Justia Government Contracts Opinion SummariesArticles Posted in Government Contracts
USA v. Hirani Engineering & Land
The surety (“Colonial”) for the prime contractor (“Hirani”) challenged the district court’s award of quantum meruit damages on the Miller Act claim of the subcontractor (“ACC”), and the district court’s award as double recovery for the subcontractor. The subcontractor continues to challenge the district court’s denial of recovery under the Miller Act for the reasonable value of its superintendent’s services at the job site. The DC Circuit affirmed the district court’s judgment except to remand for the district court to expressly address whether there would be impermissible double recovery for the subcontractor. The court wrote that even if D.C. contract law caps the subcontractor’s restitution recovery against the prime contractor to expectation damages and does not permit recovery in quantum meruit where there is an express contract, no such limit applies to the claim against the surety under the Miller Act. Second, the court explained it need not resolve the surety’s contention that the district court awarded the subcontractor double recovery. Further, given that the construction work at issue had to be supervised and inspected for conformance with the subcontract and other requirements, such as government quality control standards, the superintendent’s on-site supervisory work constitutes “labor” within the meaning of the Miller Act. View "USA v. Hirani Engineering & Land" on Justia Law
Sanofi Aventis US LLC v. United States Department of Health and Human Services
Drug makers participating in Medicare or Medicaid must offer their drugs at a discount to certain “covered entities,” which typically provide healthcare to low-income and rural individuals, 42 U.S.C. 256b, 1396r-8(a)(1), (5) (Section 340B). Initially, few covered entities had in-house pharmacies. A 1996 HHS guidance stated that covered entities could use one outside contract pharmacy each; a 2010 HHS guidance stated that covered entities could use an unlimited number of contract pharmacies. Drug makers thought that contract pharmacies were driving up duplicate discounting and diversion and adopted policies to limit any covered entity’s use of multiple contract pharmacies. A 2020 HHS Advisory Opinion declared that Section 340B required drug makers to deliver discounted drugs to an unlimited number of contract pharmacies.In 2010, Congress told HHS to establish a process for drug makers and covered entities to resolve Section 340B–related disputes. In 2016, HHS issued a notice of proposed rulemaking and accepted comments on the proposed ADR Rule. HHS subsequently listed the proposed rule as withdrawn. In 2020, HHS stated that it had just “paus[ed] action on the proposed rule,” responded to the four-year-old comments. and issued a final ADR Rule.Drug companies sued. The Third Circuit held that Section 340B does not require drug makers to deliver discounted drugs to an unlimited number of contract pharmacies. HHS did not violate the APA by purporting to withdraw the proposed ADR Rule before later finalizing it. View "Sanofi Aventis US LLC v. United States Department of Health and Human Services" on Justia Law
Commonwealth of Kentucky v. Biden
The 1949 Federal Property and Administrative Services Act concerns the purchase of goods and services on behalf of the federal government, 40 U.S.C. 101. In November 2021, the Safer Federal Workforce Task Force, citing the Act, issued a “Guidance” mandating that employees of federal contractors in covered contracts with the federal government become fully vaccinated against COVID-19. Ohio, Kentucky, and Tennessee and Ohio sheriffs’ offices challenged the mandate. The district court enjoined its enforcement in the three states and denied the government’s request to stay the injunction pending appeal.The Sixth Circuit denied relief in January 2022 and, a year later, affirmed. The Property Act does not authorize the President to issue directives that simply “improve the efficiency of contractors and subcontractors.” The plaintiffs are likely to succeed in showing that the President exceeded his authority in issuing the mandate. The plaintiffs are likely to lose valuable government contracts and incur unrecoverable compliance costs if the mandate is not enjoined. The public interest “lies in a correct application” of the law. Because an injunction limited to the parties can adequately protect the plaintiffs’ interests while the case is pending, the district court abused its discretion in extending the preliminary injunction’s protection to non-party contractors in the plaintiff states. View "Commonwealth of Kentucky v. Biden" on Justia Law
22nd Century Technologies, Inc. v. United States
Government agencies can issue Indefinite Delivery, Indefinite Quantity Multiple Award (IDIQ) contracts to multiple companies, which then compete for subsequent task orders. The Army solicited proposals for the RS3 IDIQ Contract. The solicitation was not set aside for small businesses but allowed the Army to restrict task orders to small businesses. In 2019, the Army awarded Century an RS3 IDIQ contract. In 2015, when Century submitted its proposal, it was a small business. A 2020 Task Order Request for Proposals required a contractor submitting a bid to represent whether it was a small business for purposes of the task order. Century was no longer a small business but represented that it had been a small business at the time of its original RS3 IDIQ proposal. The Army issued the task order to Century, Other companies filed size protests. The Small Business Association found that Century was “other-than-small” for purposes of the Task Order. The Office of Hearings and Appeals (OHA) affirmed. The Army terminated the award.Century filed a Tucker Act, 28 U.S.C. 1491(b)(1), bid protest. The Federal Circuit affirmed the dismissal of the suit. OHA’s size determination was made in connection with the issuance of a task order, so the Federal Acquisition Streamlining Act of 1994, 10 U.S.C. 3406(f), barred the Claims Court from exercising jurisdiction. A claim based on improper contract termination falls under the Contract Disputes Act, 41 U.S.C. 7101–09; Century failed to present its claim to the contracting officer as required by that statute. View "22nd Century Technologies, Inc. v. United States" on Justia Law
Secretary of Defense v. Raytheon Co.
Raytheon has cost-reimbursement government contracts. Raytheon’s Government Relations Department engaged in information gathering, internal discussions on lobbying strategies, attending meals with contractors and Congresspeople or staff, meeting with internal Raytheon customers, attending political fundraisers, administering Raytheon’s Political Action Committee, interfacing with the legislative branch, responding to requests from Congressional staffers, and similar activities. Raytheon instructed employees to record all compensated time spent on lobbying activities. Accounting personnel withdrew costs associated with that time from Raytheon’s incurred-cost submissions. Raytheon’s employees considered time worked outside of regular hours part of their regular work duties, yet Raytheon’s policy instructed them not to report “[t]ime spent on lobby activity after the scheduled working day.” Raytheon’s Corporate Development Department worked with Raytheon’s business units, including internal investment, research and development, intellectual property licensing, partnerships, or acquisitions. Corporate Development had rules establishing when employees begin recording their time on acquisitions and divestitures.In 2007-2008, Raytheon charged the government for roughly half of the salary costs of its Government Relations and Corporate Development Departments. The Defense Contract Audit Agency audited both departments, determined that Raytheon’s incurred-cost submissions for those departments included unallowable costs, and demanded reimbursement and penalties. The Armed Services Board of Contract Appeals ruled in favor of Raytheon. The Federal Circuit reversed. The Board erred in interpreting Raytheon’s corporate practices and policies, which are inconsistent with the Federal Acquisition Regulation and led Raytheon to charge the government for unallowable costs. View "Secretary of Defense v. Raytheon Co." on Justia Law
California-American Water Co. v. Marina Coast Water Districtw
Monterey is an independent public agency responsible for analyzing Monterey County's water resources. Cal-Am is an investor-owned water utility providing water to over 100,000 residents on the Monterey Peninsula. Marina, a public agency, provides water for the City of Marina and neighboring Monterey Peninsula communities. In 1995 the State Water Resources Control Board ordered Cal-Am to stop drawing water from the Carmel River and develop an alternate water supply. In 2009 Marina, Monterey, and Cal-Am agreed to develop and construct a regional desalinization project to extract brackish water from beneath Monterey Bay, purify it, and deliver it to consumers. In 2010-2011, the parties entered into several agreements. The project was never built. The parties engaged in negotiation and mediation, ending in January 2012 without resolution.In September 2012, Cal-Am submitted a claim under the California Government Claims Act. Litigation followed. In 2019, the trial court entered summary adjudication against Monterey, finding that a negligence cause of action was barred by the two-year statute of limitations and against Cal-Am under the Government Claims Act. The court of appeal reversed. The trial court erred in finding that the “harm” accrued in 2010. There were triable issues of fact as to express waiver and as to the applicability of alternatives to the Claims Act. View "California-American Water Co. v. Marina Coast Water Districtw" on Justia Law
Human Rights Commission v. Vermont, et al.
Plaintiff Vermont Human Rights Commission, on behalf of plaintiff Latonia Congress, appealed a trial court’s decision granting summary judgment to defendant Centurion of Vermont LLC on the Commission’s claims of discrimination under the Vermont Public Accommodations Act (VPAA). Congress was incarcerated at a prison owned and operated by the Vermont Department of Corrections (DOC). The DOC contracted with Centurion to provide all medical services for inmates at the prison. Under the previous provider, Congress was seen by an audiologist, who determined that she had substantial bilateral hearing loss, and she was given hearing aids for both ears. In December 2016, Congress reported that the hearing aids were not working, and Centurion planned to send them “to Audiology for check of functioning.” Later in December 2016, a doctor examined Congress’s ears and did not find any indication of an obstruction or other problem that might be affecting her hearing. Congress delivered her hearing aids to the medical unit to be sent out for testing. They were returned to her without having been tested. The record established that no one knew what happened to the hearing aids during that time; they were apparently misplaced. Through 2017 and early 2018, Congress attempted numerous times to obtain functioning hearing aids. Because Congress was deemed “functional” for some period of time despite her reported difficulty in hearing conversations, she was not eligible for hearing aids under Centurion’s policies. Eventually, in March 2018, an audiologist concluded Congress had moderate to severe bilateral hearing loss, which was worse in one ear, and recommended hearing aids. She was provided with one hearing aid in April 2018, which improved her hearing in that ear. Congress was released from prison in October 2019. In March 2020, the Commission filed a complaint against Centurion, the DOC, and other state defendants, alleging, as relevant here, that they discriminated against Congress in violation of the VPAA by failing to provide her with functioning hearing aids and thereby denying her equal access to certain benefits and services offered at the prison. Finding no reversible error in the grant of summary judgment in favor of Centurion, the Vermont Supreme Court affirmed. View "Human Rights Commission v. Vermont, et al." on Justia Law
Georgia, et al. v. Federal Defender Program, Inc., et al.
After an order was issued setting the execution of Virgil Delano Presnell, Jr., the Federal Defender Program, Inc. filed a breach of contract action against the State of Georgia and Christopher Carr in his official capacity as Attorney General (collectively, the “State”) alleging that the State breached a contract governing the resumption of the execution of death sentences in Georgia after the COVID-19 pandemic. The State contended the trial court erred in denying its motion to dismiss based on sovereign immunity and in granting the Appellees’ emergency motion for a temporary restraining order and an interlocutory injunction. The Georgia Supreme Court concluded that an e-mail exchange between a deputy attorney general and certain capital defense attorneys, including an attorney employed by the Federal Defender, constituted a written contract sufficient to waive sovereign immunity in this matter, and the Supreme Court in turn conclude that the trial court did not abuse its discretion in weighing the equities in granting the Appellees’ motion for injunctive relief. Accordingly, judgment was affirmed. View "Georgia, et al. v. Federal Defender Program, Inc., et al." on Justia Law
Obsidian Solutions Group, LLC v. United States
The Department of Energy (DOE) issued a solicitation for Technical Security, Communications Security, Cyber, Analysis, and Security Administration, designated as a small business set-aside. The size limit for interested businesses was a maximum of $20.5 million in average annual receipts. Obsidian submitted a bid proposal and self-certified as a small business based on its five-year average of annual receipts ($17.5 million). DOE notified Obsidian that it was the apparent successful offeror but submitted a request to the Small Business Administration (SBA) to confirm Obsidian’s size status before making the award. The SBA determined Obsidian did not qualify as a small business. Rather than use the five-year average of receipts, the SBA used Obsidian’s three-year average (roughly $21.8 million)The Office of Hearings and Appeals affirmed. Obsidian filed a bid protest under the Tucker Act, 28 U.S.C. 1491(b), arguing that the BA was required to start using five years of annual receipts. Obsidian cited the Runway Extension Act (REA), an amendment to the Small Business Act (15 U.S.C. 632(a)(2)), including a requirement to use a five-year average of receipts for purposes of size determinations. The Federal Circuit affirmed judgment on the administrative record in favor of the government. The REA unambiguously did not apply to the SBA. There are two subsections discussing size factors. The SBA has its own, broader limitations on establishing size standards than other agencies. View "Obsidian Solutions Group, LLC v. United States" on Justia Law
Supreme Foodservice GmbH v. Director of the Defense Logistics Agency
In 2005, the Defense Logistics Agency (DLA) awarded Supreme a contract to provide food to U.S. forces in Afghanistan. During negotiations concerning deliveries to forward operating bases, Supreme submitted inflated cost proposals. Supreme threatened to withhold payments to subcontractors (potentially cutting off supplies to troops), The parties executed a Modification, including Supreme’s proposed rates, subject to verification. The Defense Contract Audit Agency concluded that Supreme’s documentation was not adequate and questioned more than $375 million of claimed costs. The contracting officer, in 2011, determined that DLA had overpaid Supreme by $567,267,940. DLA withheld $540 million from Supreme’s monthly payments. Supreme submitted unsuccessful “reverse image” claims. In 2014, Supreme pled guilty to fraud and entered into a civil settlement in a False Claims Act suit. During the investigations, with Supreme’s contract expiring, the parties entered into two extensions. In 2015, based on Supreme’s guilty plea, DLA demanded the return of all money paid under the contract. In 2020, the Armed Services Board of Contract Appeals concluded that Supreme’s contract claims against the government were barred by Supreme’s prior material breach.The Federal Circuit affirmed. The government did not waive its prior material breach defense. While DLA had some notice of Supreme’s fraudulent behavior in 2009, it had no “known right” until Supreme’s guilty plea, after which DLA never extended Supreme’s contract. Supreme cannot treat the bridge contracts as separate only to evade the government’s affirmative defenses. The parties treated the original contract and the extensions as inextricably intertwined; DLA’s prior material breach defense applies to those contracts. View "Supreme Foodservice GmbH v. Director of the Defense Logistics Agency" on Justia Law