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

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

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

Tina D. Reynolds

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

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

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

James Tucker

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

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

J. Alex Ward

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

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On May 19, 2023, the General Services Administration (GSA) issued Multiple Award Schedule (MAS) solicitation refresh 16, which introduced a formal offer process for joint ventures. To provide guidance on navigating those changes, GSA also issued a list of <a href="https://www.gsa.gov/system/files/Final%20JV%20Industry%20FAQs%20071923.pdf" target="_blank">Frequently Asked Questions (FAQ)</a> for joint ventures. The FAQ illuminates both positive and negative implications.The GoodStarting off with the good news: we now have official confirmation that joint ventures can hold a GSA MAS contract. Although this is old news to the many joint ventures that already hold GSA schedules, some in the industry were unaware it was possible for an unpopulated joint venture with little to no sales history to qualify for the schedule. This FAQ publicly confirms this avenue for growth.Unrelated to the GSA schedule itself, another positive found in this announcement is that GSA officially confirms that when a Mentor-Protégé Agreement (MPA) pursuant to the Small Business Administration (SBA) Mentor-Protégé Program ends, the same mentor and protégé can enter into a second MPA together. This is consistent with SBA’s brand-new regulations, which provide that a protégé may elect to renew its MPA with the same mentor, thereby reaching 12 years for the relationship, rather than six.The BadDespite this good news, GSA’s guidance is frustratingly impractical and will almost certainly be impossible to implement (wait for the revision). In the past, a joint venture would be awarded labor categories which could be utilized by any joint venture member to fulfill the required mentor-protégé workshare of 40% for the protégé (if applicable). Mid-contract, GSA has cast that fundamentally sound approach aside. In its place, GSA no longer permits joint venture partners to share labor categories. Instead, each member must propose and perform under their own separate (and not overlapping) labor categories. To make matters worse, GSA is requiring the joint venture partners to identify the source of labor for each partner for the life of contract. GSA will also require existing joint venture MAS contracts to conform their labor categories to this new convention. We hope joint venture members have their crystal balls ready, because not only does this require joint venture partners to predict well in advance how they are going to perform under all task orders in the future, but mentor-protégé joint ventures (MPJVs) or joint ventures where only one member has a given socio-economic status also have the added wrinkle of having to be able to do so with enough specificity to ensure they will be able to meet SBA’s performance of work requirements—years in advance! Although the GSA schedule is not a set-aside contract, orders thereunder may be, and according to GSA’s new solicitation refresh, joint venture partners must have been able to adequately predict which of the protégé’s labor categories might make up a minimum of 40 percent of a future set-aside task order’s statement of work.This change unnecessarily complicates proposal submissions and may even deter small business joint ventures from competing for set-aside task orders under GSA schedules. Worse still, there is no reason for this change. Current joint ventures’ holding schedules have been able to comply with both GSA and SBA rules without locking in labor categories for decades. Hopefully, GSA will promptly recognize the error of its ways and revert to its prior rule.Finally, GSA is now requiring all parties to a joint venture to submit a Commercial Sales Practice report. This may introduce an additional layer of risk joint venture parties may want to consider before competing for a GSA Schedule.Special thanks to Jennifer Aubel, senior manager of government contracting at Aprio, for contributing to this blog post.

GSA Issues Multiple Award Schedule Solicitation Refresh 16: What It Means for Joint Ventures, Good and Bad

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Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

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Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

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

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GSA Issues Multiple Award Schedule Solicitation Refresh 16: What It Means for Joint Ventures, Good and Bad

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Federal Procurement

Schedule Contracting

The General Services Administration’s Federal Supply Schedule contracts are an efficient method for agencies across the Government to meet their needs for many commercially available supplies and services. For requirements above a certain value, agencies ordinarily hold competitions among Schedule contract holders for issuance of orders or Blanket Purchase Agreements (BPAs) under the vendors’ Schedule contracts. These fair-opportunity competitions are subject to the regulations in FAR Part 8—not the regulations for negotiated procurements in FAR Part 15 or the rules for task and delivery orders in FAR Subpart 16.5.The different regulatory regime governing Schedule orders results in an added layer of complexity for companies considering a protest of an award decision. Here are five key differences companies should keep in mind:1. No Required Debriefing. From a protest perspective, perhaps the biggest difference between Part 8 procurements under a Federal Supply Schedule and most procurements under FAR Parts 15 and 16 is that FAR Part 8 does not require post-award debriefings. The only analogous requirement in FAR Part 8 is found in FAR 8.405-2(d), which provides: “If an unsuccessful offeror requests information on an award that was based on factors other than price alone, a brief explanation of the basis for the award decision shall be provided.” Depending on the contracting officer, this “brief explanation” may be so frustratingly brief as to be meaningless, or it may approximate the detail found in normal Part 15 debriefings. When a “brief explanation” is devoid of meaningful information, it may be difficult to assess whether the ordering agency conducted the procurement properly. A dearth of information dissuades some companies from protesting, but it sometimes has the opposite effect: spurring some disappointed bidders to protest simply to learn why they lost and whether they were treated fairly. Although it is a best practice for agencies to provide fulsome “brief explanations,” a company has no legal recourse if an agency chooses to do the bare minimum required by law.2. Stay of Performance Clock. In procurements subject to FAR Part 15’s debriefing rules, the Competition in Contracting Act (CICA) ordinarily entitles a protester to an automatic stay of contract performance if the GAO notifies the procuring agency of a filed protest by the later of 10 days after contract award or five days after the close of a required post-award debriefing. Because competitions under FAR Part 8 do not require debriefings, the second alternative timeline (the “debriefing exception”) is inapplicable to protests of an award under FAR Part 8. Thus, to secure a CICA stay of performance under a Part 8 acquisition, a disappointed offeror must file its protest with the GAO within 10 days after award. This can pose a challenge if, for example, an ordering agency schedules the “brief explanation” to fall on the 11th day after award.3. Jurisdictional Clock. The lack of required debriefings also alters the ordinary timeline for invoking the GAO’s jurisdiction over a protest. In procurements subject to FAR Part 15’s debriefing rules, a post-award protest is ordinarily timely if the protest is received within 10 days after the close of a required debriefing (even if the protester learned a particular basis of protest 12 days earlier). Under FAR Part 8, however, a post-award protest is always due within 10 days of when the protester knew or should have known of the basis of a particular protest ground. In many instances, for an initial protest, that will turn out to be 10 days after the “brief explanation.” But not always. For example, if an agency provides reasonably detailed information about ratings and the basis of award in the initial notice of non-award, and that information provides a basis of protest, the 10-day clock for protesting on that particular ground begins immediately, and not on the day when the agency decides to provide a further “brief explanation.” See, e.g., IR Techs., B-414430 et al., June 6, 2017, 2017 CPD ¶ 162 at 6 (dismissing as untimely an allegation that the awardee’s price was unrealistically low, where the protester filed the protest within 10 days of its “brief explanation,” but where the earlier non-award notice contained the awardee’s price and the comparison of prices was the sole basis of the protest ground). The flipside of the coin is that, if the only basis of protest is disclosed more than 10 days after award, one’s CICA stay clock may have already run out before one’s jurisdictional clock even begins to tick.4. Forum and Dollar Thresholds. Congress has established bars on certain protests in connection with task or delivery orders under multiple-award Indefinite Delivery/Indefinite Quantity (IDIQ) contracts. Under that bar, with certain exceptions, the GAO lacks jurisdiction over protests of task or delivery order solicitations or awards valued at less than $10 million (under civilian IDIQ contracts) or $25 million (under Defense Department IDIQ contracts). And the Court of Federal Claims ordinarily lacks jurisdiction altogether over these task or delivery order protests. Federal Supply Schedule contracts, however, are not treated as task or delivery order contracts and are not subject to the bar. This means one can protest a FAR Part 8 order regardless of its value, and can even take the protest to the Court of Federal Claims, if one wants.5. Differences in Merits Arguments. In addition to these important procedural differences, there are also certain substantive legal standards applicable to FAR Part 15 procurements that do not apply to competitions under FAR Part 8. Many of these differences are subtle and are generally irrelevant for post-award protest purposes. But occasionally one of these differences affects the analysis of the merits of a post-award protest. See, e.g., Atlantic Sys. Grp., Inc., B-413901, B-413901.2, Jan. 9, 2017, 2017 CPD ¶ 38 at 7 (denying allegation that the agency should have considered the past performance of the protester’s proposed subcontractors and noting that, unlike FAR Part 15, “FAR part 8 does not suggest that in evaluating an offeror’s past performance an agency should also consider the past performance of its proposed subcontractors”). The differences in substantive law may be more evident in pre-award protests of solicitation terms than in post-award protests.

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Five Peculiarities of Protests of Federal Supply Schedule Orders

Five Peculiarities of Protests of Federal Supply Schedule Orders

The General Services Administration’s Federal Supply Schedule contracts are an efficient method for agencies across the Government to meet their needs for many 

As talk of a trade war escalates, government contractors should be alert to the possibility that the recently imposed steel and aluminum tariffs could increase their cost of performance.  The orders, <a rel="noopener noreferrer" target="_blank" href="https://www.nytimes.com/2018/03/08/us/politics/trump-tariff-announcement.html?action=Click&contentCollection=BreakingNews&contentID=66637894&pgtype=article">signed March 8, 2018</a>, impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, with exemptions for imports from Canada and Mexico.  The tariffs took effect March 23.  Increasing the cost of imported materials will in varying degrees lead to price increases when manufacturers of finished goods who rely on those materials are able to pass their increased material costs to consumers.  But this may not be feasible for government contractors with firm fixed-price contracts and options, and it also could affect certain flexibly priced contracts, including cost-type contracts with incentive fee provisions.  The tariffs may also indirectly increase the price of domestically produced steel and aluminum by reducing competition from foreign sources.  In addition, the tariffs may lead to temporary shortages while foreign suppliers sell their products overseas on more favorable terms and domestic suppliers are still ramping up their production to fill the gap.  With these potential effects looming, contractors have to consider the remedies they may be entitled to pursue.To protect themselves, contractors should first consider whether the new tariffs will affect their contracts.  If so, they should evaluate the terms of their contracts to determine whether they contain clauses that will allow them to recover.  If not, contractors should weigh other available options.  If the tariffs lead to shortages, contractors may also need to seek appropriate schedule relief.  Going forward, contractors may need to factor increased cost and performance risk into their bids and proposals.Consider Whether and How Tariffs Affect Your Contract Tax ProvisionsThe FAR’s tax provisions may provide the best solution to the tariff issue, at least in the first instance.  FAR 52.229-3 – “Federal, State and Local Taxes” provides for a price increase for after-imposed taxes that a contractor is “required to pay or bear as the result of legislative, judicial, or administrative action taking effect after the contract date.”  Covered taxes include “any new or increased Federal excise tax or duty,” FAR 52.229-3(a), which likely includes the new tariffs.  FAR 29.401-3 calls for the inclusion of FAR 52.229-3 in solicitations and contracts if (1) the contract is to be performed in the United States; (2) a fixed-price contract is contemplated; and (3) the contract is expected to exceed the simplified acquisition threshold.  This may eliminate the risk under at least some fixed-price contracts.  However, contractors should keep in mind that FAR 52.229-3(g) requires contractors to “promptly notify the Contracting Officer of all matters relating to any Federal excise tax or duty that reasonably may be expected to result in either an increase or decrease in the contract price and shall take appropriate action as the Contracting Officer directs.”  Thus, if and when a contractor determines that the new tariffs “reasonably may” affect its pricing, it should provide prompt notice to the relevant contracting officer.Economic Price Adjustment ClausesIf the tax clauses are unavailing – for example, where a contractor experiences increased costs from domestic suppliers due to secondary market effects – the FAR’s Economic Price Adjustment (“EPA”) clauses might provide an alternative remedy.  Those clauses are included in fixed-price contracts “for upward and downward revision of the stated contract price upon the occurrence of specified contingencies.”  FAR 16.203-1(a).  There are several types of economic price adjustments, each with its own contract clause, so it is essential to determine which – if any – is included in a given contract.  For example, the typical clause for “Labor and Material” calls for the Contracting Officer to negotiate a price adjustment upon receiving notice of a price change.  FAR 52.216-4(b).  Because contractors normally must provide that notice within 60 days, it is essential to be on the alert for any price increases and to provide prompt notice to the government to avoid timeliness or waiver problems.  FAR 52.296-4(a).  Even where relief is available under one of the EPA clauses, upward adjustments usually are limited to 10 percent of the unit price.  FAR 52.216-4(c)(4).  Thus, these clauses may not provide complete relief if the new tariffs lead to major price hikes by domestic suppliers who now face reduced competition.For Department of Defense contractors, the Department of Defense FAR Supplement provides additional guidance on price adjustments for basic steel and aluminum products and for nonstandard steel items.  See DFARS 216.203-4-70; 252.216-7000; 252-216-7001.  As with the FAR clauses, the DFARS clauses require prompt notice to the Contracting Officer and impose a 10 percent maximum on the price increases.  A contractor seeking a price adjustment may also be required to show its math, including by making available all relevant records used in the computation.  See DFARS 252.216-7001(f)(3).Although EPA clauses may offer a solution for some contractors, not all contracts contain them.  Contractors should carefully review their contracts for EPA clauses that may allow a price increase in light of escalating material costs.Other RemediesOther remedies are limited.  In particular, any claim based on a changes clause or breach of contract theory is unlikely to succeed.  Contractors frequently turn to the changes clauses when government action interferes with their ability to perform the contract as agreed.  Those remedy-granting clauses recognize that the government has extraordinary power to unilaterally change the terms of its contracts, and, in return, contractors are entitled to an equitable adjustment in the contract price or schedule.Here, the government has not formally changed the contract.  Instead, government conduct has had the effect of indirectly increasing the cost of performance; therefore, contractors considering this path must show that a “constructive change” has occurred.  A constructive change occurs when the government has taken actions that have the same effect as a written change order signed by the contracting officer.  However, the imposition of new tariffs likely does not fit within the language of the changes clauses.  See FAR 52.243-1 to 7.The changes clauses identify the possible modifications or events that could qualify as a constructive change.  For example, FAR 52.243-1 applies to fixed-price contracts when government action has the effect of modifying the specifications, the method of shipment or packing, or the place of delivery.  Similarly, FAR 52.243-3 applies to time-and-materials or labor-hours contracts when government action modifies the description of services to be performed, the time of performance, the place of performance of the services, specifications for supplies, the method of shipment or packing of supplies, the place of delivery, or the amount of government-furnished property.  None of the modifications identified in the changes clauses address the imposition of new tariffs.  Therefore, it is unlikely that the new tariffs would qualify as a constructive change.Moreover, under the Sovereign Acts Doctrine, the United States Government is not liable for breach of a contract made by a public and general act within its sovereign power.  The enactment of a tariff likely falls under this doctrine, which stems from the Court of Claims’ venerable decision in Deming v. United States, 1 Ct. Cl. 190 (1865).  In Deming, the court held that the United States is not liable for losses caused by duties imposed by Congress after the contract was formed.  The facts of the case are relatively straightforward.  Deming entered into a contract to provide rations to the Marine Corps.  After the contract was formed, Congress imposed an additional duty on some of the supplies needed to perform the contract.  As a result, Deming performed the contract at a loss.  He claimed that the government’s action imposed new conditions upon his performance of the contract, which caused him to suffer monetary damages.  The court differentiated between the government acting as a party to a contract and the government “exercising its sovereign power of providing laws for the welfare of the State.”  Deming, 1 Ct. Cl. at 191.  In dismissing the case, the court explained that “[a] contract between the government and a private party cannot be specially affected by the enactment of a general law.  The statute bears upon it as it bears upon all similar contracts between citizens, and affects it in no other way.  In form, the claimant brings this action against the United States for imposing new conditions upon his contract; in fact he brings it for exercising their sovereign right of enacting laws.”  Id.  The upshot is that – in the absence of contract provisions such as the Federal, State, and Local Taxes clause or the Economic Price Adjustment clause – the government cannot be made to pay for the financial consequences of a generally applicable tax or duty.Side Effects:  Shortages and Schedule DelaysIn addition to the obvious financial consequences, one potential side effect of the tariffs may be shortages and resulting schedule delays.  While the tariffs are intended to bolster domestic steel and aluminum production, they may create a temporary reduction in the availability of steel and aluminum as foreign suppliers look elsewhere to sell their products on more favorable terms, and domestic suppliers have not yet increased their production capacity to supply domestic needs.  If so, contractors may face schedule delays due to an inability to acquire necessary materials.  Fortunately, those delays may be excusable. Excusable delays in fixed-price supply and service contracts are governed by the Default clause contained in FAR 52.249-8(c), which states that “the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor.”  The clause provides a list of examples that would entitle a contractor to an excusable delay, which includes “acts of Government in either its sovereign or contractual capacity.” FAR 52.249-8(c)(2).  Similarly, excusable delays in fixed‑price construction contracts are dealt with in the Default clause in FAR 52.249-10(b), which states that “[t]he Contractor’s right to proceed shall not be terminated nor the Contractor charged with damages under this clause if – (1) the delay in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor.” Such causes may include “acts of the Government in either its sovereign or contractual capacity.”  FAR 52.249-10(b)(1)(ii).Consistent with these clauses, the courts and boards have recognized that a contractor that experiences supply shortages beyond its control is entitled to a schedule extension.  For example, in J.D. Hedin Construction Co. v. United States, 408 F.2d 424, 428-30 (Ct. Cl. 1969), the Court of Claims decided that a delay  caused by an unforeseeable cement shortage may give rise to an excusable delay.  And in Maverick Diversified, Inc., ASBCA No. 19454, 75-1 B.C.A. (CCH) ¶ 11114 (Feb. 12, 1975), the Armed Services Board of Contract Appeals recognized that, where a contractor establishes that a steel shortage is the cause of its delay, that delay is excusable.What the Future Holds  To quote the Magic Eight Ball, the picture is cloudy for the future of the tariffs, with any number of consequences both intended and unintended.  Given this uncertainty, contractors not only should stay alert for possible effects on their existing contracts, they also should weigh the price and performance risks posed by their new proposals and closely examine the remedy‑granting clauses included in the resulting contracts.Even contractors who use no steel or aluminum in their products may see ricochet effects if the new tariffs lead to retaliatory measures such as reductions in foreign government purchases of U.S. defense and aerospace technology and platforms.  If a tariff squabble becomes a trade war, those purchases may become one of the front lines.  That unintended consequence might eventually become the tariffs’ most significant effect on U.S. defense and aerospace contractors.  Unfortunately, it is also an effect for which the FAR offers little or no recourse.

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Impending Tariffs Could Increase Cost of Performance, but Remedy-Granting Clauses May Allow for Price Adjustments