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

Effective January 1, 2010, the U.S. Trade Representative (USTR), Ronald Kirk, published new dollar thresholds determining the applicability of the Buy American Act (BAA), the Trade Agreements Act (TAA), and (potentially) other "Buy American" preferences to the United States' various international free trade agreements. See 74 Federal Register 68907 (December 29, 2009). The changes to the dollar thresholds are effective through the end of 2011, so it is doubtful that we will see any additional escalation until 2012. 
 

• Email This
• Print
• Comments

If you are a company that has received funds under the American Recovery and Reinvestment Act of 2009 (also known as “ARRA,” “the Recovery Act” or “the Stimulus Act”) and that has a requirement to report the data required under the Act (under FAR 52.204-11 and Section 1512 of the Act), you have until the end of this week (October 10, 2009) to report this data through the new website www.federalreporting.gov.
 

• Email This
• Print
• Comments

Stimulus projects are likely to come with a thick string of transparency and accountability requirements, along with potentially severe financial penalties and, in some cases, possible prison time. These conditions may be extended not only to U.S. government contractors, but to companies undertaking federally funded projects for state and local governments.

Companies that plan to accept money from the 2009 American Recovery and Reinvestment Act (ARRA) should consider acting now to prepare for an especially demanding environment. Investing time, effort, and resources today to establish and improve risk management and compliance processes and controls can help companies mitigate potentially catastrophic problems later.

Learn more by reading the complete paper authored by Deloitte Financial Advisory Services partner, Donna Epps, and Sheppard Mullin Government Contracts partner, John Chierichella, available through the following link.

• Email This
• Print
• Comments

The civil False Claims Act (FCA) prohibits using false statements related to a false claim. (Other types of FCA liability include presenting a false claim, concealing an obligation to pay money to the government, and conspiring to violate the FCA.) In the recent FCA amendments, Congress explicitly added materiality as an element of FCA false statement liability.  Not surprisingly, it also adopted a weak, pro-plaintiff definition: materiality means “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.”
 

• Email This
• Print
• Comments

Congress recently expanded contractors’ liability under the civil False Claims Act (FCA). The substantive changes include eliminating the presentment requirement, adding liability for claims seeking non-United States funds, expanding the scope of reverse false claims and conspiracy liability, and eliminating the intent requirement for conspiring to violate the FCA and for using false statements material to a false claim.
 

• Email This
• Print
• Comments

I.  INTRODUCTION

Without a doubt, the False Claims Act ("FCA") has been dramatically changed in the last few months. As will be discussed in more detail herein, it certainly appears that the FCA has been retooled so that the playing field is now stacked in favor of the government and qui tam plaintiffs. There is also every indication that lenders who have federally insured mortgages, redevelopment funding, or other financial support from the government, are at risk of being sued for false claims unless they take certain precautions to educate and protect themselves.

In fact, it is a good idea for all companies who receive government funding (e.g., defense contractors, health care providers, academic institutions) to look closely at their internal compliance programs, and modify them to reflect the recent changes in the FCA. This article is intended to offer some specific suggestions, and also encourage companies to have their programs amended, and implemented by legal counsel who are receptive to flexible billing arrangements including flat fee schedules.
 

• Email This
• Print
• Comments

The Administration has conceded that the American Recovery and Reinvestment Act (“ARRA”) has not worked as planned. With unemployment numbers continuing to climb, the Administration now acknowledges it “misread the economy.” But from the beginning not everyone believed ARRA would achieve the desired stimulative effect. After all, $787 billion cannot be disbursed without some complication.
 

• Email This
• Print
• Comments

On March 31, 2009, the FAR Councils issued several new interim rules (effective March 31, 2009) implementing the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) (also known as ARRA, The Recovery Act, or the Stimulus Act). See Federal Acquisition Circular (FAC) 2005-32, published at 74 Federal Register 14621-14652. The FAC issued new interim rules on a number of areas required under the Stimulus Act, including:

• Reporting Requirements for Recipients of Recovery Funds (see 74 Federal Register 14639) 
   
• Publicizing Contract Actions (see 74 Federal Register 14636) 
   
• GAO and IG Access to Company Employees (see 74 Federal Register 14646) 
   
• Whistleblower Protections (see 74 Federal Register 14633) 
   
• Buy American Requirements for Construction Materials (see 74 Federal Register 14623)
   

This blog focuses on the final three sets of rules – those relating to Auditor access; Whistleblower protections; and Buy American requirements. The first set of rules is discussed separately here.
 

• Email This
• Print
• Comments

Federal contractors that perform work funded, in whole or in part, by the American Recovery and Reinvestment Act of 2009 must report on certain aspects of that work under an interim rule issued by the FAR Councils on March 31, 2009. As currently written, the interim rule provides that recipients of Recovery Act funds must report information including, but not limited to—
 

a) The dollar amount of contractor invoices;
 

b) The supplies delivered and services performed;
 

c) An assessment of the completion status of the work;
 

d) An estimate of the number of jobs created and the number of jobs retained as a result of the Recovery Act funds;
 

e) Names and total compensation of each of the five most highly compensated officers for the calendar year in which the contract is awarded if in its preceding fiscal year the contractor received 80 percent or more of its annual gross revenues and $25 million or more in annual gross revenue from federal funds, and such information is not publicly available through SEC filings; and
 

f) Information on first-tier subcontractors, including the same executive compensation information required from prime contractors.
 

• Email This
• Print
• Comments

Currently before Congress are at least two bills that could significantly increase government contractors’ liability and strengthen whistleblowers’ power to sue on behalf of the government. Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vermont) are spearheading a bipartisan effort to revise the False Claims Act (FCA), the government’s primary tool to recover damages for fraud related to government contracts. Under the FCA, the government may recover treble damages for false claims in addition to a $5,500 to $11,000 penalty per claim. The qui tam provisions of the FCA permit whistleblowers (called “relators”) to sue on behalf of the government and receive up to 30 percent of the government’s total recovery. Since 1986, the government has recovered over $22 billion through the FCA.

Both Senate bills would overturn court decisions that the sponsors (and the plaintiffs bar) allege were too friendly to contractors. The first bill, the Fraud Enforcement and Recovery Act of 2009 (FERA), would expand FCA liability, particularly for subcontractors. The second bill, the False Claims Act Clarification Act of 2009 (FCACA), would eliminate the public disclosure defense and give relators new procedural advantages. Interestingly, as we discussed here, the Department of Justice (DOJ) is already on record questioning the need for some of these provisions in earlier proposed legislation.
 

• Email This
• Print
• Comments

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 ("the Act" or "the Stimulus Bill") (P.L. 111-5) (H.R. 1).  We already have discussed some of the provisions of this Act here and here, focusing on the implications of the various audit and Buy American provisions (including those in Section 1605 of the Act).
 

• Email This
• Print
• Comments

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 ("the Act" or "the Stimulus Bill") (P.L. 111-5) (H.R. 1). As widely reported in the media, the Stimulus Bill includes approximately $787 Billion in government spending and tax cuts. With regard to the government spending provisions (Division A of the Act, which appropriates approximately $520 Billion), the U.S. Government (as well as the State and local governments receiving this money) will disburse the funds through a number of different vehicles – namely government contracts, grants, cooperative agreements, and other transactions. The legislation is intended to deal with, on an expedited basis, economic conditions that many Americans have not experienced in their lifetimes and for which they want an accelerated cure. Those familiar with the federal acquisition and grant processes, however, know that immediacy is not built into those processes. Moreover, to the extent that the “need for speed” overtakes process, recipients of the funds will almost assuredly find themselves downrange from one of the most rigorous oversight regimes ever enacted. Companies, and even States and localities – should familiarize themselves with the full terms of the Faustian bargain they will be striking.  

• Email This
• Print
• Comments

In its 2008 report on the Government’s financial consolidated statements released on December 15, the Government Accountability Office criticized “serious financial management problems at the Department of Defense, the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and the federal government’s ineffective process for preparing the consolidated financial statements.”  GAO further reported that the Government did not comply “with significant laws and regulations.”  Ironically, this report issued just days after the Government forced all federal contractors to implement their own internal control systems under penalty of suspension or debarment.

• Email This
• Print
• Comments

On September 17, 2008, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued interim rules providing for enhanced competition for task and delivery order contracts.  The interim rules essentially mirrored Section 843 of the National Defense Authorization Act of 2008 (the Act), which went into effect on May 27, 2008, and revised three provisions of the Federal Acquisition Regulation (FAR 16.503 – 16.505) to incorporate the Act’s enhanced competition requirements.  See 73 Fed. Reg. 54008 (Sept. 17, 2008).  As was discussed in an earlier blog article with respect to the interim rules when they were initially proposed, the rules targeted three primary areas:

• Email This
• Print
• Comments

With the enactment of the Federal Acquisition Streamlining Act (FASA) in 1994, Multiple Award task and delivery order contracts were given a significant boost.  As part of that legislation came an almost ironclad bar to bid protests against the award of individual task or delivery orders.  Disappointed offerors were prohibited from protesting the award of task or delivery orders except if such orders increased the scope, period, or maximum value of the underlying contract.  Several exceptions subsequently were carved-out from the general prohibition, including protests of “down-selections” as well as task and delivery orders awarded under the GSA FSS program.  Otherwise, however, disappointed offerors could either air their grievances with the agency ombudsman (an individual who possesses no binding authority) or could take the road seldom traveled and file a CDA claim with the contracting officer alleging a breach of the "fair opportunity to compete" required by FASA, implementing regulations, and contract clauses.  Only recently was there any indication that damages could be awarded under the latter approach and, as expected, the standard for recovery is a difficult one for any contractor to meet.  The circumscribed recourse available to disappointed task or delivery order offerors did not occur by happenstance – it was the result of deliberate efforts by reformers to streamline the acquisition process and to avoid the delays and increased costs they attributed to the numerous, routine and purportedly needless protests encumbering the procurement system.
 

• Email This
• Print
• Comments

Effective July 21, 2008, the U.S. Department of Defense ("DOD") issued an interim rule with a request for comments that creates a contractual obligation for all DOD contractors to comply with U.S. export control laws.  See 73 Federal Register 42274.  While, technically, the interim rule does not impose any new requirement on U.S. businesses, because all are already required to comply with U.S. export requirements, the interim rule does impose additional risks and liabilities on defense contractors because a violation of U.S. export laws could now also result in a breach of contract.  Given the fact that many companies do not fully understand the scope or intricacies of U.S. export laws, inadvertent export violations are a common occurrence.  Accordingly, this new rule could easily increase contractual (and related) risks for DOD contractors.

• Email This
• Print
• Comments

On April 23, 2008, the U.S. House of Representatives passed H.R. 3033, "Contractors and Federal Spending Accountability Act," agreeing by voice vote that GSA would maintain a centralized database of government contractors.  The GSA database would collect information on contract defaults, suspensions, and debarments, as well as "any civil or criminal proceeding, or any administrative proceeding" for which a contractor paid at least $5,000 in restitution, that has been "concluded" by the federal or state governments.  If a contractor committed in a three-year period more than one offense for which it could be debarred, the contracting officer must affirmatively demonstrate the contractor's responsibility prior to award.

• Email This
• Print
• Comments