Government Contract Attorneys, SDVOSB Law: Government Contracts Attorneys | Lawyers

In Trade West Construction, Inc., ASBCA No. 61068 (October 13, 2020), the government argued that the contractor failed to provide timely notice under the changes clause. It requires the contractor to provide notice to the government within 20 days of incurring additional costs and to submit a request for equitable adjustment within 30 days. Even though the contractor did not this, the Board allowed the contractor to pursue his change order claim anyway.

In government contracts, notice provisions are not strictly adhered to. Instead, the government must show how it was harmed by the lack of notice. Here, the government argued it was stripped of the opportunity to track the contactor’s increased costs caused by the change. The government also argued that, with the passage of time, project documentation gets lost and memories fade. The Armed Services Board of Contract Appeals held that this was not enough to show Government harm due to the contractor’s failure to provide timely notice under the changes clause. The contractor dodged the bullet and was allowed to pursue its claim based on the changes clause.

If you are confronted with a change on the project, always notify the Government in real time. An RFI is a good tool to provide such notification and to request direction on how to proceed. Better yet, insert this RFI activity into your CPM Schedule to track its potential impact on the critical path.

Posted in Uncategorized

The Department of Veterans Affairs (“VA”) issued an SDVOSB set-aside procurement for oxygen tank services. Warrior Service Company, LLC (“Warrior”) was the apparent awardee. However, the Contracting Officer deemed Warrior non-responsible because it “has never performed home oxygen delivery services and does not have the necessary experienced, qualified personnel, equipment and capital to be able to perform the required service.”

The SBA Office of Hearings and Appeals (“SBA OHA”) evaluated the Contracting Officer’s position under the Ostensible Subcontract Rule:

The “ostensible subcontractor” rule provides that when a subcontractor is actually performing the primary and vital requirements of the contract, or when the prime contractor is unusually reliant upon the subcontractor, the two firms are affiliated for purposes of the procurement at issue. 13 C.F.R. § 121.103(h)(4). The rule “asks, in essence, whether a large subcontractor is performing or managing the contract in lieu of a small business [prime] contractor.” Size Appeal of Colamette Constr. Co., SBA No. SIZ-5151, at 7 (2010). To ascertain whether the relationship between a prime contractor and a subcontractor violates the ostensible subcontractor rule, an area office must examine all aspects of the relationship, including the terms of the proposal and any agreements between the firms

In short, the Ostensible Subcontractor rule is violated when a prime contractor will have no meaningful role in performing the contract’s primary and vital requirements.  SBA OHA found that Warrior’s proposal violated this rule.

Warrior’s proposal indicated that the prime contractor would rely on a single subcontractor to provide equipment, facilities, vehicles, and financial assistance.  Warrior would only manage the contract.   SBA OHA found  this violated the ostensible subcontractor rule:

OHA has long held that a prime contractor cannot comply with the ostensible subcontractor rule merely by supervising a subcontractor in its performance of the work. E.g., Size Appeal of Jacob’s Eye, Inc., SBA No. SIZ-5955, at 12 (2018); Size Appeal of Hamilton Alliance, Inc., SBA No. SIZ-5698, at 9 (2015); Size Appeal of Shoreline Servs., Inc., SBA No. SIZ-5466, at 10 (2013). Accordingly, based on Appellant’s proposal of August 2, 2018, the Area Office did not err in concluding that Appellant did not comply with the ostensible subcontractor rule, because [Subcontractor] would be performing all, or nearly all, of the primary and vital contract requirements.

During the size protest, Warrior tried explaining how it would meet the limitation on subcontracting requirement, but the SBA OHA would not consider such  information because the size protest must be based on the proposal that was submitted, not additional information raised during the protest.

Posted in Uncategorized

In the appeal of P.K. Management Group, Inc., CBCA 6185 (August 20, 2019), the Civilian Board of Contract Appeals denied a contractor’s request for additional compensation.  I will spare you the details on what the additional compensation was. What is interesting in this case is Judge Chadwick’s finding that the awarded contract did not incorporate the Q&As and therefore they were not part of the contract.  So, Judge Chadwick would not consider the Q&As when deciding a dispute over what the contract meant.

Because the Q&As were not part of the contract, Judge Chadwick found there was no need to look at them because the contract was clear on the interpretation issue in dispute:

Citing no documentary evidence, PKMG asserts that the questions and answers (Q&A) issued with the contract solicitation are “part of the PKMG Contract.” We see nothing in the contract that incorporates solicitation documents. PKMG cites as support for its assertion Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991), and our decision in A-Son’s Construction, 15-1 BCA ¶ 36,089. Gould states that we must read contracts as a whole. 935 F.2d at 1274. In A-Son’s, we discussed a solicitation Q&A because HUD cited it as “extrinsic evidence” to help clarify an asserted ambiguity. 15-1 BCA at 176,213-14. Neither decision makes the Q&A here part of this contract.

Lesson Learned:  Q&A’s exchanged during the solicitation process will not trump clear language in the awarded contract.  So, when bidding, do not assume that the Q&As will save the day if you have a contract interpretation dispute after contract award.

Posted in Uncategorized

On May 2, 2018, in the Appeal of Cooper-Ports America, LLC, ASBCA No. 61461, the Armed Services Board of Contract Appeals (“ASBCA”) rejected the Air Force’s position that Cooper-Ports America, LLC did not have the right to pursue claims that accrued before a novation agreement was executed. Under FAR Part 42.1204, a novation is required when a contractor sells his company and existing contracts will be performed by the buyer. The buyer basically assumes all obligations of the seller to perform these pending government contracts.

In this case, the Air Force argued that Cooper-Ports America, LLC (the buyer) cannot pursue claims against the Government that accrued before the novation was executed because it was not in privity of contract with the Government until that time. The Board rejected this position and held that under the novation agreement the Air Force acknowledged that the buyer is “entitled to all rights, titles and interests” of the seller  as if the buyer was the original party to the contracts.  The Board read this language to include claims that accrued before the novation was executed.

This decision is well reasoned.  After all, if the buyer is going to assume all liabilities under an existing government contract, it should also be entitled to all claims against the government as well.

Posted in Uncategorized

Effective June 30, 2016, the SBA’s limitation on subcontracting rules will undergo a major change. Now, a small business prime contractor can count subcontractor work towards its self-performance requirement if the subcontractor is “similarly situated.”  The new regulation defines a similarly situated entity as follows:

Similarly situated entity is a subcontractor that has the same small business program status as the prime contractor. This means that: For a HUBZone requirement, a subcontractor that is a qualified HUBZone small business concern; for a small business set-aside, partial set-aside, or reserve a subcontractor that is a small business concern; for a SDVO small business requirement, a subcontractor that is a self-certified SDVO SBC; for an 8(a) requirement, a subcontractor that is an 8(a) certified Program Participant; for a WOSB or EDWOSB contract, a subcontractor that has complied with the requirements of part 127. In addition to sharing the same small business program status as the prime contractor, a similarly situated entity must also be small for the NAICS code that the prime contractor assigned to the subcontract the subcontractor will perform.

In plain terms, if a subcontractor meets the small business eligibility requirements under a particular procurement, then work performed by that subcontractor will be treated as if performed by the prime contractor. For example, in an SDVOSB set aside procurement, if the subcontractor qualifies as an SDVOSB, the prime contractor can credit that subcontractor’s work towards the prime contractor’s self-performance requirement. The revised regulation will permit more subcontracting on small business set asides.

However, the SBA’s limitation on subcontracting regulation limits the “similarly situated” subcontractor rule to first tier subcontractors only:

SBA will apply the limitations on subcontracting collectively to the prime and any similarly situated first tier subcontractor, and any work performed by a similarly situated first tier subcontractor will count toward compliance with the applicable limitation on subcontracting. Any work that a similarly situated first tier subcontractor subcontracts, to any entity, will count as subcontracted to a non-similarly situated entity for purposes of determining whether the prime/sub team performed the required amount of work. In other words, work that is not performed by the employees of the prime contractor or employees of first tier similarly situated subcontractors will count as subcontracts performed by non-similarly situated concerns.

The SBA’s limitation on subcontracting rules also change the way percentage of work is calculated for services and supply contracts. Instead of focusing on cost of labor, the SBA will base percentage of work on how much the Government pays for a particular service or supply:

General. In order to be awarded a full or partial small business set-asidecontract with a value greater than $150,000, an 8(a) contract, an SDVO SBC contract, a HUBZone contract, a WOSB or EDWOSB contract pursuant to part 127 of this chapter, with a value greater than $150,000, a small business concern must agree that:

In the case of a contract for services (except construction), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded.

(2)(i) In the case of a contract for supplies or products (other than from a nonmanufacturer of such supplies), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded. Cost of materials are excluded and not considered to be subcontracted.

 Affiliation

 The new SBA regulations create a presumption of affiliation based on two additional grounds:

• Firms that conduct business with each other and are owned and controlled by persons who are married couples, parties to a civil union, parents and children, and siblings.
• If a firm derives 70% or more of its revenue from another firm over the previous fiscal year, SBA will presume that the one firm is economically dependent on the other and, therefore, that the two firms are affiliated.

The above presumptions of affiliation have long be recognized in case law decisions.  The regulations now codify them.

Joint Ventures

SBA regulations create an exclusion from affiliation for small business size status to allow two or more small businesses to joint venture for any procurement without being affiliated with regard to the performance of that procurement requirement. This will encourage more joint venturing of small businesses.

Posted in Limitation on Subcontracting, Uncategorized