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FAR Council Issues Final Rule on Sustainable Products & Services

As part of the Biden administration’s effort to use federal purchasing power to tackle climate change, the FAR Council issued a final rule, effective May 22, 2024, requiring agencies to procure “sustainable products and services,” to the “maximum extent practicable.” The “sustainable products and services” rule is just one of several proposed rules and directives intended to compel the government and government contractors to do business in a more environmentally sustainable way.

Under the final rule, the procurement of sustainable products and services is considered “practicable” if the products or services meet “reasonable performance requirements” and can be acquired “competitively within a reasonable performance schedule” and at “a reasonable price.” Federal Acquisition Regulation (“FAR”) 23.103(a)(1). To determine whether the price is reasonable, the regulation directs agencies to “consider whether the product is cost-effective over the life of the product.” FAR 23.103(a)(2). If an agency determines that it is not practicable to procure sustainable products or services, the contracting officer must document the reason in writing in the contract file. FAR 23.103(a)(2).

Timely Protesting Non-Solicitations at GAO

Merle M. DeLancey, Jr. and Michael J. Slattery ●

The Government Accountability Office’s (“GAO”) rules for timely protesting non-solicitations can be confusing. Offerors (or potential offerors) diligently monitoring SAM.gov need to focus on the substance of a non-solicitation posting and not simply the name or subject line an agency uses for the posting. Postings titled Notices of Intent, Sources Sought Notices (“SSN”), and Requests for Information (“RFI”) (collectively “pre-solicitation notices”) are common but the information therein can be different even for nearly identical titled postings. For example, one agency’s RFI might request that interested parties submit statements of interest or capabilities while another agency’s RFI has no such requirement. Companies need to carefully review these pre-solicitation notices to determine if they must protest the notice to be timely under GAO’s rules, or if they can wait and protest the terms of a subsequently issued solicitation.

The general rule is that GAO only has protest jurisdiction over actual solicitations—not pre-solicitation notices—since the pre-solicitation notice does not set forth the actual final requirements of an agency, but only a draft of the eventual requirements. Protests of such pre-solicitation documents that do not reflect the final actual requirements of the agency will be dismissed as premature, as they only anticipate improper agency action. See F-Star Zaragosa Port, LLC, B-417414.1, B-417414.2, Apr. 15, 2019, 2019 U.S. Comp. Gen. LEXIS 110 at *1; see also AeroSage, LLC, B-415893, B-415894, Apr. 17, 2018, 2018 Comp. Gen. ¶ 142 at 4-5 (explaining that “a sources sought notice is a request for information by the agency and not a solicitation that anticipates the award of a contract”); Onix Networking Corp., B-411841, Nov. 9, 2015, 2015 Comp. Gen. ¶ 330 at 5 (concluding that a request for information provided to prospective vendors is not a “solicitation that embodies [the agency’s] actual requirements”); Sigmatech, Inc., B-296401, Aug. 10, 2005, 2005 Comp. Gen. ¶ 156 at 4 (finding that a “sources sought notice is not a solicitation”).

OMB Embraces Government Use of Artificial Intelligence

Robyn N. Burrows and Sara N. Gerber ●

Last month, the Office of Management and Budget (“OMB”) issued a memorandum directing federal agencies to adopt artificial intelligence (“AI”) and advance its use to inform and carry out agency actions. OMB’s new policy addresses three main areas it views as necessary for responsibly deploying AI in agency decision-making: (1) strengthening AI governance; (2) advancing AI innovation; and (3) managing risks from the use of AI. With OMB encouraging the use of AI to streamline agency actions wherever possible, government contractors can also expect to see AI increasingly used in the procurement process.

AI Governance

OMB directed agencies to designate a Chief AI Officer whose responsibilities will include coordinating agency use of AI, developing a workforce with the skillsets necessary for implementing AI, and “identifying and prioritizing appropriate uses of AI that will advance both their agency’s mission and equitable outcomes.”

The Chief AI Officer is also tasked with ensuring that AI code and the data used to develop and test AI are inventoried and shared in data repositories. That individual must also prepare and submit annually to OMB an “AI use case inventory” documenting instances in which AI is used to address a particular need. For example, the Department of State’s (“DOS”) AI Inventory includes a bot that it developed “to automate the data entry in the Federal Procurement Data System” which the State Department reports has reduced the burden on the agency’s procurement staff and improved compliance on DATA Act reporting.

60-Second Sustains: Criterion Corporation

Elizabeth N. Jochum ●

Criterion Corporation
B-422309

In Air Force procurement for base operations support services, the Agency had eliminated the protester from consideration for award on the basis that its proposed price was significantly lower than the internal government estimate (“IGE”) and the average proposed price and, therefore, was found unrealistic.
The protester challenged its elimination, arguing that it proposed a unique technical approach that supported its low price and that the agency ignored the technical approach, instead conducting a mechanical comparison of the proposed price to the IGE and the average price of other offerors.
GAO noted that the purpose of a price realism analysis is to determine whether proposed prices are realistic for the work to be performed, reflect a clear understanding of the requirements, and are consistent with the offeror’s unique method of performance.
In this case, GAO found that the Air Force had not considered the entirety of the protester’s technical solution when concluding the proposed price was unrealistic.
While the Agency had compared the number of employees the protester proposed and its labor rates, it had not considered its labor mix or whether its technical solution was unique.

Time for Compliance with DOD’s Cybersecurity Regulations is NOW

Michael Joseph Montalbano and Samarth Barot ●

On February 19, 2024, the Department of Justice (“DOJ”) notified the U.S. District Court for the Northern District of Georgia that it would intervene in a False Claims Act (“FCA”) case filed against Georgia Tech Research Corporation and Georgia Institute of Technology (collectively “Georgia Tech”) for not complying with the requirements of DFARS 252.204-7012 and National Institute of Standards and Technology Special Publication 800-171 (“NIST 800-171”).

All Department of Defense (“DOD”) solicitations and contracts contain DFARS clause 252.204-7012. DFARS 252.204-7012 requires a contractor to assess its compliance with 110 cybersecurity controls set out in the NIST 800-171 if the Company has controlled unclassified information. Specifically, pursuant to DFARS 252.204-7012, contractors must implement all of the NIST 800-171 requirements and upload the results of that assessment to the Department of Defense’s Supplier Performance Risk System (“SPRS”), or have a plan of action and milestones in place for any requirement the contractor has not yet implemented.

OMB Issues Guidance on Application of Section 889 to Federal Assistance Recipients—and Confirms No Part B “Use” Prohibition

Robyn N. Burrows ●

On April 22, 2024, the Office of Management and Budget (“OMB”) issued final guidance regarding the application of the Section 889 telecommunications ban to federal grants, loans, and cooperative agreements under 2 C.F.R. § 200.216. As a quick recap, Part A of Section 889 prohibits contractors from providing the federal government covered telecommunications equipment and services from certain Chinese manufacturers, whereas Part B prohibits contractors from using covered equipment and services. Section 889 also applies to grant, loan, and cooperative agreement recipients and subrecipients through 2 C.F.R. § 200.216, with certain differences. Most notably, OMB recently clarified that the Part B “use” prohibition does not apply to recipients and subrecipients, meaning they may use covered telecommunications equipment and services as long as they are not purchased with federal funds.

DOE OIG Cites Need for Data Analytics to Combat Fraud

Robyn N. Burrows ●

Last month, the Department of Energy (“DOE”) Office of Inspector General (“OIG”) issued a special report on the DOE’s use of data analytics to reduce the risk of fraud, waste, and abuse within DOE programs. As noted in our prior post (“More Cases and Expanded Data Analytics: A Closer Look at DOJ’s FY 2023 False Claims Act Statistics”), the Department of Justice has successfully used data analytics to identify and develop fraud cases, and the DOE OIG appears poised to adopt a similar approach—despite several implementation challenges.

Citing the significant influx of funds DOE has received through recent spending bills, the OIG report emphasized a need for the DOE to adopt data analytics and data-driven management to conduct oversight—moving away from a “pay and chase” model to a predicative, proactive approach to combatting fraud. However, the OIG found that DOE generally lacks the ability to perform comprehensive and timely analytics given that relevant data is maintained in a multitude of systems across the DOE complex. Without a coordinated approach for data standards, the OIG found that DOE’s ability to monitor contract costs and manage fraud risks is likely to be hampered.

Justin A. Chiarodo and Elizabeth N. Jochum Named to Law360’s 2024 Editorial Advisory Boards

Blank Rome LLP is pleased to announce that Government Contracts partners Justin A. Chiarodo and Elizabeth N. Jochum have been named to Law360’s 2024 Editorial Advisory Boards. As board members, the partners will provide feedback on Law360’s coverage and share insights on how to best shape future coverage.

Justin, who serves as chair of our firm’s Aerospace, Defense & Government Services industry team and Government Contracts practice group, has been named to Law360’s Aerospace & Defense Editorial Advisory Board for the second time.

Elizabeth has been named to Law360’s 2024 Government Contracts Editorial Advisory Board.

Learn more about other Blank Rome partners serving on Law360’s 2024 Editorial Advisory Boards on our website.

DOJ Looks to Incentivize Whistleblowers with New Pilot Program

Robyn N. Burrows ●

On March 7, 2024, Deputy Attorney General Lisa Monaco announced that the Department of Justice (“DOJ”) is designing and launching a pilot program to pay monetary rewards to whistleblowers who report significant corporate or financial misconduct. The pilot program, which will roll out later this year, is intended to encourage individuals to report misconduct and for companies to further invest in their internal compliance and reporting systems.

Several agencies have already established similar programs that reward whistleblowers financially, including the U.S. Securities & Exchange Commission (“SEC”) and the Commodities Futures Trading Commission (“CFTC”). Those programs, however, are limited in scope to each agency, resulting in what Monaco referred to as a “patchwork quilt” that does not address the full range of corporate and financial misconduct. The new pilot program is intended to fill these gaps.

Key Aspects of Pilot Program

Over the next 90 days, DOJ will be engaging in a “policy sprint” to gather information, consult with stakeholders, and design the pilot program. DOJ’s Money Laundering and Asset Recovery Section (“MLARS”) will lead the development and administration of the program.

The program’s core concepts will include the following:

Award Thresholds: DOJ expects to establish a monetary threshold to focus its resources on the most significant cases. Both the SEC and CFTC whistleblower programs limit rewards to cases in which the agency orders sanctions of one million dollars or more. DOJ may end up adopting a similar threshold.
Victim Compensation: Whistleblowers will only receive payment after all victims have been compensated.
“First in the Door”: Eligibility is limited to whistleblowers who provide truthful information not already known to the government. The information cannot be in response to any government inquiry, pre-existing reporting obligation, or imminent threat of disclosure. As Monaco emphasized, “you have to tell us something we didn’t already know.”
No Criminal Involvement: Whistleblowers cannot be involved in the criminal activity itself.
No Existing Incentive Programs: The program applies only in cases where there is no existing disclosure incentive, including qui tam provisions of the False Claims Act or another federal whistleblower program.

Enforcement Priorities

Although DOJ seeks information about any violation of federal law, Monaco clarified that the government is primarily interested in:

Criminal abuses of the U.S. financial system;
Foreign corruption cases outside the SEC’s jurisdiction; and
Domestic corruption cases, especially involving illegal corporate payments to government officials.

What to Expect from the Pilot Program?

Increase in voluntary disclosures

The new whistleblower program builds on DOJ’s prior efforts to strengthen corporate enforcement by encouraging voluntary disclosures. With the new pilot program offering monetary rewards to those “first in the door,” companies assessing whether to self-report potential misconduct must consider whether a whistleblower might get to DOJ first (thereby preventing the company from reaping the benefits of a voluntary disclosure). This may encourage companies to self-report misconduct earlier and more often. As Monaco stated, “[O]ur message to whistleblowers is clear: the Department of Justice wants to hear from you. And to those considering a voluntary self-disclosure, our message is equally clear: knock on our door before we knock on yours.”

More referrals to DOJ—and potentially fewer internal whistleblower reports

With the prospect of potentially significant financial rewards, we can expect more employees to report wrongdoing directly to DOJ, rather than going through corporate whistleblower channels. Companies should therefore ensure employees are aware of and have easy access to whistleblower hotlines to encourage internal reporting.

Focus on non-public companies

One of the “gaps” DOJ seeks to fill with the whistleblower program is to target foreign corruption cases outside the jurisdiction of the SEC, which already has its own whistleblower program. Thus, DOJ is likely to focus on suspected violations by non-public corporations.

We expect more information on program details and implementation over the coming months and will follow up with further updates.

More Cases and Expanded Data Analytics: A Closer Look at DOJ’s FY 2023 False Claims Act Statistics

Dominique L. Casimir, Luke W. Meier, and Oliver E. Jury ●

The United States Department of Justice (“DOJ”) recently announced its statistics for False Claims Act (“FCA”) FY 2023 settlements and judgments. DOJ recovered $2.68 billion in FY 2023; as usual, the majority of these recoveries (nearly 70 percent, or $1.8B) came from the healthcare industry. DOJ continues to make use of data analytics to inform its enforcement activity.

Background

Comparing year-to-year variance in the volume of DOJ’s FCA recoveries provides only marginal utility. More telling is the rapid expansion of the non-qui tam matters opened during the past two years. In FY 2022, DOJ opened 305 non-qui tam matters, representing approximately 186 percent of its prior ten-year average (164). In FY 2023, this increase continued, with DOJ opening 500 non-qui tam matters—305 percent of the ten-year average over FY 12–21.

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