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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Govcon GAO Post Award Protest Timeline Article

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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

Telesto: Another Call For Clarity In Other Transactions Protest Jurisdiction

Strengthening the American Drone Industrial Base

Bid Protest Spotlight: Jurisdiction, Price Range, Late-Is-Late

Trump Issues Executive Order on Cybersecurity Rolling Back Some Prior Policies and Introducing New Ones

GAO Reaffirms Agencies’ Discretion to Award Sole-Source SBIR Phase III Contracts (Even to a Successor-in-Interest)

LinkedIN

The Defense Contract Management Agency (DCMA) will institute a new Defective Pricing Pilot Team, according to a September 30, 2020, <a href="https://www.acq.osd.mil/dpap/policy/policyvault/USA002090-20-DPC.pdf">memo</a> issued by Kim Herrington, Acting Principal Director of Defense Pricing and Contracting at the Office of the Under Secretary of Defense.  The DCMA Defective Pricing Pilot Team will assist Government Procuring Contract Officers (PCOs) in resolving audits initiated by the Defense Contract Audit Agency (DCAA) pursuant to the Truth in Negotiations Act.<a name="_ftnref1" href="#_ftn1">[1]</a>When a PCO receives notice of a DCAA audit dated after September 30, 2020, he or she may request assistance from DCMA in undertaking functions set out in FAR 15.407-1(b), (d), and (e) – determining and reporting whether certified cost or pricing data submitted was in fact defective, concluding whether a contract price reduction is appropriate, and determining the appropriate contract price adjustment.If DCMA accepts a PCO’s request for assistance, the Defective Pricing Pilot Team will have the authority to take all necessary actions to resolve and disposition the DCAA audit, including issuing final decisions and executing price adjustments in coordination with the PCO.  Prior to the September 30, 2020, memo, the authority to take these actions resided with the contracting officer alone.It is not yet clear whether the Defective Pricing Pilot Team will be a centralized national group or whether there will be members of this group in DCMA offices across the globe.The Defective Pricing Pilot Team may deal with recurring, complex defective pricing issues, so this concentrated expertise and newly granted authority may lead to more expeditious resolution of DCAA defective pricing audits.The DCMA and DCAA share a common mission to effect successful, cost-efficient procurements, and the success of the DCMA Defective Pricing Pilot Team could mean more function-specific collaborative workflows between the two agencies.<a name="_ftnref2" href="#_ftn2">[2]</a>Read the September 30, 2020 memo <a href="https://www.acq.osd.mil/dpap/policy/policyvault/USA002090-20-DPC.pdf">here</a>.<a name="_ftn1" href="#_ftnref1">[1]</a> 10 U.S.C § 2306(a) and 41 U.S.C. § 3501- 3509<a name="_ftn2" href="#_ftnref2">[2]</a> https://www.dcma.mil/News/Article-View/Article/1609484/dcma-dcaa-chicago-build-on-shared-vision/*Michaela Thornton contributed to this blog post. Michaela is a full-time law student at The George Washington University Law School and a Law Clerk with Morrison & Foerster’s government contracts practice group.

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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New DCMA Defective Pricing Pilot Team Will Possess Audit Resolution Authority

New DCMA Defective Pricing Pilot Team Will Possess Audit Resolution Authority

The Defense Contract Management Agency (DCMA) will institute a new Defective Pricing Pilot Team, according to a September 30, 2020, memo issued by Kim Herringto

Defense

Below is an excerpt from one of Morrison & Foerster’s newest blogs,<a rel="noopener noreferrer" target="_blank" href="https://federalcircuitry.mofo.com/"> Federal Circuitry</a>, which takes a data-driven look at the Federal Circuit. In addition to analyzing Federal Circuit statistics, the blog publishes a “Last Week in the Federal Circuit” roundup and a monthly “Oral Argument Recap.”To read this post in full on Federal Circuitry, please click <a rel="noopener noreferrer" target="_blank" href="https://federalcircuitry.mofo.com/topics/Last-Week-in-the-Federal-Circuit-August-10-14-Clear-Skies-for-Boeing-After-No-Waiver-Ruling.html">here</a>.<img height="148" width="300" alt="Cybersecurity" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltd20a42d589f06a7d/627316818e09542a15b7deab/defense-600.jpg?format=auto&quality=60" class="alignright size-medium wp-image-3655" loading="lazy" type="asset" sys-style-type="download">Case of the week:  <a href="https://www.cafc.uscourts.gov/sites/default/files/opinions-orders/19-2148.OPINION.8-10-2020_1633634.pdf">The Boeing Co. v. United States</a>, No. 19-2148 (Aug. 10, 2020)Panel:  Judges Moore, Taranto, and Chen, with Judge Taranto authoring the opinion Read this case if:  you have a matter involving the Blue & Gold contract waiver doctrine.This week’s featured case is about an issue the government often raises in contract cases—waiver, particularly under <a href="https://www.cafc.uscourts.gov/sites/default/files/opinions-orders/06-5064.pdf">Blue & Gold Fleet, L.P. v. United States</a>. In Blue & Gold, the Federal Circuit held that “a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a bid protest action.” This week in Boeing, the Federal Circuit limited that rule’s reach when the contracting agency could not have granted any meaningful relief during the pre-award process.

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Seth Lloyd, a member of Morrison Foerster’s Appellate and Supreme Court practice, has been counsel in more than a hundred appeals in federal and state courts nationwide.

Seth W. Lloyd

Seth Lloyd is an associate in Morrison Foerster’s Appellate and Supreme Court Practice with broad experience briefing and arguing appeals. Seth has particular experience in patent appeals before the Federal Circuit. He has been a primary author of successful briefs on a wide range of technologies, from medical devices to chemistry to computer hardware and software. He also has successfully argued multiple times in that Court, including obtaining reversal of three Patent Trial and Appeal Board decisions in a consolidated appeal for a computer memory designer. Before joining Morrison Foerster, Seth served as a law clerk for Judge Richard G. Taranto of the Federal Circuit. He earned his J.D. from Stanford Law School and also holds a Ph.D. in electrical engineering from Stanford University.

Seth Lloyd

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Clear Skies for Boeing After No-Waiver Ruling

Below is an excerpt from one of Morrison & Foerster’s newest blogs, Federal Circuitry, which takes a data-driven look at the Federal Circuit. In addition to ana

Clear Skies for Boeing After No-Waiver Ruling

We have <a href="https://govcon.mofo.com/defense/who-bears-the-risks-of-war/">previously written</a> about the challenges contractors face when pursuing costs incurred because of combat zone risks.  These risks, and the resulting costs, can be unpredictable and are not always compensable.  In ECC Int’l Constructors, LLC, ASBCA No. 59138, 19-1 BCA ¶ 37252 (Jan. 24, 2019), for example, the Armed Services Board of Contract Appeals (“Board”) held that the Army was not liable for the inclusion of a construction site within the secure perimeter of an International Security and Assistance Force (“ISAF”) base because the contract’s discussion of security requirements did not amount to a warranty that ISAF would not change the security procedures for the site.  On appeal, the Federal Circuit affirmed.ECC International Constructors, LLC (“ECC” or “appellant”) contracted with the U.S. Government to construct a compound outside the ISAF military base in Afghanistan.  The ISAF was a third party, not an agency of the U.S. Government.  The contract provided that “[t]he Compound will be sited … on a dedicated area located outside the perimeter fencing of the existing base.”  ECC Int’l Constructors, LLC, ASBCA No. 59138, 19-1 BCA ¶ 37252 (Jan. 24, 2019).  Because the compound would be outside the base security perimeter, the construction site for that compound was not subject to base security procedures.  Instead, the contract required ECC to erect a temporary security fence around the project and to provide physical security for the compound and all materials, supplies, and equipment.That arrangement eventually changed.  “Initially, appellant performed its work on the compound outside the base security fence, not subject to base security procedures, and provided the security measures that the contract required, including temporary fencing, necessary to secure the compound; however, in 2012, ISAF (1) completed an expansion of the base security fence that encompassed the contract work site; and (2) exercised its authority to establish, monitor, and enforce all of the strict base security procedures at the contract work site.”  Id.ECC argued that the imposition of base security procedures amounted to a constructive change to the contract.  ECC filed a motion for summary judgment arguing that ISAF’s actions breached an express warranty that (1) the contract work would take place outside the base perimeter; (2) ECC would control security and access to the contract work site; and (3) ECC would control when the work site would be “tied-in” to the base and thus become subject to base security procedures.  ECC contended that ISAF’s extension of base security procedures to the work site, in violation of these warranties, constituted a constructive change to the contract.  The government cross-moved for summary judgment, arguing that ECC was not entitled to compensation for ISAF’s security procedures.The key question in the case became “whether, when a third party controlling a military base interfered with access to a compound that the government contracted appellant to build outside the base, an express contract warranty was breached, entitling appellant to recover for a constructive change to the contract.”  Id.In answer to that question, the Board stated, “absent fault or negligence or an unqualified warranty on the part of its representatives, the government is not liable for damages resulting from the action of third parties.” Id. (citing Oman-Fischbach International (JV) v. Pirie, 276 F.3d 1380, 1385 (Fed. Cir. 2002)).  “Unless the parties in unmistakable terms agreed to shift the risk of increased costs due to acts by the ISAF, no liability on the part of the government attaches from such acts.”  Id.  Because the parties did not agree in unmistakable terms that the Government would assume the risk of increased costs resulting from acts of ISAF that affected access to the work site, the Board concluded that there was no breach of a contract warranty and no constructive change to the contract.  Therefore, appellant was not entitled to compensation for costs and delays incurred because of ISAF’s base security procedures at the contract work site.  The Board granted the Government’s request for partial summary judgment that “[t]he change to the security posture of the … Compound was not a constructive change to the Contract for which [appellant] is entitled to Compensation.”  Id.On appeal, the Federal Circuit affirmed the Board’s conclusion that the change in security posture was not a constructive change.  ECC Int’l Constructors, LLC v. Sec’y of the Army, 817 F. App’x 952 (Fed. Cir. 2020).  The Federal Circuit reasoned that ISAF is a third party, and the expansion of the ISAF military base in Afghanistan was the act of that third party, not the U.S. Government.  “[T]he government is not liable under contract for increased costs caused by acts of a third party absent the breach of an unqualified warranty that would amount to a constructive change in the agreed terms.”  Id. at 953.The Federal Circuit agreed with the ASBCA that there was no meaningful distinction between this case and Oman-Fischbach.  As the Federal Circuit explained, “[i]n Oman‑ Fischbach, the mere fact that the contract depicted several routes to a disposal site on a map did not explicitly assure the contractor of access to any particular route.”  Id. at 954.  Similarly, in ECC’s case, there were no contract provisions warranting that ISAF would not change the security procedures that would apply to the worksite.  “ECC’s contractual responsibility to enforce security procedures on the work site did not unmistakably give it the right to determine the particular security procedures applicable thereto or the timing of when the work site might be brought within the Base perimeter fence and subject to heightened security procedures.”  Id.  The Federal Circuit thus affirmed the ASBCA’s decision that ECC bore the risk of changes to base access, because the changes in security procedures were not a constructive change entitling ECC to compensation.The Federal Circuit also agreed with the Board that various contemporaneous communications cited by ECC were insufficient to establish that the contract contained an unmistakable warranty.  Id. at 954-55.  As the Court explained, the contract itself was clear on its face, making it unnecessary and inappropriate to resort to parole evidence.  Id.  In addition, the Court pointed out that parole evidence is generally limited to communications occurring before a dispute arises, while the communications cited by ECC in this case came after the security situation had changed.  Id.<a href="#_ftn1" name="_ftnref1">[1]</a> Perhaps most importantly, the Court also observed that the communications were not as clear as ECC contended.  Id.  ECC’s unsuccessful attempt to rely on parole evidence drives home the importance of focusing on what the contract itself says.While the results in cases stemming from war zone risks can run the gamut, the Federal Circuit’s affirmation in this case confirms the one point that is clear from all of those cases: contractors should look closely at how contract provisions allocate the risk of additional costs or delays that may arise in a combat environment and should think carefully about how to respond when security, access, or other types of changes occur.<a href="#_ftnref1" name="_ftn1">[1]</a> The general preference for pre-dispute evidence seems designed to prevent a party from citing its own posturing as support for its position.  In this case, however, the Board and the Court disregarded post-dispute communications by the Government that arguably were contrary to the Government’s litigation position.  It is not clear whether the preference for pre-dispute communications should bar this type of evidence, which is in essence an admission against interest.

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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

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Who Bears the Risks of War? Federal Circuit Affirms ASBCA’s Decision That the Contractor Bore the Risk of Changes to Worksite’s Security

Initial Thoughts on the 2021 NDAA’s Procurement Provisions

We have previously written about the challenges contractors face when pursuing costs incurred because of combat zone risks.  These risks, and the resulting cost

Who Bears the Risks of War? Federal Circuit Affirms ASBCA’s Decision That the Contractor Bore the Risk of Changes to Worksite’s Security

Protests & Litigation

Compliance

Like the rest of the nation, and indeed the whole world, contractors today are fighting a war against an invisible enemy.  As we observed in a <a href="https://govcon.mofo.com/coronavirus/limits-on-a-contractors-ability-to-recover-for-unforeseen-risks-in-the-age-of-covid-19/" target="_blank" rel="noopener noreferrer">previous post</a>, responding to COVID-19 raises wartime contracting issues on the home front and abroad.  In “<a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltdc107bc777a4b3f5/627318da8e09542a15b7df63/190424-contracting-fog-war.pdf">Contracting in the Fog of War</a>,” we reported on IAP Worldwide Servs., Inc., ASBCA Nos. 59397 et al., 17-1 BCA ¶ 36763 (May 17, 2017), in which the Armed Services Board of Contract Appeals (ASBCA) agreed with a contractor’s claim that the government had constructively accelerated performance in the face of excusable delays due to Pakistan’s closure of its borders to military shipments into Afghanistan.  The ASBCA concluded there that the contractor was “entitled to an equitable adjustment reimbursing it for expenses actually and reasonably incurred in complying with the acceleration orders.”  17-1 BCA ¶ 36763.  In this post, however, we discuss the Civilian Board of Contract Appeals’ (CBCA) recent decision that a contractor’s additional costs incurred due to the Ebola outbreak did not entitle the contractor to an equitable adjustment.  The case could have important implications for COVID-related claims, and may offer an important lesson for contractors.In <a href="https://www.cbca.gov/files/decisions/2020/SOMERS_04-22-20_5683__PERNIX_SERKA_JOINT_VENTURE%20(Decision).pdf" target="_blank" rel="noopener noreferrer">Pernix Serka Joint Venture v. Department of State</a>, CBCA No. 5683 (April 22, 2020), Pernix Serka Joint Venture (PSJV) was performing a firm, fixed-price contract for the Department of State (DOS) when the Ebola virus hit.  The contract required PSJV to construct a rainwater capture and storage system in Freetown, Sierra Leone.  The contract included an excusable delays clause providing that PSJV would be allowed time, but not additional costs, for excusable delays.  Examples of excusable delays included acts of God, epidemics, and quarantine restrictions.  PSJV received a notice to proceed from DOS on December 17, 2013, and began contract performance.  By July 2014, the Ebola outbreak had spread to Sierra Leone.PSJV sought guidance from the DOS contracting officer (CO) as to how to respond to the outbreak.  The CO, however, did not provide any guidance.  Instead, the Agency stated that PSJV would need to make its own decisions about whether PSJV should evacuate the jobsite to protect the health and safety of its personnel.  On August 8, 2014, the World Health Organization (WHO) declared the outbreak an “international public health emergency.”  That same day, PSJV decided to shut down the project and evacuate its personnel.PSJV notified DOS of its decision to temporarily shut down the project.  In response, DOS stated: “Since you are taking this action unilaterally based on circumstances beyond the control of either contracting party, we perceive no basis upon which you could properly claim an equitable adjustment from the Government with respect to additional costs you may incur in connection with your decision to curtail work on this project.”In March 2015, PSJV returned to the project site with additional medical facilities and services to protect its employees.  PSJV then submitted two requests for equitable adjustment (REAs) to the CO for the cost impacts associated with the Ebola outbreak.  The CO denied the first REA, stating, “there is no contractual basis for an adjustment to the contract price.”  The CO did not take action on the second REA.In January 2017, PSJV submitted a certified claim for $1,255,759.88.  The claim sought “(1) $608,891 in additional life safety and health costs incurred due to differing site conditions, disruption of work and the need to maintain a safe work site for the Pernix Serka Joint Ventures work and Government personnel, and (2) $646,868.88 in additional costs incurred resulting from that disruption of work, and the need to demobilize and remobilize at the work site.”  PSJV offered several theories for why these unforeseen costs should fall on the Government, including a cardinal change theory, a constructive change theory, and a constructive suspension of work theory.  PSJV did not assert a constructive acceleration claim.  The DOS moved for summary judgment, arguing that PSJV bore the risk of any unexpected costs not attributable to the Government under its firm, fixed-price contract, and the CBCA agreed.First, the Board stated, “PSJV’s firm, fixed-price contract obligated PSJV to perform and receive only the fixed price.”  The contract explicitly stated that acts of God, epidemics, and quarantine restrictions would entitle PSJV to additional time, but not additional costs.  Therefore, PSJV cannot shift the risk of additional performance costs to the Government.  Furthermore, the contract did not “require the Government to provide PSJV with direction on how to respond to the Ebola outbreak.”  The Agency left it up to PSJV to decide whether to evacuate the worksite, and under the firm, fixed-price contract, PSJV bore the risk of any additional costs.Second, the Board addressed PSJV’s theory that it “was forced to perform in cardinal change conditions.”  A “cardinal change” is “a breach that occurs if the Government effects a change in the contractor’s work ‘so drastic that it effectively requires the contractor to perform duties materially different from’ those found in the original contract.”  PSJV asserted a cardinal change occurred when the Bureau of Overseas Building Operations (OBO), a branch within DOS, expected PSJV to work in Ebola crisis conditions without any guidance or direction from OBO, or a suspension of work.  PSJV further alleged that a cardinal change occurred when OBO pressured PSJV to return to the project site, which required PSJV to add safety measures that were not in its approved work plan.  The Board found this argument unavailing because, “[d]espite the difficulties encountered during the Ebola outbreak, the Government never changed the description of work it expected from the contractor.”  DOS informed PSJV that it would not order PSJV to evacuate the site and that PSJV would need to make its own decision as to whether it needed to demobilize from the site or take other steps to protect its personnel.  Furthermore, the implementation of additional safety measures after remobilization did not alter the contract.  PSJV remained obligated to perform at the contract price.Third, the Board addressed PSJV’s constructive change theory that it “was constructively ordered to provide medical and life safety measures outside the scope of the contract.”  A constructive change occurs when a contractor performs work beyond the contract requirements without a formal change order.  To recover on a constructive change claim, a contractor must show that (1) it performed work beyond the contract requirements and (2) the Government directed the contractor to perform the additional work without following the procedures in the Changes clause.  PSJV argued that both the demobilization and remobilization of its personnel and the additional safety measures put in place due to the Ebola epidemic should be considered constructive changes.  PSJV’s arguments failed, however, because the Government did not order it to take any action in response to the Ebola epidemic.Finally, the Board briefly addressed PSJV’s constructive suspension of work claim.  In its opposition brief, PSJV argued that the outbreak resulted in a constructive suspension of work.  However, the Board found this claim untimely because it did not arise from the same set of operative facts as the theories raised in PSJV’s certified claim.  For these reasons, the Board denied the appeal.Key Takeaways and Missed OpportunitiesIn this case, the Agency put the contractor in a difficult position by not providing it any guidance or direction on how to respond to the outbreak.  The Agency did not tell the contractor to do anything, so the contractor had no constructive change claim.The Board might have reached a different conclusion had the company been in a position to pursue a constructive acceleration claim.  A constructive acceleration claim requires: (1) a delay which entitles the contractor to additional time for performance (such as an excusable delay), (2) contractor notice to the government of such delay and a request for an extension of time, (3) an action or statement by the government that can be construed as an acceleration order, and (4) reasonable efforts by the contractor to accelerate work, resulting in additional costs.In the IAP case, the agency’s failure to promptly grant an extension request (which the contractor was entitled to receive due to excusable delay) constituted constructive acceleration.  While there is no guarantee it would have succeeded, PSJV might have been able to pursue a constructive acceleration with the proper groundwork, which would likely have involved the contractor (a) advising DOS that the schedule impact caused by the outbreak was unknown, (b) expressly asking DOS to agree to an excusable delay for the length of the epidemic and until the CO was able to establish a new, reasonable schedule, and then (c) refusing to restart operations until the epidemic was over unless the Agency ordered a restart.  Instead, the contractor played into the Agency’s hands by making the unilateral decision to cease work and then to restart operations with added safety measures.

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Contracting in the Fog of War: Recovering Costs Caused by an Epidemic

Another Ticking Clock: Additional District Court Preliminarily Enjoins EO 14042 | Increasing Need for OMB Update on GA Court Clarification Order

Like the rest of the nation, and indeed the whole world, contractors today are fighting a war against an invisible enemy.  As we observed in a previous post, re

Contracting in the Fog of War: Recovering Costs Caused by an Epidemic

Coronavirus

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

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