on June 20, 2018. SWC filed a protest at the GAO on June 24, 2018, arguing that the protest was timely because it was filed within five days of receiving the second round of written responses. USACE and the GAO disagreed.

According to GAO’s strict regulations on timeliness, protests must be filed within ten days “after the basis of protest is known or should have been known. . . with the exception of protests challenging a procurement conducted on the basis of competitive proposals under which a debriefing is requested, and when requested, is required.” When a required debriefing is requested, a protest must be filed within ten days from when the debriefing was held. Thus, the GAO in State Women Corp. considered whether the debriefing closed on June 1 – the date that USACE provided written responses to SWC’s first round of debriefing questions – or on June 20 as SWC argued. Although USACE responded to SWC’s second round of debriefing questions, the GAO found that nothing in FAR 15.506(d) or the Enhanced Debriefing Rights entitles unsuccessful offerors to multiple rounds of post-award debriefing questions. The GAO also noted that USACE’s June 1 responses unambiguously stated that debriefing had concluded upon providing those responses. Thus, the debriefing concluded on June 1, despite USACE answering SWC’s second round of debriefing questions at a later date. Therefore, the time for submitting a timely protest to the GAO began to run from June 1.

USACE also argued that the Enhanced Debriefing Rules mandated that unsuccessful offerors could not file a protest at the GAO any later than five days after receiving written responses to debriefing questions, irrespective of the GAO’s timeliness rules. Rejecting this argument, and clarifying that the GAO’s timeliness rules had not been modified, the GAO held that SWC had ten days, not five, from June 1 to timely file its protest. The GAO explained that the five day timeline referenced in the Enhanced Debriefing Rules reflects the agency’s mandatory stay obligations under the 2018 NDAA’s change to the Competition in Contracting Act (CICA). The agency is now required to implement a mandatory stay if the unsuccessful offeror files a protest at the GAO within five days after receiving the agency’s written responses to submitted debriefing questions. While SWC would not have benefited from a mandatory stay if it filed its protest after June 6, pursuant to the GAO’s timeliness rules, it had until June 11 to timely file its protest.

Consequently, State Women Corp. provides useful guidance on filing deadlines to those contractors taking advantage of the enhanced debriefing opportunities.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Disputes frequently arise because the government refuses to agree that a contractor is entitled to additional money or time resulting from constructive changes, differing site conditions, government-caused delays, or countless other reasons. These disagreements typically are dealt with through the submission of Requests for Equitable Adjustment (REAs) or certified claims and are ultimately resolved through the disputes process. They focus on the rights of the parties under the specific terms of the contract. The problem, however, is that contractors also incur costs because of government indecisiveness that has not yet generated an REA or claim under a particular contract clause. This places the contractor in a state of limbo, not knowing whether there will be a significant impact to the project.

The failure to promptly review and determine the acceptability of a submittal, respond to a Request for Information (RFI), or to review a shop drawing can have a significant impact on the cost and time of performance. As esteemed Professor Ralph Nash once observed, “indecision by the government can be very costly” and the “ball is in the government’s court” when a contractor puts the government on notice of a problem, submits a document for approval, or requests additional information. Nash & Cibinic Report, February 1988, Vol. 2, No. 2. Particularly frustrating are those situations where the government is guilty of lethargy or fails to act because necessary funding is not yet available. This causes the contractor to finance project performance to an extent that it could not have reasonably anticipated at the time of bidding.

To increase the chance of getting paid in a timely manner, contractors should diligently document the time lost and cost incurred as the result of government indecision. The government’s contracting and field personnel must be provided with prompt notice of the impact of the government’s failure to act with specific reference to the possibility that a claim might result. Above all, government representatives must be reminded that contractors are not bankers and they are not in the business of providing financing for the additional costs that arise because of government inaction or indecision.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Over the past couple of months, we have had several clients contact us to discuss issues involving Organizational Conflicts of Interest (OCIs). In each case, it seemed like there was some confusion either by the government, the contractor, or both, regarding what amounted to a conflict of interest and how having one could impact contract performance. In most cases, we were able to work with the contracting officer and develop a mitigation plan to avoid, neutralize, or mitigate each OCI successfully. This blog post will cover the basics about OCIs and discuss some ways that contractors can work with the government to mitigate them.

An OCI occurs when a contractor’s performance on one government contract may compromise its ability to perform on another government contract or may compromise its ability to compete for a government contract in a fair way. The Federal Acquisition Regulation (FAR) defines an OCI as a situation where “because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.” FAR 2.101. Contracting agencies are responsible for determining whether an actual or apparent conflict of interest exists. If a conflict of interest does exist, it can lead to the contractor being excluded from a contract competition, having an existing contract terminated, and, in some cases, it can even lead to the contractor being suspended or debarred from performing on future federal government contracts. As such it is imperative that contractors avoid actual or apparent conflicts of interest at all costs.

Organizational Conflicts of Interest fall into three categories:

  1. Unequal Access to Information: This type of OCI occurs when, as part of its performance on a government contract, a contractor has access to non-public information that may provide the contractor with a competitive advantage in a competition for a different government contract. Non-public information includes proprietary information and non-public source selection information. To constitute an OCI, it is sufficient that the offeror has access to the information; actual use of that information does not need to be shown. For there to be an unequal access to information OCI, the information must be real, substantial, completely useful, and non-public. The mere fact that a contractor is the incumbent will not, by itself, create an OCI. Contractors should be aware that the actions or knowledge of a subcontractor or other team member can create an OCI. This is especially true when the subcontractor or team member is a former government employee. In cases where non-public information is obtained from a former government employee, the issue will be treated as if the information had been obtained under a government contract.
  2. Impaired Objectivity: This type of OCI occurs when the nature of a contractor’s work under one government contract could give it the opportunity to benefit on other government contracts. If the contractor is using subjective judgment or giving advice, and its other business interests could be affected by the judgment or advice, its objectivity may be impaired. For example, if a contractor were to have an opportunity to evaluate itself, an affiliate, or a competitor, either through assessment of its performance under another contract or the evaluation of proposals, this could constitute an impaired objectivity OCI. The issue is not whether the biased advice was actually given but whether a reasonable person would find that the contractor’s objectivity could have been impaired. Some relationships, however, are too remote to create an impaired objectivity OCI. Additionally, some tasks are too ministerial to give the contractor an opportunity to act in other than the government’s interest.
  3. Biased Ground Rules: This type of OCI occurs when as part of its performance on a government contract, a firm has helped set the ground rules for the procurement of another government contract. For example, if a contractor were to write the statement of work or specifications for a government contract, or help establish the evaluation criteria, this could constitute a biased ground rules OCI if the contractor were to subsequently submit a proposal for that contract. The primary concern is that the contractor could tilt the competition in its favor, either intentionally or not.

As noted above, contracting agencies are responsible for determining whether an actual or apparent conflict of interest exists. FAR 9.5 requires contracting officers to identify and evaluate potential OCIs as early in the contracting process as possible. Contracting officers are required to avoid, neutralize, or mitigate potential significant conflicts of interest to prevent an unfair competitive advantage or the existence of conflicting roles that might impair a contractor’s objectivity. Although FAR 9.5 is directed principally at the government, contractors also share some of the same responsibilities. Taking these responsibilities into account contractors should seek to identify actual and potential OCIs, both proactively and in response to inquiries from the contracting officer. Contractors should also actively communicate with the contracting officer to agree upon ways to avoid or mitigate potential OCIs.

Contracting officers are required to reasonably consider any mitigation plan that is submitted by a contractor who could potentially be excluded from a competition because of an OCI. In most cases, it is not possible to mitigate an OCI after the fact, so any mitigation plan must address prospective OCIs. In general, the Government Accountability Office (GAO) and Court of Federal Claims (COFC) will give substantial deference to an OCI mitigation plan, as long as the contracting agency has thoroughly investigated and resolved the conflict of interest, and the plan is appropriately tailored to the specific situation.

Some factors to consider when developing an OCI mitigation plan include:

  1. Unequal Access to Information: This type of OCI can be mitigated by establishing a firewall, or a combination of procedures and security measures that block the flow of information between contractor personnel who have access to non-public competitive information and other contractor employees who are preparing the proposal. The potential competitive advantage resulting from the unequal access will be nullified if the information cannot cross the firewall to be used in a competitive procurement. Another way to mitigate this type of OCI is to share the information with all competing offerors so that all offerors are on a level playing field.
  2. Impaired Objectivity: This type of OCI can be mitigated by de-scoping an existing contract to exclude the performance of certain work by a contractor, or even removing a conflicted subcontractor from the contract. In some cases, impaired objectivity OCIs can be mitigated by having certain work performed by a firewalled subcontractor or the government itself. This type of OCI can also be mitigated through increased government oversight that limits the amount of independent judgment and analysis required by the contractor for performance.
  3. Biased Ground Rules: This type of OCI is difficult to mitigate because once a contractor has influenced the statement of work, specifications, or evaluation criteria the harm has already been done. Looking forward, if a contractor is interested in a potential future opportunity, it should avoid any current opportunities that could create an OCI. A contractor can do this by refraining from submitting a proposal for certain contracts, or by entering into a contract that allows it to recuse itself from any work that might create a potential future conflict.

If a contractor is not able to successfully mitigate an OCI, it should consider asking the government for a waiver. In most cases, the government has the unilateral right to waive an OCI requirement if it determines that a waiver is in the government’s best interests. This usually occurs after the government has thoroughly investigated the conflict of interest and determined that the benefit to the government outweighs the risk of harm.

If you have any questions about what an OCI is or how you can work with the contracting officer to develop a successful mitigation plan, please contact our Government Contracting Group. We will also be hosting a webinar on the basics of OCI’s on Thursday, November 1. Register today!

Read Full Article

Read for later

Articles marked as Favorite are saved for later viewing.
close
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview