McMahon, Welch and Learned, PLLC is proud to be a sponsor of the Greater Reston Chamber of Commerce’s Northern Virginia B2G Matchmaking Conference to be held on June 6, 2013. If your business serves the federal government, you do not want to miss the first ever premier business-to-government (B2G) matchmaking event taking place outside of the beltway.
See full details here: B2B Matchmaking Conference
With sequester looming, clients have asked us whether the Government has the authority to tell contractors they can’t work at risk. Some clients have received notices stating, in effect, that if a contract or task order runs out of funding, the contractor may not continue to work “at risk.” So, what are the rules?
The important thing to remember about the upcoming sequester is that the sequester does not/will not change the Government’s contractual responsibilities in a government contract. Those responsibilities are governed by the contract clauses. The contract does give the government certain rights to order a stop work, a change of work, terminate, or partially terminate a contract. Each of these modifications/changes should be in writing by the contracting officer, and the contractor’s remedies for each are governed by clauses in the contract. Any order or request to slow down or change work that is made orally or from someone other than the contracting officer should not be followed but should be referred directly to the contracting officer.
For contracts that are incrementally funded, it is the contractor’s obligation to notify the Government when the contractor expects to reach a specific threshold of funding within 60 days (the limitation of funds or limitation of costs clause), usually the 75% level. Once the notice is given and the funding level has not been exceeded, then the contractor works as normal. Once the 100% funding level is reached and not extended, the contractor is allowed to stop work completely. Occasionally a contractor may agree to work at risk beyond the funding limit, but we always caution contractors never to do that because, in our experience, they don’t always get paid. The Government does have a right to order/prevent a contractor from working at risk without any obligation or liability to the Government once the funding level has been met. Our advice once the funding level has been reached is to give notice to the Government of reaching the funding limit, stop work, mitigate any potential damages relating to the stop to the extent possible, and track your costs relating to the stop work separately and carefully because the costs may be reimbursable.
For more information, contact MWL partner Bill Welch.
The GAO recently announced statistics on bid protests filed at the GAO in 2012 (get a copy here). For the fifth straight year, bid protests increased over the previous year. For 2012, there were 2,475 protests filed, an increase of 5% over 2,353 protests filed in 2011. This also is an increase of 42% from five years ago, with only 1,652 filed in 2008.
Only 570 protests went to a final decision on the merits, with the remainder either withdrawn by the protester, dismissed following voluntary Agency corrective action, or dismissed by the GAO for procedural defects. The GAO’s sustain rate increased from 16% in 2011 (67 decisions) to 18.6% (106 decisions sustained) in 2012.
More importantly, the GAO tracks what it refers to as the “Effectiveness Rate” of protests, or the instances in which a protester receives at least some portion of the relief that it requests in its protest either through voluntary agency corrective action or the GAO sustaining the protest. This rate continued for the third year in a row to be 42%. So, in just under one half of the protests filed, the protester receives some portion of the relief that is requested in the protest.
For more information on the GAO overview and bid protests generally, contact MWL attorney Bill Welch.
If I’m a federal government contractor, why do I need a government contracts attorney on hand for advice? Can’t I use our regular business attorney to advise us on contract matters? Usually not. The law of federal government contracts differs significantly from regular commercial contract law. A contract entered into by two businesses is governed by state law and often by the version of the Uniform Commercial Code or UCC that has been adopted by your state. A contract between a business and the United States Government (usually referred to as a federal prime contract) is not governed by state law or the UCC, but is governed by a different body of law that has developed over the last one hundred and fifty years – since the American Civil War. Commercial contract disputes are often litigated in state courts or federal district courts. Federal Government Contract disputes are litigated in specialized Federal Courts or federal administrative boards, each with their own internal rules and practice requirements.
Leaving aside government contracts for grants or loans, most government contracts are for the acquisition by the U.S. government of goods or services. At the heart of federal government contract law is the Federal Acquisition Regulations or the FAR. The FAR is codified as part of the U.S. Code of Federal Regulations (Title 48) and is 7 printed volumes with 35 chapters and thousands of pages. In addition to these written regulations, there is a body of case law on interpreting federal government contracts developed by the U.S. Court of Federal Claims, the applicable Court of Appeals, the GAO, and the applicable Board of Contract Appeals, which are the specialized courts or quasi-judicial offices charged with interpreting federal government contract law.
Moreover, there are several notable legal principles that distinguish federal government contract law from traditional commercial law. One of the most unusual differences is the federal government’s right to terminate almost any federal government contract unilaterally and without your agreement. This is called a “termination for convenience” and there is a special clause defining this right in most federal prime contracts. If the government has a contract with you to buy 100 guns and, after the contract begins, they decide that 50 is really all they need, they can terminate the contract after delivery of 50 guns. You don’t get to recover any lost profit on the guns you did not deliver. You do have some right to recover extra costs you incurred that you expected would be paid back through the sale of all 100 guns, but all such costs are highly regulated by the FAR.
Another legal principle that applies uniquely to federal government contracts is what is now referred to as the Christian doctrine. The name comes from the U.S. Supreme Court case of G.L. Christian and Assoc. v. United States, 375 U.S. 954 (1963). The Christian Doctrine says that if your federal prime contract fails to include a contract clause that was required by regulation to be included, the Court will interpret the contract as though the clause had been included. In a commercial contract, if the parties did not include a clause in the contract, the clause has no legal enforceability – regardless of whether the parties intended or desired the clause to be included at the time. Not so in federal government contracts.
Another difference is the standard government contract “Changes” clause. In a commercial contract, once the parties agree on the terms of a contract, the terms are locked in unless all parties agree to change them. Not so in federal government contracts. By way of a specific “Changes” clause required to be in many government contracts, the government reserves the right to make changes to the contract within the general scope, including changing specifications, the method or manner of performance, or accelerating the work. The government contractor is not allowed to refuse the change, as a commercial contractor could, and the government is not in breach of the contract by insisting that the change be carried out. The government contractor is entitled to payment for the increased costs in performance attributed to the change.
Federal government contracts also have the potential to create criminal liabilities in certain contexts where it would not in a commercial contract. If one of your employees lies to get a federal government contract or falsifies an invoice to the federal government, both the employee and the company could face stiff criminal and civil sanctions under the False Claims Act. In a commercial context, you would likely face only a civil lawsuit.
These are only a few of many different and sometimes intricate requirements of federal government contract law. Federal Government contracting practice is a specialized area that can be overwhelming to attorneys unfamiliar with the unique rules and regulations. For this reason, if you are or intend to be a provider of products or services to the Federal Government, it is probably a good idea to have a government contracts attorney in your corner. The Federal Government is big and can be a tough and stubborn adversary, especially for the unprepared.
Check out our Seminars page for more information on our upcoming Seminar on Bid Protests.
On January 10, 2012 at 4:00 PM EST, MWL Attorney Kevin Learned will be discussing legal issues for startup companies on a Google+ “Hangout” hosted by the Teen Business Forum (TBF) and TBF Mentor Paul McNeal. Mr. Learned will be leading a high level discussion of legal issues that arise when you start a new business. For more information and how to join the Hangout, join the TBF Community on Google+ (link here).
Update 1/10/13:
Missed the Hangout? See the video here: http://www.youtube.com/watch?v=aq3v9sJuZaQ&feature=youtu.be
In a small business set-aside contract, does an offeror need to be “small” at the time of contract award? That answer continues to be “No.” SBA regulations require that an offeror be small on the date that it submits its initial offer, including price, not necessarily on the date of the contract award. In September of this year, an MWL client received a decision from the SBA confirming that our client was small for purposes of the SBA Small Business Administration size standards. A disappointed offeror had challenged our client’s size following contract award. Indeed, our client exceeded the size standard on the date of contract award, but we countered that the regulations did not require it to be small on the date of contract award, a position the SBA agreed with. In this case, the date set for receipt of proposals was several months earlier than the award date, and our client was indeed small on the date that it submitted its initial offer. Primary counsel: J. Patrick McMahon
If you missed our November 2012 seminar on Non-competition and Non-solicitation Provisions: Issues in Drafting/Negotiation and Enforcement, you can download the presentation here: http://www.mwllegal.com/wp-content/uploads/2012/11/Noncompete-and-Nonsolicit.pdf
Here’s a synopsis of the seminar:
In this seminar we will analyze non-competition and non-solicitation provisions in the contexts of M&A transactions, employee/consultant relationships and subcontracting agreements. We will address issues that arise in the drafting and negotiation of these provisions, as well as issues related to enforcement and litigation, with a particular emphasis on issues impacting federal service contractors who operate in the DC/MD/VA region.
Check our our Seminars page for more information on our upcoming seminar on Non-competition and Non-solicitation Provisions: Issues in Drafting/Negotiation and Enforcement.
On Tuesday, September 18, 2012, the Government Technology & Services Coalition (“GTSC”) hosted McMahon, Welch and Learned, PLLC (“MWL”) for a seminar in which Kevin Learned and Patrick McMahon discussed important aspects of Subcontract Drafting and Negotiation in the context of federal services contracting. GTSC is a coalition of small to mid-sized federal contractors specializing in providing services in support of defense, homeland security and other sensitive contract requirements.
Visit GTSC at: http://www.gtscoalition.com/
McMahon, Welch and Learned, PLLC is a law firm that focuses on the same group of contractors as does GTSC, in addition to other federal support services contractors. MWL is located in Reston, Virginia and is available for seminars and other speaking engagements, ordinarily at no cost to the sponsoring entity.