Assuredcommunications ™ 1 – Recent developments_NCMA Presentation Recent Developments in Federal Procurement 2005 – 2006 NCMA Cape Canaveral Chapter June

assuredcommunications™1 – Recent developments_NCMA Presentation

Recent Developments

in Federal Procurement

2005 – 2006

NCMACape Canaveral ChapterJune 2006

Frank W. KenniastyHarris CorporationLegal Department


Topics

• Statutes and Regulations

• Bid Protests

• Cost and Accounting

• Ethics and Compliance

• Performance Issues

• Export Controls


Statutes and Regulations

• Buy American Act– Enacted in 1933

• Government may procure non-manufactured articles if mined or produced in US

• Procure manufactured articles only if components and materials are “substantially manufactured in US.”

– Exemption for IT products. 71 Fed. Reg. 223 (Jan. 3, 2006).– Manufacturing means products must have “undergone

substantial changes in physical character.” City Chemical LLC, B-296135.2

• Berry Amendment – Domestic Specialty Metals– Appropriations Act provision added in 1973– DFARs implements provision through 252.225-7014

• Requires DoD to use domestic specialty metals (inter alia titanium and steel with certain alloys)


Statutes and Regulations (cont.)

• Berry Amendment (cont.)– Alt 1 of clause requires flow down to all subcontractors for the

following programs:• Aircraft• Missiles• Ships• Tanks• Weapons• Ammunition

– Recent emphasis due, in part, to Boeing False Claim Act settlement of nearly $6M

– Current issues include withholds at component level– Possible legislative or DoD revisions


Bid Protests

• VSE Corporation, B-290452.3– GAO overturned sole source award

• Agency failed to engage in reasonable advance planning

• Did not allow sufficient time to allow award to an entity other than incumbent

• Worldwide Language Resources, Inc., B-296984– GAO sustained two protests to same contractor for bilingual

advisors in Iraq

– First award invalid due to lack of reasonable planning and outside of scope of contract

– Second award invalid because premise that awardee was only capable contractor was unsupported


Bid Protests (cont.)

• University Research Co, LLC, B-294358.6– GAO held there is no per se requirement that agencies

distinguish degrees of relevance for past performance

– Incumbent’s experience not necessarily more relevant

• MIL Corp. B-294836– GAO found agency’s unfavorable past performance rating

improper

• Agency’s low rating was based on lack of relevant, past performance information

– Lack of relevant past performance information can only be a neutral rating


Bid Protests (cont.)

• Alion Science & Tech. Corp., B-297022.3– GAO found OCI based on impaired objectivity

• Contractor provided electromagnetic spectrum engineering services while also could affect sale and use of spectrum-dependent products

• Mitigation plan did not fully consider potential conflicts– Even if agency approves OCI mitigation plan, contractor not

necessarily immune to OCI challenges


Cost and Accounting

• ATK Thiokol, Inc. v. United States, 68 Fed.Cl. 612 (2005)– Effectively overrules Newport News

– Design work specifically excluded from commercial contract was not “required in the performance of a contract”

– Court rejected “implicit requirement” concept

– Decision on quantum by this summer; appeal period likely expires by the fall

• MPR Associates, Inc., ASBCA No. 54689– Board held Government was bound by ACO’s oral agreement

• Agreement concerned settlement of disputed rental costs

• ACO had authority to exercise judgment in interpreting cost principle


Cost and Accounting (cont.)

• Cherokee Nation of Oklahoma v. Leavitt, 543 US 631 (2005)– Supreme Court affirmed Federal Circuit decision and reversed

Tenth Circuit decision– Human Services breach contract by failing to re-program funds

to satisfy payment obligations– Weakens the “subject to availability of funds” clause

• Exemption for T&M contracts for commercial services– CAS Board published notice on Jan 4, 2006 of proposed

rulemaking– Commercial item exemption to include time-and-materials and

labor-hour contracts


Cost Principles (cont.)

• CAS thresholds revised. See Fed Reg. 73423 (Dec 12, 2005)– Contract applicability from $500,000 to $550,000– For applicability to a business unit from $7.5M to $8.5M– For waiver authority from $15M to $17M– For disclosures statement submissions by a company from

$50M to $56M

• TINA threshold also revised to $600,000. See Fed Reg. 73415 (Dec 12, 2005)


Ethics and Compliance

• Violations of Conflict of Interest Regulations– David Safavian, Administrator of Office of Federal Procurement

Policy, GSA

• Allegedly made false statements and obstructed a Government investigation regarding lobbyist attempt to acquire property form GSA

– Jack Abramoff, lobbyist

• Pleaded guilty to charges of fraud, tax evasion, and conspiracy to bribe public officials

• Also pleaded guilty to conspiracy to violate laws regarding post employment restrictions on former Congressional staff members


Ethics and Compliance (cont.)

• Northrop Grumman Corp. and B-2– Agreed to pay $62M for false claim settlement

– Allegedly overcharged Government by inflating cost and misrepresenting progress of B-2 radar device under contract with Air Force

– Largest claim ever settled

• Aftermath of Darlene Druyun– Michael Wynn (Under Secretary of Defense) initiated task force

on acquisition oversight

• Recommended that ethics be placed at forefront of DoD communications.

• Emphasis on post employment restrictions within DoD


Ethics and Compliance (cont.)

• Update on EELV Boeing Scandal– Air Force lifted Boeing suspension on March 4, 2005

– Boeing agreed to extensive compliance agreement

– Recently settled investigation with Department of Justice for unprecedented $615M

• Ends three-year investigation

• No admission of guilt

– Boeing admits scandals will affect reputation for up to ten years


Performance Issues

• Changes

– Precision Dynamics, Inc., ASBCA No. 50519• Board held that handling Government property not required

under Navy contract was a constructive change.

• Modification of specification also was constructive change

• Second hydro test for submarine feed pumps was not a change because repair standard required two tests

• Contract Interpretation

– Advanced Engineering & Planning Corp., ASBCA 53366• Board held contractor entitled to equitable adjustment for

testing work which was not mentioned in specification

• Navy technical documents required to specify when radiographic testing was required


Performance Issues (cont.)

• Agency Violation of Statute– Gould, Inc. v. U.S., 66 Fed Cl. 253 (2005)

• Court held contractor did not have actionable claim in multiyear dispute over Government’s procurement of radios

• Defense Authorization Act requiring stable design for multiyear contracting was not intended to benefit contractors

• Intellectual Property– Night Vision Corp. v. U.S., 68 Fed Cl. 368 (2005)

• Court denied contractor’s claim that Government disclosed proprietary technical data

• Contractor waived claim by failing to affix proprietary data legend on prototype goggles


Performance Issue (Cont.)

• Government Contractor Defense– Ibrahim v. Titan Corp., 391 F. Supp. 2d 10 (D.D.C. 2005)

• Court denied contractors’ motion to dismiss Iraqi national detainee’s claim of torture

• Treatment of prisoners during wartime implicates a unique federal interest that conflicts with the Government contractor defense

• Damages– New Valley Corp. v. U.S., 67 Fed. Cl. 277 (2005)

• NASA announced it would not launch contractor’s satellite after Challenger explosion

• Contractor sought damages for diminished sales price caused by Government’s repudiation of launch services contract

• Court rejected Government’s argument that damages were too speculative and found proper measure of damages was difference between price with and without Government launch services


Export Controls

• U.S. v. Yakou, 393 F.3d 231 (D.C. Cir 2005)– Court granted Government’s motion to clarify ITAR § 129.2

which covers brokers “otherwise subject to jurisdiction of the United States

– Left unsettled whether the U.S. can exercise jurisdiction over foreign brokers

• DIRECTTV Group Inc. and Hughes– Entered into consent agreement with Department of State in

connection with unauthorized provision of defense articles and services to a Chinese subsidiary of DIRECTTV

– Civil penalty of $5M including $1M towards remedial compliance measures

Documents

Assuredcommunications ™ 1 – Recent developments_NCMA Presentation Recent Developments in Federal Procurement 2005 – 2006 NCMA Cape Canaveral Chapter June