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Key Sources of Law in Federal Construction Contracting

May 7, 2012 Construction Industry Legal Blog

Reading Time: 8 minutes

Occasionally in our firm’s representation of construction companies, materials suppliers, services contractors and sureties, we will find ourselves embroiled in a local, state, or federal contracting dispute. These disputes are nuanced and procedurally driven, requiring knowledge of administrative and contract laws that at times overlap. Whether it is in the bid process, bid protests, post-contract compliance and administration, pricing adjustments or government contracting disputes, we have the experience to represent clients in a myriad of government contracting issues. In doing so, we are required to have an operational knowledge of how the following (among many others) key sources of federal contract law apply to our construction clientele who bid on and obtain contracts for federal projects:

Federal Acquisition Streamlining Act of 1994– The Federal Acquisition Streamlining Act was enacted in 1994 with the goal of lowering procurement barriers. This Act enables simplified procurement procedures where the procurement is limited, facilitates reliance of commercial off the shelf technology, and promotes the use of fixed price performance based contracting. The law alters procurement strategy from lowest bid to best value. The Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act of 1996 removed the traditional oversight mechanisms that had been in place for decades and paved the way for a new method of awarding federal government contracts. Contracts must meet 90% of their performance goals or face termination.

Competition in Contracting Act- The Competition in Contracting Act was designed to increase competition for all types of government contracts and to save the government money via lower, more competitive pricing. The Act requires the government to hold full and open competition for most solicitations, with exceptions being documented in writing and authorized by the appropriate government official. To pursue the mandate for competitive pricing, the procuring agency must either solicit sealed bids or request competitive proposals if sealed bids are not appropriate. Executive agencies may use non-competitive procedures under certain limited circumstances. Each solicitation for sealed bids or competitive proposals must fully disclose all significant factors to be considered in evaluating the proposal and relative importance of each. Evaluation of and award of the contract must be based solely on the factors specified in the solicitation. When a contract is awarded on the basis of competitive proposals, an unsuccessful offeror who makes a timely written demand must be “debriefed” and provided a detailed explanation of the basis for the selection decision. The CICA is set forth in 41 U.S.C. §253-54. An informative guide to competition in federal contracting can be found here:

The Procurement Protest System is set forth in extensive detail in 31 U.S.C. §§3551 et. seq. The system applies to bid protests and authorizes an interested party to file most protests with the Comptroller General pursuant to 31 U.S.C. §3552. In most instances the bid documents and contract documents will identify bid protest procedures. The General Accounting Office also publishes several helpful guides to GAO bid protests, including forms and practice tips.  I also found this article when surfing around a few months back and found it comprehensive and helpful.

Contract Disputes Act of 1978– The Contract Disputes Act of 1978 (“CDA”, Pub.L. 95-563, 92 Stat. 2383), which became effective on March 1, 1979, establishes the procedures for handling “claims” relating to federal government contracts. The CDA applies to virtually all express or implied contracts relating to the procurement of property or services or to construction of buildings entered by executive departments, military departments, the U.S. Postal Service and corporations owned by the U.S. The Contract Disputes Act allows federal government contractors to sue the United States government for monetary damages related to their contractual dealings. This Act is tremendously important to the numerous contractors that provide the federal government with more than $200 billion of services, supplies, and construction each year. The Act waives the government’s sovereign immunity, permitting contractors to sue the government in either an administrative tribunal (a board that hears appeals) or in a court. The Act establishes the procedures to be used by contractors and contracting officers (those authorized to bind the government in contract) in resolving disputes involving contracts with the federal government, specifically the executive branch.

 All claims by the contractor against the government must be submitted in writing to the Government’s Contracting Officer for a decision. Claims by the contractor that exceed $100,000 must be accompanied by a certification that (i) the claim is made in good faith, (ii) the supporting data are accurate and complete to the best of the contractor’s knowledge and belief, (iii) the amount requested represents the contract adjustment for which the contractor believes the government is liable, and (iv) the certifier is authorized to submit the certification on behalf of the contractor. For claims of $100,000 or less, the Contracting Officer is required to issue a decision within 60 days of receipt of the claim provided the contractor requests a decision within that time period. For claims in excess of $100,000, the Contracting Officer is required, within 60 days, either to issue a decision or notify the contractor when a decision will be issued. All decisions should be issued within a reasonable time, taking into account the nature of the claim, and, if they are not, the contractor may either request a tribunal to direct the Contracting Officer to issue a decision within a specified time or treat the failure to issue a decision as an appealable “deemed” denial of the claim.

If the contractor is dissatisfied with the Contracting Officer’s decision on a claim, the contractor may (i) appeal that decision to the requisite agency board of contractor appeals within 90 days of receipt of the decision or (ii) bring suit on the claim in the Unites States Court of Federal Claims within 12 months. Decisions not appealed within one of these time periods become final and conclusive. The losing party may appeal a decision by either a board of contract appeals or the United States Court of Federal Claims to the Court of Appeals for the Federal Circuit. A contractor is entitled to interest on the amount found due on its claim running from the date the Contracting Officer received the claim until the claim is paid.  See 41 U.S.C. 7103-7109.

False Claims Act- The False Claims Act is an important mechanism by which U.S. taxpayers recover the billions of dollars stolen through fraud by U.S. government contractors every year. Under the False Claims Act, 31 U.S.C. §§ 3729-3733, those who knowingly submit, or cause another person or entity to submit, false claims for payment of government funds are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim. The law includes a “qui tam” provision that allows people who are not affiliated with the government to file actions on behalf of the government (informally called “whistleblowing”). Persons filing under the Act stand to receive a portion (usually about 15–25 percent) of any recovered damages. Claims under the Act have typically involved health care, military, or other government spending programs. The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government (tax fraud is excepted). The Act prohibits:

 1. Knowingly presenting, or causing to be presented a false claim for payment or approval;

 2. Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;

 3. Conspiring to commit any violation of the False Claims Act;

 4. Falsely certifying the type or amount of property to be used by the government;

 5. Certifying receipt of property on a document without completely knowing that the information is true;

 6. Knowingly buying government property from an unauthorized officer of the Government, and;

 7. Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the government.

The most commonly used of these provisions are the first and second, prohibiting the presentation of false claims to the government and making false records to get a false claim paid. By far the most frequent cases involve situations in which a defendant—usually a corporation but on occasion an individual—overcharges the federal government for goods or services. Other typical cases entail failure to test a product as required by the rigorous government specifications or selling defective products.

The False Claims Act has a detailed process for making a claim under the Act. Mere complaints to the government agency are insufficient to bring claims under the Act. A lawsuit must be filed in U.S. District Court in camera (under seal). After an investigation by the Department of Justice within 60 days, or frequently several months after an extension is granted, the Department of Justice decides whether it will pursue the case.

If the case is pursued, the amount of the reward is less than if the Department of Justice decides not to pursue the case and the plaintiff/relator continues the lawsuit himself. However, the success rate is higher in cases that the Department of Justice decides to pursue.

While the above-referenced items of federal legislation are important in federal construction contracting practice, they are by no means all encompassing. Federal codes and regulations often require overlapping interpretation that must be buttressed with decisional law in order to fully understand the law governing your issue. For these reasons, among many others, we recommend you contact an attorney with experience resolving federal construction contracting issue so that your company’s rights are protected.

Industry: Construction

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