Government Contracts Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

The Obama Administration is now planning yet another spending plan, this time in the form of a policy that actively encourages federal contractors either to increase the pay and benefits extended to their workforces, or to face an evaluative disadvantage in competing for federal contracts. This so-called "High Road Procurement Policy" includes an evaluative reward for "potential Federal contractors that pay wages or provide benefits above those required by our laws," including the Service Contract, the Davis-Bacon, the Walsh-Healey, and the Fair Labor Standards Acts.
 

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There are few things worse for a business than starting the day with FBI agents at the door demanding to search the files and computers with a search warrant in hand. Matters have not improved for businesses in the last ten years.  Courts have struggled with balancing the government's interest in discovering evidence of a crime before it is possibly destroyed by the target of a criminal investigation, and the Fourth Amendment right against unreasonable searches and seizures. This balancing of competing priorities is even more difficult now that the majority of business records are in electronic format, which makes an on site review for material covered by the search warrant virtually impossible.  Consequently, the government has been obtaining search warrants that allow entire computer files and email communications to be copied, and then seized in their entirety by the government. Needless to say, such an unbridled search without reasonable constraints is tantamount to a "general warrant" that is expressly prohibited by the Fourth Amendment.
 

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Where is the line between a legitimate False Claims Act whistleblower and an opportunistic parasite? How detailed do a whistleblower’s allegations have to be to survive a motion to dismiss and subject a defendant to expensive discovery? These questions have split the federal courts. The Supreme Court recently invited the Solicitor General to offer the government’s opinions on a petition for certiorari raising these questions. This is a strong signal that the Supreme Court will address these issues and hopefully bring more clarity to False Claims Act litigation.
 

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2010 is promising to be a banner year for enforcement of the Foreign Corrupt Practices Act ("FCPA"). In mid-January of this year, the DOJ unsealed sixteen indictments charging twenty-two individuals with violations of the FCPA's anti-bribery provisions. A few weeks later, in early February, British defense industry giant, BAE Systems plc ("BAE"), announced that it would plead guilty to one charge of conspiring to make false statements to the U.S. Government regarding its ongoing compliance with the FCPA. In connection with its guilty plea, BAE also agreed to pay a $400 million penalty. Notably, the DOJ did not allege that BAE violated the FCPA or that BAE executives willfully looked the other way while their agents or subordinates violated the Act. Instead, the crux of the DOJ’s case appears to be that BAE failed to install a compliance system capable of detecting FCPA violations in the first place.
 

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Recent trends demonstrate that virtually every industry is vulnerable to potential liability under the Foreign Corrupt Practices Act (FCPA) and global Anti-Bribery Conventions. Moreover, regulators are increasingly conducting both industry-wide reviews and global investigations of targeted organizations. The recent indictments of twenty-two individuals in the military equipment industry demonstrate that, regardless of size, any company involved in international commerce is now a potential target.
 

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In comments released on March 12, 2010, the Administration announced that it will be shifting the current encryption review request process under 15 C.F.R. section 740.17 to an on-line system, with the objective of reducing review times from 30-60 days to 30 minutes. While industry will welcome the shortening of the review waiting period, the current regulations already allow many encryption exports to our largest trading partners, those listed in Part 740, Supplement 3, as well as exports to other countries of items described in section 740.17(b)(1)(ii), to occur during the waiting period. There is no indication that the change would add countries like China or India to Supplement 3. As described, it also would not alter the technical definition of encryption products requiring review or result in any expansion of the existing exception for "ancillary cryptography." Without more fundamental changes along these lines, the ultimate impact of the review request change will probably be minimal.
 

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Nearly one year ago on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5), more commonly known as the Stimulus Act, the Recovery Act, or ARRA. One of the key features of the Act included a "Buy American" requirement, requiring domestically manufactured "iron, steel, or manufactured goods" to be used in Recovery Act funded projects (located at Section 1605 of the Act). This requirement has proven to be a collossal headache for vendors supporting Recovery Act projects and has also proven to be immensely complicated for the good men and women in Government (including those at the State and local levels), who are faced with the task of figuring out how, where, and when the Recovery Act Buy American requirement applies. 
 

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The intrusive nature of the oversight mechanisms that are available to the Government under the Recovery Act is unprecedented in federal contracting. It is a subject that has been dealt with previously in this blog (click here, here, here and here). For a useful PowerPoint summary of these mechanisms, click here. This link was used as the basis for a presentation at the recent 16th Annual Procurement Institute in which the acceptance of ARRA dollars was said to evoke memories of a 1959 movie starring James Cagney and Don Murray entitled "Shake Hands With the Devil." We leave it to you to decide if the title is apt.
 

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At their December 2009 Plenary Session, the member countries of the Wassenaar Arrangement on dual-use export controls adopted a new Note 4 to Category 5 - Part 2 of the Dual-Use List covering information security and encryption. 
 

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A recent California Court of Appeals case, Coito v. Superior Court of Stanislaus County, __ Cal. App. 4th __ (March 4, 2010), highlights an important discrepancy between state and federal protection of attorney work product as it applies to witness statements. While the federal rules and case law support a qualified privilege with regard to such statements (requiring a showing of substantial need to permit discovery), the law applicable in state courts may differ. The court in Coito, as further discussed below, followed a line of California cases that place witness statements outside of the attorney work product doctrine.
 

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