TERMINATION OF AN 8(A) CONTRACTOR FOR FAILURE TO PAY A SUBCONTRACTOR

A recent decision by the Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”) sustained the SBA’s termination of an 8(a) contractor for failing to pay a subcontractor $68,688.53, citing this failure as a lack of business integrity. Corporate Portfolio Management Solutions, SBA No. BDPT-567, Feb. 15, 2018. OHA noted that the failure to pay the subcontractor, Procon, and failure to comply with either an arbitration agreement or a civil judgment entered against Corporate Portfolio, amounted to conduct indicating a lack of business integrity. Because there was no basis for determining that the SBA’s decision was arbitrary, capricious or contrary to law, OHA dismissed Corporate Portfolio’s appeal and declined jurisdiction. By regulation, SBA accepts a business into the 8(a) program for 9 years, so … Continue reading

UNILATERAL MODIFICATION OF FUNDING CLAUSE BY AGENCY IS A BREACH OF CONTRACT, NOT A PROPER CHANGE ORDER

This blog recently discussed the limits of the use of the Changes Clause in a contract, noting that the clauses at Federal Acquisition Regulation (“FAR”) 52.243-1 through FAR 52.243-7 (Changes) are limited to the specific changed situations described in each clause, and cannot be used to change terms and conditions, including the payment clause of the contract. See “Changes Clause Can’t Be Used To Change terms and Conditions, Including Payment Clause” (Nov. 6, 2017). Now comes a later case where the Armed Services Board of Contract Appeals (“ASBCA” or “Board”) clearly states that an agency’s unilateral modification of a contract’s funding clause constitutes a breach of the contract. Kelly-Ryan, Inc., ASBCA No. 57168, Dec. 5, 2017. Kelly-Ryan was awarded a contract by the U.S. Army … Continue reading

GOVERNMENT WAIVER OF CONTRACT SPECIFICATIONS: WHEN AND HOW?

Waiver: The voluntary relinquishment or abandonment—express or implied—of a legal right or advantage. Black’s Law Dict. (10th Ed. 2014) This blog has discussed situations where the government has waived a delivery schedule in a contract. See “How Many Mistakes Can A Defense Logistics Agency Contracting Officer Make?” (January 2, 2018) and “Was Your Delivery Date Waived? Was Your Default Termination Improper?” (April 25, 2016). But there is another important waiver—when the Government waives contract specifications or requirements. How does that occur? A good example is found in American West Construction, LLC, ASBCA No. 61094, Dec. 19, 2017. The Army Corps of Engineers awarded a contract to American West to construct bridges over irrigation canals in Texas, near the border with Mexico. To access the site … Continue reading

HOW MANY MISTAKES CAN A DEFENSE LOGISTICS AGENCY CONTRACTING OFFICER MAKE?

A Defense Logistics Agency (“DLA”) contracting officer (“CO”) terminated a contract to provide jet fuel to Bagram airfield in Afghanistan, (including construction of a pipeline). The termination, however, was so erroneous that the Armed Services Board of Contract Appeals (“ASBCA”) cited numerous reasons for converting the default to a termination for convenience of the government. Asia Commerce Network, ASBCA No. 58623, October 4, 2017 (hereafter “ACN”) Probably the most important error was the CO’s waiver of the delivery date, and failure to establish a new delivery date. The CO issued a cure notice in October 2012 and ACN explained that the delays cited in the cure notice were beyond its control. The CO requested revised milestones, recognizing delays that were beyond the contractor’s control. ACN … Continue reading

HOW TO SIGN YOUR CLAIM AND CERTIFICATION

The Contract Disputes Act of 1978 (“CDA”) contains a few simple requirements for claims over $100,000, including certification. Yet to this day contractors have consistently violated the certification requirements and, as a result, had their claims dismissed by the Boards and Courts. This happened most recently in NileCo Gen’l Contracting, LLC, ASBCA No. 60912, Sept. 22, 2017. It seems as if a technology-crazed world sometimes refuses to use the most low-tech machine of all—the pen—because the pen is just not electronically convenient. Hopefully, government contractors will read this blog. The CDA states that each claim for more than $100,000 must be certified to state that: The claim is made in good faith; The supporting data are accurate and complete to the best of the contractor’s … Continue reading

SUBCONTRACTOR COSTS: CAN THE PRIME BILL FOR VACATION COSTS, EVEN IF INVOICED SEPARATELY?

Is a prime contractor entitled to bill for vacation costs incurred by and owed to its subcontractor on a time and materials contract, even if they were invoiced separately from the subcontractor’s salary cost? The Armed Services Board of Contract Appeals (“ASBCA”) answered “yes,” explaining that the application of the clause at Federal Acquisition Regulation (“FAR”) 52.232-7, “Payments Under Time and Materials and Labor Hour Contracts” so mandates. Access Personnel Servs, Inc., ASBCA No. 59900, September 7, 2017. Access used a subcontractor to perform a portion of its Navy contract for personnel support services. The subcontractor, Professional Services of America, invoiced Access separately for its personnel’s vacation pay, instead of incorporating the vacation pay into the hourly rates that it billed Access. Access advised the … Continue reading

CHANGES CLAUSE CAN’T BE USED TO CHANGE TERMS AND CONDITIONS, INCLUDING PAYMENT TERMS

The Federal Acquisition Regulation (“FAR”) defines “change order” to mean “a written order, signed by the contracting officer, directing the contractor to make a change that the Changes clause authorizes the contracting officer to order without the contractor’s consent.” FAR 2.101. The question is, what types of changes are authorized by the Changes clause? The answer is found in the Changes clause and the caselaw. The simple answer is: only limited types of changes, and generally, the terms and conditions in the contract cannot be changed by a change order. And in particular, payment methods or amounts cannot be changed, as demonstrated in a recent case. CH2M-WG Idaho, LLC, CBCA 3876, Sept. 7, 2017. FAR 52.243-1, Changes—Fixed-Price (AUG 1987), states The Contracting Officer may at … Continue reading

BE CAREFUL WHAT YOU SIGN

Now comes two cases decided on the same day by the Armed Services Board of Contract Appeals that demonstrate how important it is for a contractor to understand what he/she signs. Arab Shah Const. Co., ASBCA No. 60813, September 7, 2017 and Central Texas Expr. Metalwork LLC,, ASBCA No. 61109, September 7, 2017. In both cases, the contractors signed away rights to potential claims they could have reserved. Case 1: In Arab Shah, the Air Force contract was for construction of two metal pole barns in Afghanistan. Before being built, one of the pole barns was no longer needed and the Contracting Officer (“CO”) emailed Arab Shah stating that he wanted the barn built at another location, and would modify the contract, if the contractor … Continue reading

HOW TO GET PAID FOR WAGE DETERMINATION INCREASES IN OPTIONS AND EXTENSIONS UNDER THE SERVICE CONTRACT ACT

Contractors know that most contracts for services are subject to the Service Contract Act, 41 U.S.C. § 351(a) (the “SCA”). The SCA was designed to protect wages and fringe benefits of service workers employed on U.S. Government contracts. It directs the Department of Labor (“DOL”) to issue minimum wage orders applicable to fixed-price services contracts, called “Wage Determinations,” which are developed to reflect “prevailing wages.” Through Federal Acquisition Regulation (“FAR”)-mandated contract clauses, contractors are forbidden from paying less than the wages and fringe benefits contained in a Wage Determination. Furthermore, the FAR clauses permit a contractor to recover increases in wages and benefits mandated by future Wage Determinations when they impact on options and extensions. A recent Board case demonstrates the entitlement. Hallmark-Phoenix 3, LLC, … Continue reading

DISMISSAL OF AN INCOMPLETE (IMPROPER) CLAIM OR APPEAL

A recent Armed Services Board of Contract Appeals (“ASBCA”) decision is a strong reminder that contractors must submit complete and proper claims, or they will be dismissed by either the Contracting Officer or a board or court, if appealed to one of those forums. Andrews Contracting Services, LLC, ASBCA No. 60808 (May 22, 2017). Andrews submitted to the Contracting Officer a “Request for Equitable Adjustment” for $292,797.51 in connection with its contract. The REA contained a certification required by the Defense Federal Acquisition Regulation Supplement (“DFARS”) 252.243-7702 where the contractor’s President certified that “the request is made in good faith and that the supporting data are accurate and complete to the best of my knowledge and belief.” The Contracting Officer denied the REA three months … Continue reading