The Civilian Board of Contract Appeals (CBCA) recently examined a potential conflict between the federal Copyright Act and the Contract Disputes Act (CDA) to determine its jurisdiction over a claim arising from a Federal Supply Schedule (FSS) contract delivery order. The decision provides analysis of the preemption doctrine and a discussion of how the CBCA determines its own jurisdiction. . .
Contractors should note that earlier this month the Under Secretary of Defense for Acquisition and Sustainment (USDAS) directed the Defense Contract Management Agency (DCMA) to develop a way for more efficient implementation of government cybersecurity requirements under Defense Federal Acquisition Regulation Supplement (DFARS). . .
In the final installment of our two-part series, we continue our discussion of the most important recent False Claims Act decisions and what we predict will be their implications for FCA jurisprudence in the coming months. See part 1 here.
Multiple FCA Defendants: Group Pleading and Conspiracy Theories
This happens more and more, especially with the rise of individual defendants being named in FCA suits: a number of defendants are accused of perpetrating a single scheme. As they move separately for dismissal or summary judgment, the question becomes: What must be pled or proven as to each defendant?
U.S. ex rel. Silingo v. WellPoint Inc.[1] was brought by a former compliance officer at a home-health contractor which managed risk-adjustment data for several Medicare advantage organizations. All were named defendants. The district court had dismissed the relator’s complaint against the MAOs for impermissible “group pleading.”
It was another year of interesting developments under the federal False Claims Act.[1] Based on our collective decades of experience investigating and litigating these cases at all stages, we compile below what we view as the most important recent developments and the implications of these decisions for FCA jurisprudence in the coming months.
U.S. Supreme Court Takes Up FCA Statute of Limitations
An FCA plaintiff only has six years to bring her case, except that she will get three years after “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,” even if that means more than six years after the action accrues, but only to a maximum of 10 years.[2]
This is one of several FCA provisions born of a simple idea but ambiguously drafted. Although the three-year provision maps easily onto a case brought by the government, what about qui tam cases brought by relators? May they avail themselves of the provision?
On Monday, Jan. 7, 2019, the U.S. Supreme Court denied certiorari in two major False Claims Act cases. Though factually distinguishable, both cases involve the government’s knowledge or suspicion of the regulatory or contractual violations alleged to have resulted in knowingly false claims.
The Afghan Ministry of Finance (MoF) has for years sought to impose income taxes, customs duties, or similar charges on all U.S. Government (USG) contractors operating in Afghanistan. Many contractors have avoided paying their tax bills (or even dealing with the MoF) due to ambiguity about their legality and reimbursability under USG contracts, resulting in a build-up of assessed back taxes and penalties. Recently, the Afghan MoF has offered an amnesty program that substantially lessens penalties for contractors willing to pay their outstanding tax bills. Many contractors are now facing an immediate decision as to whether it is time to finally address these legal questions. For years, the USG and the Afghan government disagreed over the taxation of USG contractors. The Afghan government initially sought to impose taxes on all USG contractors, whether acting as primes or subs. Over time, USG agencies succeeded in entering into bilateral agreements with the Afghan government to provide tax exempt status for certain classes of contractors. This ad hoc approach added to the confusion over the applicability of MoF taxes. The Department of Defense (DoD) early on entered into a Military Technical Agreement (MTA) between the International Security Assistance Force and the Interim Administration of Afghanistan and the NATO-Afghanistan Status of Forces Agreement (SOFA). DoD took the position that the MTA granted tax exempt status for all contractors and subcontractors, but the Afghan government took a narrower reading. Then, in 2014, DoD and the Afghan government entered into a Bilateral Security Agreement (BSA) providing clear income tax exemptions for USG DoD contractors, subcontractors, and their employees that are not resident in Afghanistan. The Afghan government initially took—but then somewhat retreated from—the position that the BSA does not cover tax liability for years prior to 2015 or most subcontractors. The U.S. Agency for International Development (USAID) obtained a tax exemption from the MoF for its Strategic Objective Grants Agreements (SOAGs). The Department of State’s Bureau of International Narcotics and Law Enforcement (INL) had yet another agreement with limited effect. Other agencies lacked any agreement to exempt contractors from taxation at all.
In K-Con, Inc. v. Secretary of the Army, No. 2017-2254, the Federal Circuit applied the Christian doctrine to read FAR clause 52.228-15, requiring the contractor to provide performance and payment bonds, into a construction contract—even though the Army designated the procurement as commercial-item pursuant to FAR Part 12 and omitted that clause. In doing so, the Federal Circuit left two key issues unresolved: whether construction can be procured as a commercial item, and how the Christian doctrine applies to a commercial-item contract, where countervailing procurement policies may undermine the argument for incorporating certain clauses that would otherwise be read in. How did the Federal Circuit avoid these key issues? By letting the Justice Department flip-flop the Army’s positions regarding commerciality, and by sidestepping the findings from the underlying ASBCA opinion that the Christian doctrine applies to commercial-item contracts. The upshot is more questions than answers.
The case involved two contracts at Camp Edwards, Massachusetts, for the procurement of prefabricated shelters—a laundry facility and a communications equipment shelter. The Army issued the solicitations as commercial-item procurements using Standard Form 1449. The solicitations and the contracts did not include any requirement for performance or payment bonds. After awarding the commercial-item contracts to K-Con, the Army told K-Con that it must obtain performance and payment bonds as required by the Miller Act, 40 U.S.C. §§ 3131-3134, and FAR 52.228-15. K-Con replied that it had not anticipated obtaining bonding, since the solicitation and contract did not include any such requirements and, in any event, it could not obtain the bonds immediately. Rather than terminating the contract for convenience, the Army decided to wait for K-Con to try to acquire the bonds. Two years later, K-Con did so, and the government issued notices to proceed and modified the contracts to include the bonding requirements. K-Con asked the Army to pay the costs of the bonds and the costs incurred for increased material and labor due to the two-year delay. The Contracting Officer agreed to pay the bond costs but not the delay costs.
New DOJ guidance will likely reduce the situations in which the Criminal Division imposes an independent monitor as a condition of a non-prosecution agreement, deferred-prosecution agreement, or plea agreement. The guidance will also change the process by which monitors are proposed and selected. We follow these developments because our clients are, on occasion, faced with decisions to enter into monitorships, and we have an active practice as monitors ourselves. Nichols Law is currently the independent monitor under an administrative agreement between Agility Public Warehousing Company and the Defense Logistics Agency. We also currently serve as monitors under resolutions with federal and state agencies: the Department of Transportation, NASA and the State of New York. Our extensive background in government contracts—especially in areas of investigations and compliance—make our firm particularly suited to these matters. On October 11, 2018, the Department of Justice issued a new memorandum on the selection of monitors in Criminal Division matters (hereinafter the “Beneczkowski memo”). That memo elaborates on the original, 2008 guidance (the “Morford memo”) and supersedes intervening guidance from the Obama administration (the 2009 “Breuer memo”). Thus, the guidance going forward is the original Morford memo as elaborated upon by the Beneczkowski memo.
In Palantir USG, Inc. v. United States, No. 2017-1465 (Fed. Cir. Sept. 13, 2018), the Federal Circuit recently affirmed a successful bid protest under a twenty-four-year old statute — the Federal Acquisition Streamlining Act of 1994 (FASA), codified in part at 10 U.S.C. 2377. Importantly, the decision marks a potential new route for contractors to challenge agency decisions regarding the use of commercial items. Congress enacted FASA in response to burden some regulatory requirements that precluded many companies from competing for government contracts. FASA requires agencies to purchase commercial items to the maximum extent practicable. This includes defining requirements in such a way that commercial services and supplies could be procured, surveying the market to determine whether commercial items could satisfy its requirements, and providing offerors of commercial items and non-developmental items the opportunity to compete in any procurement for such requirements. FAR Part 12 implements the statutory preference for the acquisition of commercial items. The definition of “commercial item” is contained in FAR 2.101. It includes “any item, other than real property, that is of a type customarily used by the general public or by nongovernmental entities for purposes other than Governmental purposes, and — (i) Has been sold, leased, or licensed to the general public; or, (ii) Has been offered for sale, lease, or license to the general public.” It also includes “any item that would satisfy [that] criterion . . . but for — (i) Modifications of a type customarily available in the commercial marketplace; or (ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements.”
For 17 years, the United States and its allies have remained in Afghanistan, fighting alongside Afghan forces, now against a strong Taliban insurgency. Nick Schifrin looks at the continuing bloodshed, as well as some aspects of progress, then talks with former State Department officials Robin Raphel and Barnett Rubin about the standstill and prospects for peace.
