Tuesday, December 18, 2018

Unsealing "Qui Tam" Cases

The publicizing of a "Qui Tam" suit happens at the time the Government decides whether to intervene. The underlying investigation took months, and sometimes years, to complete.U

Under the False Claims Act (FCA), private parties may bring suit in the name of the United States. The private parties, known as qui tam relators, must initially file the complaint under seal. Sealing protects the United States' investigation while the Government determines whether to intervene in the action. Once the United States decides whether to intervene, the qui tam complaint is unsealed. This is keeping with the general presumption that the public enjoys free and unfettered access to Court records.

To justify continued sealing of qui tam court records, the risk of disclosure must outweigh the public benefits in access to court records. What might those risks be? Such risks for continued sealing would be a showing that the particular pleading either includes confidential investigative techniques, jeopardizes an ongoing investigation or risks injury to non-parties. By contrast, if the pleading merely discloses routine investigative procedures which anyone with rudimentary knowledge of the investigative process (i.e. someone who watches crime shows on television) would assume would be utilized in the regular course of business and contains no information about specific investigatory techniques, then the pleading would be unsealed.

Sometimes the Government will try to maintain pleadings under seal. Perhaps the real reasons for trying to do do are not disclosed but the Government still tries and usually fails. In one recent case, the Government cited motions for extensions of time, routine investigative matters such as the numbers of subpoenas issued, witnesses interviewed, and pages of documents reviewed. as justification for continued sealing. The Court ruled that none of the pleadings implicate specific people or provide any substantive details about the investigative or decision-making efforts beyond memorializing routine investigative steps involved in any such process.

Monday, December 17, 2018

SBIR/STTR Contracts - Know Cost "Eligibility" Rules

We use these pages to keep readers up to date on FAR (Federal Acquisition Regulation) cost principles (i.e. FAR Part 31) and supplemental cost principle regulations from individual agencies (e.g. DFARS or DoD FAR Supplement). Contractors need to understand however that there are many other factors that affect the allowability and eligibility of costs. Contracts and grants often contain specific limitations while agencies themselves impose their own limitations. When it comes to SBIR/STTR programs, things can get very confusing and its necessary to fully understand allowability and eligibility criteria when negotiating contract prices. Here are some examples of competing or conflicting guidance pertaining to SBIR/STTR contracts.

  • Some agencies allow you to purchase equipment as a direct cost on a Phase 1 project while others do not.
  • Some agencies prohibit travel in Phase 1 while others strongly encourage it and even others require it. This leads to "consistency" issues in estimating, recording, and reporting costs.
  • NIH (National Institute of Health) limits Phase 1 indirect rate to 40 percent of all direct costs unless there is an approved rate on a recent Federal project. This 40 percent limitation can result in a significant hardship to small businesses.
  • NSF (National Science Foundation)  limits the combination of fringe benefits and indirect costs to not more than 150 percent of direct labor.
  • All agencies allow profit and commonly refer to 7 percent of total cost. However, some agencies take that to mean that profit cannot exceed 7 percent, others say that means "normally" profit should not exceed 7 percent, while still others say 7 percent is an agency average.

The eligibility of costs is usually mentioned in the agency's SBIR/STTR solicitations but usually requires some "digging" to find them. Before entering into an SBIR/STTR contract, be certain that you fully understand any unique cost eligibility requirements and restrictions that apply and query the contracting officer for others that might not be evident. Phase 1 projects are usually fixed price while Phase 2 are typically cost-reimbursable. Once Phase 1 costs are negotiated, contractors can pretty much spend the contract amount as it sees fit. Not so with Phase 2 projects. Phase 2 projects can cause the most problems to contractors because those contracts become subject to audit.

For some free training resources from the SBIR/STTR folks, see New Resources for Small Businesses Seeking R&D Funding.

Friday, December 14, 2018

Government Paid $13.6 Million to Hire Two Border Guards

Boarder patrol positions have been notoriously difficult to fill, in large part, because of the polygraph exam applicants are required to undergo. It must be a rigorous polygraph because two of three applicants fail the exam.

To assist in hiring border guards, the U.S. Customs and Border Protection (CPB) awarded Accenture Federal Services a five year contract for nearly $300 million to to recruit and hire 7.500 Boarder Patrol Agents. Now, 10 months into the contract, CPB has paid Accenture $13.6 million and what do they have to show for their efforts? Accenture has filled 2 positions (or $6.8 million per recruit).

The Department of Homeland Security (DHS), Office of Inspector General (OIG), initiated its audit of Accenture's performance after receiving "Hotline" complaints about the contractor's performance. The OIG's report, issued last week, found numerous problems and concluded that CBP management needed to address "serious performance issues on the Accenture hiring contract.".

Among the performance issues identified by the OIG are

  • Accenture has not provided the promised hiring process or results. Accenture has yet to demonstrate the efficient, innovative, and expertly run hiring process it promised.
  • Accenture relied on CBP resources to fulfill contract obligations. Accenture was supposed to provide a team of technical experts and tools to fulfill contract requirements. Instead, Accenture relied heavily on CBP resources to complete the hiring process.
  • Accenture has not provided the agreed-upon technological innovations.
  • Accenture used a retinal scanning tool to discern deception based on eye and face muscle movement to pre-screen candidates without regulatory approval.

The OIG made a series of recommendations which CPB concurred to.

The full report can be accessed here.

Thursday, December 13, 2018

Government Employee Guilty of Accepting Gratuities in Exchange for Official Acts

NASA's Wallops Flight Facility (WFF) is located on the Eastern shore of Virginia although to get there from Virginia proper, you would need to take a boat or drive through Deleware. WFF provides launch and range services for both the Government and commercial sectors.

Mr. Kremer was the Chief of the Range and Mission Management Office at NASA Wallops (a GS-15 position). In his position, Kremer was responsible for administering the Range Operations Contract (ROC) - a multi-year, $190 million, cost-plus Government contract to provide various services at Wallops' test facilities and launch control centers. The prime ROC contractor awarded numerous subcontracts. One of the subcontractors performed interior design and office furnishing services and equipment at WFF.  The subcontractor (identified as Firm #2 in court documents. One of Firm #2's employees, identified as 'SC" in court documents, was the primary point of contact between Firm #2 and Mr. Kremer. "SC" also owned a beach house in Cape Charles, VA that he made available for Kremer's use.

One week for eight consecutive summers, Kremer was allowed free use of SC's beach house. In exchange, Kremer steered the award of interior design and furnishing projects to SC and Firm #2. Ultimately, emails between Kremer and SC did them in. During one stay, Kremer emailed SC: "... after this week, I'm going to be searching for rooms even those that no one uses at Wallops and put new furniture in the. I owe u big time. This has been so super." After another week's free use, Kremer wrote: "Can I book a week like last year? I will give you some days this week if that is OK ... THANK YOU so much again. Your customer service is unmatched ... not to mention the summer fun you offer. LOL.."

The Justice Department estimated the value of these week long stays to be about $18 thousand. In addition, the Government's investigation also disclosed that Kramer asked SC to procure some personalized art and charge it to the contract. Together they conspired to call it a "whiteboard" with SC claiming that it was not her "first time at the rodeo". Investigators also found that Kremer instructed the ROC contractor to buy $7,000 in Amazon gift cards, ostensibly to use to purchase "electronic reference books" for WFF employees. Those gift cards however were used for Kremer's personal use.There were more irregularities uncovered in the investigation including $11 thousand in "promotional" items for Kremer's friends and family members.

Mr. Kremer plead guilty in Federal court to receiving gratuities in exchange for official acts performed in his capacity as a government official, and to stealing funds from a Government contract. Sentencing is scheduled for next March.

Wednesday, December 12, 2018

Proposed Changes to Progress Payment Rate - Public Meetings Rescheduled

Last August, the Defense Department proposed significant changes in the way that progress payment rates are established. Currently, FAR 52.232-16 sets customary progress payment rates of 80 and 85 percent for large and small businesses while the Defense Department bumps the small business progress payment rate to 90 percent. The change proposed back in August leaves the small business progress payment rate alone but drops the rate for non-small businesses from 80 percent to 50 percent with provisions to increase the base amount to 90 percent by meeting certain incentives (see Proposed Changes to Progress Payment Rate).

The idea behind these changes were to increase the effectiveness and efficiency of certain areas including (i) on-time deliveries, (ii) contractor quality, (iii) contractor business systems, (iv) increasing subcontracting opportunities for small businesses, and (v) improved estimating systems. The objective, while addressing valid DoD concerns, met with a lot of opposition. Initially DoD scheduled a public meeting in the DC area to obtain views of interest parties (see Proposed Changes to Progress Payment Rate - Public Meeting). Later on (in October 2018), the entire proposal was withdrawn and the public meeting was cancelled (see Proposed Changes to Progress Payment Rate - Withdrawn).

Withdrawn perhaps, but not forgotten. DoD withdrew the proposal to give it time to conduct additional outreach with industry regarding contract financing methods. but since the proposed rule is predicated upon a provision in the 2017 NDAA (National Defense Authorization Act), there will need to ultimately be some kind of change to contract financing reform.

The Defense Department has now rescheduled its public meetings (two in January and one in February) to obtain views of experts and interested parties regarding revising policies and procedures for contract financing, performance incentives, and associated regulations for DoD contracts. The fact that the Department is scheduling three meetings instead of one previously, gives some indication of the level of interest in this matter.

Pre-registration is required so hurry over to these registration instructions if interested in attending.