In a decision issued by the United States Court of Federal Claims, Anthem Builders, Inc. v United States, 121 Fed. Cl. 24, the Court considered a Contracting Officer’s right to deny a bid on a project based on an entity’s use of an unacceptable individual surety. Proper bonding is essential, because without a safety net, the government is left with no protection if the contractor fails to meet its contractual obligations. Under FAR 28.203 an entity can use an individual surety, instead of a corporate surety, for all types of bonds, with the exception of position schedule bonds. Anthem bid on a government construction project and the bidding package included a bond secured by an individual surety. The Contracting Officer rejected the bid as “nonresponsible.”
Contractors have been careful about using an individual surety to secure bonds because of the difficulty in verifying assets and the questionable practices of some individual sureties. Since these problems arise with an individual surety a Contracting Officer is given wide latitude under FAR 28.203(a). FAR 28.203(a) gives the Contracting Officer the right to find the individual surety “nonresponsible.” The right of a Contracting Officer to reject an individual surety was cemented in Anthem Builders. The Court found that even though pursuant to FAR 52.228–15(d), the bond was supported by an individual surety, the Contracting Officer had the right to deny the bid if the individual surety was “nonresposible” and the funds were not guaranteed.
For Contracting Officers, the validation that a bid does not have to be accepted if the individual surety raises severe financial red flags for the project provides some much needed relief and mitigates a common fear of having to accept fraudulent transactions. Entities bidding on a federal government project should try and obtain bonding from a surety listed on the Treasury Department Circular. If an entity is using an individual surety as security for the bond, the entity could take steps to avoid Anthems’ fate in this case. The entity should ensure that the individual surety provides an escrow account where the Contracting Officer has the sole and unrestricted right to draw on the funds, provides proof of unencumbered assets, or provides an Irrevocable Trust Receipt that is issued by an FDIC insured financial institution.
Moore & Lee partner Robert D. Windus was recognized in the Official Educational Journal of the American Subcontractors Association, The Contractor’s Compass, for his peer review of the 2018 edition of Mechanical Contractors Association of America, Inc.’s (MCAA) publication Change Orders, Productivity, Overtime: A Primer for the Construction Industry. Specifically, Mr. Windus was credited for helping ensure that the content and data in 2018 edition was correct, reasonable, and applicable to the current state of construction management and construction law. The American Subcontractors Association recently joined the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) and the National Electrical Contractors Association (NECA) in announcing its full support and formal endorsement of the 2018 edition of MCAA’s publication. Read the full article here.
Moore & Lee is pleased to announce that Tara Hosseini and Zackary Rogers have joined the firm as Associates. Tara graduated from The George Washington University School of Law in 2020. Zackary graduated from the George Mason University School of Law in 2020. Tara and Zack worked as Summer Associates at Moore & Lee in 2019.
Moore & Lee is pleased to announce that Rachel Bauer has joined the firm as a Law Clerk. Rachel graduated from the American University Washington College of Law in 2019. She worked as a Summer Associate at Moore & Lee in 2017.
Moore & Lee was once again selected as Tier 1 for Construction Law and Construction Litigation in both the National and Washington, DC Metro Area Rankings of the U.S. News & World Report’s Best Law Firms.
Charlie Lee was featured in a recent issue of The Virginia Lawyer…
“Devastating, isn’t he?” That’s an ESPN announcer describing 22-year-old Charlie Lee in the center of a boxing ring, performing his taekwondo routine in 1986 Atlanta. “Lee is noted for his strong, solid stances,” the announcer says. “Every block, every punch is perfectly clean, solid, and strong.” In the YouTube clip, Lee slices and kicks at the air with precision before a large crowd, his routine set to the music of The Twilight Zone.
The announcer notes that Lee is a marketing major at Virginia Tech. “I wanted to go out to Hollywood and be the next Bruce Lee after I graduated,” says Lee, now 55. “But my very traditional Korean mother said, ‘No, you’re going to law school.’ So, you know, you don’t disobey your mother.”
But Lee didn’t just follow his mom’s advice. He became a lawyer, but he also found a way to make his passion an ongoing part of his life. Today, he is co-founder and partner at Moore & Lee LLP in McLean, and he crisscrosses the United States representing clients in cases ranging from healthcare to corporate litigation to construction law. Read the full story
Moore & Lee is pleased to announce that John Bertino and Danielle Lubin have joined the firm as Associates. John graduated from The George Washington University School of Law in 2018. He worked as a Summer Associate at Moore & Lee in 2017. Danielle graduated from Suffolk University Law School in 2018.
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, LLP 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.