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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Our government contracts and procurement attorneys counsel businesses on legal and compliance issues encountered when doing business with government entities.

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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.

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James A. Tucker

Deregulating Federal Procurement: Implications of Three Recent Executive Actions

Kickstarting AI in the Federal Government: OMB’s Policy to Implement Executive Order 14179

Bid Protest Spotlight: Instructions, Price Evaluation, Standing

FAR Overhaul Underway

FedRAMP 20x: Reformulating the Authorization Process

As the novel coronavirus, COVID-19, invades more and more of everyday life, the chance it will affect government contracts and government contractors becomes more and more likely. These effects might include workforce reductions from those out sick, travel restrictions, base closures, or telework.  Indeed, as reported earlier this week in <a rel="noopener noreferrer" target="_blank" href="https://www.nationaldefensemagazine.org/articles/2020/3/2/coronavirus-threatens-defense-supply-chain">National Defense magazine</a>, Representative Mac Thornberry recently predicted COVID-19 would threaten the defense supply chain as a result of the quarantine efforts and work stoppages in China.  Whether such supply chain issues come from components manufactured in China, South Korea, Europe, or the United States, the effects are likely to be felt all the same.What, then, must government contractors know?Excusable Delays and Schedule ExtensionsContractors should keep in mind the various excusable delay provisions contained in the FAR.  For example, FAR 52.249-14, which covers excusable delays for cost reimbursement contracts, states that a Contractor shall not be in default as a result of “causes beyond the control and without the fault or negligence of the Contractor.”  Listed among the examples of such causes is “epidemics” as well as “quarantine restrictions.” FAR 52.249-14(a)(5) & (6).  This protection also extends to failures on the part of subcontractors so long as the cause of the failure is beyond the control of both the Contractor and subcontractor and the Contractor did not fail with an order by the Contracting Officer to purchase the effected supplies or services from another source.  FAR 52.249-14(b).  Any excusable delay should result in an amendment to the schedule to take into account the delay; if it does not, the Contractor may be able to recover its increased costs of performing to the original schedule by submitting a constructive acceleration claim.For fixed price contracts, the FAR likewise provides that excusable delays prohibit the government from terminating the contract for default.  For example, under FAR 52.249-8(c) and (d), if the cause of the failure to perform is beyond the control and without the fault of the Contractor or a subcontractor (including, again, for epidemics and quarantine restrictions), the Contractor cannot be liable for any excess costs.  Moreover, subsection (g) of this clause explains that in the event of an excusable delay, any termination that is issued will be converted to a termination for convenience.  Given the worldwide spread of COVID-19, of course, Contracting Officers will likely be more amenable to adjusting the contract schedule rather than attempting to start anew with a different contractor.Contractors would be well-advised to keep in close communication with their contracting officers about any potential threats to their workforce or their supply chains as a result of COVID-19 to ensure that issues such as schedule adjustments can be negotiated early in the process, rather than waiting until there is a failure to perform.Price Adjustments for Stop Work or Government-Created DelayNotably, although the excusable delay provisions allow for a schedule adjustment, they do not provide for an adjustment to price (except, as noted, in the case of a constructive acceleration, where no schedule adjustment is provided).  Where contractors may be able to seek a price adjustment would be in the context of a government-issued stop work order or as a result of a government-caused delay.  For example, if base closures or travel restrictions result in a stop work order from the government, contractors may be able to seek an equitable remedy under the FAR’s stop work order provision.  FAR 52.242-15.  If the government creates delay through a base closure or travel restriction and does not issue a stop work order, the contractor may be entitled to a schedule adjustment for its excusable delay, as described above, or potentially a price adjustment for constructive acceleration if no schedule relief is provided.  The same would be true if, for example, government personnel becoming sick delays inspection or testing.  And although government-caused delays unavoidably stemming from COVID-19 do not, without a refusal to provide schedule relief, by themselves entitle a contractor to a price adjustment, if those delays become unreasonable in length, the contractor may seek compensation under the FAR’s Government Delay of Work clause.  FAR 52.242-17.Under these circumstances, contractors should carefully track any additional costs or any delays caused by the government delay or stop work order and be prepared to provide these to the Contracting Officer as part of a future request for equitable adjustment.Prioritization of DoD NeedsFinally, Contractors should keep in mind the potential use for rated orders under the Defense Priorities and Allocation System (“DPAS”).  The DPAS is a system of rating and assigning precedence to orders in tiers to ensure the Department of Defense’s most critical needs are prioritized as necessary to meet required delivery dates.  See 15 C.F.R. § 700.3; FAR 52.211-15. If a contractor that has both commercial and government contracts is performing DPAS-rated orders, the government could ask the contractor to fill the government’s orders first, potentially affecting the contractor’s ability to fulfill its commercial contracts. The government may also allow contractors a right to claim priority for materials or components that may be in short supply as a result of downstream supply chain issues.ConclusionWe likely have only seen the beginning of COVID-19’s effects on the global economy generally and U.S. government contracting specifically.  As in all cases, emergency situations in particular, the best course of action is to keep calm, ensure your program and contracts personnel communicate frequently and comprehensively with their counterparts in the government, and know your rights (and obligations) when it comes to delays, adjustments to contract price or schedule, and defense-related priorities.

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

Locke Bell

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Coronavirus (COVID-19) Update: Keep Calm, Wash Your Hands, and Know Your Rights

Updated Coronavirus (COVID-19) Guidelines For Employers

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As the novel coronavirus, COVID-19, invades more and more of everyday life, the chance it will affect government contracts and government contractors becomes mo

Coronavirus (COVID-19) Update: Keep Calm, Wash Your Hands, and Know Your Rights

Please join Morrison & Foerster LLP, Coalfire Federal, and Grant Thornton Public Sector on Thursday, February 27 at 12PM EST for a deep dive into the key aspects of the Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) process and how it will affect your business. Register <a rel="noopener noreferrer" target="_blank" href="https://veracast.com/webcasts/mofo/mcle_programs/54143125.cfm">here</a>.Panelists will provide an overview of CMMC, discuss what contractors can do to prepare for third-party review, and outline what to expect, and when, based on what we know today.Presenters<ul><li><a href="https://protect-us.mimecast.com/s/zBRwCkROBgiRLzAwfQW2i9?domain=www2.mofo.com">Tina D. Reynolds</a> – Partner, Morrison & Foerster LLP</li><li>Mike Pitcher – Vice President, Technical Cyber Services, Coalfire Federal</li><li>Chris Ballister – Director, Grant Thornton Public Sector</li><li>Dave Simprini – Principal, Grant Thornton Public Sector</li></ul>We are collecting pre-webinar questions through the Veracast platform. Once you register, you may log-in and submit your questions for presenters to answer during the webinar.

Tina is a partner in Morrison & Foerster’s Government Contracts practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmace

Tina Reynolds

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MoFo Webinar: Are You Ready for CMMC? Do You Need to Be?

DOJ Cyber-Fraud Initiative Highlights Potential Civil Liability for Failing to Meet Federal Cybersecurity Requirements

Please join Morrison & Foerster LLP, Coalfire Federal, and Grant Thornton Public Sector on Thursday, February 27 at 12PM EST for a deep dive into the key aspect

MoFo Webinar: Are You Ready for CMMC? Do You Need to Be?

Morrison & Foerster Government Contracts associate Sandeep Nandivada, with assistance from law clerk David Allman*, discuss FCA liability for prime contractors in this issue of the American Bar Association’s The Procurement Lawyer publication. See below for an excerpt:<blockquote>The specter of the civil False Claims Act (FCA) is, by now, well known to companies doing business with the federal government. The FCA creates liability for any entity that “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” or that “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” In Fiscal Year 2018, the U.S. Department of Justice recovered over $2.8 billion in FCA matters, including over $107 million from the defense industry.Less understood are the myriad ways in which a company can find itself on the wrong side of an FCA action. Government contractors frequently focus their attention inwardly, thinking they can improve their own internal ethics and compliance systems to ward off potential FCA suits. But FCA threats are not so limited in nature. A company can find itself in hot water based not just on its own conduct, but also on the conduct of its employees, agents, or subcontractors.This article discusses how subcontractor misconduct can give rise to FCA liability for prime contractors who have not committed any wrongdoing directly. The Supreme Court of the United States has explicitly held that, although a subcontractor does not have privity of contract with the government, it still may be subject to FCA liability by causing a prime contractor to submit a false claim to the government on the subcontractor’s behalf. But what of the prime contractor’s liability when one of its subcontractors has committed an FCA violation? Under what circumstances can a prime be held liable for its subcontractors’ misconduct?</blockquote>*David Allman is an associate in the Washington, D.C. office and is not admitted to the bar.<div class="col-lg-3 col-md-10 offset-md-1"><div class="row"><div class="col-12 col-lg-12 col-md-6"><div class="article-block-small article-block-contact"></div></div></div></div>

The Procurement Lawyer: Imputation of False Claims Act Liability to Prime Contractors

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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

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The Procurement Lawyer: Imputation of False Claims Act Liability to Prime Contractors

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

Morrison & Foerster Government Contracts associate Sandeep Nandivada, with assistance from law clerk David Allman*, discuss FCA liability for prime contractors 

The Procurement Lawyer: Imputation of False Claims Act Liability to Prime Contractors

Although there is great deal being written these days about DOD’s increasing use of Other Transactions “OTs”, no one explains how you actually negotiate OT terms and conditions, particularly the intellectual property clauses that are the most troublesome for contractors.  Jay DeVecchio fixes that, by describing how to prepare and to negotiate key IP clauses.  His article, published February 19, 2020, in The Government Contractor, “Here Is How You Actually Negotiate IP Rights In Other Transactions,” is available <a rel="noopener noreferrer" target="_blank" href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltbeb9366484727e2d/627318e35f7b601eaaebd082/200219-negotiate-ip-rights-other-transactions.pdf">here</a>.

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The Government Contractor: Here Is How You Actually Negotiate IP Rights In Other Transactions

FedPubs Intellectual Property Series (June 16-30)

Although there is great deal being written these days about DOD’s increasing use of Other Transactions “OTs”, no one explains how you actually negotiate OT term

The Government Contractor: Here Is How You Actually Negotiate IP Rights In Other Transactions

In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: Which countries brought the largest coordinated foreign bribery resolution of all time? Which countries moved up, and which moved down, in the latest Transparency International Corruption Perceptions Index?  How does the UK Serious Fraud Office evaluate the effectiveness of corporate compliance programs? The answers to these questions and more are here in our January 2020 Top 10.Read our <a href="https://www.mofo.com/resources/insights/200211-top-anti-corruption.html?utm_source=publication&utm_medium=email" target="_blank" rel="noopener noreferrer">client alert.</a>

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James Koukios is co-chair of Morrison Foerster’s Investigations + White Collar Defense Group and also serves as co-head of the FCPA + Global Anti-Corruption Practice.

James Koukios

James Koukios is co-chair of Morrison Foerster’s Securities Litigation, Enforcement, and White-Collar Defense Group and serves as Global Co-Head of the FCPA + Anti-Corruption Practice.

James M. Koukios

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Charles (Chuck) Duross serves as co-chair of the firm’s Investigations + White Collar Defense Practice Group and is a co-leader of the FCPA and Global Anti-Corruption practice.

Charles Duross

Charles (Chuck) Duross serves as co-head of Morrison Foerster’s FCPA + Global Anti-Corruption practice.

Charles E. Duross

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Top 10 International Anti-Corruption Developments for January 2020

Top 10 International Anti-Corruption Developments for March 2021

In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corrupt

Top 10 International Anti-Corruption Developments for January 2020

A variety of arcane domestic-preference regimes apply to many Federal procurements – the Buy American Act (BAA), the Trade Agreements Act (TAA), the Berry Amendment, and the Cargo Preference Act, to name a few.  In <a href="https://www.cafc.uscourts.gov/sites/default/files/opinions-orders/18-2399.Opinion.2-10-2020_1529718.pdf">Acetris Health, LLC v. United States</a>, the Court of Appeals for the Federal Circuit recently denied a Government appeal and clarified the test used to determine if a pharmaceutical product – or any other product – is compliant with the TAA.  This significant decision rejects the longstanding analytical approach used by U.S. Customs and Border Protection (CBP) for pharmaceuticals as well as the reliance of the Department of Veterans Affairs (VA) on the CBP’s judgment for purposes of Federal procurement.The Governing LawTwo statutes are the source of most restrictions on the Government’s ability to procure supplies of foreign origin:  the BAA and the TAA.The rules governing whether the BAA or TAA applies to a particular procurement are fairly confusing, and the analysis required to determine BAA compliance is quite different from the analysis for TAA compliance, and neither is particularly intuitive.  The BAA was designed to keep foreign products from competing on an equal footing with American-made products.  The Federal Circuit has succinctly summarized the main features of the BAA:The first of these statutes to be enacted, the Buy American Act of 1933 (“BAA”), provides in relevant part that:[O]nly manufactured articles, materials, and supplies that have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, shall be acquired for public use unless the head of the department … determines … their cost to be unreasonable.41 U.S.C. § 8302(a)(1) (emphasis added). A 1954 Executive Order, now implemented in the FAR, specifies that the unreasonable cost exception to the BAA applies where the lowest domestic offer by a large business is over 6% higher than the lowest foreign offer, and the lowest domestic offer by a small business is over 12% higher than the lowest foreign offer. 48 C.F.R. (“FAR”) § 25.105.  Congress has also exempted commercial-off-the-shelf (“COTS”) products from the “substantially all” requirement, 41 U.S.C. § 1907, so a COTS product “manufactured” in the United States is BAA-compliant even if it is manufactured from predominantly foreign components, FAR § 25.101(a)(2).Thus, the BAA considers both an end product’s component articles, materials, and supplies (unless it is a COTS item) and the end product’s place of manufacture, and has a built-in exception applied via a price premium analysis.The TAA is far more recent and, when it applies, provides an exception to the BAA.  The Federal Circuit explained the TAA in this way:The second of these statutes is the TAA.  The TAA was designed to encourage foreign countries to enter reciprocal government-procurement trade agreements.  Those agreements prohibit foreign countries from discriminating against American-made products and prohibit the United States from discriminating against foreign-origin products.  Under the statute, countries that have entered into such agreements, and that do not discriminate against American-made products, are allowed to compete for U.S. government procurements on non-discriminatory terms.  At the same time, products from countries that have not entered into such trade agreements are barred from government procurements.  Countries that have entered into such agreements are described as parties to the World Trade Organization (“WTO”) Agreement. …The TAA generally prohibits the procurement of “products of a foreign country or instrumentality” that is not party to the WTO agreement or otherwise “designated” by the President for purposes of the TAA.  19 U.S.C. § 2512(a)(1).  The TAA’s country-of-origin test defines “a product of a country” as:An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.19 U.S.C. § 2518(4)(B) (emphasis added).  Note that, although a finding that an article is the “product” of a non-designated foreign country generally precludes the Government from procuring it, the statute does not require that the Government affirmatively determine that an article is a “product” of the United States or a designated country as a prerequisite to a procurement of that article.The FAR implements the TAA in regulation and harmonizes it with the BAA.  As relevant here, the FAR’s Trade Agreements clause provides that a contractor shall “deliver under this contract only U.S.-made or designated country end products.”  FAR 52.225‑5(b).  The FAR defines “U.S.-made end product” as:U.S.-made end product means an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed.FAR 52.225-5(a) (emphasis added).  Note that, unlike the BAA, the TAA and its implementing clause do not require an analysis of the country of origin of a manufactured item’s components.  Note also that, unlike the country of origin definition in the TAA’s statutory text, the FAR does not use the adverb “wholly” when discussing where an article is mined, produced, or manufactured.Factual BackgroundThe protester, a contractor to the VA and other agencies, was a distributor of generic pharmaceuticals.  As relevant here, the protester supplied Entecavir tablets (used to treat hepatitis B) that were manufactured in New Jersey, using an active pharmaceutical ingredient that was made in India.  India is not a “designated country” subject to preferential treatment under the TAA and its implementing regulations.During performance of a prior contract, the VA “requested” that the protester seek country-of-origin determinations from CBP for certain of its products, including Entecavir, as the VA had been informed that the protester may be supplying drugs that were not TAA-compliant, as required by its contract.  CBP, following its own longstanding practice, determined that Entecavir was a product of India because the pharmaceutical’s active ingredient was made in India and allegedly no substantial transformation had occurred in the United States.  The protester accepted a no-cost cancellation of its incumbent contract to avoid a termination for default.The VA then issued a new solicitation for Entecavir, again subject to the TAA.  In response to a question by the protester, the VA stated that CBP’s prior determination was final and therefore any Entecavir made with an Indian-origin active ingredient would be deemed non-compliant with the TAA and unacceptable.  The protester filed a timely pre-award protest, challenging the VA’s interpretation of the TAA and arguing “its products, though manufactured using foreign-made [active ingredients], are not ‘products of’ India (under the TAA) and are ‘U.S.-made end products’ (under the FAR) because they are manufactured into tablets in the United States.”The Court of Federal Claims agreed with the protester, and the Government appealed.  The Federal Circuit concurred with the result of the lower court’s decision, while adjusting the analysis and remedy.StandingBefore reaching the merits of the protest, the Court addressed an interesting question of standing.  Notwithstanding its pending protest, the protester submitted a proposal in response to the challenged solicitation.  The Government showed that the protester’s proposed price was the highest received, in a procurement conducted on a lowest price technically acceptable basis.  Because the protester had no chance at award, even if its tablets were found to be TAA‑compliant, the Government moved to dismiss the case on the basis that the protester suffered no injury-in-fact, the case was moot, and the protester lacked standing to protest.The Court agreed with the Government that the protester no longer had standing to challenge the current solicitation in light of a price that precluded it from award.  The Court found, however, that the VA was “virtually certain” to conduct similar procurements in the future and, absent the VA’s erroneous application of the TAA, the protester was “very likely” to bid on those procurements.  The Court noted that the Court of Federal Claims had jurisdiction over suits objecting to “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement,” and that its own precedents held that “‘in connection with’ is very sweeping in scope.” the Court held that the protester had standing with respect to future procurements expected in the relatively near future.  The Court found that the protester had a substantial chance of securing future contracts for similar products and that the VA’s stated interpretation of the TAA caused the protester a “non-trivial competitive injury.”  Therefore, the protester was an interested party with standing to bring the protest.MeritsAddressing the merits of the protest and the Court of Federal Claims’ analysis, the Federal Circuit first rejected the Government’s argument that CBP’s country-of-origin determination was binding on the VA.  The Court held that it is the procuring agency, not the CBP, that is “responsible for determining whether an offered product qualifies as a U.S.-made end product.”  Contrary findings of the CBP are entitled to no deference.The Court also rejected the Government’s argument (which repeated the CBP’s finding) that the protester’s Entecavir tablets were products of India because that was the country of origin of the tablets’ active pharmaceutical ingredient.  The Court held that the “product” at issue here – and the only thing regulated by the TAA – was “the pill itself,” not the pill’s various ingredients.  The tablet itself was not a “product of India” because the tablet was not “wholly the . . . manufacture” of India, nor was it “substantially transformed” in India, as provided in the TAA’s country-of-origin test.  19 U.S.C. § 2518(4)(B).  Because the statutory country-of-origin test applies only in the negative – i.e., prohibiting procurement of products of a non-designated country, but not also requiring that the product be found to be a product of the United States or another designated country – the Court held that the statute did not bar the protester’s product:  “Accordingly, since the TAA only excludes products from government procurement if they are ‘products of’ a foreign country like India, the TAA does not bar the VA from procuring Acetris’ products.”Turning next to the FAR’s Trade Agreements clause, the Government argued that the tablets were not compliant because they were neither “wholly” manufactured in the United States, and manufacturing the final tablets in New Jersey did not “substantially transform” the Indian active ingredient into a new product.  This argument required the Government to read the adverb “wholly” from the statutory country-of-origin test, where it is present, into the FAR’s Trade Agreements clause, where it is not present.  Nor, for that matter, is the adverb “wholly” present in the BAA or its regulatory implementation, either.The Court noted that the Trade Agreements clause defines “U.S.-made end product” as “an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States.”  FAR 52.225-5(a) (emphasis added).  The Court reasoned that, regardless of whether manufacturing the tablets substantially transformed the Indian ingredients into a new product, the definition of a compliant end product included any product that is “manufactured in the United States,” which the Entecavir tablets indisputably were, regardless of the source of their ingredients and other components:A product need not be wholly manufactured or substantially transformed in the United States to be a “U.S.-made end product.” Instead, such products may be—as Acetris’ products are—“manufactured” in the United States from foreign-made components.(Emphasis added.)  Given the fact of domestic manufacture, the Court found it unnecessary to decide the separate question of whether the tablets also were substantially transformed in the United States.  The FAR says either prong is enough to render an end product “U.S.-made” and thus compliant with the Trade Agreements clause.  Therefore, under the TAA and its implementing regulations in the FAR, the VA incorrectly determined that the protester’s Entecavir was non-compliant with the TAA and its regulatory implementation in the FAR.The Court concluded its merits discussion by observing:  “If the government is dissatisfied with how the FAR defines ‘U.S.-made end product,’ it must change the definition, not argue for an untenable construction of the existing definition.”The Court remanded the matter to the Court of Federal Claims, with instructions to adjust the relief granted, including a permanent injunction applicable to future procurements:On remand, the Claims Court should declare that: (1) under the TAA, a pharmaceutical product using [active pharmaceutical ingredients] made in India does not, because of that fact, thereby become the “product of” India; and (2) under the FAR, the term “U.S.-made end product” may include products manufactured in the United States using [active pharmaceutical ingredients] made in another country.  The Claims Court should also enjoin the VA from excluding Acetris’ products manufactured in Aurolife’s Dayton, New Jersey facility from future procurements.Takeaways<ol><li>The rules for analyzing and applying the various domestic-preference regimes can be complicated and counter-intuitive, with requirements that change from one regime to the next, and a variety of exceptions and exceptions to the exceptions. If an offeror or contractor is unsure of its compliance obligations, it is prudent to seek legal counsel to navigate the labyrinth.</li><li>The Federal Circuit sidestepped an argument that was central to the litigation at the Court of Federal Claims: whether a product that is BAA-compliant (as the protester’s was here) is necessarily also TAA-compliant.  The protester argued (and the Court of Federal Claims concluded) that it was; the Government argued that it was not.  In a footnote, the Federal Circuit found that analysis was irrelevant.  As a practical matter, though, it is difficult to imagine a situation where an item would be BAA-compliant but not TAA-compliant under the holdings of this decision.</li><li>The Federal Circuit has provided helpful guidance by clarifying that, so long as an end product is not “wholly the . . . manufacture” of or “substantially transformed” in a non-designated country, and is either “mined, produced, or manufactured in the United States [or other designated country] or . . . substantially transformed in the United States [or other designated country],” it is TAA-compliant. This is a far simpler test to apply than the one the VA attempted to impose.</li><li>This decision’s only direct effect is on Federal procurements. The decision will not bind any agency for non-procurement purposes, such as country-of-origin determinations in connection with tariffs and other import duties.  It remains to be seen whether CBP will accept the Federal Circuit’s analysis as persuasive authority in those non-procurement arenas and alter its country-of-origin analysis in general and as applied to pharmaceuticals.  Suppliers that previously have unquestioningly relied upon CBP determinations for procurement purposes may wish to rethink that approach in light of Acetris.</li><li>The Federal Circuit accepted the Court of Federal Claims’ finding that the process of converting Entecavir’s active pharmaceutical ingredient and other constituents into the final tablet form was “manufacturing” for purposes of the FAR’s Trade Agreements clause. Under both the BAA and the TAA, however, it is not always easy to determine where an end product was “manufactured,” and that potential complication will remain even under the Federal Circuit’s simplification of the TAA analysis.</li><li>Potential offerors should scrutinize the domestic-preference provisions appearing in solicitations and, like the protester here, ask questions early and be prepared to protest before the date set for the receipt of proposals. If an offeror fails to object to improper solicitation terms before that time, any later protest of those terms generally will be dismissed as untimely.</li></ol>