What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers

Volume VI —Organizational Conflicts of Interest:  When the Whole Is Less Than the Sum of Its Parts

An organizational conflict of interest (“OCI”) arises when the performance of one contract undermines a contractor’s objectivity or creates an unfair competitive advantage with respect to another contract.  An agency cannot issue an award to a contractor that possesses an OCI unless that OCI has been avoided, mitigated, or waived.  Many government contracts include clauses that require contractors to avoid potential OCIs, to notify the Government of any OCIs that arise after award, and to work with the Government to mitigate any such OCIs.  Some contracts also avoid OCIs proactively by precluding the contractor from performing specific types of work.

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FCA’s “Implied Certification” Theory Survives

We previously reported on the viability of the “implied certification” theory of FCA liability based on oral argument before the Supreme Court in Universal Health Services, Inc. v. U.S. ex rel. Escobar.  We concluded that the theory—under which a claim for payment can be false without an express certification, but because the government contractor has not complied with an applicable statute, regulation, or contractual provision—did not appear to be headed for extinction.  It turns out we were right.

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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers

Volume V—The Land Mines Strewn Throughout the Data Room

M&A transactions, like most transactions in life, involve a cost/benefit analysis.  Some cost/benefit analyses are relatively easy to perform.  For example, if I buy an energy efficient appliance, I can calculate the likely savings in energy costs over the useful life of the appliance (the benefit) and compare it with the acquisition cost of the appliance (the cost).  M&A transactions, of course, involve far more complex cost/benefit analyses.  But the key to any such analysis is the ability to identify and quantify the costs and benefits with some measure of confidence.  Every line of business has its own quirks and idiosyncrasies, and they need to be understood when evaluating the acquisition of a company that operates in that line.  More than most, the business of government contracting is replete with such quirks and idiosyncrasies, and they can have a dramatic effect on the “cost” side of the cost/benefit analysis.

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It’s Arrived! FAR Final Rule Addressing “Basic Safeguarding of Contractor Information Systems”

After nearly four years of planning and comments, DoD, GSA, and NASA issued a final rule today amending the Federal Acquisition Regulations (“FAR”) with a new Subpart 4-19 and a new contract clause 52.204-21 addressing the basic safeguarding of contractor information systems.  Applicable to all acquisitions, including commercial items other than commercial off-the-shelf items (“COTS”), the Final Rule applies to any contractor information system that may contain “Federal contract information,” meaning “information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government.”  See FAR 4.1901.  The term expressly excludes information provided by the Government to the public (e.g., on public-facing web sites) or simple transactional information, “such as that necessary to process payments.” Continue Reading

In Wake of Panama Papers Scandal Obama Calls for Stricter Bank Regulations, Tax Rules

In a news conference May 6, President Obama addressed recently announced rules and proposed regulations intended to help the U.S. fight tax evasion and other crimes connected to anonymous offshore companies and accounts.  The announcements come after a month of intense review by the administration following the first release of the so-called Panama Papers, millions of documents stolen or leaked from Panamanian law firm Mossack, Fonseca.  The papers have revealed a who’s who of international politicians, business leaders, sports figures and celebrities involved with financial transactions accomplished through anonymous shell corporations. Continue Reading

Did the FCA’s “Implied Certification” Theory Dodge a Bullet?

Last week’s argument before the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar had the potential to put false claims based on an “implied certification” in the crosshairs. Instead, based on the weight of questioning by a plurality of justices, it appears that some form of implied certification theory may survive. (We previously reported on this case, here.)

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DoD Proposes Cost Allowability Rule for Correcting Counterfeit Electronic Parts

The Department of Defense (“DoD”) recently proposed to make specified costs allowable that are associated with discovering and correcting counterfeit or suspect counterfeit electronic parts.  DoD’s proposed rule would amend the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement the National Defense Authorization Act (“NDAA”) for Fiscal Year 2016.

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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers

Volume IV – Key Issues in Government Contracts Due Diligence

This posting is the fourth in our ten-part series on unique issues that arise in connection with mergers and acquisitions involving government contractors and subcontractors.  Parts 1 through 3 focused on the structure of the transaction and the implications of that structure on the transfer of pending contracts and proposals.  This posting, Part 4, introduces some of the most important issues that potential buyers should consider and address during the due diligence and negotiation process.  The posting is not intended to be a detailed “due diligence checklist,” but rather a high level overview of certain key factors that are likely to impact the “go/no go” decision and the buyer’s valuation of the target company. Continue Reading

To Share or Not to Share (with the Government)? That is the Question: DHS Announces Interim Guidelines for Sharing Cyber Threat Indicators

On February 16, 2016, Secretary of Homeland Security Jeh Johnson announced interim guidelines and procedures for sharing cyber threat indicators under the Cybersecurity Information Sharing Act of 2015 (“CISA”). Because the guidelines are voluntary, the next question is, should your company share information with the Government? Continue Reading

Potential Changes at GAO in 2016

There are some big potential changes coming to the bid protest process at the Government Accountability Office (“GAO”) in 2016. It is possible that this year will bring a formalized electronic docketing system, a fee for filing protests, and a sunset on an important part of GAO’s bid protest jurisdiction.   Continue Reading

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