Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Anatomy of a Protest

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Of Counsel

Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

Bradley Wine

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James A. Tucker

Less Oversight and Undefined Penalties: The NDAA’s Proposed Protest Reforms

The Tortured Regulations Department: SBA’s New Rule and Its Effect on Investments

Bid Protest Spotlight: Standing, Relationships, Responsibility

House’s Passage of the SAMOSA Act Signals Policy Shift Towards Government-Wide Enterprise Software Licensing

New DFARS Regulation on Small Business Affiliate Past Performance

On February 1, 2022, the U.S. Department of Justice (DOJ) <a href="https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year" target="_blank" rel="noopener">announced</a> that it collected more than $5.6 billion in False Claims Act (FCA) settlements and judgments in fiscal year 2021. This is the largest annual total since 2014, and the second largest in FCA history. Though $2.8 billion in recoveries are the result of the civil portion of the settlement with Purdue Pharma, the government still collected $2.8 billion from other FCA defendants. This number is in line with recent annual trends and marks an increase from the $2.2 billion <a href="https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases-fiscal-year-2020" target="_blank" rel="noopener">collected</a> in fiscal year 2020.Read the <a href="https://www.mofo.com/resources/insights/220207-doj-releases-false-claims-act-statistics.html" target="_blank" rel="noopener">full client alert</a>.

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Brian Kidd is a partner in Morrison Foerster’s Investigations + White Collar Defense Practice. 

Brian K. Kidd

Brian K. Kidd is former Chief of the Market Integrity and Major Frauds (MIMF) Unit of the Criminal Division’s Fraud Section at the United States Department of Justice (DOJ) and a partner in Morrison & Foerster’s Investigations + White Collar Defense Practice Group. At DOJ, Brian supervised a team of roughly 40 federal prosecutors and oversaw virtually all major fraud cases, with a special focus on investigating and prosecuting complex securities, commodities, and other major corporate fraud cases.

Brian Kidd

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Adam L. Braverman is a partner in Morrison Foerster’s Investigations + White Collar Defense practice. Adam formerly served as an Associate Deputy Attorney General for the U.S. Department of Justice (DOJ) and as the U.S. Attorney for the Southern District of California. 

Adam L. Braverman

Adam L. Braverman is a partner in Morrison Foerster’s Investigations + White Collar Defense group. He represents companies and their executives in internal and government investigations, white collar criminal defense matters, and parallel civil litigation related to allegations of bribery, government procurement fraud, COVID-19 and CARES Act fraud, anti-money laundering violations, and matters involving organized crime.

Adam Braverman

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Demme Doufekias is a trial attorney whose practice focuses on matters involving complex government and internal investigations.

Demme Doufekias

Demme Doufekias represents corporations and individuals in enforcement proceedings and criminal investigations conducted by the U.S. Department of Justice, U.S. attorney’s offices, and other federal enforcement agencies. She also tries civil and criminal cases in federal and state court. Her practice focuses on health care enforcement issues, the Foreign Corrupt Practices Act, and the False Claims Act.What do you like best about your work? Strategy. Investigations and trial work demand a focus on the end game, even as the facts are changing and evolving. You have to be thinking about how multiple scenarios might play out, strategizing ten steps down the road on each one, and staying flexible enough to swap your thinking for something different, depending on how the case develops.What has been the key to your success? Working with smart people who respect collaborative thinking and challenge the whole team to do its best work.What is your favorite thing about your city? How open Washington, D.C. feels because buildings cannot be built higher than the top of the Capitol Building.

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DOJ Releases False Claims Act Statistics for Fiscal Year 2021

MoForecast Podcast: Predictions on the False Claims Act (FCA)

On February 1, 2022, the U.S. Department of Justice (DOJ) announced that it collected more than $5.6 billion in False Claims Act (FCA) settlements and judgments

DOJ Releases False Claims Act Statistics for Fiscal Year 2021

An interesting new bid protest decision from the U.S. Court of Federal Claims articulates a rule for pre-award key personnel unavailability that is very different from the one employed by the U.S. Government Accountability Office (GAO). In <a href="https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2021cv1966-58-0">Golden IT, LLC v. United States</a>, Judge Matthew Solomson held that, absent specific requirements to the contrary in a solicitation, as long as an offeror had a reasonable expectation at the time of proposal submission that its proposed key personnel would be available to perform as proposed, any subsequent unavailability of a key person does not render the offeror’s proposal unacceptable or trigger an obligation to report the unavailability to the procuring agency.This sensible rule, if other judges on the Court of Federal Claims opt to follow it, diverges sharply from the GAO’s rule that, if an offeror gains actual knowledge before award that a proposed key person is no longer available, the offeror must inform the procuring agency of that fact. Under the GAO’s precedents, once an offeror informs an agency of key personnel unavailability, the agency’s only options are to reject the proposal as unacceptable for failure to comply with a material solicitation requirement, or to (re)open discussions with all offerors in the competitive range and request revised proposals. This rule is particularly harsh (with regard to offerors and agencies alike) given the length of time procurements may take these days, with proposed key personnel being expected to remain available indefinitely. We have discussed the GAO’s much-criticized rule before (<a href="https://govcon.mofo.com/protests-litigation/july-bid-protest-roundup-law360-spotlight/">here</a>, and <a href="https://govcon.mofo.com/protests-litigation/november-2021-bid-protest-roundup/" target="_self">also here</a>, for example).<h5>BACKGROUND FACTS</h5>Golden IT involved procurement of a blanket purchase agreement (BPA) and the first order for information technology support, procured under the Federal Supply Schedule using FAR Part 8 procedures. The request for quotations (RFQ) required offerors to propose named individuals for key personnel positions, including an information specialist/knowledge engineer position. The eventual awardee proposed one of its employees, “Mr. JH,” to fill this role. The RFQ did not require offerors to submit letters of commitment, and the awardee apparently did not request one from Mr. JH.On May 20, 2021, the awardee submitted its quotation. Also in May 2021 (presumably sometime after quotation submission), Mr. JH quit his job and went to work for a different company. On September 22, 2021, the agency awarded the BPA and first order. It was undisputed that the awardee did not disclose Mr. JH’s unavailability to the agency before award.After the BPA and order were awarded, the protester filed suit at the Court of Federal Claims, challenging the award on various bases. The protester apparently learned the identities of the awardee’s key personnel from the quotation contained in the administrative record, ran those names through LinkedIn, and in that way discovered that Mr. JH left the awardee’s employ sometime in May 2021. The protester moved to supplement the administrative record with Mr. JH’s LinkedIn profile and alleged the awardee “misrepresented the availability of Mr. [JH] either when it submitted its quote or because it failed to notify the Agency of the material change to its quote when it had knowledge of Mr. [JH]’s unavailability.” The protester concluded that the awardee “should either have received a significant weakness for this issue or it should be ineligible for award.”<h5>LEGAL ANALYSIS</h5>First, the Court discussed the concept of misrepresentation. After discussing in some detail the precedents of the Court of Federal Claims, the Court of Appeals for the Federal Circuit, and the GAO, the Court summarized the rule by observing that “all of the parties agreed that an offeror may not knowingly misrepresent a material fact in a proposal for the purpose of winning a government contract.” To avoid a misrepresentation, “an offeror must have a reasonable basis for all facts and representations made in its proposal—and may not knowingly or recklessly include false statements of material fact.” The Court emphasized, however, that “a court’s assessment of an offeror’s knowledge of facts and representations . . . is made with respect to the point in time at which the offeror submitted its proposal.”Applying that rule, the Court concluded the protester failed to meet its burden of proving a misrepresentation. Nothing in the administrative record (even supplemented with the LinkedIn profile) demonstrated that, as of the date of quotation submission, the awardee did not have a reasonable basis for submitting Mr. JH’s name as a key person. The Court rejected as speculative and unsupported by the record the protester’s argument that Mr. JH surely must have given notice of his forthcoming May 2021 departure before the awardee submitted its quotation on May 20, 2021. The Court also agreed with the Government that nothing in the record clearly established that Mr. JH was currently unavailable to return to his old employer to fill the key personnel position. The Court conceded that “[t]he documentation [the awardee] submitted to substantiate Mr. [JH]’s commitment to [the awardee] certainly raises questions regarding what [the awardee] knew about Mr. [JH]’s likely availability to serve as a key personnel and when [the awardee] knew it (i.e., prior to quote submission).”Although the protester raised many good questions, the Court noted a protester “cannot sustain its claim on questions alone.” The judge observed this likely was a case where he would have granted a request for the protester to conduct limited discovery from the awardee in the form of interrogatories to probe the questions of what the awardee knew and when it knew it. But the protester did not request discovery, and the judge saw no reason to order it sua sponte. Thus, based upon the record before it, the Court found the protester failed to meet its burden of proving the awardee submitted a quotation with knowing or reckless material misrepresentations.Second, the Court considered whether the awardee should have notified the agency of Mr. JH’s unavailability prior to award. The awardee plainly knew, no later than a few days after quotation submission, and months before award, that its proposed key person was no longer its employee (and presumably had no intention of returning). Under the GAO’s rules, this fact alone likely would have resulted in a sustained protest.The Court acknowledged that offerors must have a reasonable basis for the representations they include in proposals. And it also acknowledged a “likely” obligation to notify an agency if a key person’s unavailability came to light between submission of an initial proposal and the due date for submitting proposal revisions. But the Court professed an inability to locate any legal basis for the GAO’s rule that offerors must advise agencies of material changes in proposed staffing when the changes are discovered only after the last (or only) proposal submission. The Court also endorsed the view of many in industry, government, and academia that the GAO’s disclosure and disqualification rule is without a legal basis and is “unfair.” The Court stated that it would “not conjure up a rule—and particularly not one untethered from a statu[t]e, regulation, or Federal Circuit decision—requiring offerors or quoters to routinely update the government when facts and circumstances change post-proposal or quote submission, during the course of the government’s evaluation period.”With that legal point decided, and because the RFQ did not establish any further requirements, the Court concluded that “all that is necessary here is that [the awardee] had a reasonable belief, at the time of its quote, that [it] would deploy Mr. [JH] as key personnel upon contract award.” Because the protester failed to prove the awardee lacked that reasonable belief at that particular time, the Court denied this protest ground.<h5>TAKEAWAYS</h5><ul><li>A word of caution: Until the Federal Circuit weighs in on this issue, Judge Solomson’s holding is not binding precedent for other judges on the Court of Federal Claims, nor is it binding on the GAO. And, even if the Federal Circuit were to endorse the Golden IT holding, it is not certain the GAO would change its rule. But the Golden IT decision is well-reasoned and persuasive authority, will be welcomed by many, and likely will be cited repeatedly in future protests.</li><li>In Golden IT, the procuring agency did not know of the key personnel’s unavailability until the protester’s LinkedIn sleuthing discovered the unavailability in the midst of a protest. But what if an agency discovers an unavailability before award—perhaps because an offeror follows the GAO rule and dutifully tells on itself? Under Golden IT, it would appear that the agency is not required to choose one of the two options the GAO provides: (i) eliminate the proposal or (ii) open discussions. But if the agency relies on Golden IT and awards to an offeror notwithstanding a known unavailability (and perhaps even awards the offeror a strength for the unavailable person), Golden IT likely will not protect the award from the GAO, which hears the vast majority of bid protests. Will we see agencies decline to follow GAO recommendations to terminate awards based upon the alternative authority provided by Golden IT? Or will they continue to follow the GAO rule and decline to follow Golden IT? And will Golden IT embolden offerors to stop making the pre-award disclosures the GAO insists are necessary? All of that remains to be seen.</li><li>A corollary to that: Suppose the GAO sustains a protest and recommends that an agency disqualify a proposal with unavailable key personnel or open discussions, and the agency goes the disqualification route. If the newly disqualified offeror then files its own protest with the Court of Federal Claims, challenging the corrective action and the rationality of the GAO’s recommendation, the agency faces serious litigation risk (at least it will if the protest is assigned to Judge Solomson). If the assigned judge thinks the basis of the GAO’s recommendation is a conjured-up rule without any legal justification, the judge is likely to find an agency’s compliance with the recommendation to be arbitrary and capricious. Awardees facing a sustained protest over key personnel unavailability should consider challenging any adverse corrective action at the Court if the Court has jurisdiction over the particular procurement.</li><li>What if the agency in Golden IT had disqualified the awardee’s quotation—either because it learned of the unavailability before the award or it determined to disqualify the quotation as voluntary corrective action after the protester uncovered the fact? Golden IT stands for the proposition that an offeror need not self-disclose after proposal submission, and the mere fact of unavailability does not compel disqualification. The decision does not address whether an agency has the discretion to disqualify in such circumstances—based upon the GAO’s position that, if named key personnel are material requirements of a solicitation, a proposal with unavailable key personnel is materially deficient and unawardable. Would that decision be an abuse of discretion, given that the GAO’s underlying position is, in the view of at least one judge of the Court, “untethered from a statu[t]e, regulation, or Federal Circuit decision”? Maybe.</li><li>The Golden IT decision carefully notes that this particular solicitation did not require any documentation, such as letters of commitment, assuring the continued availability of key personnel. Nor did it require offerors to disclose changes in availability after quotation submission (although it did require notice after award if, in the performance of an order, a key person had to be changed as part of contract administration). If a solicitation has more stringent terms than those in Golden IT, the outcome might be different, and disclosure or disqualification might be justified.</li><li>The Golden IT protester understandably was suspicious of a possible bait-and-switch where a proposed key person left within days of quotation submission. But, because nothing in the record established what exactly the awardee knew or should have known at the time of quotation submission, the protest could not meet its burden of proof for a misrepresentation claim. The judge noted it is very unlikely the administrative record for a procurement would ever contain such evidence and suggested that the protester could have moved to conduct limited discovery from the awardee (and intimated he likely would have granted such a motion). Protesters pursuing misrepresentation claims before the Court should keep that advice in mind.</li></ul>

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ARKA

Arlington Capital

Battle Investment Group

Behrman Capital

Cadmus

Chainalysis

CollabraLink

Definitive Logic

Emmes

Enlightenment Capital

Grant Thornton

Griffon Corporation

eTelligent

L3Harris

Jacobs

LinQuest Corporation

Micross

Sagewind

Sedgwick

Sigma Defense

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Damien is a partner in the firm’s Government Contracts & Public Procurement practice. He represents clients in all facets of government contracts transactions, as well as regulatory counseling, subcon

Damien Specht

Damien C. Specht

Jim Tucker is of counsel in Morrison & Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.
Jim’s practice runs the gamut of litiga

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Unavailable Key Personnel: Differing Legal Standards at the Gao and Court of Federal Claims

GAO Finds CIO-SP4 Solicitation Is Unduly Restrictive of Competition

An interesting new bid protest decision from the U.S. Court of Federal Claims articulates a rule for pre-award key personnel unavailability that is very differe

Unavailable Key Personnel: Differing Legal Standards at the Gao and Court of Federal Claims

Aerojet Rocketdyne received another blow last week in its long running battle to end a 2015 False Claims Act suit alleging it lied about its compliance with cybersecurity requirements in order to win several federal contracts. In United States ex rel. Brian Markus v. Aerojet Rocketdyne, Inc., the relator, Aerojet’s former senior director of cybersecurity, alleged that the company entered into several Department of Defense and NASA contracts while knowingly misrepresenting its compliance with cybersecurity requirements. The relator raised two separate legal theories—implied false certification and fraud in the inducement—based on the company’s alleged failure to fully disclose the extent of its noncompliance with cybersecurity controls required by DFARS 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, and NASA FARS 1852.204-76, Security Requirement for Unclassified Information Technology Resources. In 2019, the company’s motion to dismiss on the ground that the relator failed to demonstrate the cybersecurity requirements at issue were material was denied. We covered that decision in a <a href="https://govcon.mofo.com/defense/federal-court-confirms-that-cybersecurity-gaps-can-form-the-basis-of-false-claims-act-violations/">previous article</a>.Eastern District of California Judge William Shubb’s most recent opinion on the parties’ cross-motions for summary judgment spells more bad news for the company. Aerojet was able to obtain a favorable ruling on the implied false certification theory: those claims were denied because the only allegedly false certification was related to a contract awarded after the filing of the complaint and it was therefore not relevant to the litigation. However, the court refused to end the relators’ claim for promissory fraud (or fraud in the inducement), holding that there were triable issues of fact as to whether Aerojet fraudulently induced the government to enter into contracts by materially misrepresenting its cybersecurity compliance, including questions as to the materiality of the cybersecurity requirements and the falsity of Aerojet’s compliance claims. The court’s decision seems to be heavily influenced by a rare Statement of Interest filed by the government, which declined to litigate the case itself but filed a brief opposing many of Aerojet’s key arguments.Aerojet argued that the relator’s fraudulent inducement claims failed on the element of falsity because the company did not make any false statements to the government. Aerojet does not dispute that it was not in compliance with the relevant DFARS and NASA FARS requirements, but instead observed that it repeatedly disclosed that it was not in compliance with requirements to the government and even worked with the agencies to obtain a waiver of the requirements. Both the relator and the government argued those disclosures were inadequate and misleading and thus still false. For example, while a 2014 audit found that Aerojet was compliant with only 5 of 59 DFARS requirements, Aerojet provided a compliance matrix stating that it was compliant with 10 of 59 requirements. The company also purportedly failed to disclose certain breaches and leaks that the court noted might have been material to the government’s award decision.Perhaps more troublesome as a matter of general applicability, the court also pointed to language in DFARS 252.204-7012 stating that contractors must meet an undefined requirement to have “adequate security” and that the listed control requirements represent only a “minimum” standard of compliance. According to the court, the fact that an audit firm identified several high, moderate, and low risk deficiencies in Aerojet’s systems and was able to penetrate the company’s network within four hours might lead a reasonable trier of fact to find that Aerojet did not meet the “adequate security” requirement.Departing from the D.C. Circuit’s recent decision in United States ex rel. Adams v. Dell Computer Corp. (discussed in <a href="https://govcon.mofo.com/false-claims-act/u-s-district-court-for-the-district-of-columbia-finds-that-alleged-cybersecurity-vulnerability-is-not-material-under-false-claims-act/">our blog post</a>), the court also rejected Aerojet’s arguments that the cybersecurity requirements were not material. The company pointed to the Supreme Court’s holding in Escobar that “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material,” and cited to several instances in which the government awarded contracts to other contractors not in compliance with the relevant cybersecurity regulation. Siding with the government, the court rejected those arguments, finding that Aerojet failed to provide sufficient information about those instances, including the level of the noncompliance at issue in those awards.Finally, the court denied the cross-motions for summary judgment as to the amount of damages. The relator argued that damages amounted to a multiple of the entire value of the contracts at issue, or $19 billion, while Aerojet argued that the government suffered no damages at all because it received the rockets included in the contract. Seemingly sympathetic to the government’s argument that it “did not just contract for rocket engines, but also contracted with [Aerojet] to store the government’s technical data on a computer system that met certain cybersecurity requirements,” the court found that neither theory of damages was correct as a matter of law: “In essence, relator would have the court find as a matter of law that what the government received under the contracts had no economic value whatsoever, whereas defendants would have the court find that the government received the full economic value of goods and services [that Aerojet] was contracted to provide. Neither of these propositions is supported by the record before the court at this time. The amount of statutory or actual damages, if any, to which relator would be entitled is for the trier of fact to determine and cannot be adjudicated on summary judgment.”The Aerojet litigation highlights the increasing False Claims Act risk that federal contractors face related to cybersecurity concerns. The government has demonstrated its intent to aggressively pursue claims under the Civil Cyber-Fraud Initiative, and contractors must heed the government’s warnings about maintaining a strong cybersecurity program in order to avoid becoming the next target.