Category: Sara N. Gerber

FAR Council Issues Final Rule on Sustainable Products & Services

Sara N. Gerber ●

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).

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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.

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GSA Relaxes Price Increase Limitations for FSS Contractors

Merle M. DeLancey Jr. and Sara N. Gerber


The General Services Administration (“GSA”) Office of Governmentwide Policy recently authorized contracting officers to provide relief to GSA contractors experiencing cost increases due to surging inflation. See Acquisition Letter. To assist struggling contractors, GSA issued a temporary moratorium on the enforcement of certain limitations contained in GSA economic price adjustment (“EPA”) clauses.

GSA issued the moratorium in response to an uptick in contractors’ requests for price increases and removal of items from their Federal Supply Schedule (“FSS”) contracts to avoid selling at a loss. In issuing the moratorium, GSA recognized that inflationary pressures and price volatility, caused by supply chain disruptions, strong demand, and labor shortages, are ongoing concerns unlikely to abate in the near term. GSA acknowledged that it must help contractors weather this “unusual time”—especially small businesses and new market entrants—to ensure a resilient and diverse federal industrial base and the government’s continued access to critical “products, services, and solutions.”

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Report on the State of Competition within the Defense Industrial Base

Brian S. Gocial, Sara N. Gerber, and Tjasse L. Fritz

As the federal government prepares to roll out infrastructure grants and contracts in amounts not seen since the New Deal and the defense industrial base (“DIB”) gears up to support billions in new spending to support Ukraine, a new Department of Defense (“DoD”) report raises serious concerns about the state of competition within the DIB. The report recently released by the Office of the Under Secretary of Defense for Acquisition and Sustainment analyzes the state of competition within the DIB and concluded that it can be summarized in one word: poor. The report discusses the causes for the lack of competition and makes recommendations for improving the solicitation process to increase competition, inspire innovation, reduce prices, and improve quality.

Consolidation

Foremost among the causes for the lack of competition identified by the report is consolidation of the DIB. Of 51 aerospace and defense prime contractors in the 1990s only five exist today. Although the report failed to find significant correlation between this consolidation and increased pricing, the consolidation raises additional concerns for DoD, such as national security, mission risk, and strategic technology innovation. The report notes that “having only a single source or a small number of sources for a defense need can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks.” The report recommends that when a merger is likely to harm one of these interests, DoD work closely with the Federal Trade Commission and Department of Justice to take structural or behavioral measures deemed necessary, up to and including blocking the merger.

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Seventh Circuit Weighs in on Government Dismissal Authority under the FCA

Sara N. Gerber

The Seventh Circuit’s recent decision in U.S. ex rel. CIMZNHCA, LLC v. UCB, Inc. widens the Circuit split on the standard of review applicable when the government seeks to dismiss a qui tam case under the False Claims Act (“FCA”). The FCA, 31 U.S.C. § 3730(c)(2)(A), provides that the government may dismiss a qui tam case without the relator’s consent if the relator is given notice and an opportunity to be heard. Although the Department of Justice (“DOJ”) has increasingly exercised its dismissal authority since issuance of the “Granston Memo” in January 2018—which encouraged DOJ attorneys to consider seeking dismissal if in the best interests of the government—as the Seventh Circuit noted, the FCA does not indicate “how, if at all,” courts are “to review the government’s decision to dismiss.” Circuit Courts have taken divergent views in answering that question.

Circuit Court Decisions

The D.C. Circuit, in Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003), decided that the government has an “unfettered right” to dismiss based on the Executive branch’s “historical prerogative” to decline to prosecute a case. The Ninth Circuit, in U.S. ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998), and the Tenth Circuit in Ridenour v. KaiserHill Co., LLC, 397 F.3d 925 (10th Cir. 2005), imposed a rational-relation test: the government must establish a rational relation between dismissal and the accomplishment of a valid government purpose. If the government satisfies this test, the burden shifts to relator to show that dismissal is fraudulent, arbitrary and capricious, or illegal. So far, the Supreme Court has declined to step in, denying certiorari in April 2020 in United States ex rel. Schneider v. JP Morgan Chase Bank on the question of whether the government’s dismissal decisions constitute an “unreviewable exercise of prosecutorial authority.” Now, however, the Seventh Circuit has articulated a new standard, relying on Federal Rule of Civil Procedure 41(a) governing voluntary dismissals by plaintiffs. Continue reading “Seventh Circuit Weighs in on Government Dismissal Authority under the FCA”

12 Steps for Reducing CARES Act Enforcement Risks

William E. Lawler III, Gregory F. Linsin, Justin A. Chiarodo, Dominique L. Casimir, and Sara N. Gerber

The Coronavirus Aid, Relief and Economic Security, or CARES, Act provides more than a trillion dollars in relief to both small and large businesses in the form of loans, grants and tax credits, designed to quickly stabilize the economy during the ongoing crisis.

But this is not free money: The CARES Act also includes a robust oversight and enforcement regime to enable the government to combat fraud, waste and abuse. Experience shows that when this much government money is being spent, there will be investigations and enforcement actions.

The CARES Act is complex with evolving regulatory guidelines, and this increases the potential for missteps by companies trying to take advantage of the program’s benefits while navigating program requirements. How can companies manage this uncertainty and reduce the risk of becoming an enforcement target?

We offer 12 suggested steps.

To read the full article that was published in Law360 on May 11, 2020, please click here.

Renewed Focus on Contractor Business System Reviews

Sara N. Gerber

According to a recent U.S. Government Accountability Office (“GAO”) report, the Defense Contract Audit Agency (“DCAA”) and the Defense Contract Management Agency (“DCMA”) have taken certain steps to improve the contractor business system (“CBS”) review process and are forecasting that CBS reviews will increase significantly over the next four years. Contractor business systems include a contractor’s accounting, earned value management, estimating, purchasing, material management, and property management systems. These systems require contractors to maintain internal controls that, as GAO noted, “act as the first line of defense against fraud, waste and abuse of federal funding.” Given their importance, the renewed focus on ensuring CBS reviews are conducted in a timely and consistent manner is not surprising, and contractors should prepare for a new wave of audit activity. Continue reading “Renewed Focus on Contractor Business System Reviews”

Supreme Court Grants Cert to Resolve Circuit Split on FCA Statute of Limitations

Sara N. Gerber

The U.S. Supreme Court has granted a writ of certiorari to address a Circuit Court split concerning whether False Claims Act (“FCA”) relators may rely on the statute of limitations in 31 U.S.C. § 3731(b)(2)—a limitations period which is triggered by the government’s knowledge of the fraud—when the government does not intervene. The Supreme Court granted cert on November 16, 2018, to review the Eleventh Circuit’s decision in U.S. ex rel. Hunt v. Cochise Consultancy, Inc. The Eleventh Circuit reversed the Alabama District Court, reviving the relator’s complaint by giving the relator the benefit of the longer limitations period in § 3731(b)(2).

At the center of the matter is the interplay between the two limitations periods in the FCA after which a “civil action under section 3730” is time-barred: (1) “6 years after the date” of an alleged violation, see 31 U.S.C. § 3731(b)(1); or (2) “3 years after the date” when material facts “are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no more than 10 years after the date” of the alleged violation, see 31 U.S.C. § 3731(b)(2). The relator in Cochise Consultancy filed his claim more than six years after the alleged fraud occurred, but within three years of his disclosure of the fraud to FBI agents who had interviewed him about his role in a separate kickback scheme, to which he ultimately pled guilty and served time in federal prison. Continue reading “Supreme Court Grants Cert to Resolve Circuit Split on FCA Statute of Limitations”

Certified Cost and Pricing Data Thresholds to Increase July 1, 2018

Scott Arnold and Sara N. Gerber

On July 1, 2018, the threshold for obtaining certified cost and pricing data increases substantially from $750,000 to two million dollars. The change was authorized by the Department of Defense pursuant to a class deviation, pending official rulemaking and publication in the Federal Acquisition Regulation (“FAR”). The class deviation implements Section 811 of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2018, which raised the certified pricing threshold contained in the Truthful Cost or Pricing Data Act (still commonly referred to as “TINA” based on the former name of the relevant statute, the Truth in Negotiations Act). The Civilian Agency Acquisition Council recently followed suit, advising other federal agencies that they “may authorize a class deviation to implement the threshold change.” In addition to the increase under the NDAA, the TINA threshold is also subject to adjustment every five years to keep pace with inflation. See 41 U.S.C. § 1908. The last adjustment for inflation, made in 2015, raised the threshold by $50,000. Continue reading “Certified Cost and Pricing Data Thresholds to Increase July 1, 2018”

Another Banner Year for False Claims Act Recoveries Signals More of the Same for 2018

Justin A. Chiarodo and Sara N. Gerber

The Department of Justice (“DOJ”) reported $3.7 billion in False Claims Act (“FCA”) settlements and judgments for fiscal year 2017, the 8th straight year of 3-plus-billion-dollar recoveries and 700-plus new cases filed. Healthcare, mortgage, and procurement fraud once again dominated recoveries. This article analyzes DOJ’s FCA statistics, and includes our predictions for continued strong enforcement in 2018. Continue reading “Another Banner Year for False Claims Act Recoveries Signals More of the Same for 2018”

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