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©2013 Wiley Rein LLP

GOVERNMENT CONTRACTS ISSUE UPDATE Winter 2013

ALSO IN THIS ISSUE

2 Late Government Claims: ASBCA Taking a Harder Look at When Government Cost Accounting Claims Accrue

64 Federal Agencies Are Preparing for

Sequestration—Are You?

67 Wiley Rein Practice Statistics: 2012

68 Service Contract Act: What You

Really Need to Know Before You Submit That Proposal

611 Claims Reminder: Federal

Express Is Not U.S. Mail for Purposes of Establishing Timeliness of Board Appeal

612 Speeches & Publications

612 Paul F. Khoury Appointed Chair

of GW Law School Government Contracts Advisory Board

“Waive” Goodbye to OCIs?By Brian Walsh

For years, the Government Accountability Office (GAO) has indicated in decisions sustaining organizational conflict of interest (OCI) protests that agencies could simply follow the waiver provisions in FAR 9.503 rather than take corrective action. And for years, agencies have shied away from accepting GAO’s invitation. Maybe that is about to change.

In AT&T Government Solutions, Inc., B-407720, Jan. 30, 2013, GAO dismissed as academic AT&T’s protest alleging that the awardee of a Marine Corps task order should be determined ineligible because of an alleged OCI. GAO ruled that the protest had been rendered academic when the Marine Corps advised GAO that the head of the contracting activity (HCA) had properly followed FAR 9.503’s waiver

procedures. The waiver came on day 97 of the protest—three days prior to GAO’s 100-day decision deadline. It followed the GAO attorney’s indication, during outcome prediction, that GAO would likely sustain the protest because, “despite the Marine Corps’ investigation, the record showed that the agency failed to meaningfully consider whether [the awardee] had unequal access to information and impaired objectivity OCIs.” Following receipt of the waiver from the Marine Corps, GAO promptly dismissed the protest noting that “[t]he issues in dispute in this case arise from the rules and procedures in Subpart 9.5, and, as of January 28, 2013, the application of these rules and procedures have been waived for this procurement by the Marine Corps, which renders the protest academic.” The Marine Corps HCA’s view was that there was no real OCI to worry about: “My finding [is] that the risk of any potential or real OCI existing under the subject contract is negligible to non-existent.”

What makes this decision interesting is not just GAO’s interpretation of its protest jurisdiction, but the aggressive stance taken by the Agency in response to GAO’s outcome prediction. When the Marine Corps learned that GAO had deemed its OCI analysis inadequate, it did not just roll over and decide to take corrective action. Instead, it opted to exercise its right under the FAR to waive an OCI in a situation where it had already determined to its satisfaction that no significant OCI existed. Only time will tell if other agencies will be inspired to respond to what they view as non-meritorious OCI allegations by issuing similar waivers and enabling the procurement at issue to proceed.

For more information, please contact:

Brian Walsh 202.719.7469 [email protected]

Government Contracts Issue Update

Late Government Claims: ASBCA Taking a Harder Look at When Government Cost Accounting Claims AccrueBy Kara M. Sacilotto and Nicole J. Owren-Wiest

The Contract Disputes Act (CDA) provides that all claims—whether brought by the government or a contractor—must be asserted within six years after the claim “accrues.” Accrual is not defined in the CDA, but FAR 33.201 defines it as “the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred.”

To date, there have been relatively few decisions interpreting the CDA’s six-year statute of limitations and FAR 33.201, and even fewer decisions applying these provisions to claims by the government. In recent years, however, the body of law has grown, in part because the backlog of Defense Contract Audit Agency (DCAA) audits has led to delayed government claims. In particular, the Armed Services Board of Contract Appeals has issued several decisions applying the CDA’s six-year limitation period to government claims, particularly in connection with cost-related cases. For example, in McDonnell Douglas Services, Inc., ASBCA No. 56568, 10-1 BCA ¶ 34,325 (2009), the Board determined that a government claim for defective pricing was a “nullity” because the government delayed for years after receiving DCAA audit reports to assert its defective pricing claim. In The Boeing Company, ASBCA No. 57490, 12-1 BCA ¶ 34916 (2012), the Board held that a Defense Contract Management Agency (DCMA) claim relating to voluntary changes to Boeing’s cost accounting practices was time-barred because DCMA failed to issue a contracting officer final decision on the claim until October 2010, despite having all the available information regarding the alleged impact of the change no later than September 2003. Most recently, in Raytheon Co., ASBCA No. 57576 (Dec. 17, 2012), the Board arguably issued its broadest decision to date on when a government claim relating to a cost accounting matter is foreclosed.

In Raytheon, the government brought two claims for certain compensation costs covering multiple years, which the government asserted were

expressly unallowable and therefore subject to penalties. In its first claim, in a final decision issued on January 10, 2011, the government sought to recover increased costs for certain purportedly unallowable bonus and restricted stock award costs that Raytheon included in its annual “overhead cost submissions” for calendar years (CY) 2003 through 2009.

In its second claim, asserted through a contracting officer’s final decision issued on June 2, 2011, the government sought to recover costs and penalties for allegedly unallowable compensation costs arising from changes Raytheon made in January 2004 to its long-term incentive plan. Raytheon advised the DCAA of these changes in January 2004, and the DCAA evaluated the changes at that time. Although Raytheon revised its long-term incentive plan in 2004, Raytheon did not include any of the challenged costs in its overhead cost submission for CY 2004 or CY 2005, because the costs were not incurred in those years, but rather, were incurred only after a full three-year cycle. Thus, although the plan was changed in 2004, the costs were not incurred until CY 2006. Raytheon’s CY 2006 overhead cost submission, which included the allegedly unallowable costs, was submitted in June 2007.

Raytheon argued that the government’s claims accrued more than six years before they were asserted and were therefore untimely. The Board agreed in part and dismissed a portion of the government’s claims. Because the contracting officer’s final decision on the allowability of Raytheon’s bonus and incentive compensation costs was issued on January 10, 2011, the Board determined that, to be timely, the government’s claim must have accrued no earlier than January 10, 2005. With respect to costs incurred in CY 2002, the record showed that DCAA had issued a memorandum on September 29, 2003, regarding its review of these costs (concluding that they were allowable). Moreover, the costs were included in Raytheon’s CY 2002 overhead cost submission, which was submitted to the

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government “in or around June 2003.” Thus, the Board concluded that “the government should have known by 29 September 2003 that Raytheon had included these expressly unallowable costs in its CY2002 final indirect cost rate proposal,” and, therefore, the government’s “claim for CY 2002 accrued no later than 29 September 2003.” Accordingly, the Board held that the government’s claim for CY 2002 was untimely.

Similarly, the Board held that the government’s claim related to the bonus and incentive compensation costs for CY 2003 and 2004 was untimely because (1) Raytheon’s overhead cost submission for CY 2003 was submitted in or around June 2004 and (2) with respect to the CY 2004 costs, Raytheon included these costs in its forward pricing rate proposal submitted to the government in September 2004. Because these submissions were both made prior to January 10, 2005, the Board concluded that the government’s claims for increased costs in those years were untimely. Because Raytheon’s final indirect cost rate proposal for CY 2004 was submitted to the government on June 2, 2005, however, the Board concluded that the government’s claim for penalties for CY 2004 were timely (as were the government’s claims for costs and penalties for CY 2005-CY 2009).

As for the government’s claim related to Raytheon’s 2004 change to its long-term incentive plan, the Board concluded that, because the costs were not incurred until CY 2006 and not identified in Raytheon’s overhead cost submissions for the first time until its CY 2006 submission in June 2007—four years prior to the contracting officer’s final decision—the government’s claim was timely. In other words, the Board held that the government did not know in 2004 or 2005 of “any injury” and, therefore, its claim had not yet accrued. Notably, however, the Board agreed with Raytheon that the government knew or should have known by January 2004—the date of Raytheon’s briefing to DCAA—of the basis of its claim. Thus, the decision suggests that DCAA knowledge of the basis of a government claim prior to or separate from a contractor’s submission of a final indirect cost rate proposal (or other submission) could be sufficient to trigger the start of the statute of limitations clock for purposes of a government claim, so long

as there is some separate contemporaneous evidence of “injury.”

Given the significant backlog of DCAA audits—including audits of incurred cost proposals that were submitted more than six years ago—contractors are likely to see more government claims that may be untimely. Contractors should carefully examine any such claims to determine when the government knew or should have known of the facts underlying its claim. For example, when faced with a government claim, contractors should consider the following actions:

▪ In addition to examining the timing of any relevant incurred cost submissions, contractors should consider whether and to what extent information about the treatment of any costs later challenged as unallowable was communicated to the government in other submissions or exchanges, such as government briefings or forward pricing rate proposals. Even an informal briefing or exchange of information may be sufficient to trigger “accrual” of a government claim.

▪ Although the case law suggests that DCAA knowledge may be sufficient under the circumstances to impute knowledge to the “government,” contractors should copy the contracting officer on substantive submissions, briefings and communications with DCAA to cover both government bases.

▪ As DCAA scrambles to bring down its audit backlog, particularly with respect to older incurred cost submissions (ICSs), DCAA auditors may attempt to “clear” their individual dockets (at least in the short term) by rejecting a contractor’s ICS on the basis that it is “inadequate” for audit, and requesting the contractor to submit a revised ICS. Indeed, anecdotal reports within the contractor community suggest that an increased number of ICSs are being rejected as “inadequate” for reasons that go to the “merits” as opposed to the adequacy of the ICS. Whether or not these adequacy determinations are a delay tactic, contractors confronted with such a determination should proceed with caution.

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Court of Federal Claims Holds Injunctive Relief Not Available to Prevent Posting of Unsatisfactory Past Performance Rating in PPIRS continued from page 12

Depending on the nature of any changes the contractor might make, those changes could potentially “restart” the statute of limitations period for purposes of any government claims (at least in the government’s eyes).

▪ To the extent DCAA or contracting officers have questions about ICSs that are older and already subject to audit, it would behoove contractors to respond to information requests with reference to information that has already been provided to the government, as opposed to providing “new facts.” For more recent cost submissions, clearing up confusion early might assist with putting the government on “notice” at the earliest possible point regarding any potential claim.

▪ In negotiations with the government over cost issues, bear in mind the statute of limitations, but also the potential impact of delay of those negotiations. In Boeing, for example, the government attempted to argue, unsuccessfully, that negotiations between the parties “tolled” the statute of limitations. The Board found that there was no evidence of misconduct or misleading behavior that justified relieving the government of its obligation to assert its claim on time. Faced with a potentially untimely CO final decision, however, there may be renewed attempts by the government to assert that contractor “conduct” should delay accrual of a claim.

Contractors should be careful not to provide evidence, through their conduct, that would support such a claim.

▪ Contractors should also keep in mind that the statute of limitations works both ways—contractors should diligently keep track of potential claims they may have against the government to ensure that they are timely asserted.

The backlog of DCAA audits persists. Therefore, the Boards and the Court of Federal Claims will continue to make new law in this area and refine their thinking on when a claim related to a contractor cost-related issue accrues. Contractors should continue to monitor these developments to ensure that when a potentially untimely claim is asserted against them, they are armed with the most recent guidance.


Kara M. Sacilotto 202.719.7107 [email protected]

Nicole J. Owren-Wiest 202.719.7430 [email protected]

Federal Agencies Are Preparing for Sequestration—Are You?By Kevin J. Maynard and Kara M. Sacilotto

With each passing day that the President and Congress fail to reach an agreement to avoid or delay “sequestration,” it is becoming more and more likely that federal agencies will be forced to implement $85 billion in immediate spending cuts over the remainder of the current fiscal year. Even if a last-minute deal can be reached, however, federal spending levels are virtually certain to decline in coming years. Confronted with this new reality, the Office of Management and Budget (OMB) and the Department of Defense (DoD) have begun issuing detailed

guidance directing agencies to take steps to prepare for these looming budget cuts. Although much of the focus is on internal agency operations—including draconian measures such as furloughs, and elimination of any activities that are not mission critical—this guidance also directs agencies to look for ways to reduce spending on contracts. Therefore, contractors would be wise to develop their own plans for dealing with these looming cuts, and take steps to protect their contractual rights in the event that the budget ax falls their way.

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The Path to Sequestration

How we got to the point where such planning is necessary is no secret. As discussed in OMB’s recent guidance, the last-minute deal that was brokered on New Year’s Day to avoid the fiscal cliff (the American Taxpayer Relief Act of 2012, or ATRA) only delayed sequestration and the debate on deficit reduction measures for two months. Accordingly, unless Congress acts to amend current law, the President is required to issue a sequestration order on March 1, 2013, that will cancel approximately $85 billion in budgetary resources across the entire federal government.

In addition to the looming threat of sequestration, additional uncertainty is created by the expiration on March 27, 2013, of the Continuing Resolution under which the government has been operating. Add to this a need to increase the debt ceiling in August 2013 and the ongoing political stalemate over a long-term solution to the government’s fiscal crisis, and you have all the makings of a perfect storm.

Agency Planning

Faced with this uncertain budget picture, OMB issued a memorandum on January 15, 2012, instructing agencies to “intensify efforts to identify actions that may be required should sequestration occur.” Although much of the guidance addresses internal operations and personnel issues, OMB’s “guiding principles” include a number of provisions that are of particular interest to contractors, including provisions which direct agencies to:

▪ “Review grants and contracts to determine where cost savings may be achieved in a manner that is consistent with the applicable terms and conditions”;

▪ “Take into account funding flexibilities, including the availability of reprogramming and transfer authority”; and

▪ “Be cognizant of the requirements of the Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §§ 2101-2109,” which requires certain employers to provide notification 60 calendar days in advance of plant closings and mass layoffs.

Within days of OMB’s guidance, the Army, Air Force and Navy all issued their own similar guidance directing DoD personnel to prepare for the impacts of sequestration. Like the OMB memo, much of the guidance issued by DoD focuses on internal government operations—including, for example, imposition of hiring freezes and furloughs of civilian employees, termination of temporary employees and elimination of training, conferences and other non-essential activities. Nevertheless, there are a number of other cost-cutting directives that could directly impact contractors. For example:

▪ As a general matter, the Air Force and Army memos include an overarching directive to “[r]eview contracts for possible longer term cost savings.” These memos also direct Army and Air Force personnel to cancel any ongoing studies that are not Congressionally mandated or mission critical.

▪ In addition, Air Force and Army commands are directed to “[l]imit supply purchases to essential FY13 consumption” and to “stop minor purchases” that are not deemed “mission critical,” including purchases of unit equipment and information technology (IT) refresh. Where practical, Air Force activities are also instructed to “de-obligate/incrementally-fund contracts to encompass only FY13 (examples include but are not limited to base maintenance contracts, advisory and assistance services contracts, custodial contracts, etc.).”

▪ Under the Air Force’s guidance, commands are instructed to review their overseas contingency operations (OCO) requirements to identify potential reductions, “such as delaying asset reconstitution and incrementally funding OCO contracts.”

▪ Army commanders are further directed to implement “across the board efficiencies” and take other steps to reduce funding for base operations support (BOS) requirements by at least 30 percent. In addition, the Army guidance imposes limits on facilities sustainment activities that are not directly related to matters of “life, health or safety”; as well as maintenance and reset orders

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and contracts that do not directly support deployed units.

▪ In addition, the Army has imposed additional approval requirements for the award or modification of contracts in excess of $500 million, while the Air Force has implemented a review process requiring acquisition personnel to monitor certain programs and, “as prudent, halt or delay contracts to reduce expenditures.”

▪ Finally, in light of the budget uncertainty created by the Continuing Resolution, the Navy has prohibited commands from initiating any FY13 new starts, multiyear procurements or contracts for increases over FY12 quantities.

In light of these directives and the dimming prospects of a deal to avoid sequestration, the pressure is clearly on for agencies to find ways to reduce contract costs—as the Army put it, “we must begin to slow spending now and plan for the worst.”

Planning for Contractual Impacts

There are a variety of different ways in which these efforts to “slow spending” could impact contractors. Some of the more obvious methods that agencies are likely to employ include declining to exercise options, not funding incrementally funded contracts, delaying contract awards, and de-obligating funding. As OMB’s guidance warns, however, any efforts to achieve cost savings through existing contracts must be carried out “in a manner that is consistent with the applicable terms and conditions.” Therefore, contractors should take steps to preserve their contractual rights in connection with any cuts to their particular contracts.

For example, agencies may seek to achieve savings through deductive changes (i.e., reducing contract scope), or through total or partial terminations for convenience, in which case the contractor should evaluate whether it is entitled to re-price any remaining work. Contractors in these circumstances should also take immediate actions to avoid incurring additional costs for descoped and terminated work (e.g., issuing stop work orders to subcontractors), and document the impacts

resulting from the termination or descoping (e.g., setting up charge lines to address potential cost impacts).

The government may also look for cost savings by modifying existing contracts, in which case the contractor may be entitled to an equitable adjustment to compensate for any increased costs or time required to perform the modified work. Contractors faced with potential changes under commercial item contracts should be especially mindful of the unique terms and conditions that apply under those contracts, including the requirement that “changes” to commercial item contracts may be made only by mutual agreement of the parties.

Given the significant pressure on agencies to identify cost savings, it is also foreseeable that the government may advance contract interpretations that either increase or change contract work in ways that the contractor believes are inconsistent with the terms of the contract. Thus, contractors should be attuned to constructive changes driven by tighter purse strings.

With the pressures on agencies to reduce personnel through hiring freezes and other measures (including potential furloughs), contractors should also be watchful for potential government-caused delays and other potential claims resulting from any failure by the government to provide sufficient oversight, cooperation, or other required assistance. At the other end of the spectrum, contractors may find themselves having to defend against government claims or default terminations in circumstances where the agency might have previously been willing to enter into a “no cost” or standard termination for convenience or excuse performance that was less than stellar.

Finally, the government may also seek to restructure contracts, in lieu of terminating or cancelling completely, to achieve cost savings. While a restructuring in some cases might represent a “win-win” for both parties, restructuring contracts often includes the resolution or waiver of existing claims. Therefore, contractors faced with a restructuring should be attuned to any existing claims in which they may have to ensure that such claims are addressed


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or preserved.

In planning for these potential impacts, contractors may wish to think proactively and look for ways of assisting the government customers with managing tighter budgets. For example, if the government is willing to delay contract performance to save costs, the contractor can help identify areas where a schedule delay not only assists the agency, but also assists the contractor with its contract and cost performance. Similarly, if the agency is looking for ways to descope the contract, the contractor may be able to suggest work reductions that preserve the more profitable parts of the contract, while reducing the overall cost of the contract to the government. Contractors may also be willing to accept different or delayed payment in lieu of termination or descoping.

There is no doubt that sequestration brings uncertainty and would best be avoided. Contractors, like their government customers, should be planning ahead now on how to deal with the fallout of sequestration if it is not avoided this time.


Kevin J. Maynard 202.719.3143 [email protected]


Wiley Rein Practice Statistics: 2012Each year, we try to track the percentage of our practice’s time devoted to different categories of matters. While this is by no means precise, as there is much overlap, and many matters are listed in a catchall “Government Contracts Advice” category, the results are informative and often somewhat surprising. For example, although we handled 153 protests this year—including significant precedential victories at both the

Court of Federal Claims and the Government Accountability Office—protests made up only 17 percent of our work this year. By far the largest portion of our time in 2012 was spent on investigations/mandatory disclosures/subpoena responses/suspension and debarment, which accounted for 37 percent of our billings and 94 separate matters.

Below is a summary of the percentage breakdown among major categories:

Investigations etc. 94 Matters 37%Protests 153 Matters 17%Government Contracts Advice 437 Matters 14%Contractor or Government Claims/Appeals 56 Matters 13%Health Care Advice 17 Matters 7%Export Control/Buy American/TAA 19 Matters 3% Other 9%

▪ The Contractor or Government Claims/Appeals category includes conducting trials and proceedings at the Civilian Board of Contract Appeals, the Armed Services Board of Contract Appeals and the Court of Federal Claims in addition to preparing and negotiating claims. To offer a sense of the amount of fluctuation year to year, in 2011 this category made up 29 percent of our billings.



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Wiley Rein Practice Statistics: 2012 continued from page 7

▪ The “Other” category includes, among other areas, Transactional Advice/Acquisitions, Data Rights and Intellectual Property, GSA Schedule and Commercial Item Contracting, Termination Advice and Prime/Sub Disputes, although many of these are also captured in the broad Government Contracts Advice category.

Of course, 2013 is a new year with different challenges, such as the possibility of sequestration, which could again lead to a different breakdown.

Service Contract Act: What You Really Need to Know Before You Submit That ProposalBy Eric W. Leonard and Christopher M. Mills

The McNamara-O’Hara Service Contract Act of 1965 (SCA) continues to present challenges to government contractors, including both new and experienced industry players. We have found that a thorough consideration of the SCA’s requirements at the pre-award stage can help prevent troubles during contract performance. To that end, we have compiled a summary of issues that contractors should consider when bidding on an SCA-covered contract. However, because of the complexities of the SCA and its implementing regulations, this summary is meant only as general guidance and not a substitute for a thorough fact-specific analysis of a particular SCA-covered opportunity.

Where applicable, the SCA has a material impact on the manner in which contractors (and subcontractors) must compensate certain service employees, and strict compliance with the SCA is mandatory. Failure to comply with the SCA can result in numerous problems during or post performance, including Department of Labor (DoL) investigations, whistleblower actions, payment of deficient wages to existing and prior employees, and potential suspension and debarment. Therefore, we strongly encourage contractors to establish an SCA compliance program that considers these issues at the inception of the proposal preparation process.

Step 1: Will the Resulting Contract Be Covered by the SCA?

The first question to consider is whether the contract to be awarded is covered by the SCA. While this may sound like a straightforward

question, that is not always the case, and may be even more difficult to determine if you are a subcontractor. Step one is to check whether the solicitation (or an amendment thereto) provides indications that the contract will be subject to the SCA. That is, does it (i) incorporate the applicable Federal Acquisition Regulation (FAR) clause (FAR Clause 52.222-41), (ii) an SCA prevailing wage determination and/or (iii) otherwise state that it is subject to the SCA? Even if the solicitation does not address the SCA directly in one of the foregoing ways, the resulting contract could still be covered by the SCA if all of the following factors are met: (a) award by the United States Government or the District of Columbia; (b) the contract is principally one for services (as opposed to construction, manufacturing or product work) that will be performed by “service employees” (a term that includes independent contractors, temporary and contract workers) who are not exempt under the Fair Labor Standards Act; (c) the contract is expected to exceed $2,500; and (d) at least some portion of the services will be performed in the United States or its territories. If the answer to these four questions is yes, you may still need to consider the applicability of the SCA and should probably seek legal counsel for advice—even if the FAR SCA clause and/or a wage determination are not included with the solicitation or contract.

Keep in mind that the SCA does have some exceptions and exemptions that may apply under certain circumstances. If an exemption is


applicable, an otherwise SCA-covered contract may not require SCA compliance (or compliance may not be required with respect to certain employees outside the scope of SCA coverage). One common exemption is that all or substantially all of the employees who will perform the required effort are considered bona fide executive, administrative or professional workers under the Fair Labor Standards Act, based on their salary and the nature of their job duties. There are also some narrow categories of services that fall into one of the statutory or administrative exemptions (for example, public utility services). Most of these exemptions, however, are narrowly crafted and interpreted. The application of exemptions is very fact specific, and we would recommend seeking legal counsel as part of making (and documenting) any exception or exemption determination.

Step2:WhatGovernsWagesandBenefits Under the SCA?

Next, you will need to consider the SCA-specific requirements that govern the wages and benefits you will pay SCA covered employees under the contract or subcontract. If the contract is subject to the SCA, you must determine what SCA wage determination or agreement dictates the minimum wages and fringe benefits. There are two types of documents that govern wages and fringe benefits under the SCA: (i) a DoL wage determination, or (ii) collective bargaining agreements (CBAs). For DoL wage determinations, the geographic locality or place of performance will determine which wage determination governs your obligations. These wage determinations should be included with the solicitation, but are also publicly available at www.wdol.gov. For solicitations that incorporate a predecessor contractor’s CBA, it is extremely important to get access to a copy of that CBA since under the SCA, a successor contractor—even a non-unionized successor contractor—will likely be obligated to compensate its employees at the wage and fringe benefit rates specific in the predecessor contractor’s CBA. Furthermore, it is also critical, regardless of the type of wage determination incorporated into the solicitation, to determine whether the current solicitation or contract is subject to the recently enacted rules covering non-displacement of qualified

workers. See Wiley Rein alert, “FAR Council Issues Final Rule on Non-Displacement of Qualified Workers Under Service Contracts.” These non-displacement rules contain significant obligations and could impact potential staffing under the contract and fringe benefit obligations, especially involving vacation benefits that are typically based on employee years of service with a contractor or a predecessor contractor.

Step 3: Mapping

For all non-exempt SCA-covered employees, contractors must identify the specific job duties each employee will perform under the contract or subcontract and “map” those duties to an appropriate DoL wage determination labor category, in order to determine each employee’s SCA minimum wage. In some cases, the government solicitation documents (or even prior classifications by the predecessor contractor) may provide some guidance as to the appropriate labor category, but keep in mind that the contractor is ultimately responsible for selecting the appropriate labor category and will be liable for the impact of any inaccurate mapping. The SCA mapping process typically will include the following steps:

▪ Job Duties: Analyze the contract’s Performance Work Statement or Statement of Work, any incumbent contract information, Statement of Equivalent Rates in the Solicitation provided pursuant to FAR 52.222-42 and other guidance to determine scope of contract employees’ job duties.

▪ Coverage Analysis: Conduct a coverage analysis that identifies each contract employees’ actual job duties and responsibilities, and determine which employees are “service employees” who will be subject to SCA coverage and which, if any, will be classified as “exempt” under the Fair Labor Standards Act or excludable under any other relevant SCA guidance. See, e.g., 29 C.F.R. 4.153.

▪ Labor Categories: For all service employees, consult the wage determination, Statement of Equivalents information and

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DoL Directory of Occupations (which is available online at DoL’s website) to “map” each employee to an appropriate DoL labor category in the wage determination. If labor categories are missing from, or not clearly defined in, the DoL’s Directory of Occupations, consult legal counsel to consider engaging in a conformance procedure under the SCA regulations.

▪ Document Decisions: All coverage determinations and labor category assignments must be supported by adequate written documentation.

▪ Subcontractor/Independent Contractor Issues: Include the SCA requirements in every subcontract, and consider adding subcontractor indemnity provisions in the event a subcontractor fails to comply with the SCA. Ensure all subcontractor and independent contractor “service employees” are properly identified. Assess the procedures that you have in place to oversee and monitor subcontractor compliance to ensure the subcontractors at all levels are complying with the SCA.

Step 4: Pricing

▪ With respect to development of pricing under an SCA-covered contract, contractors should consider the following:

▪ Wage Determination: As discussed above, identify the prevailing wage rates and fringe benefit rates in the geographic locality for the labor categories that will be used to perform the contract or subcontract, as reflected in the wage determination or relevant CBA rates, if applicable.

▪ Pricing: Ensure your pricing strategy appropriately takes into account SCA minimum wage and fringe benefits payments required for each affected labor category and does not include wage and fringe benefit rate increases for the option years, if not permitted under FAR 52.222-43. See FAR 52.222-43(b)(“The Contractor warrants that the prices in this contract do not include any allowance for any contingency to cover increased costs for which adjustment is provided under this clause.”)

▪ Wages and Price Adjustment Clause: If you intend to pay any service employees in excess of the SCA minimum wages or benefits, assess how the Price Adjustment Clause will impact your ability to seek price adjustments in future contract years.

▪ FringeBenefits: Identify the minimum fringe benefit amounts in the wage determination (measured by the actual cost of the benefit to the employer, not the value of benefits actually received by the employee), and assess your plan to satisfy those requirements and how it affects proposal pricing. Also, you need to determine: (a) whether your planned health and welfare benefits qualify as “bona fide” fringe benefits under the SCA; (b) whether your method for calculating vacation is consistent with SCA requirements; (c) how you plan to account for paid holidays; and (d) whether you will need to provide cash equivalents in lieu of any benefits if you are unable to satisfy the minimum fringe benefit requirements with “bona fide” fringe benefits. [Note: Paying an employee at a wage rate in excess of the SCA minimum rate cannot be used to offset fringe benefit requirements.]

▪ No Offsets: Other applicable laws may impose additional fringe benefit requirements (i.e., workmen’s compensation, unemployment insurance, Social Security) that cannot be used to offset or meet SCA benefit requirements.

▪ Employee Notice: Service employees must receive notice of the wage and benefits they will receive, and pay stubs should inform them precisely which amount received is for wages versus fringe benefit.

▪ Deductions: Any deductions that an employer makes from service employee paychecks must be permitted by the SCA, with notice to employees in advance. Where required, proper employee approval also must be received.

Although this discussion is focused on pre-award and pricing considerations, contractors also need to stay vigilant when transitioning from




pre-award to performance under SCA-covered contracts. During performance, contractors must (i) ensure they are paying the proper wage and fringe benefits, (ii) monitor the SCA compliance of their subcontractors, (iii) monitor whether revised wage determinations have been issued by DoL and incorporated into the contract by the contracting officer upon the exercise of any options, or as otherwise required under the SCA and its implementing regulations, and (iv) continually assess whether changes to the contract or subcontract Statement of Work require new labor categories, or whether changes in employee job duties require revised coverage analyses, labor category assignments, or updated place(s) of performance. While the SCA certainly can present many challenges in all phases under SCA-covered contracts, there

simply is no substitute for early identification and assessment as to how a contractor plans to address these challenges.


Eric W. Leonard 202.719.7185 [email protected]

Christopher M. Mills 703.905.2810 [email protected]

Claims Reminder: Federal Express Is Not U.S. Mail for Purposes of Establishing Timeliness of Board AppealBy Kara M. Sacilotto

In the past, we’ve written about common pitfalls in the claims process, such as affixing an electronic signature reference (e.g., “//s//”) instead of a signature to a claim certification and failing to identify a “sum certain” in a claim. See “CDA Claim Reminder: State a ‘Sum Certain,’” Government Contracts Issue Update, Spring 2009 and “Put Your John Hancock on It!” Government Contracts Issue Update, Summer 2008. A recent decision from the Civilian Board of Contracts Appeals warrants an additional reminder: An appeal of an adverse contracting officers final decision must be appealed to the Board within 90 days—that’s 90 calendar days, not “three months” or 90 working days and, moreover, Federal Express (no matter how reliable) is not U.S. Mail.

This claim lesson was recently reinforced in Schunck v. GSA, CBCA 3079, decided on January 31, 2013. There, a General Services Administration (GSA) contracting officer (CO) issued a final decision on August 14, 2012,

denying appellant’s claim for a refund of the purchase price for 12 cameras purchased at a GSA online auction. Appellant Schunck received the final decision on August 15, 2012, and sent his notice of appeal to the Board via Federal Express, standard overnight delivery, on November 13, 2012. The Board received the notice on November 14, 2012, and it docketed the appeal on November 15, 2012. GSA promptly moved to dismiss the appeal.

The Board stated that the 90-day appeal period in the Contract Disputes Act, 41 U.S.C. 7104(a), “has been strictly construed by the Court of Appeals for the Federal Circuit because the authorization to make the filing is a waiver of sovereign immunity. A late filing divests the Board of jurisdiction to consider the case on its merits.” Furthermore, CBCA Rule 1(b)(5)(i) provides: “[a] notice of appeal . . . is filed upon the earlier


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SPEECHES & PUBLICATIONSObama Win Means More of the Same for Government ContractorsKara M. Sacilotto, John R. Prairie and Scott WeaverGovernment Contracts Law 360November 8, 2012

6Obama’s Executive Order Against Trafficking: What Contractors Need to KnowBarron A. AveryBloomberg BNA Daily Report for ExecutivesDecember 5, 2012

6FY 2013 NDAA Passes Without Many of the More Controversial Contracting ProvisionsJohn R. Prairie and Barron A. AveryBloomberg BNA Federal Contracts ReportJaNuary 8, 2013

The Federal Market: Due Diligence and M&A Transactions Involving U.S. Government ContractorsEric W. Leonard and Jon W. Burd, Speakers Lawline Breakfast Series WebinarJaNuary 11, 2013

6Regulatory and Legislative Updates in Government ContractingKara M. Sacilotto and Benjamin Kohr, SpeakersBoard of Contract Appeals Judges’ Association Educational SeminarJaNuary 17, 2013 | alexaNDria, va


Claims Reminder: Federal Express Is Not U.S. Mail for Purposes of Establishing Timeliness of Board Appeal continued from page 11

of its receipt by the Office of the Clerk of the Board or if mailed, the date on which it is mailed to the Board. A United States Postal Service postmark shall be prima facie evidence that the document with which it is associated was mailed on the date of the postmark.” (Emphasis added); see also ASBCA Filing Guidance, July 25, 2012 (“Documents may be filed via a governmental postal service. Filing occurs when the document, properly addressed and with sufficient postage, is transferred into the custody of the postal service.”); Kamp Systems, Inc., ASBCA No. 55317, 08-1 BCA ¶ 33748 (2007) (“Under established Board precedent, notices of appeal sent via commercial delivery services are deemed to be filed when received by the Board . . . .”). Thus, the Board held, a notice of appeal served via a commercial delivery service is deemed “filed” at the Civilian Board when the Board receives the notice, not on the date it is placed into the custody of the commercial delivery service provider. Schunk’s notice, therefore, was “filed” on November 14, 2012, when the Board received it.

Schunck also argued that the 90 days expired on

November 15, 2012, making his filing received on November 14, 2012, timely. The Board disagreed: “[n]inety days from August 15, 2012 is November 13, 2012. Here the notice, sent by Federal Express, arrived at the Board ninety-one days after receipt of the CO’s decision.” Accordingly, the claim was dismissed.

Upon receipt of an adverse contracting officer’s final decision, contractors should not wait until the last minute to file their notice of appeal. Although both Boards now support filing via email, even email is not risk free. Accordingly, “best practices” still counsel that a notice of appeal should be filed in sufficient time so that the contractor can confirm the Board’s timely receipt of the notice of appeal (and take corrective action if, for some reason, the notice is waylaid on route).




COFC Suggests a Possible Exception to the Axiom Standard for Supplementing the Administrative RecordPhilip J. Davis, Brian Walsh, William M. Novak and Collin D. SwanBloomberg BNA Federal Contracts ReportJaNuary 22, 2013

6Is Late Always Late? Recent CoFC and GAO Decisions Introduce Uncertainty in Protests Requesting Consideration of “Late” ProposalsBrian Walsh and Nooree LeeThe Procurement LawyerWiNTer 2013

6Going It Alone: Recent Federal Court Decision Demonstrates Risks of Losing Privilege When Conducting Internal Investigations Without CounselNooree Lee and Samantha S. LeeFinancial Fraud Law ReportFebruary, 2013

6Venture Capital-Owned Small Businesses Now Eligible to Receive Certain SBIR AwardsJohn R. PrairieVCExpertsFebruary 5, 2013

6Cyber Security: Recent Developments and a Case for Self DefenseMegan L. Brown, Jennifer S. Zucker and Jon W. Burd, SpeakersL2 Federal Resources WebinarFebruary 6, 2013

6Air Force General Counsel’s Acquisition ConferenceRand L. Allen, PanelistFebruary 19, 2013 | crySTal ciTy, va

6West Government Contracts Year in Review ConferenceRand L. Allen, SpeakerFebruary 20, 2013 | WaSHiNGToN, Dc

Introduction to Litigation at the Boards of Contract AppealsPaul F. Khoury, PanelistAmerican Bar Association Program and WebinaraPril 17, 2013 | WaSHiNGToN, Dc

6Preparing for Executive Compensation Reviews in the Wake of the J.F. Taylor and Metron Decisions: What Recent Experiences Reveal about DCAA’s Current Statistical MethodologyNicole J. Owren-Wiest, PanelistACI’s Government Contract Cost & Pricing ConferenceaPril 17, 2013 | arliNGToN, va

6ACI’s Government Contract Cost & Pricing ConferenceNicole J. Owren-Wiest, Co-ChairaPril 17-18, 2013 | arliNGToN, va

6Regulatory and Legislative Updates in Government ContractingKara M. Sacilotto and Benjamin Kohr, SpeakersBoard of Contract Appeals Judges’ AssociationaPril 25, 2013 | arliNGToN, va

6Due Diligence in Government Contractor Mergers and AcquisitionsPhilip J. Davis, Kay Tatum, Daniel P. Graham, Eric W. Leonard, Jon W. Burd, Christopher B. Weld and Nova J. DalyFederal Publications Seminar, AMA Executive Conference Centermay 8-9, 2013 | arliNGToN, va

Speeches & Publications continued from page 12

Paul F. Khoury Appointed Chair of GW Law School Government Contracts Advisory Board

Paul F. Khoury, a partner in the Government Contracts Practice, has been appointed chair of the George Washington University Law School Government Contracts Advisory Board for 2013-2014. Distinguished George Washington University Law School alumni and members of the legal community provide guidance and expertise to the dean and academic program directors through participation in the school’s advisory boards. The Government Contracts Advisory Board allows the Government Procurement Law Program to draw upon the support, advice and expertise of a wide range of leaders from throughout the public procurement and acquisition fi eld.


Government Contracts TeamPartners/Of CounselRand L. Allen, Chair 202.719.7329 [email protected] A. Roberts, III, Co-Chair 202.719.4955 [email protected] A. Bromberg 202.719.7357 [email protected] L. Brown 202.719.7579 [email protected] Bucher 202.719.7530 [email protected] W. Burd 202.719.7172 [email protected] J. Caccia 202.719.7242 [email protected] J. Davis 202.719.7044 [email protected] A. Felder 202.719.7029 [email protected] P. Graham 202.719.7433 [email protected] F. Khoury 202.719.7346 [email protected] W. Leonard 202.719.7185 [email protected] J. Maynard 202.719.3143 [email protected] M. McCaleb 202.719.3193 [email protected] M. Mills 703.905.2810 [email protected] J. Owren-Wiest 202.719.7430 [email protected] H. Powell-Woodson 202.719.7150 [email protected] M. Sacilotto 202.719.7107 [email protected] Tatum 202.719.7368 [email protected] L. Thomas 202.719.7035 [email protected] S. Zucker 202.719.7277 [email protected]

Other ProfessionalsJohn A. McCullough, Special Counsel 202.719.7254 [email protected]

Richard B. O’Keeffe, Jr. 202.719.7396 [email protected]

AssociatesRachel A. Alexander 202.719.7371 [email protected]. Barron A. Avery 202.719.7263 [email protected] L. Gonsalves* 202.719.7526 [email protected] Winfrey Howard 202.719.7452 [email protected] J. Kohr 202.719.7493 [email protected] Lee 202.719.7278 [email protected] S. Lee 202.719.7551 [email protected] K. Nord 202.719.7183 [email protected] M. Novak 202.719.7488 [email protected] R. Prairie 202.719.7167 [email protected] E. Robinson 202.719.7497 [email protected] E. Sherman* 202.719.7568 [email protected] Smith 202.719.7297 [email protected] D. Swan* 202.719.7567 [email protected] Volkmar 202.719.7527 [email protected] Walsh 202.719.7469 [email protected] L. Ward 202.719.7495 [email protected]

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