Justia Government Contracts Opinion Summaries

For pressing projects, the government can issue “Undefinitized Contract Actions” (UCAs) to allow contractors to begin work before the parties have reached a final agreement on contract terms, like price. The Air Force entered into two UCAs with Lockheed for upgrades to F-16 aircraft. Both UCAs include “definitization” clauses that provide that if the parties are unable to reach agreements on price by a certain time, the Contracting Officer (CO) may determine a reasonable price. After years of negotiations, the Air Force and Lockheed were unable to agree on the price terms. The CO assigned to each UCA unilaterally definitized a price of about $1 billion.The Armed Services Board of Contract Appeals (ASBCA), acting under the Contract Disputes Act (CDA), dismissed appeals for lack of jurisdiction because Lockheed failed to submit a certified contractor claim to the COs requesting a final decision on its claims as required under the CDA. The Federal Circuit affirmed, rejecting Lockheed’s argument that the COs’ unilateral definitizations qualified as government claims under the CDA, which a contractor can directly appeal to the ASBCA without having to submit its own claim to the COs. The COs’ definitizations of the contract prices were not demands or assertions by the government seeking relief against Lockheed. View "Lockheed Martin Aeronautics Co. v. Secretary of the Air Force" on Justia Law

Congress passed the American Recovery and Reinvestment Act ARRA) to stabilize the U.S. economy following the 2008 financial crisis, 123 Stat. 115, creating two types of government-subsidized Build America Bonds (BABs). “Direct Payment BABs,” entitled bond issuers to a tax refund from the Treasury Department equal to 35 percent of the interest paid on their BABs. Treasury pays issuers of BABs annually. The payments are funded by the permanent, indefinite appropriation for refunds of internal revenue collections. 31 U.S.C. 1324. Local power agencies (Appellants) collectively issued over four billion dollars in qualifying Direct Payment BABs before 2011. Through 2012, Treasury paid the full 35 percent.In 2011 and 2013, Congress passed legislation reviving sequestration: “[T]he cancellation of budgetary resources provided by discretionary appropriations or direct spending law,” 2 U.S.C. 900(c)(2), 901(a). Treasury stopped making payments to Appellants at 35 percent. Since 2013, Appellants have been paid reduced rates as determined by the Office of Management and Budget’s calculations; for example, 2013 payments were reduced to 8.7 percent.Appellants sued, arguing a statutory theory that the government violates ARRA section 1531 by not making the full 35 percent payments and that the government breached a contract that arises out of section 1531. The Federal Circuit affirmed the Claims Court’s dismissal of the suit. No statutory claim existed because sequestration applied to these payments. No contractual claim existed because the ARRA did not create a contract between the government and Appellants. View "Indiana Municipal Power Agency v. United States" on Justia Law

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

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

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

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

In 2008, Zafer entered a $40 million contract to build water systems on the Bagram Air Base in Afghanistan. Zafer completed the project and submitted a request for equitable adjustment in September 2013, which it timely amended in December 2014. Zafer alleged that the government increased the cost of the project by causing delays and modifying the contract. Zafer’s detailed request sought $6.7 million and provided a breakdown of the reasons for the claimed amounts. Zafer certified its request under 41 U.S.C. 7103(b)(1), beyond what is required by 48 C.F.R. 252.243-7002(b) to certify mere requests for equitable adjustment. The parties negotiated for four-and-a-half years but did not fully resolve Zafer’s request.In February 2018, Zafer asked to convert its request for equitable adjustment into a claim. The contracting officer determined that most of the claim was time-barred because the government’s alleged conduct had transpired more than six years before Zafer had converted its request into a claim. The Claims Court found that Zafer’s claim had “accrued no later than August 1, 2011,” meaning Zafer had to have submitted a claim by August 1, 2017, for the claim to be timely, reasoning that Zafer’s request for equitable adjustment “lacks a request for a final decision” and “asks for negotiations.” The Federal Circuit reversed. Zafer’s December 2014 request for equitable adjustment implicitly requests a final decision and therefore is a claim. View "Zafer Construction Co. v. United States" on Justia Law

Lanclos was born in 1982 at the Keesler Air Force Base Medical Center. During childbirth, she was seriously injured and as a result, suffers from Athetoid cerebral palsy. The settlement agreement for Lanclos’s medical malpractice suit required the government to make lump sum payments to Lanclos’s parents and their attorney; Lanclos would receive a single lump sum payment followed by specific monthly payments for the longer of 30 years or the remainder of her life. The government would purchase an annuity policy to provide the monthly payments. The government selected Executive Insurance to provide the monthly annuity payments. Executive encountered financial difficulties and, in 2014, reduced the amount of the monthly payments by 42%. Lanclos estimates that the reduction will result in a shortfall of $731,288.81 from the amount described in the settlement agreement.The Court of Federal Claims reasoned that the “guarantee” language in the Lanclos agreement applies to the scheduled monthly structure of the payments but not the actual payment of the listed amounts and that the government was not liable for the shortfall. The Federal Circuit reversed. Under the ordinary meaning of the term “guarantee” and consistent with the agreement as a whole, the government agreed to assure fulfillment of the listed monthly payments; there is no reasonable basis to conclude that the parties sought to define “guarantee” or to give the term an alternative meaning. View "Lanclos v. United States" on Justia Law

The 1938 Javits-Wagner-O’Day Act prioritized purchasing products from suppliers that employed blind individuals; 41 U.S.C. 8501–06, establishes a procurement system in which the government procures certain commodities and services from nonprofit agencies that employ the blind or otherwise severely disabled. The “AbilityOne Program” regulations govern the procurement system. 41 C.F.R. 51 and reiterate the Program's mandatory nature. The DLA, within the Defense Department, issued a Solicitation that contemplated awards for a Rifleman Set with Tactical Assault Panel (TAP) and Advanced TAP (ATAP). Before an ATAP award was made, SEKRI, a nonprofit agency qualified as a mandatory source of ATAP under the AbilityOne Program, sought an injunction prohibiting the federal government from procuring ATAP from any other source.The Claims Court dismissed for lack of standing, reasoning that SEKRI cannot claim to be a prospective bidder because the solicitation period had ended and the only action SEKRI took before filing its complaint was contacting DLA, through a third party, to inform DLA that SEKRI was a mandatory ATAP source. SEKRI did not submit a bid before the deadline despite DLA’s invitation. The Federal Circuit reversed. SEKRI qualifies as a prospective bidder for standing purposes under the Tucker Act. Given DLA’s awareness during the bidding process that SEKRI is the mandatory ATAP source, SEKRI has not waived its right to bring its bid protest action under the “Blue & Gold” standard. View "SEKRI, Inc. v. United States" on Justia Law

CSI was awarded a government contract to provide “[a]ir charter services operated by brokers, and various auxiliary services that will be used to support the contract.” After U.S. Immigration and Customs Enforcement (ICE) canceled various removal flights, CSI sought payment ($40,284,548.89) from the Department of Homeland Security. The Civilian Board of Contract Appeals dismissed the action, concluding that the CSI Terms and Conditions, which include “Cancellation Charges” were not incorporated by reference into the Schedule Contract.The Federal Circuit vacated and remanded. The Schedule Contract expressly incorporates at least one document that unambiguously identifies the CSI Terms and Conditions and makes clear such terms and conditions apply to all operations. CSI’s Offer plainly identified the CSI Terms and Conditions—along with the CSI Commercial Sales Practice attachment, its Pricing Policy, and its Commercial Price List—in the “Pricing” section of its table of contents. View "CSI Aviation, Inc. v. Department of Homeland Security" on Justia Law