Category: Contract Performance and Administration

Two Sides to Every Story: When Is Extrinsic Evidence Relevant to Interpreting the Scope of a Contractor Release?

Stephanie M. Harden and David L. Bodner ●

When is it appropriate to consider “extrinsic evidence” of the parties’ intent when interpreting a contractor’s release of claims? A new decision out of the Armed Services Board of Contract Appeals (“ASBCA”), Sonabend Company (ASBCA No. 63359), sheds new light on this important question, denying the government’s motion for summary judgment because the release language it relied on was ambiguous and thus raised an issue of fact.

Signing Releases—An Area Fraught with Risk

Releases are typically presented to the contractor as routine. Simply sign the modification and new work scope or new funding will be added to your contract! But when a contractor signs a modification, it might waive its ability to later pursue a cost claim, even for prior changes not impacted by the modification itself. Thus, it is important to identify modification language that may bar a future claim.

The government typically seeks to bar recovery based on at least one of two legal theories: (1) a release and (2) accord and satisfaction.

  • Release—a unilateral act by which one party disclaims a contract right or obligation.
  • Accord and Satisfaction—a bilateral agreement or an accord, where the parties agree to altered performance and the acceptance of such altered performance is satisfaction of the accord, which discharges the claim.

In practice, these theories may apply even though a modification does not announce itself as a release or an accord and satisfaction or a bar to a future claim.

Continue reading “Two Sides to Every Story: When Is Extrinsic Evidence Relevant to Interpreting the Scope of a Contractor Release?”

3 Tips to Reduce False Claims Act Exposure in the Wake of United States ex rel. Schutte v. SuperValu, Inc.

Justin A. Chiarodo,Jennifer A. Short, Stephanie M. Harden, Samarth Barot, and Oliver E. Jury ●

2023 is shaping up to be a major year in False Claims Act (“FCA”) practice, with the Supreme Court weighing in on both FCA scienter (in SuperValu) and the reach of the government’s dismissal authority (in Polansky), and the government focusing its enforcement efforts around antitrust, cyber, and national security. We focus today on the United States ex rel. Schutte v. SuperValu, Inc. decision, in which the Supreme Court held that a contractor’s subjective belief about its compliance at the time it submitted claims for payment is relevant to whether it had the requisite scienter for FCA liability. Much has been written on this case, with most articles exploring esoteric concepts like “scienter,” “falsity,” and the “objectively reasonable person.” But assuming—as we do—that the decision will reduce the prospect of successful early dispositive motions, what practical steps can contractors take to reduce their False Claims Act exposure and avoid litigation in the first place? We offer three suggestions.

We begin with a basic refresher on the issue presented in SuperValu. A defendant is not liable under the False Claims Act unless it “knowingly” (including acting with “reckless disregard”) submits a false claim to the government. The “knowing” scienter element—particularly around reckless disregard—can be difficult to prove in the world of complex and often ambiguous laws and regulations that govern contractors’ compliance. The federal circuits had split on the issue of whether a defendant’s subjective interpretation at the time it submitted claims for payment to the government was relevant to determining FCA “knowledge” if the defendant could later show that the underlying rule was ambiguous and its conduct (regardless of its contemporaneous understanding or belief) was consistent with an objective, reasonable interpretation of the unsettled requirement. SuperValu resolved the debate by holding that whether a defendant knowingly violated the FCA—and satisfied the scienter element—must consider the defendant’s real-time “knowledge and subjective beliefs.” United States ex rel. Schutte v. SuperValu, Inc., 143 S. Ct. 1391 (2023).

Continue reading “3 Tips to Reduce False Claims Act Exposure in the Wake of United States ex rel. Schutte v. SuperValu, Inc.“

Conflicting State and Federal Requirements for Government Contractors . . . Again

Merle M. DeLancey, Jr. ●

In 2021, federal government prime contractors and subcontractors found themselves in a difficult situation with respect to COVID vaccination requirements. More than a dozen states enacted laws prohibiting companies from requiring their employees to be COVID-19 vaccinated or even show proof of COVID-19 vaccination as a condition of employment. At the same time, federal government contracts were subject to mandatory employee vaccination requirements in the FAR and DFARS. (i.e., FAR 52.223-99 Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (OCT 2021) (DEVIATION) and DFARS 252.223-7999 Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (Deviation 2021-O0009) (OCT 2021). Luckily, the potential conflict was resolved, on May 9, 2023, when President Biden signed Executive Order (“EO”) 14099, Moving Beyond COVID–19 Vaccination Requirements for Federal Workers, which revoked EO 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors. EO 14099 directed agencies to rescind any policies that were adopted to implement EO 14042. Thus, the potential conflict between inconsistent federal and state laws concerning COVID-19 vaccinations was mooted.

A new conflict between state and federal procurement requirements may be brewing for federal prime contractors and subcontractors concerning race-based employment preferences and diversity policies after the Supreme Court decision in Students for Fair Admissions v. Harvard and Students for Fair Admissions v. UNC.

Continue reading “Conflicting State and Federal Requirements for Government Contractors . . . Again”

Lifecycle of a Claim, Part IV: Contracting Officer’s Final Decision

Stephanie M. Harden and David L. Bodner ●


Welcome back to our “Lifecycle of a Claim” series. This series explores the Contract Disputes Act claims process, with practical guidance stemming from recent case law every step of the way. Click the subscribe button on this page to get timely updates right in your inbox!

This series walks through this infographic (click here or the image below to expand), which illustrates the lifecycle of a typical claim:

Contract Disputes Act: Claim Lifecycle Flowchart

Our previous posts are available at the following hyperlinks: Part I, Part II, and Part III. This post focuses on Steps 6 through 8 of this process: reviewing the Contracting Officer’s Final Decision (“COFD”), accepting or the appealing the COFD, and resolving or litigating the matter.

We begin with these essential questions: What is a COFD? What can a contractor do if it does not like the COFD? And what is the timeline to appeal a COFD?

What Is a COFD?

A COFD is a Contracting Officer’s (“CO”) decision on the merits, which provides the reasons for the decision and notifies the contractor of its appeal rights. 41 U.S.C. § 7103(d)-(e). The FAR describes a COFD as a written decision that:

i. Describes the claim or dispute

ii. References pertinent contract terms

iii. States the factual areas of disagreement

iv. States the CO’s decision, with supporting rationale

v. includes notice of contractor’s appeal rights “substantially as follows:”

Continue reading “Lifecycle of a Claim, Part IV: Contracting Officer’s Final Decision”

And No Longer Trending: 7 FAQs Regarding the Federal Contractor TikTok Ban

Justin A. Chiarodo, Luke W. Meier, and Robyn N. Burrows ●


Building on recent and ongoing efforts to limit Chinese government access to government contractor supply chains, the FAR Councils published an interim rule effective June 2, 2023, that will broadly ban TikTok on contractor and contractor employee electronic devices used in the performance of federal contracts. The ban will be implemented through a new contract clause at FAR 52.204-27. Expect to see the clause added in all future solicitations (including commercially available off-the-shelf (“COTS”) acquisitions and micro-purchases) and added to existing contracts over the next month. We answer seven common questions on this new interim rule and offer several compliance tips.

What’s banned?

The new TikTok ban broadly prohibits contractors from having or using a “covered application” (e.g., TikTok or other successor applications by ByteDance Limited, a privately held company headquartered in Beijing, China) on any “information technology” used in the performance of a government contract. The ban applies regardless of whether the technology is owned by the government, the contractor, or the contractor’s employees. Bottom line, the rule has a (very) broad reach—it applies to contracts below the micro-purchase threshold, contracts for commercial products and services, and COTS items.

Continue reading “And No Longer Trending: 7 FAQs Regarding the Federal Contractor TikTok Ban”

Federal Contractor Vaccine Mandate to End

Merle M. DeLancey Jr. and Samarth Barot ●

Samarth Barot headshot image

After several Federal District Courts issued injunctions against the federal contractor vaccine mandate in December 2021, the Federal Government issued guidance fully suspending its enforcement of the federal contractor mandate. Despite the guidance, the future of the federal contractor vaccine mandate continued to remain in a state of limbo. This was best demonstrated two weeks ago when the Ninth Circuit sided with the Federal Government by lifting the district court’s preliminary injunction of the federal contractor vaccine mandate. The Ninth Circuit’s decision created a split with the Fifth, Sixth, and Eleventh Circuits that have enjoined the mandate. This Circuit split was likely headed to the United States Supreme Court.

On May 1, 2023, all of this changed. The Biden Administration announced its plan to end its federal contractor vaccine mandate on May 11, 2023, the same day the public health emergency ends. Accordingly, the Administration plans to issue an Executive Order “rescinding the vaccination requirement for federal employees and COVID-19 safety protocols for federal contractors, effective at 12:01 am on May 12, 2023.” For Federal Contractors | Safer Federal Workforce. Until then, the guidance suspending the enforcement of the federal contractor mandate remains in effect.

This should be the end of the federal contractor vaccine mandate; however, we will know more by May 11, 2023. Stay tuned for further developments.

What Is “Knowing” under the FCA? Supreme Court to Consider Impact of Ambiguous Regulations

Jennifer A. Short, Bridget Mayer Briggs, and Tjasse L. Fritz ●

Jennifer A. Short headshot image
Bridget Mayer Briggs headshot image
Tjasse L. Fritz headshot image

A successful False Claims Act (“FCA”) claim must show that the defendant submitted a false claim or statement “knowingly.” The “knowing” element—the scienter prong—depends on whether the defendant actually knew that the claim or statement was incorrect, or recklessly disregarded the facts or legal requirements that rendered the claim “false.” But, of course, government regulations, contract terms, and grant requirements can be incredibly complex and difficult to understand. When the ground rules are unclear, how does a company “know” that its claims for payment may be false under the FCA?

What does the FCA say about “knowing”?

The FCA defines “knowing” as (1) having “actual knowledge of the information;” (2) acting “in deliberate ignorance of the truth or falsity of the information;” or (3) acting “in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b). A “specific intent to defraud” is not required for liability under the FCA. 

Continue reading “What Is “Knowing” under the FCA? Supreme Court to Consider Impact of Ambiguous Regulations”

Proposed Greenhouse Gas Rule Previews New Compliance Frontier for Government Contractors

Michael J. Slattery and Justin A. Chiarodo ●

For over 18 months, the Biden Administration has discussed incorporating certain climate-change measures into the federal procurement system. A recent proposed rule forecasts where the Administration may be headed. In a nutshell, the proposed rule would require contractors receiving over $7.5 million in annual contract obligations to disclose greenhouse gas emissions. And it would require those receiving over $50 million in annual contract obligations to also set greenhouse gas reduction targets. Though the rule remains open to comment (through February 13, 2023), the FAR Council has tentatively tied compliance with the rule to responsibility determinations—making this a key new compliance frontier for many government contractors. This post summarizes the proposed rule, including implementation and enforcement mechanisms.

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Background

Climate change has been a procurement priority since early in the Biden Administration. In May 2020, the President issued Executive Order (“E.O.”) 14030, which directed the FAR Council to consider amending the FAR to require contractors to publicly disclose greenhouse gas (“GHG”) emissions and climate-related financial risk, have these entities set science-based GHG-reduction targets, and ensure that federal procurements minimize climate change risk.

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FY 2023 NDAA Muddies the Water on Whether Chinese Semiconductor Ban Will Apply to Contractors

Robyn N. Burrows ●

Last month, we wrote about a proposed amendment to the FY 2023 National Defense Authorization Act (“NDAA”) that would prohibit contractors from selling certain Chinese semiconductor technologies to federal agencies and from using these same covered products and services. This measure was added through Section 5949 of the NDAA.

On December 6, the House passed a compromise version of the NDAA, which appears to scale back the semiconductor ban by applying it only to federal sales of covered products and services, without also banning contractors from using them. However, the explanatory statement accompanying the NDAA suggests contractors (including their affiliates and subsidiaries) may ultimately be prohibited from using covered semiconductor technologies—which would raise a host of compliance and implementation concerns.

Compromise Version of NDAA Limits Semiconductor Ban to Federal Sales

Section 5949 bans semiconductor products and services from Semiconductor Manufacturing International Corporation, ChangXin Memory Technologies, and Yangtze Memory Technologies Corp., plus their subsidiaries and affiliates. This ban was modeled after the supply chain restrictions from Section 889, which prohibit contractors from selling and using covered telecommunications and video surveillance equipment from five Chinese telecom companies.

Continue reading “FY 2023 NDAA Muddies the Water on Whether Chinese Semiconductor Ban Will Apply to Contractors”