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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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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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

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

Bid Protest Spotlight: Unclear Criteria, Data Rights, Conflicts

A recent decision, <a href="https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2024cv0160-37-0" target="_blank">Independent Rough Terrain Center, LLC v. United States</a> (“IRTC”),<a href="#_ftn1" target="_self">[1]</a> confirms the U.S. Court of Federal Claims has jurisdiction over bid protests related to follow-on production contracts arising out of other transaction (“OTs”) for Department of Defense prototype projects. The court’s holding in this respect is consistent with past cases and relatively unremarkable. But the legal framework the court adopts is quite noteworthy and may even chart a path for expanded jurisdiction over protests of initial prototype OT solicitations and awards. First, a brief introduction (or reminder) on OTs. Most federally funded agreements in the United States take one of three forms: a procurement contract, where the government is acquiring goods or services for its direct benefit or use, or a grant or cooperative agreement, where the government provides funding (or something else of value) to carry out some public purpose. Congress has further authorized some agencies to enter into other types of agreements in certain circumstances. For DoD, this includes the award of OTs to carry out prototype projects that meet the statutory criteria set forth in 10 U.S.C. § 4022, and the award of sole source follow-on production OTs or contracts upon their successful completion. In many ways, DoD’s prototype OTs look and feel and act a lot like a procurement contract – they are, after all, contracts for prototypes or prototyping services – but they are, by design, not subject to most procurement laws and regulations, including the Competition in Contracting Act (CICA), the Federal Acquisition Regulation (FAR), or the DoD FAR Supplement (DFARS). This affords greater flexibility and speed in the acquisition process. It also raises questions around traditional means of oversight, including the availability of independent review through bid protests.A general rule has emerged in federal courts: If a prototype OT solicitation or award contemplates follow-on production, the Court of Federal Claims has exclusive jurisdiction to hear related bid protests. If, on the other hand, the prototype OT stands independent from any future production award, then any protest must be brought in a federal district court of general jurisdiction. We have discussed this rule in greater detail elsewhere: e.g., <a href="https://govcon.mofo.com/topics/another-piece-to-the-puzzle-court-of-federal-claims-has-jurisdiction-over-bid-protest-where-the-disputed-other-transaction-could-lead-to-a-follow-on-production-contract?_gl=1*re7ds*_ga*MTkyMTA2Mzg1OC4xNzE3MDEzODc5*_ga_3HVRG7GH76*MTcxNzUxNjI3OS40LjEuMTcxNzUxNjMwNC4wLjAuMA.." target="_blank">Another Piece to the Puzzle: Court of Federal Claims Has Jurisdiction over Bid Protest Where the Disputed Other Transaction Could Lead to a Follow-on Production Contract</a> and <a href="https://govcon.mofo.com/topics/where-can-you-protest-an-other-transaction-award-insights-from-kinemetrics" target="_blank">Where Can You Protest an Other Transaction Award? Insights from Kinemetrics</a>.<a href="#_ftn2" target="_self">[2]</a>Through this lens, the court’s decision to take jurisdiction in IRTC makes perfect sense: not only did the solicitation at issue contemplate follow-on production, it was for follow-on production. Specifically, the protester challenged actions of the U.S. Army Materiel Command in connection with determining which of two prototype OT recipients would receive a follow-on production contract. That the Court of Federal Claims has jurisdiction over such protests is a natural application of the court’s jurisdictional mandate, DoD’s OT statute, and past case law. More interesting, though, is how the court reached its conclusion. Yes, the court acknowledged the prior cases and rule, noting the Court of Federal Claims has claimed jurisdiction when a prototype OT award “initiated an acquisition process that led to, or at least contemplated, the eventual award of a follow-on production contract.” But before reaching those cases, the court pinpointed a different, higher-level question guiding its analysis. According to IRTC, “the relevant inquiry requires the Court to look at what the Government is seeking through the solicitation of proposals.” If the purpose is “acquiring property or services,” then the solicitation is a “procurement” properly within the court’s jurisdiction.<a href="#_ftn3" target="_self">[3]</a> Because in IRTC “the Solicitation at issue [was] to acquire for the benefit of the Army the goods and services proposed” by the prototype OT performers, exclusive jurisdiction properly sat with the Court of Federal Claims.The court distinguished this from its prior decision in Space Exploration Technologies Corp. v. United States (“SpaceX”),<a href="#_ftn4" target="_self">[4]</a> where it transferred a prototype OT bid protest to the Central District of California because the government had no intent to award direct follow-on production contracts. In that case, the U.S. Air Force issued prototype OTs as investments in developing the commercial space launch industry, from which the Government would procure services in the future through full-and-open commercial services competitions that were “separate and distinct” from the OTs. Thus, the OTs were not a procurement because, according to the court, they “did not involve the procurement of any goods or services” by the agency. The court concluded that, “[i]n this way, a solicitation for a follow-on production contract is materially distinguishable from a solicitation issued during the OT prototype phase.”That may arguably be true for the OTs at issue in SpaceX, but it is too broad a stroke to apply to all prototype OTs. In fact, one could reasonable estimate that most prototype OTs involve the acquisition of property or services in some form or another, whether through the delivery of prototype hardware or software or related design documents, or provision of R&D or prototyping services. Indeed, DoD has even admitted, in historical (and admittedly outdated) versions of its Other Transactions Guide, that prototype OTs are “acquisition instruments” that are “intended to provide DoD a direct benefit.”<a href="#_ftn5" target="_self">[5]</a> In that case, it seems logical to extend the court’s definition of a “procurement,” and its holding in IRTC, to give it jurisdiction over OT bid protests even where the initial prototype OT solicitation does not contemplate a follow-on production award, but nevertheless involves the acquisition of prototypes or prototyping services.There is a good public policy rationale to support this result. Keep in mind the alternative if the Court of Federal Claims declines jurisdiction: it is not a total bar to judicial review, but rather jurisdiction in one of the man federal district courts of general jurisdiction, before a judge who is unlikely to be as familiar with bid protests or government contracting as the specialized judges at the Court of Federal Claims.We will watch with interest to see whether IRTC is in fact a harbinger of expanded OT bid protest jurisdiction at the Court of Federal Claims, much like we are watching to see if GAO will expand its own jurisdiction over OT bid protests involving follow-on production awards, as we wrote about recently in <a href="https://govcon.mofo.com/topics/gao-opens-the-door-to-certain-other-transaction-bid-protests" target="_blank">Has The GAO Opened the Door to Certain Other Transaction (OT) Bid Protests?</a>. <hr class="divider"><a href="#_ftnref1" target="_self">[1]</a> No. 24-160 (Fed. Cl. July 1, 2024).<a href="#_ftnref2" target="_self">[2]</a> For discussions of GAO’s OT jurisdiction, see, e.g., <a href="https://govcon.mofo.com/topics/gao-opens-the-door-to-certain-other-transaction-bid-protests" target="_blank">Has The GAO Opened the Door to Certain Other Transaction (OT) Bid Protests?</a> and <a href="https://govcon.mofo.com/topics/gao-sharpening-its-blade-strategies-on-ota-review" target="_blank">GAO Sharpening Its Blade [Strategies] on OTA Review</a><a href="#_ftnref3" target="_self">[3]</a> Ironically, this definition, based in Federal Circuit precedent, is pulled from 41 U.S.C. § 111, a section of the U.S. Code comprising the very procurement laws from which OTs have been exempted. <a href="#_ftnref4" target="_self">[4]</a> 144 Fed. Cl. 433 (2019).<a href="#_ftnref5" target="_self">[5]</a> Dep’t of Def., Other Transactions Guide for Prototype Projects, Version 1.2.0 at 1-2 (Jan. 2017); see also USD (AT&L), “Other Transactions” (OT) Guide for Prototype Projects § C1.6 (Dec. 21, 2000) (“OT prototype authority may be used only to carry out prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the Department. As such, any resulting OT awards are acquisition instruments since the government is acquiring something for its direct benefit.”).

Court of Federal Claims Potentially Expands Its Other Transaction (OT) Bid Protest Jurisdiction

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Locke Bell is a partner in the firm’s Government Contracts & Public Procurement practice.

Locke Bell

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Court of Federal Claims Potentially Expands Its Other Transaction (OT) Bid Protest Jurisdiction

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A recent decision, Independent Rough Terrain Center, LLC v. United States (“IRTC”),[1] confirms the U.S. Court of Federal Claims has jurisdiction over bid protests related to follow-on production contracts arising out of other transaction (“OTs”) for Department of Defense prototype projects. 

The Procurement Integrity Act (“PIA”), codified at 41 U.S.C. § 2101–2107, is intended to prevent unethical and improper competitive practices from influencing federal procurements. To achieve this end, the PIA prohibits knowingly disclosing, or knowingly obtaining, source selection information or contractor bid or proposal information (collectively, “Protected Information”) before the award of a federal agency procurement contract to which such information relates.<div data-reactroot=""><a class="align-none rich-text-embed-image-wrapper" href="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltf0d756b5a5b9b082/669597b31e4e7e4c8fb66ed2/240715-procurement-integrity-act.jpg?format=auto&amp;quality=60" rel="noopener noreferrer" target="_blank"><img width="449" height="581" class="rich-text-embed-image" alt="Procurement Integrity Act infographic" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltf0d756b5a5b9b082/669597b31e4e7e4c8fb66ed2/240715-procurement-integrity-act.jpg?format=auto&amp;quality=60"/></a></div>

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Sandeep Nandivada is a partner in the Litigation Department of Morrison & Foerster’s Washington, D.C. office.

Sandeep N. Nandivada

Sandeep Nandivada

The Procurement Integrity Act (“PIA”), codified at 41 U.S.C. § 2101–2107, is intended to prevent unethical and improper competitive practices from influencing federal procurements.

Under the Supreme Court’s decision in Chevron USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), for decades courts have sometimes been required “to defer to ‘permissible’ agency interpretations of [ambiguities in] statutes those agencies administer—even when a reviewing court reads the statute differently.” This is known as “Chevron deference” or the “Chevron doctrine.” Loper Bright Enters. v. Raimondo, 603 U.S. __, 2024 WL 3208360, at *16 (June 28, 2024). Last month, the U.S. Supreme Court overruled Chevron and held that courts “may not defer to agency interpretation of the law simply because a statute is ambiguous.” Id. at *62. The Court made it clear that “[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the [Administrative Procedure Act] APA requires.” Id. at *61-62. The APA was enacted “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.” Id. at *32. The Court found that Chevron deference cannot be squared with the APA, which specifies that courts, not agencies, will decide all relevant questions of law and set aside agency action inconsistent with the law as the courts interpret it.  Id. at *38.A detailed overview of the Supreme Court’s decision in Loper can be found on our <a href="https://www.mofo.com/resources/insights/240703-supreme-court-strikes-down-chevron" target="_blank">website</a>, and another article discussing the potential impacts of the Supreme Court’s decision on government contractors is available on our <a href="https://govcon.mofo.com/topics/the-end-of-chevron-deference-what-it-means-for-government-contractors" target="_blank">Government Contracts Insights</a> blog. This article discusses the potential impacts the fall of the Chevron doctrine may have on False Claims Act (FCA) litigation. In short, the end of the Chevron doctrine may create situations in which it is easier to defend against FCA cases based on violation of a regulation.Last year in United States ex rel. Schutte v. SuperValu, Inc., 598 U.S. 739 (2023), the Supreme Court determined that a defendant’s contemporaneous subjective beliefs about a legal requirement matter, which made it harder to win a motion to dismiss on the ground that the requirement was unclear or open to more than one interpretation (i.e., the “objective reasonableness” or “clever lawyer” defense). The Supreme Court may now have revived a similar (though not exactly the same) defense through the back door, allowing a defendant to argue that a regulation underlying an FCA case is contrary to, or unsupported by, the governing statute.For example, if an FCA defendant is accused of a regulatory violation in which its alleged conduct does not violate the underlying statute but does violate an implementing regulation, the defendant might contend the regulation is inconsistent with the statute. In that scenario, the defendant could move to dismiss on the ground that, even if the facts are as alleged, they do not support a legal violation. Under Loper, a court would have more latitude to consider that argument. Unlike the “objective reasonableness” defense the Supreme Court rejected in Schutte, which focused on the scienter element of an FCA claim, this new avenue would focus on the falsity element, arguing that it is not false or fraudulent to violate an unlawful regulation.Before Chevron’s undoing, deference to agency interpretations of statutes may have given relators and the federal government a leg up in FCA cases, while defendants faced an uphill battle against years of agency rulemaking and a thumb on the scale in favor of agency interpretations. Now, savvy defense attorneys may look for potential daylight between a statute and the regulation a defendant is accused of violating.

The End of Chevron Deference: What It Means for False Claims Act Litigation

IAP Worldwide Servs., Inc.

Flight Support, Inc.

DynCorp Int’l LLC

Raytheon Co.

DynCorp International, LLC v. United States

URS Federal Servs., Inc.

DynCorp International, LLC

Planned Sys. Int’l, Inc.

Threat Mgmt. Group, LLC

Vencore Servs. & Solutions, Inc.

Jacobs Tech., Inc.

Cubic, Inc.

American Institutes for Research v. State of New Mexico

CACI-WGI, Inc.

Fluor Intercontinental, Inc. v. IAP Worldwide Servs., Inc.

IAP World Servs., Inc.

Size Appeal of IAP World Servs., Inc.

Al-Ghanim v. IAP Worldwide Servs., Inc.

O’Gara Training & Servs., LLC

IAP Worldwide Servs., Inc. v. Johnson Controls, Inc.

AAR Mobility Sys.

Matt Martin Real Estate Mgm’t, LLC v. United States

Pyramid Real Estate Servs., LLC v. United States

Harrington, Moran, Barksdale, Inc.

Homesource Real Estate Asset Servs., Inc. v. United States

Ocean Ships, Inc.

Keystone Sealift Servs., Inc.

ITT Corp., Sys. Div.

IAP Worldwide Servs., Inc. v. Fluor Intercontinental, Inc.

FedSys, Inc.

Academy Facilities Mgm’t v. United States

Academy Facilities Management -- Advisory Opinion

Evans Security Solutions, Inc.

Contingency Mgm’t Group, LLC and IAP Worldwide Servs., Inc.

Kellogg Brown & Root Services, Inc.

Liberty Power Corp.

J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. 

J. Ward

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Associate

Tori Dalcourt Angle is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.
Tori advises clients on various government contract matters, including both pre

Victoria Dalcourt Angle

Victoria Angle

The End of Chevron Deference: What It Means for False Claims Act Litigation

Under the Supreme Court’s decision in Chevron USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), for decades courts have sometimes been required “to defer to ‘permissible’ agency interpretations of [ambiguities in] statutes those agencies administer—even when a reviewing court reads the statute differently.” 

On June 28, 2024, the Supreme Court of the United States overruled a cornerstone of contemporary administrative law when it determined­­­­, in a 6-3 ruling, that the Supreme Court’s decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), was wrongly decided. In Chevron, the Supreme Court considered whether an Environmental Protection Agency regulation was consistent with the term “stationary source,” as used in the Clean Air Act.  467 U.S. at 840.  In resolving that question, the Court announced a two-step approach (“Chevron Doctrine”) to evaluate whether a governing statute permitted a particular agency action.  Id. at 842-43.  First, a court must consider whether Congress, by statute, had “directly spoken to the precise question at issue.”  Id. at 842.  If congressional intent was clear from the relevant statute, then that intent would control the court’s assessment of the agency’s regulation.  Id.  If the relevant statute was silent or ambiguous as to congressional intent, however, then the court would defer to the agency’s “permissible construction of the statute,” even if the court thought there was a better interpretation.  Id. at 843.In Loper Bright Enterprises v. Raimondo, the Supreme Court held this step-two approach could not be reconciled with the Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. (APA), which the Court concluded “requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”  No. 22-1219, 2024 WL 3208360, at *1 (U.S. June 28, 2024).  Thus, the Supreme Court’s 40-year precedent in Chevron is now dead.  In its wake, courts must now turn to the longstanding precedent in Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944), when determining the best interpretation of a particular statute.  Under Skidmore, when engaging in independent statutory interpretation, courts may accord persuasive, but not controlling, value to an agency’s informed judgment regarding how to implement a statute.  323 U.S. at 140.A detailed overview of the Supreme Court’s decision in Loper can be found <a href="https://www.mofo.com/resources/insights/240703-supreme-court-strikes-down-chevron" target="_blank">here</a>.  The purpose of this article is to discuss the potential impacts that the fall of the Chevron Doctrine may have on public procurements generally and government contractors specifically.  In short, the end of the Chevron Doctrine appears unlikely to alter drastically the regulatory requirements to which government contractors are subject and which contractors routinely accept as part of their government contracts.  Contractors are unlikely to expend the time and resources to try to overturn age-old regulatory requirements for which contractors have already developed compliance frameworks.  Instead, it is more likely that we will see ad hoc challenges to agency regulations when a particular contractor needs to make such a challenge to preserve or ensure a remedy. In addition, contractors may target new regulations to prevent new regulatory requirements from ever taking effect. Potential Impacts on Government Contractors<ul><li>Reduced Potential for Regulatory Whiplash.  Chevron required courts to defer to agency interpretations of ambiguous statutes so long as the agency’s interpretation was “permissible.”  Chevron, 467 U.S. at 842-43.  But because agency leadership often changes with turnover in the Presidency, Chevron opened the door for successive administrations to advance differing interpretations of the same statutory language, creating uncertainty for regulated parties.  See Loper, 2024 WL 3208360, at *21 (“Chevron thus allows agencies to change course even when Congress has given them no power to do so.  By its sheer breadth, Chevron fosters unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.”).  Under Loper, however, the courts, rather than the agencies, will have the ultimate authority for statutory interpretation, limiting the potential for ever-changing interpretations of applicable law (at least once a court has ruled on the best interpretation of a statute and appeals are exhausted).  This could mean less regulatory whiplash – especially in areas such as labor law – for government contractors between changing political administrations.</li><li>Skidmore “Respect” Returns to Prominence.  Although the Supreme Court held in Loper that it is improper under the APA for a court to defer to an agency on an interpretation of law, it reiterated the longstanding rule that courts should give “respect” to the “informed judgment of the Executive Branch.”  Loper, 2024 WL 3208360, at *10, *15.  Quoting the Supreme Court’s decision in Skidmore, the Supreme Court explained that the amount of respect given to such Executive Branch judgments depends on “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”  Id. at *2, *10.  Thus, although Chevron Doctrine no longer compels the Court to defer to permissible agency interpretations of law, Skidmore “respect” continues to require the Court to consider an agency’s informed basis for implementing an ambiguous statute in the way it has and to assign persuasive value accordingly.  See id.  Nevertheless, as Justice Kagan noted in her dissent in Loper, it is not altogether clear how the “respect” a court must pay agency judgment differs from the deference previously required under Chevron.  Id. at *51 (“If the majority thinks that the same judges who argue today about where ‘ambiguity’ resides (see ante, at ––––) are not going to argue tomorrow about what ‘respect’ requires, I fear it will be gravely disappointed.”).  In this way, although Loper eliminated Chevron deference, it may have left a similarly amorphous concept in its place.<a href="#_ftn1">[1]</a>  How courts assess the “respect” due an agency’s informed judgment will ultimately dictate the lasting impact of Chevron’s demise.</li><li>Potential Challenges to Existing or New Government Contracts Regulations.  The Supreme Court’s overruling of Chevron opens the door for government contractors to try to overturn existing government contract regulations as contrary to their underlying statute.  Prior to Loper, an interested party challenging an agency regulation under the APA as arbitrary and capricious had to demonstrate either that the regulation was contrary to an unambiguous statute or that the agency’s construction of the ambiguous statute was not permissible.  Chevron, 467 U.S. at 842-43.  That was a heavy burden for contractors.  Post-Loper, however, that burden has significantly lessened.  Contractors no longer have to clear the Chevron two-step analysis.  Instead, they need only show that a particular regulation is contrary to a statute, as interpreted by the court de novo and with due “respect” given to the relevant agency’s informed judgments.  Loper, 2024 WL 3208360, at *1.  This standard, stripped of the previously required binding deference to agency interpretation, could embolden contractors to challenge regulations under ambiguous statutes.  Indeed, in a subsequent decision this term, Corner Post v. Board of Governors of the Federal Reserve System, the Supreme Court held that the default six-year statute of limitations for APA claims does not begin to accrue until after the agency action first affects a company.  No. 22-1008, 2024 WL 3237691, at *1 (U.S. July 1, 2024) (“An APA claim does not accrue for purposes of § 2401(a)’s 6-year statute of limitations until the plaintiff is injured by final agency action.”).  As Justice Jackson noted in her dissent, this decision, alongside Loper, has the potential to create a “tsunami of lawsuits against agencies” that may “devastate the functioning of the Federal Government.”  Id. at *35.</li></ul>It is not yet clear to what extent, if any, interested parties will take advantage of the fall of Chevron to challenge existing government contracts regulations as contrary to their underlying statutes.[2]  The Federal Circuit has previously held that “the provisions of [the Federal Acquisition Regulation (FAR)] are entitled to Chevron deference.”  Brownlee v. DynCorp., 349 F.3d 1343, 1354 (Fed. Cir. 2003) (citing Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1321-22 (Fed. Cir. 2003); Newport News Shipbuilding and Dry Dock Co. v. Garrett, 6 F.3d 1547, 1552 (Fed. Cir. 1993); United States v. Grumman Aerospace Corp., 927 F.2d 575, 578 (Fed. Cir. 1991)).  And at least one U.S. Court of Appeal has concurred.  See Cont. Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145, 1147 (9th Cir. 2006) (affirming district court decision that Small Business Administration and FAR regulations were entitled to Chevron deference).  That deference could explain why contractors have not frequently relied on APA challenges to the FAR:  the odds of success were relatively low.  With Chevron deference dead and buried, however, contractors may be encouraged to revisit regulations of questionable origin that impose continuing burdens.One specific area to watch is the burgeoning field of cybersecurity regulation.  Given the broad reach of recent proposed rules, contractors may be interested in challenging cybersecurity regulations as contrary to statute.  Whether contractors could successfully challenge such regulations, however, is an open question.  For example, the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (CIRCIA) expressly directed the Cybersecurity and Infrastructure Security Agency (CISA) to publish a notice of proposed rulemaking to implement the statute, to publish a final rule, and to issue regulations to amend or revise the final rule.  6 U.S.C. § 681b(b).  Such express delegation would appear to indicate congressional intent to defer to CISA as to how to implement CIRCIA.  See United States v. Mead Corp., 533 U.S. 218, 229 (2001) (noting “a very good indicator of delegation meriting Chevron treatment [is] express congressional authorizations to engage in the process of rulemaking or adjudication that produces regulations or rulings for which deference is claimed”).  Consequently, although a court may not blindly defer to CISA regarding how to implement CIRCIA, as it might have done were Chevron still good law, its review may be limited only to determining whether the CISA engaged in “reasoned decisionmaking” within the confines of its discretion.  See Loper, 2024 WL 3208360, at *2 (“And when the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits.  The court fulfills that role by recognizing constitutional delegations, fixing the boundaries of the delegated authority, and ensuring the agency has engaged in reasoned decisionmaking within those boundaries.” (cleaned up)).[3]<ul><li>Increased Importance of Notice and Comment Rulemaking.  Notice and comment rulemaking is likely to take on even greater importance post-­Loper in ensuring agency rulemakings are consistent with underlying statutes.  The notice and comment process will provide interested parties with their first opportunity to raise concerns that a proposed regulation is contrary to law.  It will also provide agencies with their first opportunity to address such concerns prior to finalizing a new regulation.  Notice and comment rulemaking thus can potentially help stakeholders iron out perceived inconsistencies between proposed regulations and their underlying statutes short of litigation.  </li></ul>The Office of Federal Procurement Policy Act, 41 U.S.C. § 1707, governs the publication of the FAR and agency FAR supplements.  It requires notice and comment for any regulation that has a significant effect beyond the internal operating procedures of the federal government or that has a significant cost or administrative impact on contractors or offerors.[4]  Government contractors should continue to harness the notice and comment process to influence agency rulemaking and, in particular, highlight areas where agencies may be overstepping their statutory authority.<ul><li>Statutory Specificity.  In Loper, the majority explained that Chevron improperly forced courts to “pretend that ambiguities are necessarily delegations [of authority to agencies to fill in statutory gaps].”  2024 WL 3208360, at *4.  Thus, post-Loper, it appears Congress will need to sharpen its pencil during the legislative process either to make desired delegations of authority express and clear (as Congress appears to have done with CIRCIA), or to make congressional intent clear so that agencies implement that intent correctly.  Neither seems easy to accomplish in a divided and often dysfunctional Congress, which may introduce yet another reason for the legislative process to grind to a halt.  Interested parties should pay particular attention to annual defense authorization bills and appropriations acts, which often authorize new government contracting requirements for agencies to implement through regulation. </li><li>Contract Interpretation Disputes.  The U.S. Court of Appeals for the Federal Circuit has long evaluated contractual ambiguities using traditional contract interpretation techniques.  See, e.g., Turner Const. Co. v. United States, 367 F.3d 1319, 1321 (Fed. Cir. 2004).  This practice, however, was not uniform across Circuits.  In 2017, the Supreme Court denied a petition for a writ of certiorari in Scenic America, Inc. v. Department of Transportation, which addressed, among other things, this circuit split as to whether courts must provide Chevron deference to an agency’s interpretation of ambiguous contract terms.  583 U.S. 936 (2017).  Foreshadowing the Court’s decision in Loper, Justice Gorsuch expressed skepticism that Chevron deference should “displace the traditional rules of contract interpretation,” such as contra proferentem, which requires a court to resolve contractual ambiguities against the party that drafted the agreement.  Id.  Now, with Chevron’s demise, the Supreme Court has seemingly resolved the question it declined to consider in Scenic America: contractual ambiguities must be resolved through traditional contractual interpretation tools.  The Court’s decision thus has confirmed the Federal Circuit’s longstanding approach to contractual ambiguities, which means Chevron’s fall should not have any effect on government contract disputes.</li></ul>ConclusionThe ripple effects from the Supreme Court’s landmark decision in Loper remain to be seen, but there is good reason to believe Loper will not have a significant disruptive effect on government contracts, at least in the short term.  Over time, however, Loper could fundamentally alter the manner in which agencies implement federal statutes, including those pertaining to government contractors.  Only time will tell.Ethan Sterenfeld, a Summer Associate in Morrison Foerster LLP's Washington, D.C. office, contributed to the writing of this article.[1] The “respect” required under Skidmore is often referred to as “Skidmore deference,” although the Loper majority avoids that terminology in its opinion.  2024 WL 3208360, at *51.[2] As we saw during the COVID-19 pandemic, various states successfully challenged the legality of Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors, on the ground that the Executive Order’s vaccination requirements exceeded the authority conferred upon the President by the Federal Property and Administrative Services Act of 1949.  These states prevailed in their challenges based on the Major Questions Doctrine, which was an exception to the Chevron Doctrine and precludes agencies from addressing matters of “vast economic and political significance” without clear statutory authorization to do so.  West Virginia v. EPA, 597 U.S. 697, 716 (2022).[3] Of course, any delegation of authority by Congress must still comply with the Nondelegation Doctrine, which provides that Congress cannot delegate its legislative powers unless it provides an “intelligible principle” that directs the delegee how to conform its actions with legislative intent.  Touby v. United States, 500 U.S. 160, 165 (1991) (“Thus, Congress does not violate the Constitution merely because it legislates in broad terms, leaving a certain degree of discretion to executive or judicial actors.  So long as Congress lays down by legislative act an intelligible principle to which the person or body authorized to act is directed to conform, such legislative action is not a forbidden delegation of legislative power.” (cleaned up)).[4] The APA requires notice and comment rulemaking for non-FAR regulations promulgated by executive agencies.  5 U.S.C. § 553.

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The End of Chevron Deference: What It Means for Government Contractors