The Interagency Suspension and Debarment Committee (ISDC) recently released its annual report to Congress regarding suspension and debarment across the federal government in FY 2019.  The report serves as a yearly reminder that while selling to the federal government – the largest purchaser of goods and services in the world – may present tremendous opportunities, it is not without risk or obligation.  As Justice Holmes stated in Rock Island, Arkansas & Louisiana R.R. Co. v. United States, 254 U.S. 141, 143 (1920), people “must turn square corners when they deal with the Government.”  Those that don’t may lose access to the federal marketplace altogether, a loss that can prove fatal to companies that are heavily reliant on government contracts or grants.

Overview of ISDC Report

The ISDC report, which is available here, shows that while the total number of actions nearly doubled over the last decade, the number of proposed debarments and debarments continues its steady decline that began in FY 2014.  While this might suggest that agencies are utilizing this administrative tool less frequently, a closer analysis of the report shows that is not the case.

In fact, the number of referrals to suspending and debarring officials (SDOs), as well as the number of suspensions, increased significantly from FY 2018 to FY 2019: referrals were up from 2,441 to 2,806 and suspensions increased from 480 to 722, due in large part to increased activity by the Air Force, the EPA, and the Department of Labor.  This uptick is likely the result of a multi-year effort to educate contracting officials about the importance of referring contractors to SDOs when their conduct indicates either serious poor performance or a lack of business honesty or integrity such that excluding them from the federal marketplace to protect the government from potential harm might be appropriate.

Continue Reading Annual Suspension and Debarment Report Serves as a Reminder to “Turn Square Corners” When Dealing with the Government

On February 1, the U.S. Commerce Department, Bureau of Industry & Security (BIS), announced a settlement (available here) with Princeton University in connection with 37 alleged violations of the Export Administration Regulations (EAR).  The EAR are the main regulations that govern exports of commercial goods, software and technology; BIS has principal responsibility for administering and enforcing the EAR.

The settlement is a valuable reminder of the amount of export-controlled activity that takes place at and involving universities, academic medical centers, and other research institutions.  Penalties for export violations can be significant.  Legal departments, compliance departments, and offices of sponsored research therefore must ensure that faculty – many of whom may be non-U.S. nationals – are aware of their responsibilities under U.S. export law.

Alleged Violations

According to BIS, the violations occurred when Princeton exported strains and recombinants of animal pathogen to non-U.S. research institutions.  These items are controlled for export for chemical and biological reasons, and thus an export license is required to make the exports.  Princeton did not obtain the necessary export licenses.

Continue Reading Princeton Penalized for Alleged Research-Related Export Violations

The U.S. Court of Federal Claims (COFC) decision in HWI Gear, Inc. v. United States highlights the importance of reviewing a solicitation to determine if the text of Federal Acquisition Regulation (FAR) 52.219-28 is included in it, as well as the risk of engaging in corporate transactions while a proposal to a procuring agency is pending. In this case, the COFC held that an offeror was required to recertify its size status during a procurement, and the agency’s failure to enforce this requirement invalidated the award.

In HWI Gear, Mechanix Wear, Inc. (Mechanix) and HWI Gear, Inc. (HWI) submitted proposals in response to a solicitation set aside for small businesses. After proposal submission but before award, Mechanix informed the procuring agency that it had changed its corporate structure from a corporation to a limited liability company and changed its corporate name, but that all other terms and conditions in its proposal remained unchanged. Mechanix, however, did not inform the agency that its change in corporate structure was the result of a merger with a large business and that Mechanix no longer qualified as a small business under the size standard established for the procurement. The agency ultimately selected Mechanix as the awardee, and HWI filed a bid protest challenging the agency’s evaluation.

Continue Reading Size Recertification Prior to Award – When is it Required?

I’m looking forward to participating in a panel session at the 2021 Tennessee Procurement Opportunities Conference presented by the Tennessee Procurement Technical Assistance Center (PTAC) and Tennessee Small Business Development Center. I will join other industry panelists for a discussion focusing on best practices for teaming in government contracting.

The program will also feature:

  • Judy Bradt (Amazon #1 Bestselling Author & Speaker) on how to “Win your meeting and get invited back!”
  • Discussions about contracting opportunities and how to do business with the NASA Marshall Space Flight Center.
  • NASA prime contractors who will discuss upcoming opportunities.
  • Matchmaking opportunities with local, state, and federal agencies and prime contractors.

The conference will be held over a virtual platform on Tuesday, January 26, 2021 from 9:00 a.m. – 3:00 p.m. For more information and registration, please visit the event website. Feel free to email me and let me know that you’ll be attending.

In recent months, the U.S. Department of Justice (DOJ) and Securities & Exchange Commission (SEC) have announced several notable penalties for violations of the U.S. Foreign Corrupt Practices Act (FCPA).  The FCPA prohibits bribery of foreign government officials and requires issuers of securities on U.S. exchanges to keep and maintain accurate books and records and robust internal controls.

We have summarized a few of these enforcement actions below to serve as a reminder of the various ways in which companies can fall afoul of the FCPA.

Goldman Sachs Pays Largest-Ever FCPA Penalty

In October 2020, Goldman Sachs Group Inc. (Goldman Sachs) agreed to a $3.3 billion penalty to resolve allegations that the company and its Malaysian subsidiary violated the FCPA by making payments to a Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB).  This represents the largest-ever FCPA penalty imposed on a company.

The DOJ and SEC alleged that senior employees of Goldman Sachs used a third-party intermediary to bribe high-ranking government officials in Abu Dhabi and Malaysia.  The improper payments were allegedly made by Goldman Sachs to assist with efforts to obtain business from 1MDB.

Continue Reading FCPA Update: Enforcement Continues

Last month, the U.S. Court of Appeals for the Federal Circuit’s (Federal Circuit) opinion in The Boeing Co. v. Secretary of the Air Force shed additional light on the technical data rights of contractors under defense contracts. The decision hinges on the fact that technical data provided by a contractor to the government remains the property of the contractor. Additionally, contractors retain certain rights in connection with technical data even when the government has so-called “unlimited rights” to use it.

Case Background

In this case, Boeing held two contracts with the U.S. Air Force (USAF) for work on the F-15 Eagle Passive/Active Warning Survivability System. The contracts included the requirement for delivery of technical data to the USAF with Unlimited Rights and the DFARS 252.227-7013, non-commercial technical data rights clause (Subsection 7013). The parties did not dispute that Boeing retained ownership of technical data delivered to the USAF under the contracts, but Boeing contended that its legends on the technical data were intended to protect its rights as they pertained to third parties. Namely, putting third parties on notice of the proprietary nature of the data and directing that “Non-US Government Entities May Use and Disclose Only As Permitted In Writing By Boeing Or By The US Government.” The USAF rejected the data deliverables marked in this manner, finding them nonconforming and Boeing requested a final Contracting Officer’s decision on the matter.

The Contracting Officer’s final decision confirmed that the USAF was correct in rejecting the legends and directed Boeing to correct them. Boeing appealed the decision to the Armed Services Board of Contract Appeals (ASBCA) on the ground that Boeing’s legend was “not nonconforming” under Subsection 7013(f) since its legend did not address restrictions on government rights, only third-party rights. The ASBCA, ruling on the motion for summary judgment, disagreed, siding with the USAF’s position that only the legends listed in Subsection 7013(f) are authorized and Boeing’s legend was not one of those. Boeing appealed this decision to the Federal Circuit.

Continue Reading Federal Circuit Confirms DoD Contractor’s Expanded Restrictions on Non-Government Parties Rights in Data

In October, the U.S. Small Business Administration (SBA) published a final rule entitled “Consolidation of Mentor-Protégé Programs and Other Government Contracting Amendments,” which went into effect on November 16, 2020. This final rule merges two existing mentor-protégé programs, revises SBA’s affiliation rules, and makes other technical changes to clarify SBA’s size requirements for contractors. Contractors of all sizes should review this sweeping final rule for any changes that may impact them. Here, we present some of the most significant changes this final rule implements.

Merger of SBA’s 8(a) Mentor-Protégé Program into the All-Small Mentor-Protégé Program

SBA’s first mentor-protégé program was created in 1998 solely for 8(a) small businesses. The goal of the program was to pair SBA-approved experienced businesses (mentors) with SBA-approved 8(a) small businesses (protégés) to help them develop. Mentors and protégés were able to form joint ventures to compete for contracts and, importantly, were not subject to SBA’s affiliation rules. This affiliation exception is important because SBA’s regulations require a small business to count its annual receipts or employees, plus the annual receipts or employees of each affiliate when determining its size status. Waiving this requirement for mentors and protégés allowed them to be awarded contracts they might have otherwise been ineligible for because of affiliation rules.

In October 2016, SBA created the All-Small Mentor-Protégé Program (ASMPP) to expand the mentor-protégé program beyond 8(a) small businesses to include all small businesses, including women-owned small businesses, service-disabled veteran-owned small businesses, and Historically Under-Utilized Business Zone small businesses. The ASMPP program possessed similar benefits as SBA’s 8(a) mentor-protégé program, including the ability to form joint ventures and the exception to affiliation rules. The ASMPP has been very popular, with more than 1,200 active mentor-protégé agreements currently in existence under the program. Because of ASMPP’s success and the overlap that exists between ASMPP and SBA’s 8(a) mentor-protégé program, the final rule eliminated the 8(a) mentor-protégé program and merged it into ASMPP in its latest final rule.

Continue Reading Bye Bye 8(a) MPP and Hello to New Small Business Rules!

On September 24, the Government Accountability Office (GAO) denied DynCorp International, LLC’s (DynCorp) protest of the Department of the Army’s award of a global intelligence logistics support task order to CACI Technologies, Inc. (CACI, Inc.). DynCorp alleged that the award was improper, citing the fact that CACI, Inc. no longer existed as a corporate entity. Additionally, DynCorp challenged the Department of the Army’s evaluation of the proposals submitted. The GAO rejected both of DynCorp’s arguments and found the task order’s award to CACI, Inc. proper.

Conversion to Limited Liability Company Affects Bid

While the GAO’s decision has the familiar discussion regarding the weight and comparison of proposal elements, its examination of CACI, Inc.’s corporate entity change and how that affects the bid process is particularly noteworthy as the Federal Acquisition Regulation (FAR) is silent on this issue. In this case, CACI Technologies, Inc. was awarded a GISS IDIQ contract in September 2014 under the CAGE code 8D014. On December 31, 2017, CACI Technologies, Inc. converted to CACI Technologies, LLC (CACI, LLC) while retaining the same CAGE code as the former entity.

After the conversion to a limited liability company, CACI, LLC worked with the Defense Contract Management Agency (DCMA) to effect a name change, per FAR 42.1205. CACI, LLC reached an agreement with DCMA on the terms of a conversion and name change by March 2018, but the agreement was not approved and finalized by DCMA until April 2020. In the interim between CACI, LLC’s conversion and when DCMA approved the name change and conversion, CACI, LLC bid on the Department of the Army contract at issue.

Continue Reading Now You See Me, Now You Don’t: What Happens When a Bidder’s Corporate Entity Changes during a Bid?

This is a continuation of our series addressing ways companies can protect themselves during government enforcement actions related to COVID-19. For more information, see our previous articles focused on general corporate best practicesthe health care industry and public companies.

The economic disruptions wrought by the COVID-19 pandemic have been particularly acute for government contractors. State quarantine measures and the closure of both contractor and government worksites meant many contractors were unable to perform ongoing contracts, thus risking a lapse in payment and the need to lay off or furlough workers. To mitigate this risk, Congress passed §3610 as part of the March 27, 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act). That brief provision gives federal agencies authority to reimburse contractors for paid leave to employees who are unable to work due to the pandemic. The Department of Defense (DoD)—which obligated by far the most funds pursuant to §3610—has issued guidance, instructions, and regulations clarifying eligibility for relief and the procedures contractors must follow in order to be reimbursed. Eligible contractors should be mindful of this guidance, summarized below, and carefully monitor ongoing developments.

Section 3610: the Legislative Language

Section 3610 of the CARES Act gives agencies discretion (which they are not required to exercise) to “reimburse, at the minimum applicable contract rates (not to exceed an average of 40 hours per week) any paid leave, including sick leave, a contractor provides to keep its employees or contractors in a ready state” between January 31, 2020 through Sept. 30, 2020—which Congress recently extended to Dec. 11, 2020. Importantly, the maximum reimbursement authorized under §3610 must be reduced by the amount of credit a contractor is allowed under the Family and Medical Leave Act or any applicable credits a contractor already receives under the CARES Act. Beyond these general principles, the legislative language leaves much of the detail to be worked out by individual agencies. For example, the legislation authorizes agencies to reimburse at the “minimum applicable contract billing rates,” a term that is not defined, but only if the employees cannot perform work at a site that has been “approved by the Federal Government” without guidance on what such approval entails.

Continue Reading Important Considerations for DoD Contractors Seeking Relief Under §3610 of the CARES Act

Two recent enforcement actions taken by the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) serve as a reminder of the long-arm and broad scope of U.S. economic sanctions jurisdiction.  (Separately, perhaps nothing illustrates the breadth of OFAC’s purview as well as the agency’s recent Advisory on Potential Sanctions Risks Arising from Dealings in High-Value Artwork.)  OFAC is the main U.S. government agency that administers U.S. sanctions.

Berkshire Hathaway Agrees to Settlement for Violations of U.S. Sanctions on Iran

On October 20, 2020, OFAC announced a settlement with Berkshire Hathaway related to alleged violations of U.S. sanctions on Iran committed by Berkshire’s Turkish subsidiary.  Berkshire is the multinational holding company headed by billionaire Warren Buffett.

According to OFAC, Berkshire’s Turkish subsidiary made 144 shipments of cutting tools and related products to Turkish distributors with knowledge that the goods would be shipped on to Iran.  The products were valued at approximately $383,000.

Continue Reading OFAC Enforcement Update: November 2020