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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Federal Circuit Affirms, Requires Showing of Benefit to the Government for Allocability of Development Costs
By Sheppard Mullin on
In Teknowledge Corp. v. U.S., Fed. Cir., No. 2009-5053, 11/03/09, the U.S. Court of Appeals for the Federal Circuit affirmed a decision by the Court of Federal Claims (COFC) that software development costs were not allocable to the Government because the Government did not receive a benefit from the costs. Earlier this year we wrote about the potential implications of the COFC’s decision.
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Top Ten Reasons DCAA Should Let COs Do Their Bloody Job
By Sheppard Mullin on
Not so long ago, we called your attention to a troubling trend in the natural order of Government contracting. First, we recounted how DCAA has initiated itself into the dark art of intimidation. Then we described how a contracting officer’s mere disagreement with the DCAA could result in an IG referral for a poor CO who comes out on the other side of a DCAA recommendation. And when last we resumed our chronicle, we recalled that a call for an end to these frontal assaults on CO independence was issued – not only by us in the last several months – but by an ABA Ad Hoc Committee some 22 years ago.
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FAR Councils Issue Interim Rule Limiting Excessive Pass-Through Charges
By Sheppard Mullin on
Based on their view that contractors who subcontract the majority of the work to subcontractors add little or no value, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (FAR Councils) issued an interim rule on October 14, 2009 that limits excessive pass-through charges by contractors and subcontractors. See 74 Fed. Reg. 52,853 (October 14, 2009). The rule not only makes excessive pass-through costs unallowable, but also provides for recoupment of pass-through charges later determined to be excessive.
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Reining in Use of “Of A Type” Commercial Service Contracting
By Sheppard Mullin on
The FAR Councils issued an interim rule, effective October 14, 2009, revising the circumstances under which services not offered and sold commercially can still qualify as commercial services. This is important for a couple of reasons, but probably most importantly, because commerciality can eliminate the requirement for the submission of cost or pricing data and can limit the amount of Government contracting requirements to which a company is subjected. The new interim rule now permits a Contracting Officer determination of commerciality even where services are not offered and sold competitively in substantial quantities in the commercial marketplace.
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FAR Councils Issue Interim Rule Taking Aim at the Use of Award-Fee Contracts
By Sheppard Mullin on
On October 14, 2009, the Civilian Acquisition Council and the Defense Acquisition Regulation Council issued an interim rule that limits the use of award-fee contracts, modifies how a contractor earns an award fee, and prohibits the rollover of unearned award fees. The interim rule implements § 814 of the John Warner National Defense Authorization Act (NDAA) for Fiscal Year 2007, § 867 of the Duncan Hunter NDAA for Fiscal Year 2009, and the Office of Federal Procurement Policy Guidance Memorandum dated December 4, 2007 entitled "Appropriate Use of Incentive Contracts." The interim rule significantly revises Federal Acquisition Regulation (FAR) Part 16, adds FAR Part 16.401(e), and makes other general housekeeping changes.
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Continue Reading FAR Councils Issue Interim Rule Taking Aim at the Use of Award-Fee Contracts
The Allocability of IR&D — A Fork in the Road?
By Sheppard Mullin on
With the elimination of the IR&D and B&P ceiling a decade or so ago and the recognition of “dual use” technologies as appropriate subjects of IR&D, contractors have tended to place questions relating to the allocability of IR&D on the back burner. True, the old concurrency issue remained, but allocability seemed to be relatively non-controversial. Based upon a COFC decision issued earlier this year — and to quote Bob Dylan — “The times they are a changin.’”
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Continue Reading The Allocability of IR&D — A Fork in the Road?
Working Like a Highway Road Crew — Government Finally Amends SF 1443 to Eliminate References to “Paid Cost Rule,” a Mere Seven Years After the Fact
By Sheppard Mullin on
In November 2002, the FAR Councils eliminated the so-called "paid cost" rule from the FAR, which had previously prevented federal prime contractors other than small businesses from recognizing incurred subcontractor costs for purposes of progress billing until "payment by cash, check, or other form of actual payment" had actually been made. See 67 Federal Register 70520 (Nov. 22, 2002). The Government form used to request progress payments, the Standard Form (SF) 1443, Request for Progress Payments, implemented the paid cost rule by requiring large contractors to identify "paid costs eligible under progress payments clause" (Line 9) and "incurred costs eligible under progress payments clause" (Line 10). See FAR 53.301-1443 (2008) (last updated in October 1982). Bizarrely, however, when the paid cost rule was eliminated in 2002, the SF 1443 was not updated to remove these two lines. Now — a mere six years and eight months since the elimination of the paid cost rule — the FAR Councils have finally issued a revised SF 1443, removing Lines 9 and 10 and thereby eliminating the last vestiges of the long-defunct rule. See 74 Federal Register 28430 (Jun. 15, 2009).
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Federal Circuit Casts Cloud on Future Recovery of Settlement Costs in Non-Fraud-Related Cases
By Sheppard Mullin on
On May 19, 2009, the Federal Circuit in Secretary of the Army v. Tecom upheld the contracting officer’s disallowance of a contractor’s legal costs and settlement expenses in a sexual harassment and retaliation action brought under Title VII. The opinion is sweeping, and appears to extend the holding in Boeing North American, Inc. v. Roche, 298 F.3d 1272 (Fed. Cir. 2002) to almost every instance in which the contractor elects to settle in lieu of litigating cases to a conclusion.
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New DCAA Guidelines Severely Restrict Auditor Authority To Exercise Judgment In Audit Of Internal Controls
On December 19, 2008 DCAA issued new guidance for audit of and reporting on internal controls that — in two short pages of sometimes cryptic text — (a) redefines the agency’s approach to the critical concepts of "significant deficiency" and "material weakness" in internal controls and (b) establishes new criteria for auditor reports of deficiencies in large contractor internal control systems, and recommendations as to the adequacy of the contractor systems, including recommendations that the Contracting Officer pursue suspension of progress payments on reimbursement of costs. …