All too often, contractors have a dilemma as to which changing dollar threshold should be inserted into company policy. You may recall that there has been considerable debate around changing dollar thresholds around TINA, CAS, and even the executive comp ceiling from a few years back. There is now a proposed rule before the FAR Council is seeking to eliminate this confusion. This rule will also reduce the administrative workload in processing changing dollar thresholds throughout the FAR.
Wage Determination Fact Finding
In ASBCA Case No. 61040, 61101, Sonoran Technology appeals their claim for an equitable adjustment due to an increase in the Service Contract Act Wage Determination after contract award. The solicitation that controlled this contract award included a SCA wage determination and a Collective Bargaining Agreement (CBA). The bidders were required to use the current SCA wage determination (at the time of the bid) in the formulation of their proposals submitted to the Government. For future increases in SCA wages and/or benefits, the FAR and the contract have provisions/clauses which cover a contract price change for a wage determination for a multi-year contract. The issue here whether a new wage determination, incorporated into the contract, prompted a responsibility for the government to adjust the contract price to compensate Sonoran for a corollary increase in its state gross receipts taxes.
Although many of us think of contract disputes as those involving a prime contractor and a U.S. Government agency, subcontracts can also trigger differences of subcontract interpretation between the prime and subcontractor. In Civil Action No. 1:16-cv-215, the United States District Court for the Eastern District of Virginia decided a diversity breach of contract case between government contractors (the contractor and subcontractor names are a matter of public record, thus disclosure). Fluor (the subcontractor) contended that they did not agree to a 2.3% cap to their G&A on a proposal effort with the United States Air Force. Their proposal, as a subcontract to their prime contractor, PAE, was ultimately selected for the award, at which time, a subcontract agreement was executed and the two parties began their respective performance on the contract. The specific language of that subcontract agreement is the heart of this case (differentiated from a dispute over the regulatory language contained in a subcontract flow-down).
Understanding the requirements and/or selection criteria before preparing a fully responsive bid to a government solicitation cannot be understated. In a recent decision (B-413559.2; B-413559.8) by the Government Accountability Office (GAO), two separate government contractors’ protests questioned the government’s evaluation scheme. Specifically, the protesters argued that certain terms contained in the request for proposal (RFP) were unduly restrictive. The protestors were ultimately challenging their respective elimination from competition based on the fact that they did not score high enough to be included in the top 60 technically rated offerors.
Adhering to the requirements of a government solicitation is paramount when submitting a proposal. In a recent decision (B-413104.5; B-413104.6) by the Government Accountability Office (GAO), two separate government contractors’ protests were denied for failure to meet the explicit requirements of a solicitation for the Department of Health and Human Services, National Institutes of Health (NIH). The protestors were ultimately challenging their respective elimination from competition based on the fact that the non-responsibility determination should have been referred to the Small Business Administration (SBA) under SBA’s certificate of competency (COC) procedures.
One of the most important parts of a proper response to a Government Solicitation is the Basis of Estimate(s) (BOE). The BOE is a tool that is carefully developed by members of a project team through intricate analysis of the Performance Work Statement (PWS) in order to calculate the total price for the required effort. The BOE must be developed before the pricing can take place so that the pricing team knows the cost elements, which will require pricing. To put it differently, the BOE is an estimate developed to outline a Company’s expected staffing and solutions for the selected Government solicitation. This proposed estimate is combined with detailed explanations and supporting rationale which bolsters the overall conclusion. The BOE needs to be able to show the level of services (proposed labor), the skill mix required, materials, travel, etc., that will be required to deliver what is requested through the solicitation. In order to provide a realistic estimate, technical experts should be utilized in order to appropriately determine the work effort needed. The details in the BOE need to be sufficient for the technical evaluator (government or prime contractor) to understand the rationale used, the source of the underlying data, the detailed calculations involved, and the basis for any complexity factors.
In each of the past four years, the Justice Department has recovered more than $3.5 billion dollars from cases that involve the False Claims Act (FCA). Although the FY2015 recoveries are a substantial decline from FY2014’s $5.7 billion, these are still extraordinary amounts of money that are being recovered based upon fraud allegations. It should be noted that the DOJ FY2015 Summary Media Release mentions a number of settlements by name (i.e. specific identification of the individual or company which allegedly violated the FCA); however, this DOJ Media Release masks the fact that many of these involve mere allegations with no finding of liability (a statement included at the very end of each individual settlement media release). Of note, the government contracting world we live in represents the second largest piece of the recovery pie; according to the Department of Justice’s release, the government contracting slice was $1.1 billion over the last fiscal year. Something of a “wow moment” even though FCA recoveries from health related services continue to lead the pack.
On June 30, 2015, the U.S. Department of Labor (DOL) increased the McNamara-O’Hara Service Contract Act (SCA) Health & Welfare benefits from $4.02 to $4.27. A notice is not sent directly to contractors and unfortunately for them the importance of this change lies with timing. For those contractors that are currently working diligently on preparing cost proposals, this increase will directly affect you. According to the DOL memorandum that put this change into effect, “all invitation for bids opened, or other service contracts awarded on or after June 30, 2015, must include an updated SCA WD issued in accordance with the regulatory health and welfare (H&W) fringe benefit determination methodology.” So if you have recently submitted a proposal subject to the SCA, we suggest that you ensure that your H&W meets the SCA H&W requirement of $4.27.
The judgments rendered by the ASBCA in the Raytheon Co., Space & Airborne Sys, ASBCA Nos. 57801, 57803, 58068 resulted in the resolution of a number of issues concerning CAS (Cost Accounting Standards) cost impacts associated with unilateral changes in a contractor’s cost accounting practices. There were five basic issues; the Government prevailed on three, the contractor prevailed on one, and one was undecided (to be decided in the actual trial given that the current decisions were in reference to the parties’ cross-motions for summary judgment).
Topics: DCAA Audit Support
The Continuing Trend of Relatively Few Involving Defense Contractors
The False Claims Act (FCA) and the alleged misdeeds of companies doing business with the government made it possible for the U.S. Department of Justice to recover a record amount of $5.69 billion in civil settlements and judgments for the government for this past fiscal year. Notably a trend continues where relatively few actions involve defense contractors, albeit this group continues to be miscast as the bad players in government contracting. In FY2014, the true bad players continued to be those involved with federal health care programs ($2.3 billion) and the new kid on the block, bank and other financial institutions fraud ($3.1 billion).