Photo of Keith Szeliga

On June 24, 2019, the Supreme Court ruled that Exemption 4 of the Freedom of Information Act (“FOIA”), which protects from public disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential,” does not require a showing of substantial competitive harm for information to qualify as “confidential.” The Court’s ruling represents a sea-change in how the Government must protect information under this important exemption.
Continue Reading OH SNAP! Supreme Court Rejects Substantial Competitive Harm Test For Key FOIA Exemption

On January 11, 2019, the Supreme Court granted a petition for writ of certiorari over an Eighth Circuit decision involving Exemption 4 of the Freedom of Information Act (“FOIA”), which protects from public disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” This marks the first time the Supreme Court has agreed to hear a case involving this important exemption.
Continue Reading OH SNAP! Supreme Court to Take on Meaning of Key FOIA Exemption

By memorandum dated June 7, 2018, Shay Assad, DoD’s Director, Defense Pricing/Defense Procurement and Acquisition Policy, has reversed decades of procurement practice that has been embraced by industry and the government alike in attempting to manage the often unmanageable process of providing the government with cost or pricing data that is current, accurate and complete as of the date of agreement on price. Recognizing that inherent “lag time” often makes it impossible for contractors to provide “up to the minute” data in real time at the point when the parties “shake hands,” contractors have customarily performed immediate post-handshake “sweeps” of their databases to provide the government with any data that may have escaped the pre-handshake dragnet. The government, in turn, has customarily accepted the data, evaluated its impact on the price, and negotiated, if and as appropriate, adjustments to the price. The net result was that the government had all the data, its impact on price was addressed, and the contractor avoided liability under the Truth in Negotiations Act and, possibly, under the False Claims Act. Everyone was happy.

Not anymore.
Continue Reading OSD Issues Policy Guidance Rejecting “Sweeps” Data

The 2018 National Defense Authorization Act (“NDAA” or “Act”) includes changes that could make the Department of Defense (“DoD”) a more effective and knowledgeable purchaser of Intellectual Property (“IP”) and promote more flexible IP acquisition strategies. These same changes also could encourage Contracting Officers to insist on broader IP rights and delivery requirements. While it has always been important for contractors to protect their IP (click here for our list of “Top 10 Ways to Lose Rights in Your IP”), with the passage of the 2018 NDAA, avoiding the loss of valuable IP rights could require even more sophistication and vigilance.
Continue Reading Contractors Beware: The 2018 NDAA Ushers In New Changes Affecting IP Rights

Volume X – Accounting for the Cost of Business Combinations Under Government Contracts

Mergers and acquisitions create additional costs and complex accounting issues for government contractors.  There are fees for accounting, legal, and business consultants.  There may be restructuring costs associated with combining business operations.  Segments may be closed and retirement plans may be terminated.  Golden handcuffs and golden parachutes are also common.  Assets may be revalued, goodwill may be created, and there may be changes in cost accounting practices.


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

Volume IX – Unclassified Contracts?  Foreign Buyers Still Make a Difference

Last month, we discussed the extent to which a foreign buyer can introduce an unacceptable level of foreign ownership, control, or influence (“FOCI”) that, absent mitigation, will render the target ineligible for the facility security clearances needed to perform classified work. This month, we look at foreign ownership through a broader lens.  Specifically, we consider how the United States regulates the proposed acquisition of a U.S. business by a foreign interest, irrespective of whether classified contracts and classified information may be involved in the planned transfer.


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

Volume VIII – Foreign Buyers Do Make a Difference

Not every potential buyer is a U.S. corporation controlled by U.S. interests.  It is important, both for the buyer and the seller, to understand the implications of foreign ownership, control, or influence (“FOCI”) on the feasibility of a sale to foreign interests and the processes that apply to such sales.  As the title of this posting makes clear, foreign buyers do, in fact, make a difference.


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

Volume VII—Investing in Small Businesses

Numerous government contracts programs support small businesses.  There are prime contracts set aside for various categories of small business entities.  Agencies have small business contracting goals and take them very seriously.  Prime contractors often are incentivized, through evaluation factors, to propose significant small business participation.  They can also face liquidated damages for failing to make good faith efforts to comply with their small business subcontracting plans.  These programs promote economic growth by incentivizing investment in small business entities.

The primary obstacle to investing in small businesses, from a government contracts perspective, is that it is quite easy to lose small business size status as the result of a corporate transaction.  The difficulties arise from the doctrine of “affiliation.”


Continue Reading 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.


Continue Reading 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.


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