Government Contracts ConneKTion

Archive for April 2017

Posted on Thursday, April 27 2017 at 3:03 pm by -

New Case Lends Support to the Position that Public Universities Are Immune from False Claims Act Liability

New Case Lends Support to the Position that Public Universities Are Immune from False Claims Act Liability By: Gunjan Talati

Public universities have a new case to add to their defense arsenal should they find themselves as a defendant in a False Claims Act (FCA) case. On April 11, 2017, in United States et al v. Oregon Health and Sciences University, an Oregon federal judge dismissed a FCA case that had been brought by a relator and where the government had intervened. In Oregon Health and Sciences University, a former Oregon Health and Sciences University (OHSU) employee had filed a qui tam action alleging FCA violations on federal research grants. The Government decided to intervene in the case and filed a complaint in intervention alleging FCA violations, a claim for payment by mistake, and a claim for unjust enrichment relating to federally-sponsored projects. In response, OHSU filed a motion to dismiss arguing that OHSU is “an arm of the State” and therefore not a “person” upon whom liability can be imposed under the FCA. The court granted the motion to dismiss.

In its decision, the court looked to previous cases involving OHSU where courts had determined that OHSU was entitled to sovereign immunity because of its nexus to the state of Oregon. Additionally, the court applied a five factor test set forth by the United States Court of Appeals for the Ninth Circuit for determining whether an entity is “an arm of the state” for purposes of sovereign immunity:

  1. Whether a money judgment would be satisfied out of state funds;
  2. Whether the entity performs central governmental functions;
  3. Whether the entity may sue or be sued;
  4. Whether the entity has the power to take property in its own name or only in the name of the state; and
  5. The corporate status of the entity.

 

The court concluded that based on these factors and previous decisions regarding OHSU’s status, that it was “an arm of the state.” The Supreme Court has ruled that the definition of “person” for FCA liability purposes does not include states or arms of a state. Accordingly, the court dismissed the case against OHSU (but did grant plaintiffs leave to file an amended complaint on their unjust enrichment/payment by mistake claims to the extent they were not related to express contracts already addressed).

While this decision was at the district level and may still be appealed, public universities should evaluate the holding to determine whether they can use the principles in their own FCA cases. Doing so might reveal a powerful shield against the Government’s FCA sword.

 

Posted on Monday, April 17 2017 at 1:07 pm by -

AEIOU and Sometimes IDIQ – Indefinite Delivery/Indefinite Quantity Contract Use Remains Proportional.

AEIOU and Sometimes IDIQ – Indefinite Delivery/Indefinite Quantity Contract Use Remains Proportional. By: Lawrence M. Prosen

As we previously discussed both on this blog and elsewhere, observational and indirect evidence told us that the use of Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts was expanding. As it turns out, from 2011-2015, IDIQ usage actually remained flat, but the amount of dollars spent is still staggering. GAO, in response to a request by Senator Claire McCaskill, Ranking Member of the Committee on Homeland Security and Governmental Affairs issued a report on April 13, 2017, with metrics and insight into Agency use of IDIQ contracts. See GAO-17-329 at https://www.gao.gov/products/GAO-17-329.

IDIQ contracts, defined under FAR Subpart 16.5, are contracts under which a government agency issues a Request for Proposals and awards one or more contracts for the order of products or services where it may not know its full needs at the time of award. What is purchased spans the full panoply of goods and services the government purchases, from construction to commercial, off-the-shelf products and technical services. The only real limitation associated with IDIQ contracts is that, for purposes of contractual consideration, the Agency must guarantee a certain minimum amount of purchasing and the contractor must meet its obligation up to a stated maximum. IDIQ contracts first came into vogue in the mid-1990’s but saw a significant uptick in use in the 2000’s. We saw that uptick continue into the second decade of this century, but then flatten, as GAO has now confirmed.

GAO found that between 2011 and 2015 over $130 billion was obligated annually to IDIQ contracts, with the Departments of Defense, Homeland Security, Health and Human Services and Veterans Affairs being the lead users of these contract vehicles.

For the period observed, GAO found that roughly 2/3s of government-wide IDIQ obligations related to services, with the remaining 1/3 related to products. One concern about the use of IDIQs is the large number of IDIQ contracts that are “single-award”, meaning that only one contract is awarded under a given IDIQ solicitation. This is distinguished from the “multiple-award” situation where more than one award is made. Under this latter scenario, the Agency seeks to “prequalify” a competitive range of offerors. Those offerors who are successful are then awarded a contract under which future Deliver or Task Order Contracts (“Order Contracts”) are issued, allowing an agency to reduce the likelihood of bid protests when it solicits and awards those future Order Contracts due to statutory limitations on GAO Bid Protest jurisdiction relating to such Order Contracts.

While the Report does not reach any conclusions, and is primarily statistical, it does provide a good overview and insight into some of the reasons why contracting officers prefer the use of IDIQ contracts. This may provide potential offerors some valuable assistance in developing bidding/proposal strategies on a going-forward basis.

Posted on Thursday, April 13 2017 at 9:31 am by -

The All Small Mentor-Protégé Program List Published by SBA Can Provide Competitive Insight

The All Small Mentor-Protégé Program List Published by SBA Can Provide Competitive Insight By: Gunjan Talati & Scott Davidson, The GCO Consulting Group

Small businesses that have historically participated in the Small Business Administration’s (SBA) 8(a) program have long known the benefits of an 8(a) mentor-protégé agreement. The 8(a) protégés got to receive substantial development assistance from and team and joint venture with their mentors free from traditional affiliation considerations. The other types of small businesses were left out in the cold as the mentor-protégé program was previously limited only to 8(a) concerns. Last summer, SBA amended its regulations to let all the small business types in from the cold. Accordingly, all small business concerns including HUBZone, women-owned, and service disabled veteran-owned small businesses can now participate in what’s known as the “All Small Mentor-Protégé Program” or ASMPP.

Since opening up the mentor-protégé program to all small businesses, SBA has received a number of applications (that’s right, even though all small businesses can participate, the parties still have to submit an application). SBA has published the list of those companies with active ASMPP agreements. As of April 5, 2017, there are 90 such agreements. A few observations from that list:

  • The protégés (and their corresponding mentors) operate in a variety of industries, from construction to cybersecurity;
  • There are many well-known mentors participating indicating that large businesses are keen to participate so they can have a piece of the pie; and
  • There’s room for more to participate. While 90 companies is an impressive number for a program that is only months old and there is no doubt a slew of applications working their way through the SBA application process, we’re surprised that the list isn’t longer, particularly given the relative low risk of participating versus the potential reward.

The published list also serves as a reminder that very little in government contracting can be hidden from the public eye. Companies applying to the program should keep in mind that their arrangement will be made public. This can impact your other relationships, particularly where you might have a teaming agreement or joint venture with another party. There could also be legal repercussions for example where non-competes are involved for an organization or employee. Additionally, your competitors know who you are working with and will examine the relationship to find out if they can use that relationship to trip you up by for example raising organizational conflicts of interest allegations in bid protests. From a capture/business development perspective you should analyze the list to see if your competitors are listed as a part of the program. If they are you need to take into consideration that if your competitor is a small business you will potentially have to compete with the past performance of the large business mentor behind them in set aside competitions as well as if you are a large business be wary of your large business competitors who are mentors as they may be strategically positioning opportunities to be released under a specific socioeconomic competition.

Analyzing these issues before you submit your application can prevent a lot of headaches down the road. We’ll report back on additional observations as the list grows.

Posted on Tuesday, April 4 2017 at 12:14 pm by -

Food the Next Frontier in the CFIUS Battles?

Food the Next Frontier in the CFIUS Battles? By: Gunjan Talati

A few weeks ago we told you about the Congressional efforts underway to combat China’s increased investment in the United States (see here). Well, those aren’t the only efforts to revamp the authority of the Committee on Foreign Investment in the United States (CFIUS). In mid-March, Senators Chuck Grassley (R-IA) and Debbie Stabenow (D-MI) introduced legislation to broaden the scope of CFIUS by including the impact to food safety as part of CFIUS’ purview. (For those new to the world of CFIUS, our client alert from last summer includes a primer on CFIUS and its authority.)

The proposed bill is titled “Food Security is National Security Act of 2017” and would change the make-up of CFIUS by adding the Secretary of Agriculture and the Secretary of Health & Human Services as full-time CFIUS committee members. Additionally, the proposed legislation would identify “the potential effects of the proposed or pending transaction on the security of the food and agriculture systems of the United States, including any effects on the availability of, access to, or safety and quality of food” as an express CFIUS consideration.

CFIUS has long had broad authority to consider many different areas as a function of its national security review. As such, it’s likely CFIUS has already been considering food security issues during its reviews. This proposed legislation however would formalize the elements of food security review as part of the CFIUS process. Also, it would add two more agencies that have to clear the transaction potentially making the process longer and opening the door for additional inquiries during the review process. Food companies should follow this proposed legislation and evaluate these issues when considering taking in foreign investments