Legal Developments for Government Contractors to Consider

5 min

On October 23, the General Services Administration (GSA) announced that it will be hosting an industry engagement event to highlight how section 889 of Title VII of the National Defense Authorization Act (NDAA) for FY 2019, which prohibits federal agencies from acquiring "covered telecommunications equipment or services," i.e., equipment or services produced or provided by certain Chinese companies, will affect GSA's business and supply chain. In its announcement, the GSA calls attention to specific questions it has for industry, such as how long it would take to remove covered equipment from all levels of supply chains, what the anticipated compliance costs will be, and whether the prohibition would impact plans to do future business with the GSA.

This event will be held on Wednesday, November 6, 2019 from 9:00 a.m. to 11:00 a.m. at the Department of Interior Yates Auditorium.

Legal Decisions

Construction contractors and sureties should monitor the Federal Circuit docket, as two judges recently recommended a case as an appropriate vehicle to review Federal Circuit precedent as it relates to the relationship between sureties and the government. See Guarantee Co. of N. Am., USA v. Ikhana, LLC, No. 2018-1394, 2019 WL 5555643 (Fed. Cir. Oct. 29, 2019). In this case, the Federal Circuit affirmed a decision by the Armed Services Board of Contract Appeals (ASBCA) denying a motion to intervene by the indemnifying surety in a contractor's claim against the government for termination. The court found that because the surety had not invoked its right to assume all contractual rights under its indemnity agreement with the contractor before the contractor filed its claim with the ASBCA, the surety could not intervene in the claim. The court based this on Federal Circuit precedent, which noted that the purpose of the Contract Disputes Act (CDA) was to prevent duplicative claims before the boards and the courts. In a concurring opinion, Judges Wallach and Dyk noted that while the decision rested squarely on the court's precedent, they believed precedent had misinterpreted the CDA and brought government contracting law into conflict with basic principles of suretyship and contract law. Consequently, both judges recommended this case as an appropriate vehicle for a review of Federal Circuit precedent.

Government contractors are familiar with the concept of a patent ambiguity in terms of protesting an award, meaning a patent ambiguity in a solicitation is a pre-award protest ground and will be denied if brought post-award. However, on October 4, 2019, the Civilian Board of Contract Appeals (CBCA) reminded contractors that in the context of a claim against the government, a patent ambiguity will be resolved against the contractor. See Chupnick v. Social Security Admin., CBCA 6539 (Oct. 4, 2019) (finding that because the provision at issue was patently ambiguous, contractor had a duty to inquire, and because the contractor failed to inquire, the contractor lost its claim). Thus, contractors should be aware that addressing patent ambiguities in a solicitation is not just a matter of avoiding untimely protests; it is also a matter of protecting the offeror's interest, if it does receive an award.

Congress

On October 22, the House of Representatives passed H.R.2513, the Corporate Transparency Act of 2019, which would require companies to disclose and periodically report their beneficial ownership information to the Department of Treasury. Specifically, the legislation would require newly formed corporations or limited liability companies in any state or Indian Tribe to disclose their beneficial ownership at the time of formation and annually report their beneficial ownership and any changes. Furthermore, the legislation directs the Department of Treasury to consider rulemaking requiring companies to update their beneficial ownership within a specified amount of time after a change in beneficial owners or change in information (e.g., current address of beneficial owner). For government contractors the legislation would require disclosure of beneficial ownership as part of "any bid or proposal for a contract with a value threshold more than the simplified acquisition threshold."

FAR Changes

On October 10, the Department of Defense (DOD), GSA and National Aeronautics and Space Administration (NASA) (collectively the FAR Council) issued a final rule amending the FAR to revise the definition of a "commercial item" pursuant to a section of the National Defense Authorization Act for Fiscal Year 2018. Previously the FAR defined commercial item to include—among other things—a nondevelopmental item, if the procuring agency determines the item was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple state and local governments. The updated definition adds "or to multiple foreign governments" to the end of that definition. The revised definition adds nondevelopmental items developed exclusively at private expense and sold in substantial quantities on a competitive basis to multiple foreign governments.

This month the FAR Council also proposed amending the Federal Acquisition Regulation (FAR) to implement certain provisions of the FY 2018 NDAA. Proposed changes include the following:

  • On October 2, the FAR Council proposed increasing the threshold for requiring certified cost or pricing data from $750,000 to $2 million for contracts entered after June 30, 2018.
  • On October 2, the FAR Council proposed increasing the micro-purchase threshold (MPT) and simplified acquisition threshold (SAT) to $10,000 and $250,000, respectively. Additionally, the proposed rule seeks to "ease maintenance of regulations" by replacing—where appropriate—regulatory stated dollar thresholds (e.g., $3,500 for MPT and $150,000 for SAT) with the text "micro-purchase threshold" and "simplified acquisition threshold."

For both rule makings, interested parties should submit written comments by December 2, 2019.

Inspector General Reports

On October 11, the SBA Office of Inspector General (OIG) released a report on the most serious management and performance challenges facing the Small Business Administration (SBA). Of relevance to government contractors, the report discussed the SBA's administration of the 8(a) program, the women-owned small business (WOSB) program, and SBA's small business contract goal counting methods. Concerning the SBA's administration of the 8(a) and WOSB programs, the OIG raised serious concerns about the SBA's eligibility-monitoring activities. For example, of a sampling of 25 8(a) participants, the OIG identified 20 firms that should not have continued eligibility. Concerning the SBA's small business contracting goal, the OIG raised concerns about including small businesses that change to "other than small" after award or during contract performance in small business goal calculations. Because of the OIG's report, contractors should expect increased scrutiny of their eligibility for certain socioeconomic statuses by SBA.