Agencies Cannot Use Their Websites as Substitutes for FedBizOpps.gov Notices

Although government contractors have a duty to keep alert for contracting opportunities, agencies have a duty to use FedBizOpps.gov, and not their own websites, to give contractors FAR-required notice of those opportunities. Posting notices of solicitations, amendments, and awards on internal websites like the DLA internet bid board system (DIBBS) or the Army Single Face to Industry (ASFI) website is not enough. Unless the agency has posted notices on FedBizOpps.gov, the agency has not given contractors proper notice, according to several recent protest decisions of the Government Accountability Office (GAO).

In one case, the Army issued via ASFI a significant solicitation amendment one week before the due date for bids, but for technical reasons the amendment was not posted on FedBizOpps.gov until 7 PM the night before bids were due. GAO concluded that the Army did not give vendors sufficient FedBizOpps.gov notice, and recommended that the Army reopen the solicitation and set a new due date for bids.

In another case, a contractor learned about a DLA opportunity only after seeing in FedBizOpps.gov DLA’s notice of a purchase order award. After the contractor protested to GAO the agency’s failure to give FedBizOpps.gov notice of the solicitation itself, DLA claimed that the contractor should have seen notice of the solicitation posted on DIBBS and therefore the contractor’s protest was too late. GAO disagreed, holding that the contractor’s protest clock began only after DLA posted notice of the award on FedBizOpps.gov.

Contractors surprised by agency contract awards should not let an agency claim they should have known about the opportunity. Notice of a potential business opportunity is at the heart of full and open competition. Notice of an agency’s award of that business opportunity is at the heart of a contractor’s right to protest.

Terrence O'Connor is the Director of Government Contracts for Berenzweig Leonard, LLP, a business law firm in the D.C. region. Terry can be reached at toconnor@berenzweiglaw.com.

Documents With Short Approval Deadlines Must Be Carefully Drafted

Short deadlines leave little room for error. When the government gives a contractor a short document approval deadline, the contractor’s initial submission should strictly follow regulations because there may not be time for required revisions, as an 8(a) joint venture found out recently.

In that case, the only remaining approval the JV needed to be awarded an 8(a) Army contract was the Small Business Administration (SBA)’s approval of the 8(a) JV Agreement. Unfortunately for the JV, the SBA by law had only five business days to approve the agreement. Because the JV had not properly drafted the agreement it originally submitted to the SBA, five business days was not enough time for the SBA to review and approve a revised agreement. After time ran out on both the SBA and the JV, the Army awarded the work to another 8(a).    

The JV’s loss of the Army contract was unfortunate and probably preventable. The agreement initially drafted by the JV and sent to the SBA for approval omitted several provisions specifically required by SBA regulations. If experienced legal counsel had been involved in the drafting of the JV agreement from the start, these required clauses would have been included in the initial JV agreement, and the short SBA deadline would most likely not have prevented the JV from getting the work.

The decision shows that getting experienced legal counsel to carefully draft foundation documents is essential to winning government contracts, especially when approval deadlines are short and leave little time for error.    

Terrence O'Connor is the Director of Government Contracts for Berenzweig Leonard, LLP, a business law firm in the D.C. region. Terry can be reached at toconnor@berenzweiglaw.com.

Poorly Drafted Subcontract “Work Share” Clauses Can Be Costly

Work share – how much work a prime contractor is guaranteeing a subcontractor -- is perhaps one of the most important clauses in a subcontract. It is a mistake, therefore, to draft this critical clause without considering the language of the other subcontract clauses. Language in a subcontract’s “Definitions” section can severely limit a subcontractor’s work share.

After winning an Army contract for interpreter and translation services, a prime contractor in a recent case signed subcontracts with various linguist providers. One linguist subcontract established a work share of “15% of the services to be provided under the Prime Contract.”  That subcontractor believed that it was entitled to 15% of all prime contract revenue. However, the prime contractor pointed out that the Definitions clause defined “services” in a more severely limited way -- to mean “all linguist services” to be provided under the Prime Contract. The court concluded that the prime’s interpretation had merit.

As this case shows, it is not wise to focus solely on any one subcontract provision-- here the work share provision. Nor is it wise to routinely rely on “model” or template subcontracts. Time spent thinking more clearly about subcontract clauses, especially critical clauses like work share clauses, is time well spent.  

Terrence O'Connor is the Director of Government Contracts for Berenzweig Leonard, LLP, a DC regional business law firm. Terry can be reached at toconnor@berenzweiglaw.com. 

Pay Transparency Final Rule Imposes New Obligations on Federal Contractors

The Office of Federal Contract Compliance Programs (OFCCP) recently published a final rule imposing new obligations on federal contractors when it comes to pay transparency. This new rule, which according to the Administration seeks eliminate pay secrecy that can inhibit employees from exercising their rights to seek redress for discriminatory pay practices, is another in a line of several new labor obligations placed on federal contractors.

The final rule issued by the OFCCP prohibits contractors from discharging or discriminating against any employee or job applicant because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. An exception exists for employees that have access to compensation as part of their essential job functions. The rule does not require contractors and employees to disclose such information upon request, but rather prohibits adverse action against those who choose to do so.

The pay transparency final rule also imposes affirmative obligations on federal contractors and subcontractors. Specifically, the final rule requires that the equal opportunity clause included in covered federal contracts and subcontracts state that contractors and subcontractors are prohibited from discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants. The final rule also requires that federal contractors incorporate a prescribed nondiscrimination provision into their existing employee manuals or handbooks and disseminate the nondiscrimination provision to employees and job applicants.

Federal contractors will need to take affirmative steps in the coming months to comply with this new rule, which goes into effect on January 11, 2016. They must make sure that their subcontracts include the amended equal opportunity clause that includes the prohibition against retaliation or discrimination for discussing employee compensation. Federal contractors must review and amend their policies and practices to avoid any implication that they prohibit or tend to prohibit employees or applicants from discussing pay, as well as update their employee manuals and handbooks to include the prescribed nondiscrimination provision. Federal contractors must also disseminate through electronic and/or physical postings the prescribed provision to their employees and job applicants, and post the updated “EEO is the Law” poster if they enter into or modify federal contracts or subcontracts after the rule goes into effect. Because employees with access to compensation information as part of their essential job functions are excepted from this rule, federal contractors should review job functions and descriptions to determine whether a given position has access to pay information as an essential job function, and amend job descriptions as necessary to reflect that essential function.

Federal contractors should be aware that this new rule may lead to tension in the workplace now that previously confidential compensation information may be disclosed. Not only must employers take the steps necessary to be in compliance with this rule, but they should begin reflecting from an HR perspective how they will deal with the potential impact on employee morale once this rule goes into effect.

Stephanie Wilson is an attorney Berenzweig Leonard, LLP. She can be reached at SWilson@BerenzweigLaw.com.

New SBA Rule Promotes Growth and Development of Women-Owned Small Businesses

Women-owned small businesses are growing three times faster than their counterparts, yet they currently receive less than 5% of federal contracting dollars. The U.S. Small Business Administration (SBA) recently issued a final rule that is “a major step forward in leveling the playing field and supporting our country’s dynamic female entrepreneurs,” said SBA Administrator Maria Contreras-Sweet. This new rule encourages more women entrepreneurs to grow and start new businesses and create more jobs.

The SBA’s new rule, effective October 14, 2015, gives contracting officials the authority to award sole-source contracts to women-owned businesses without first placing the work out for bid. The rule seeks to provide greater opportunities for women-owned small businesses in the federal contracting marketplace, on par with the opportunities afforded to other types of small businesses. Contracting officials are currently able to award sole-source contracts to minority or service-disabled veteran-owned small businesses.

The rule sets out certain requirements that must be met before a sole source contract is awarded. First, a contract can only award up to $4 million (or $6.5 million for manufacturing contracts). Second, the selected woman-owned small business must be deemed a responsible contractor. Third, the selected woman-owned small business must be the only women-owned small business that can perform the work. Fourth, the award must be made at a fair and reasonable price.

The SBA is hopeful that this new rule will help the federal government achieve its goal of awarding 5% of its contract dollars to women-owned businesses. Women-owned businesses should be aware of this rule, which gives them a new competitive advantage in the federal marketplace and provides new opportunities to grow their business and revenues.

Stephanie Wilson is an attorney Berenzweig Leonard, LLP. She can be reached at SWilson@BerenzweigLaw.com. Sara Almousa is an intern with Berenzweig Leonard, LLP.

AIG Bailout – Government Was Wrong But Shareholders Get No Damages

The federal government’s 2008 loan of $85 billion bailing out insurance giant AIG during the financial crisis was illegal but literally “harmless,” according to a recent court decision. Although the government had the right to loan AIG money to keep AIG from certain bankruptcy, the government illegally demanded that AIG make the government a part-owner by acquiring 80% of AIG’s stock.  The court, however, awarded the AIG shareholders no damages, because it concluded that the shareholders had lost no money as a result of the government’s unlawful actions. The court found that the government’s loan actually helped the AIG shareholders, because it kept their stock from being completely worthless in bankruptcy.  

Illegal government loan terms. The terms of the government’s AIG loan went beyond what the law allowed. Although the government – as AIG’s banker of last resort – could demand that AIG pay interest on the government loan and demand collateral, the law did not allow the government to become a part-owner of AIG. It would be like a home mortgage loan in which the bank loans the homeowner money, but demands that the bank also become part-owner of the home. Worse yet, in this case, the government would remain a part-owner of AIG even after AIG had completely paid off the government loan.

The government’s loan terms were deemed unfair as well as illegal: “Operating as a monopolistic lender of last resort, the government imposed a 12 percent interest rate on AIG, much higher than the 3.25 to 3.5 percent interest rates offered to other troubled financial institutions such as Citibank and Morgan Stanley.” Also uniquely imposed on AIG was government voting control: “with the exception of AIG, the Government has never demanded equity ownership from a borrower in the 75–year history” of the law the government had based the loan on.

The issue in the lawsuit, however, was not “whether this treatment was inequitable or unfair, but whether the Government's actions created a legal right of recovery for AIG's shareholders.” The court agreed with the AIG shareholders on this issue, concluding that the government had acted illegally under the Federal Reserve Act.

No shareholder damages. But after concluding that AIG’s shareholders had proved that the Government was wrong, the court then reluctantly concluded that, according to legal precedent, the shareholders had not suffered any economic loss and were, therefore, not entitled to damages.
The issue here was whether their damages were to be measured by what the government gained -- $22.7 billion it received from ultimately selling the AIG stock – or by what the AIG shareholders lost – the value of their AIG stock, which would have been zero when, without the government loan, AIG would have gone into bankruptcy.  

According to the court, “common sense suggested” that the damages were the $22.7 billion the government had received “from selling the AIG common stock it illegally exacted from the shareholders for virtually nothing.” Legal precedent, however, focused on the AIG shareholders’ loss on the theory that, if the government has deprived a victim of something, compensation should be based on what the victim was actually deprived of.

The court followed legal precedent, concluding that the AIG shareholders had suffered no loss from the government’s illegal extraction of almost 80% of AIG’s stock. As a practical matter, the shareholders were undoubtedly better off with 20% of a company avoiding bankruptcy than they would be with 100% of a company forced into bankruptcy.

This necessary conclusion based on existing precedent, however, was not one the court welcomed. It sent the message that “Any time the Government saves a private enterprise from bankruptcy through an emergency loan, as here, it can essentially impose whatever terms it wishes without fear of reprisal.”

Whether the court’s concerns are valid will depend on the way appellate courts resolve the appeals that are sure to follow. This decision is not expected to be the final word on the AIG saga.

Terrence M. O'Connor is the Director of Government Contracts at Berenzweig Leonard LLP. He can be reached at TOConnor@BerenzweigLaw.com.