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In a recent decision by the Government Accountability Office (“GAO”), AutoFlex, Inc., B-415926, April 19, 2018, the GAO considered a challenge to the agency’s termination of a contract for the convenience of the government where the termination flows from a defect the contracting agency perceived in the award process.

In this bid protest, service-disabled veteran-owned small business (“SDVOSB”) AutoFlex, Inc. (“AutoFlex”), protested the termination of its contract for the lease of executive vehicles with the Department of Veterans Affairs (the “Agency”) and subsequent award of a contract to small business concern District Fleet, LLC (“District Fleet”). AutoFlex alleged that the Agency unreasonably terminated its contract, failed to set aside the procurement for SDVOSB concerns, and failed to provide AutoFlex with a debriefing. On November 30, 2017, the Agency issued the solicitation as a small business set-aside for the lease of four 2018 Chevrolet Suburbans for a period of one base year and four option years. The solicitation indicated award would be made on a lowest-price, technically acceptable basis.

District Fleet submitted the lowest-priced quotation, which the Agency initially found unacceptable. AutoFlex, the incumbent contractor, provided the next lowest-priced quotation and the Agency awarded the contract to AutoFlex on December 20, 2017. Subsequently, District Fleet filed an agency-level protest of the contract award to AutoFlex. Upon further review, the Agency determined that the evaluation of District Fleet’s quotation was erroneous and found the quotation to be technically acceptable. As a result, the Agency terminated AutoFlex’s contract and awarded the contract to District Fleet. AutoFlex then protested the termination of its contract to the Government Accountability Office (“GAO”).

In its decision, GAO noted that the GAO generally will decline to review the termination of contracts for the convenience of the government as those actions are matters of contract administration. However, the GAO will review the propriety of the termination where the termination stems from a defect perceived by the contracting agency in the award process. In which case, the GAO will analyze the award procedures underling the termination for the limited purpose of determining whether the initial aware may have been improper, and, if so, the appropriateness of the corrective action advanced by the agency in remedying the impropriety. Even if the agency’s corrective action is not the most advantageous to the government, the GAO will not object as long as the corrective action taken is appropriate.

Here, the GAO found no basis in the record to object to the agency’s termination of AutoFlex’s contract. The Agency reasonably concluded that it had misevaluated District Fleet’s quotation and corrected the error. Additionally, the GAO found AutoFlex’s challenge to the Agency’s determination to set the procurement aside for small business concerns as opposed to SDVOSB concerns as an untimely challenge to the terms of the solicitation. During the solicitation phase, the Agency posted a response to a question as to whether the solicitation was in accordance with the Veterans First Contracting Act by stating “[t]his requirement is being solicited in accordance with the Veterans First Contracting Program.” The GAO found no basis in the record to conclude that the Agency’s response was misleading. The Agency did not amend the solicitation to change the set-aside designation, nor did the Agency add VA Acquisition Regulation clauses 852.219-11, VA Notice of Total Veteran-Owned Small Business Set-Aside or 852.219-10, VA Notice of Total Service-Disabled Veterans-Owned Small Business Set-Aside to the solicitation. The solicitation clearly designated the requirement set-aside for small business concerns. The GAO found that in viewing the matter in a manner most favorable to the protester, the Agency’s response could be construed as a patent ambiguity. A patent solicitation ambiguity exists where the solicitation contains an obvious, gross, or glaring error apparent from the face of the solicitation. As such, a patent solicitation ambiguity must be protested prior to the closing time for receipt of proposals or quotations to be considered untimely. Finally, the GAO also dismissed AutoFlex’s protest of the Agency’s failure to provide it with a debriefing since the adequacy and conduct of a debriefing, including the failure to provide a debriefing are procedural matters that do not involve the validity of an award.

Decisions such as AutoFlex serve as two important reminders to both contractors and agencies alike. First, the GAO will not object to an agency’s response to a defect in the procurement process as long as the corrective action taken is appropriate. Additionally, contractors should closely adhere to GAO timeliness regulations when determining whether to protest a patent solicitation ambiguity. The untimeliness of such a challenge may prevent a contractor’s success on the merits without even a chance of its allegations being heard in such instances.

Chambers and Partners recently recognized Moore & Lee, P.C. as “Band 1” for construction law firms in Virginia in 2018.

The U.S. Supreme Court in Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 195 L. Ed. 2d 348 held that the implied certification theory can be a basis for liability under the civil False Claims Act (FCA), resolving a split among the Federal Court of Appeals about the theory’s viability.  Under this theory, when a contractor submits a claim, it impliedly certifies compliance with all conditions of payment.  However, if the contractor fails to disclose a violation of a material statutory, regulatory, or contractual requirement, the contractor has made a misrepresentation that renders the claim “false or fraudulent” under the FCA. certification theory

The Court not only upheld the validity of the implied certification theory, but also clarified the scope of the theory.  The Court held that the implied certification theory can be a basis for liability only where two conditions are satisfied.  First, a claim for payment cannot “merely request payment.”  The claim for payment must also “make[] specific representations about the goods or services provided.”  Second, the contractor’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements” must make those “representations misleading half-truths.”  The Court also held that FCA liability for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment. A contractor can be liable for violating requirements even if the requirements were not designated as conditions of payment, but not every violation of a requirement that was designated as a condition of payment triggers liability.  In reaching this holding, the Court explained: “What matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.”

The Court also clarified how the materiality requirement under the FCA should be enforced.  The Court emphasized that the “materiality standard is demanding.”  Materiality “cannot be found where noncompliance is minor or insubstantial.”  Consequently, the Government’s decision to identify a provision as a condition of payment is relevant to materiality, but “not automatically dispositive.”  The Court elaborated that “proof of materiality can include … evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement,” or, conversely, the Government’s payment of a “claim in full despite its actual knowledge that certain requirements were violated” is “strong evidence that the requirements are not material.”

While the Court upheld the implied certification theory, the true impact of the decision will depend on how the lower courts choose to implement the decision.  In particular, how the lower courts read the Court’s emphasis on materiality.  The focus of future litigation may be whether the Government actually cared about the alleged violations, rather than technical arguments over terms of payment.

Moore & Lee is pleased to announce that Ashley Presley has joined the firm as an Associate.  Ashley previously worked as a litigation attorney at the Department of Veterans Affairs where she was responsible for all facets of government contracting on behalf of the Agency

Moore & Lee is pleased to announce that Alexander Yun has joined the firm as an Associate.  Alex previously worked for a boutique law firm in Fairfax, VA where he practiced all facets of civil litigation.

The U.S. Supreme Court in Universal Health Servs., Inc. v. United States, held that liability can exist under the civil False Claims Act (FCA) based on the implied certification theory, resolving a split among the Federal Court of Appeals about the theory’s viability.  Since that decision, Federal Circuits have begun to explore the ramifications of the holding.  The Seventh Circuit Court of Appeals, in United States v. Sanford–Brown, Ltd., examined the new standard and held that the conditions for liability under an implied certification theory were not met.  840 F.3d 445, 447 (7th Cir.).  The Court of Appeals found that “bare speculation” regarding misleading representations is insufficient to support a claim at the summary judgment stage.  Id.  Second, the granting of summary judgment was affirmed because the plaintiff failed to establish the independent element of materiality.  Id.  The Court of Appeals strongly enforced this element of the implied certification theory, and focused on the fact that there was no evidence to support the argument that the government’s decision to pay would likely or actually have been different if it had known of the alleged misrepresentations.  Id.  Further, the Court of Appeals stressed that even if it was shown that the government’s knowledge of misrepresentations would have caused it to decline payment, this alone would still not be enough to meet the high standard required for the materiality element.  Id. at 448.  In summary, the Seventh Circuit Court of Appeals did not try to find ways to work around the Supreme Court’s decision; rather, it whole-heartedly enforced the elements outlined by the Supreme Court and showed that it will hold plaintiffs to a rigorous standard on alleged liability under the FCA based on the implied certification theory.

The Ninth Circuit Court of Appeals recently addressed the materiality element of the implied certification theory as well.  United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325 (9th Cir.).  Again, the Court of Appeals held that the claims failed because of the failure to meet the rigorous materiality standard.  Id. at 333.  As the Seventh Circuit Court of Appeals did, the Ninth Circuit Court of Appeals held that it is not enough to show that the government would not have paid if it knew of the alleged misrepresentation.  Id.  Rather, what was important here was the fact that the government did not find the reports which contained the alleged misrepresentations useful—the government found the reports to be neither necessary nor cost‑justified for their related project.  Id. at 334.  This indicates that the Ninth Circuit will examine the government’s use of the substance that contains the alleged misrepresentations, and that materiality will be judged partly on the utility of that use.  The takeaway from this case is that the Ninth Circuit, like the Seventh Circuit, will apply a rigorous standard to meet the materiality element.  Moving forward, it will be worth watching the Federal Circuits as they continue to develop and explore their treatment of the materiality element.

Moore & Lee is pleased to welcome John Bertino and Rachel Bauer as summer associates.  John has just finished his second year at George Washington University Law School and Rachel has just finished her first year at American University Washington College of Law.

Congratulations to Robert M. Moore on again being recognized as a Virginia Super Lawyer for Construction Litigation.

The U.S. Court of Federal Claims recently set aside GSA’s award of a lease for the Transportation Security Administration’s (“TSA”) consolidated Northern Virginia Office.  The TSA’s new office would have provided more than 600,000 square feet of rentable space for the administration.  The Court of Federal Claims in Springfield Parcel C, LLC v. United States, held that a permanent injunction preventing GSA from proceeding with lease contract originally awarded to successful offeror was warranted.  The court further held that GSA’s acceptance of an offer for space larger than the permitted maximum contained in the request for proposal contravened a material term in the proposal, and therefore, violated 40 U.S.C. § 3307(a).  The failure to acquire appropriations for this lease, also violated the Anti-Deficiency Act, and therefore, the lease was void ab initio.

The Court, with this ruling, has carved out a right for would-be lessors to seek permanent injunctive remedies if an agency lease contract does not comply with the terms approved by Congress and articulated in the Request for Lease Proposal (“RLP”).  Prior to this ruling, post award bid protests pertaining to a fully executed GSA lease did not pose a real threat to the government or the awardee.  After this ruling government contractors should be very careful to follow any, and all, specifications found in the RLP when submitting their bid.