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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Tuesday, October 11, 2011

"Disappeared Contractors": David Isenberg on Steven Schooner on Contractor Deaths in Iraq & Afghanistan

PMSCs David Isenberg, author of Shadow Force: Private Secuity Contractors in Iraq has a provocative new piece on HuffPo in which he argues that private military and security contractors (PMSCs) are like the "disappeared" victims of dictatorial rule.  This is not of course literally true, in that the bodies of PMSCs who are killed abroad are returned so that families can mourn and bury their dead.  However, Isenberg finds the analogy fitting because we do not recognize or track the extent to the which PMSCs are bearing the burden on the on-going War on Terror.

He relies on the scholarship and testimony of Geroge Washington University Law School Professor friend-of-the-blog Steven L. Schooner.  Professor Schooner has written about this topic in an article co-authored with GWU law student Collin D. Swan, called "Dead Contractors: The Unexamined Effect of Surrogates on the Public's Casualty Sensitivity," about which we have previously blogged here.

The Isenberg piece provides extensive quotations from Professor Schooner's testimony before the congressionally mandated Commission on Wartime Contracting.  The gist of the exerpted portions is that we now have more PMSC casualties than military casualties in Iraq and that trend is spreading to Afghanistan as well.  These deaths are not reported in the way military deaths are.  PMSC deaths thus impose a lower cost in terms of public tolerance for continued war than do military deaths.  Professor Schooner also notes, without allocating blame, that the government does more to protect members of the military than it does for PMSCs.

[JT]

October 11, 2011 in Contract Profs, Government Contracting, In the News, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, October 10, 2011

Southern District of New York Rejects Monsanto's Government Contractor Defense in Agent Orange Case

Agent Orange On September 28, 2011, District Judge Paul Gardephe issued his opinion and order denying defendants' motion for partial summary judgment in Spaulding v. Monsanto Company.  Plaintiffs alleged that Monsanto engaged in negligent waste disposal practices at its plant in Nitro, West Virginia between 1949 and 1970.  The waste at issue were biproducts from the manufacture of a key component in Agent Orange.  

In its motion, Monsanto attempted to rely on the govenrment contrator defense, since for part of the time that it was manufacturing the product in question, it was doing so, at least in part, for government use.  The standard for determining the applicability of the defense comes form Boyle v. United Techs. Corp. 487 U.S. 500, 512 (1988), in which the court explained as follows:

Liability for design defects in military equipment cannot be imposed, pursuant to state law, when (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.

 In this case, the Court concluded that Monsanto had not satisfied the requirements for the defense because the record did "not demonstrate . . . that U.S. Government representatives made an 'express determination' regarding Monsanto's alleged waste disposal practices."  Nor was there any evidence that the Government had "exercised consistent oversight over Monstanto's waste disposal practices."  The Court came to the same conclusion with respect to air pollution.  Because the defendants had not demonstrated that the complained-of activity was conducted "pursuant to reasonably precise government specifications," the District Court denied their motion based on the government contractor defense.  

[JT] 

October 10, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Friday, September 16, 2011

Court of Federal Claims to RN Expertise: "Piss Off!"

Urine

Slow news day. . . . and we couldn't resist.

Back in 2008, the Navy sought a new contractor to provide urine collection services for its federally-mandated rug testing program.  RN Expertise, Inc. (RN) submitted a bid and was the prsumptive awardee of the contract.  But before it finalized the award, the Navy determined that it could get the same services at a lower price through an interagency agreement (IAA) that the Department of Defense had with the Dpartment of the Interior.  So, the Navy cancelled the solicitation and went with the IAA.

RN filed a bid protest, claiming that the Navy's cost analysis was flawed.  In February 2011, the Court of Federal Claims granted the governments motion for judgment on the administrative record and dismissed RN's bid protest, RN Expertise, Inc. v. United States, 97 Fed. Cl. 460 (2011).  In March, RN moved for reconsideration, claiming that the CoFC's decision did not account for key facts and thus resulted in a manifest injustice.  On September 9th, the CoFC issued a new opinion, denying the motion and finding that RN simply sought to relitigate its case.

In its motion for reconsideration, RN argued that the CoFC erred in the way it tested the Navy's cost analysis and that the Navy failed to consider all of the costs associated with the IAA.  The CoFC found both of these argument improper on a motion for reconsideration.  In its first argument, RN merely raised facts and arguments that the CoFC previously addressed and rejected.  In its second, RN raised arguments that could have been raised in its original briefs.  Having failed to do so, it is not entitled to a second bite at the apple.

[JT]

September 16, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, September 12, 2011

The New Yorker on Contracting Out for City Work

New Yorker The September 5th edition of The New Yorker has a nifty article by Tad Friend about the budgetary problems cities are facing -- the article focuses on Costa Mesa, California, but notes that its problems are not unique.   The story is a familiar one, but the reporting is great and the details are extreme.   

The problem is a small city whose budget is tied up in personnel costs, including a 911 operator making $176,000 and a new mayor who decides to address a reported $5 million budget deficit by firing half the staff.  The new mayor plans to give city workers their notice and then solicit bids to see which jobs can be more cheaply done by employing independent contractors.  The mayor also seems to think that hiring such contractors will insulate the city from liability, although that wouldn't always be the case.  

The flip side of the overpaid 911 operator is the dedicated maintenance worker who works for the city for four years and makes $45,600/year.  He does for $26/hour what a contractor would charge $40/hour to do.  Upon receiving his layoff notice, one such worker jumped off the roof of City Hall.  An already bitter struggle now turned bloody.  Moreover, the city has over $40 million in reserves.  Some residents wondered why "Costa Mesa should be the petri dish for pension reform."  An ally of the new mayor, who is a councilman and also the head of the local Pop Warner football league wasn't about to back down.  Friend quotes him as follows:

Politics is very similiar to Pop Warner.  People think they can bully you into making their son the quarterback, but once they realize their son's a lineman they stop bothering you.

Building to his conclusion, Friend makes the following observation about leadership:

Good leaders make unpopular decisions because they're necessary.  But they also work to explain and build support for their initiatives, especially when those initiatives threaten a way of life.

This is an important insight, not only for political leaders but also for university leaders in times of shrinking budgets and rising costs.

[JT]

September 12, 2011 in Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Friday, September 9, 2011

WSJ on Global Business Norms and "Contracting" in China

G228586_chinese-flag-640 The concept of contract law is often novel in developing economies, especially communist or formerly communist ones.  Sparked by a dispute between Cosco, China's biggest state-owned shipping company, and foreign ship owners, the WSJ has an interesting discussion of business norms in China and a "Chinese corporate sector that doesn't always play by established global rules."  

Apparently, Cosco has halted or delayed payments for vessels it leased in 2008, at the height of the shipping boom.  Prices for these cargo ships have plunged since then.  Naturally, Cosco wants to renegotiate these leases, but unilaterally reneging the contracts defies established global business norms.

The article explains:

Foreign companies that do business in China are routinely warned that contracts aren't viewed in China with the same sort of legal sanctity that they receive in most developed economies. Jingzhou Tao, a Beijing-based lawyer with Dechert LLP, says that withholding payments is a frequent tactic used in China to force price negotiations. "A contract is not an unchangeable bible for Chinese companies," Mr. Tao said.

* * *

Analysts and lawyers say big Chinese state-owned companies can be especially aggressive in dealing with foreign companies because of their government backing and the enormous clout they wield within China in industries that are often oligopolies.

"State-owned enterprises that are dominant in their own sector and in some cases more powerful than government departments are used to having things their way," said Lester Ross, a Beijing-based partner at law firm WilmerHale. Mr. Ross said that Chinese companies in the minerals and cotton industries have a history of walking away from deals when prices move against them, and that foreign companies sometimes charge a premium for services to Chinese government companies because of the contract risks.

"These companies are only partly companies. They are also political entities," said Carl Walter, a former Beijing-based banker for J.P. Morgan Chase & Co. who has co-authored two books about China's state-owned enterprises. That means political imperatives, such as concerns over the value of national assets, can sometimes drive decisions by company chief executives, who at Chinese state-owned enterprises are appointed by the Communist Party. "When you do business with these major SOEs, you better make sure you make enough money to cover," Mr. Walter said.

Arthur Bowring, managing director of the Hong Kong Shipowners Association, argues that while Cosco's moves are worrisome for the industry, they won't likely be that damaging to the company long term. He adds that in late 2008, Australian iron-ore producer Fortescue Metals Group Ltd. backed out of its obligations under some shipping contracts. After a period of arbitration, the company said in October that it had settled all disputes with shipping companies.

"People are now doing business with [Fortescue Chairman] Andrew Forrest again...and it's almost like it never happened," Mr. Bowring said.

Mr. Bowring said Cosco, which has been operating internationally for decades, is too experienced to think that it can apply Chinese rules to overseas deals. Still, he said that company relationships are viewed differently in China than in many other places. "Chinese culture will build a relationship before the contract," he said. "The relationship is always something that can be talked about. The contract is just a set of papers that you keep in your bottom drawer."

In China, Some Firms Defy Business Norms, WSJ 9/6/2011.

[Meredith R. Miller]

September 9, 2011 in Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, August 29, 2011

Court of Federal Claims Delivers Tongue-Lashing to the United States

CoFC Thanks to Steven L. Schooner and the Government Contracts at GW Law Facebook page, we have word of this juicy decision by Judge Sweeney of the Court of Federal Claims in Systems Applications and Technologies, Inc. v. United States.  The opinion is long, but as Professor Schooner points out, the headings alone are enticing.

This basically a Fatal Attraction case.  Michael Douglas's character, played by the United States Army Aviation and Missile Life Cycle Management Command Contracting Center (the Army), gets tired of its long-time partner, Anne Archer, played by Madison Research Corporation, a wholly owned subsidiary of Kratos Defense & Security Solutions, Inc. (Kratos).  It takes up with Glenn Close's character, played by Systems Applications & Technologies, Inc. (SAT).  In this version of the movie, which we admit is far less cinematic than a knife fight, the Army returns to its old partner after a brief dalliance with SAT.  The return takes the form of a renewed solicitation of bids followed by a bid protest from the jilted suitor. 

The facts go back to June 2010, when the Government issued a solicitation of bids for "aerial target flight operations and maintenance services in support of its subscale, ballistic, rotary wing, and ballistic missile target systems."  The Army had to choose among three qualified offerors, and to cut to the chase, it chose SAT.  Kratos immediately filed a bid protest, which the Government Accountability Office found had merits.  The Arny thus proposed corrective action, including canceling the contract with SAT and reopening the bid process.  SAT sued to enjoin the corrective action.  On cross-motions to dismiss/for judgment on the adminsitrative record, the court ruled for SAT.

After 10 pages on jurisdiction and justiciability (i.e. non-contractual stuff = BORING), the court gets to the meat of its decision.  The headers tell it all:

A. The Army’s Decision to Take Corrective Action Constitutes a Significant Error in the Procurement Process

1. The Army’s Reliance on the GAO Attorney’s April 20, 2011 Electronic-Mail Message Renders Its Decision to Take Corrective Action Irrational

2. The Army’s Decision to Take Corrective Action Is Irrational and Unlawful

a. The Army’s Decision to Take Corrective Action Lacks a Rational Basis

b. The Army’s Decision to Take Corrective Action Violates Procurement Statutes and Regulations

B. SA-TECH Is Prejudiced by the Army’s Decision to Take Corrective Action

The Army is thus enjoined from canceling its contarct with SAT and re-opening the bid process.

[JT]

August 29, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, August 22, 2011

Local News: Fight Over A School Board's Decision to Buy a Scoreboard

Valpo Vikings

This is the sort of mess that local governments deal with all the time, but this one hits home for those of us in the Valparaiso Community School District.  As reported in the Northwest Indiana Times, the Valparaiso Community School Board held a special meeting on August 4th to approve a contract to erect a $250,000 scoreboard at the high school in time for the start of the football season.  As public expenditures go, this one seems a no-brainer, as the Board apparently believed on August 4th that it could cover the cost of the new scoreboard with advertising revenues within five years.

Some Valparaisans were outraged, however, by the lack of public discussion and by the deficient notice prior to the special meeting held on August 4th.  At a subsequent Board meeting on August 16th, public outrage was exacerbated by the revelation that the school had in fact secured only $54,000 in advertising revenues and there are divergent accounts of what information about advertising commitments was supplied to the Board at the time it approved the contract.    

But here's where it gets interesting.  The Board defended its hasty action on the ground that the $250,000 contract had already been entered into by unnamed "individuals who thought they had the authority" to enter into such a contract.  This revelation by the Board was met with a smattering of laughter at the public meeting.  Why were the outraged Valparaisans laughing?  Because they know that, under agency law, thinking you have the authority to enter into a $250,000 contract is not the same thing as having such authority.  And if residents find it laughable that some employee of the high school would claim to have such authority, the other party to the contract knew or should have known that such contracts require Board approval to be binding.  In short, there was no need for the Board to rush to approve the contract, because the contract was never binding in the first place.  

In addition, there is the separate, disputed issue of whether such a contract must be awarded only after a solicitation of competitive bids, which did not occur in this case.

Whether or not the contract was enforceable at the time it was signed, the Board has now adopted it, so it has become binding.  That does not mean that it could not be challenged of course.  Angry Valparaisans could run to court and seek to enjoin any further measures to install the new scoreboard.  But doing so would cost taxpayers more money, and so citizens who would like to hold the allegdly unaccountable Board to account while also preventing improper expenditures of public funds are faced with a Hobson's choice.

[JT]

August 22, 2011 in Government Contracting, In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Friday, August 19, 2011

Investigation into Conflicts of Interest at DARPA

According to this exclusive report from Wired.com, the Department of Defense's Inspector General is looking into $1.7 million in contracts between the Defense Advanced Research Projects Agency (DARPA), the Pentagon's top research division, and RedXDefense a corporation owned in part by DARPA's director, Regina Dugan.  According to Wired, RedXDefense is indebted to Dugan to the tune of $250,000.  

DARPA_Logo
DARPA representatives claim that the investigation is routine and that RedXDefense won its contracts fair and square.  Dugan reportedly recused herself from all deliberations that resulted in the award of contracts to RedXDefense.  Still, Wired reports that the contracts were not reviewed by someone outside of DARPA so that decision-makers likely were still subject to Dugan's influence.

In other news, Pentagon officials are denying rumors of a merger between DARPA and the Dharma Initiative.

[JT]

August 19, 2011 in Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 9, 2011

Government Contractors Immune from Suit in Afghan Copter Crash

Chinook Survivors of and heirs to those killed in the February 2007 crash of a Chinook helicopter in Afghanistan sued the defense contractors (Boeing, Honeywell, Goodrich, and AT Engine Controls), claiming that design and manufacture flaws caused the crash.  The District Court dismissed the claims against AT Engine Controls, a British corporation, based on lack of personal jurisdiction.  It also granted summary judgment to the U.S. based companies, finding that the federal government contractor defense preempted plaintiffs' claims.  

In this opinion filed last week, the Ninth Circuit affirmed the District Court's rulings.  According to the court, the government contractor defense "protects government contractors from tort liability that arises as a result of the contractor’s 'compli[ance] with the specifications of a federal government contract.'"  In Boyle v. United Technologies Corp., the U.S. Supreme Court set out a three-part test for establishing the defense: “(1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.”   The Ninth Circuit provides a full analysis, especially of the first prong, and concludes that the test is satisfied in this case.

[JT]

August 9, 2011 in Government Contracting, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, August 8, 2011

Court of Federal Claims Upholds Bid Protest Despite Completion of Challenged Contract

On July 13, 2011, the Court of Federal Claims released its opinion in California Industrial Facilities Resources, Inc. v. United States.  California Industrial Facilities Resources (CIFR) challenged the award to Alaska Structures, Inc. (AKS) of a sole source contract to build large, tent-like structures used as living quarters for troops in Afghanistan. By the time CIFR's protest was filed, AKS had almost completed the work, and the court refused to enjoin it from completing its task. Nonetheless, the court accepted jurisdiction and ruled in CIFR's favor.  The court summarized its reasoning as follows:

CoFC In brief summary, the Court finds that this case is not moot because the Government’s violation of statutory competition requirements for the war effort in Afghanistan is capable of repetition, and could again evade review. The challenged actions were too short in duration to be fully litigated prior to completion, and there is a reasonable expectation that the complaining party will be subject to the same actions in the future. Fed. Election Comm’n v. Wis. Right to Life, Inc., 551 U.S. 449, 462-63 (2007); Humane Soc’y v. Clinton, 236 F.3d 1320, 1331 (Fed. Cir. 2001); Ameron, Inc. v. U.S. Army Corps of Engineers, 787 F.2d 875, 880-81 (3d Cir. 1986). The Court has jurisdiction of this matter under 28 U.S.C. § 1491(b) (2006).

 

On the merits, the Court finds that the Government’s award of a sole source contract to AKS violated the competition requirements in 10 U.S.C. § 2304(e) (2006) and Federal Acquisition Regulation (FAR) 6.302-2(c)(2). Even when confronted with unusual and compelling urgency, the Government still must request offers from as many potential sources as is practicable. The Government was well aware that other sources would have been interested in competing for the contract, but the Government made no effort to contact any source other than AKS. The Government had 26 days between its awareness of the shelter system requirement (April 1, 2011) and the award of the contract to AKS (April 27, 2011), and it easily could have obtained competitive prices from other sources. The Government’s failure to do so was in violation of law.

[JT]


August 8, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 13, 2011

A Contractual Protest: A Thread to A Can of Worms.

Google  v US It is rare that a day passes without some headline or other about the affairs of the major players in the fields of information technology (IT), Internet Business (IB) or Social Networking (SN).   The cast of players - a revolving door of usual suspects – includes Microsoft, Apple, Google, Facebook etc.  The relative harmony that once derived from their clearly differentiated activities – e.g. personal computing, online searching or social networking – is now a thing of the past.  Brittle harmony has given way to -  shades of the 1990s  - blow by blow accounts of smear tactics, strategic protests, general blogfare, and of course, court actions .  Why?  Because the players are slugging it out in the mush pit which the converging IT/IB/SN  arena has become – all for a (bigger) piece of the pie. 

The average observer might be daunted by the copious data and convoluted interrelationships typically involved.    Close contemplation of contractual details, particularly those undergirding the relentless strategizing, negotiating, and (guarded) cooperation of such parties, is clearly something the average observer does not relish.  Yet the nitty gritty of who is doing what to whom, and where, to get to the bottom of what is really going on in a dispute may not be that hard to find.  Help is found in unexpected places – even in very contracts that are dauntingly associated with such transactions.  Or more precisely, even from the angst  created by such contracts.    

There is a struggle, you see, between an industry giant, Microsoft, who is determined not to be past its prime, and an equally determined giant slayer, Google, a relative upstart that is notoriously hungry for power.   Microsoft is determined to reinvent itself.  It is trying to build on its dominant market position to expand beyond the  dated server based computing approach.  The aim is to become the leader of the emerging ‘cloud based enterprise solution revolution’.  All very well.  The thing is, however, that Google is eagerly developing competing products in the same field.  And Google is striving, mightily, to market those products.  So,  here is the rub – Google has been having a hard time persuading potential customers, a significant percentage of whom are loyal customers of Microsoft’s email and other office offerings, to make the switch.

This is why  Google cried foul, and loudly, when the U.S. govt., through the agency of the Department of the Interior (DoI), issued a request for quotations – an invitation for offers as we know – but allegedly indicated that it would not entertain offers from Google.  The DoI subsequently awarded the contract to Microsoft. 

 Google objected to not being invited to the party by filing a bid protest in the U.S. Court of Federal Claims.  In the filing, Google asserted infringements of the Competition in Contracting Act’s policy requirements  which mandated that “technology vendor neutrality as far feasibly possible” must be maintained.  Google has asked the court to enjoin the DoI from awarding the contract to Microsoft until competitive bidding has taken place.

This dispute between the parties has been anything but straightforward.  The DoI has asserted that Google was ineligible for consideration because Google’s products were not certified under the Federal Information Security Management Act (FISMA)  at the time.  But here’s the thing  - it now seems that Google had this certification – or at least for a related product, while Microsoft at the time of the award of the contract, allegedly did not.  Microsoft reportedly received the certification after the award, but this disparity is a fierce point of contention.

Google clearly understands that it has a huge task to unseat the Microsoft behemoth.  Its hopes of entering into what must be an accelerating volume of contracts required for market viability, if not market dominance, depends on a spreading domino effect.  An increasing number of smaller users will need to take their cue (to contractually adopt Google products) from the bigger fish who adopt Google’s applications.

The bigger war for market dominance is not limited to Microsoft and Google, of course.  When this slender threat of a bid protest is traced, it leads to a whole other can of worms: cut throat rivalry not only for cloud computing, but voice over IP, mobile tasking, and mobile payment also (to name a few).  But that can of worms is for another day……

 

EOA

July 13, 2011 in Commentary, Current Affairs, E-commerce, Government Contracting, In the News | Permalink | TrackBack (0)

Sunday, July 10, 2011

Second Circuit Issues Summary Order on Remand from SCOTUS in U.S. ex rel. Kirk

We have covered this case, United States ex rel. Kirk v. Schindler Elevator Corp., before, most recently here.  Here's our recitation of the facts and history up to the Supreme Court's decision in May:

Daniel Kirk, a Vietnam War veteran, worked at Millar Elevator Industries beginning in the late 70s.  In 2002, Millar's operations were integrated into those of the Schindler Elevator Company.  In 2003, Millar was demoted and resigned.  Eight months later, Kirk sued, alleging that he had been fired in violation of VEVRAA, the VIetnam Era Veterans Readjustment Assistance Act.  That claim was dismissed and the dismissal was affirmed last year.  

2d Circuit Meanwhile, Kirk brought suit under the False Claim Act in the name of the U.S. government.   In 2007, the government elected not to intervene and Kirk pursued his claim as a relator.  His suit alleged that Schindler had entered into hundreds of contracts subject to VEVRAA requirements but that Schindler had failed to comply with those requirements.  Among other claims, Kirk alleged that Schindler failed to submit required VETS-100 reports in some years and had filed false VETS-100 forms in others.   The district court dismissed the action finding, among other things, that the claim was bared under the FCA, 31 U.S.C. s. 3730(e)(4), which provides that information that has been publicly disclosed cannot be a basis for a FCA claim.  The information at issue here related to the allegedly missing and/or falsified VETS-100 forms that Mr. Kirk had discovered through FOIA requests.  

The relevant section of the FCA provides:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. 

The Second Circuit vacated and remanded. There was no question that Mr. Kirk was not the original source of the information, so the only question whether a FOIA request counts as "public disclosure" for the purposes of the statute.  The Third Circuit answered that question in the affirmative.  The Ninth Circuit concluded that only a FOIA request that results in the production of an "enumerated source;" that is, one of the types of sources expressly named in the statute, creates a jurisdictional bar to an FCA claim.  The Second CIrcuit followed the Ninth.  It was supported in its position by the U.S. government as amicus curiae.

In the U.S. Supreme Court, the 5-3 majority (opinion by Justice Thomas) held that a government agency's response to a FOIA request constitutes a "report" and thus falls within the FCA's jurisdictional bar.  Justice Ginsburg wrote a short dissent, basically endorsing the Second Circuit's approach.  The opinion can be found here.  

Last week, the Second Circuit Revisited the case.  On its first pass on the case, the Second Circuit had left unresolved the following issues: 

(1) whether the Department of Labor's  FOIA responses indicating that reports were not found for certain years disclosed “allegations or transactions,” (2) whether Kirk’s failure-to-file claims were “based upon” any such disclosed “allegations or transactions,” or (3) whether Kirk qualifies as an “original source” of the relevant information underlying the failure-to-file claims.

The Second Circuit concluded that "Kirk’s failure-to-file claims were 'based upon' the 'allegations or transactions' disclosed in the FOIA responses and that Kirk does not qualify as an 'original source.'"  The Second Circuit thus affirmed the District Court's dismissal of Kirk's failure-to-file claims.  However, the Second Circuit left unchanged its earlier decision to vacate the District Court's dismissal of Kirks false reports claims, which were premised on Kirk's personal knowledge and thus did not run afoul of the FCA's jurisdictional bar.  

The most recent Second Circuit order can be found here.

[JT]

July 10, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Friday, July 1, 2011

Protection of Domestic Industry UK Style

Bombardier Train Today's Guardian has a story about two cabinet ministers who have sent a carefully worded letter of complaint to British Prime Minister David Cameron protesting the award of a £3 billion contract for the manufacture of train carriages (cars) to the German company, Siemens.  The ministers are upset that the contract was not awarded to Bombardier, which employs 3,000 people in Derby and is the last remaining train factory in Britain.

The ministers apparently express concern that Britain EU partners do not play fair.  After all, the German government recently awarded a £5.4 billion high-speed train contract to German-based Siemens.  And just last year, the French government awarded a £540 million contract to Siemens rather than to Paris-based Alstom.  

Wait a minute.  Doesn't this suggest that Siemens always wins these big contracts rather than that member states of the EU engage in favoritism?  Moreover, Bombardier is not even a UK company.  It's Canadian!  A union representative in Derby is quoted by the Guardian as expressing concern that Bombardier will shut down operations in England.  After all, if it can't win a UK contract, what's the point of even having a factory there?  Simple solution.  Sell the factory to Siemens.  They seem pretty busy.

[JT]

 

July 1, 2011 in Famous Cases, Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 29, 2011

Supreme Court to Decide Contractor Liability for Bivens Actions

On May 16, the Supreme Court granted cert. in Minneci v. Pollard.  The Ninth Circuit opinion and a dissent from the denial of rehearing en banc can be found here.

9th Circuit Pollard was incarcerated at a federal prison that had, for several years by then, been operated by an independent contractor, now known as The GEO Group (GEO).  Pollard alleges that he was mistreated by GEO personnel after he fell over a cart in the prison and may have fractured both his elbows.  The GEO employees allegedly put Pollard in restraints that caused him great pain, did not get him the bilateral slings prescribed for his injuries, failed to properly attend to him while he was injured and forced him to return to work before his injuries had healed.  He sued GEO, seven GEO employees, and a doctor employed by another entity, alleging violations of his 8th Amendment rights and seeking damages pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971).

GEO was not subject to suit, due to a prior ruling that private entities that run prisons are not subject to Bivens actions.  The District Court dismissed his action in its entirety.  A divided panel of the 9th Circuit reversed.  The majority ruled that: 1) private contractors running a federal prison act under color of federal law; and 2) the availability of state remedies does not foreclose Pollard's Bivens action.  In so ruling, the 9th Circuit acknowledged that it was creating a split between its law and the laws of the 4th and 11th Circuits.

Over at SCOTUSblog, Lyle Denniston predicts that the Supreme Court granted the petition in order to curb any attempts by the lower courts to expand the availability of the Bivens action.  I wouldn't wager against him.

[JT] 

June 29, 2011 in Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Friday, June 17, 2011

CRS on Presidential Authority to Impose Requirements on Contractors

CRS Thanks to the Federal of American Scientists' Secrecy News Blog, we are able to link to this new report form the Congressional Research Service, authored by Vanessa K. Burrows & Kate M. Manuel,  "Presidential Authority to Impose Requirements on Federal Contractors." 

Here is the executive summary:

Executive orders requiring agencies to impose certain conditions on federal contractors as terms of their contracts have raised questions about presidential authority to issue such orders. Recently, the Obama Administration circulated, but did not issue, a draft executive order directing “every contracting department and agency” to require contractors to “disclose certain political contributions and expenditures.” The draft order cites the President’s constitutional authority, as well as his authority pursuant to the Federal Property and Administrative Services Act of 1949 (FPASA), which authorizes the President to prescribe any policies or directives that he considers necessary to promote “economy” or “efficiency” in federal procurement. The draft executive order refers to FPASA’s goals in that it directs actions “to ensure the integrity of the federal contracting system in order to produce the most economical and efficient results for the American people.” The draft order has been characterized by some as an “abuse of executive branch authority” because it resembles the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act that the 111th Congress considered, but did not pass. If issued, the draft order may face legal challenge.

The outcome of legal challenges to particular executive orders pertaining to federal contractors generally depends upon the authority under which the order was issued and whether the order is consistent with or conflicts with other statutes. Courts will generally uphold orders issued under the authority of FPASA so long as the requisite nexus exists between the challenged executive branch actions and FPASA’s goals of economy and efficiency in procurement. Such a nexus may be present when there is an “attenuated link” between the requirements and economy and efficiency, or when the President offers a “reasonable and rational” explanation for how the executive order at issue relates to economy and efficiency in procurement. However, particular applications of presidential authority under the FPASA have been found to be beyond what Congress contemplated when it granted the President authority to prescribe policies and directives that promote economy and efficiency in federal procurement.

Some courts and commentators also have suggested that Presidents have inherent constitutional authority over procurement. A President’s reliance on his constitutional authority, as opposed to the congressional grant of authority under the FPASA, is more likely to raise separation of powers questions.

In the event that Congress seeks to enlarge or cabin presidential exercises of authority over federal contractors, Congress could amend FPASA to clarify congressional intent to grant the President broader authority over procurement, or limit presidential authority to more narrow “housekeeping” aspects of procurement. Congress also could pass legislation directed at particular requirements of contracting executive orders. For example, in the 112th Congress, legislation has been introduced in response to the draft executive order (e.g., H.R. 1906; H.R. 1540, § 847; H.R. 2017, § 713).

[JT]

June 17, 2011 in Government Contracting, Recent Scholarship, Weblogs | Permalink | Comments (0) | TrackBack (0)

Job Opening: Associate Dean for Government Contracts at GW Law

GWU2 The George Washington University Law School, in Washington, D.C. invites applications for an Associate Dean for Government Contracts Law.

JOB DESCRIPTION: Coordinates the GC LL.M. Program, ensuring that the efforts of the graduate admissions office, the communications office, the career development office, and the government contracts law faculty combine to create an academically strong, well-publicized program that meets students' and the bars' evolving needs. Assists in managing LL.M. degree design and student progress and completion of degrees. Assists in the management and supervision of student research and writing undertaken towards completion of LL.M. theses, relevant journal notes, and papers in related courses; works directly with students to facilitate publication. In conjunction with the government contracts library specialist, develops and administers special educational and research programs in the field of government contracts law. May be appointed to teach or co-teach one or more academic course(s) in government contracts law per year.

Works with the alumni office, the advancement office, and the GC faculty to coordinate GC alumni and advancement outreach, including organizing GC Advisory Board meetings and recruiting new GC Advisory Board members, and organizing alumni programs, lectures, and the annual luncheon (or similar events). Assists with the government contracts colloquia series. Attends bar, organizational, and public meetings to provide and receive feedback on issues that impact the government contracts law offerings of the Law School.

Publicizes the work of program faculty and students. In conjunction with the government contracts faculty and the legal research and writing faculty, assists in the management and supervision of the Public Contract Law Journal and the Federal Circuit Bar Journal. Creates and updates programmatic brochures, periodic newsletters, online information sharing (e.g., blogs) and provides appropriate input to annual law school publications (such as the Bulletin, Graduate admissions brochure, etc.). Engages in research and scholarship on relevant topics.

Works with the Student Bar Association, the Dean of Students Office, and the government contracts faculty to coordinate government contracts law student competitions and awards (including the internal Government Contracts Moot Court Competition and the major external annual writing competitions).

Serves as the principal contact for prospective students, visiting scholars, dignitaries, and other institutions concerning programs, conferences, cooperation agreements, and related activities involving government contract law. Investigates opportunities for international programs (e.g., exchange, summer abroad, fellowships, etc.). Participates in programs - domestically and abroad - that enhance the reputation of the Government Procurement Law Program and the George Washington University Law School.

APPLICATIONS/FURTHER INFORMATION: For applications and further information, please visit: https://www.gwu.jobs/postings/3820

[JT]

June 17, 2011 in Government Contracting, Help Wanted | Permalink | TrackBack (0)

Wednesday, May 25, 2011

Guest Post from Neil O'Donnell on General Dynamics

O'Donnell Mr. O'Donnell is a shareholder in Rogers Joseph O'Donnell, a San Francisco law firm, and co-author, with his partner, Dennis Callahan, of a recent article on the General Dynamics case.  

Given the oral argument, it was not a surprise that Justice Scalia wrote the opinion in General Dynamics v. United States.  But who would have thought that this vigorous champion of applying what he dubbed the “go away principle of jurisprudence” to this nearly 20 year old case would be the author of a unanimous decision by the Court that created the distinct possibility that this litigation would go on for several more years.

For the most part the decision follows a path that could have been predicted by listening to the oral argument.  Scalia for the Court agreed with the Court of Federal Claims that determining whether the Government had violated its obligation to disclose superior knowledge to the contractors and therefore invalidated its termination of the contractors for default, could not be ascertained without probing several layers of facts, all at great risk to national security.  He posited, fairly enough, that each party to the litigation would have the incentive to go right up to the line of state secrets in trying to prove its case, and that, as a result, witnesses may inadvertently disclose secret information.  And he strongly supported, as a policy matter, the conclusion that these risks made the contractor’s superior knowledge defense nonjusticiable.

Justice Scalia Faced with this situation, Justice Scalia adopted the approach he had suggested at argument.  First, he rejected the analysis on which the parties had devoted much of their energy in briefing and arguing the case.  He was uninterested in trying to determine who was the “moving party” under the rubric of the Supreme Court’s first (and last)  foray into the application of the state secrets privilege to civil litigation, United States v. Reynolds, 345 U.S. 1 (1953). Rather than prolonging this exercise akin to counting angels on the head of a pin, he sensibly observed that it was the “claims and the defenses together that establish the justification, or lack of justification, for judicial relief.”  And from there he concluded that the invocation of the state secrets privilege in this case made it impossible to determine who was right, whichever party was regarded as making the affirmative claim or asserting the defense.

Justice Scalia then invoked courts’ “common law authority to fashion contractual remedies in Government contracts.”  In so doing, he laid out the legal support for that proposition that neither side had been able to provide him at oral argument.  He used that authority to leave the parties in the position that they were in at the time that the dispute began.  That meant that the contractors did not have to pay back the $1.35 billion in progress payments that they had been paid but not yet earned.  And it meant that the Government did not have to pay the contractors another $1.2 billion in costs of performance that they had incurred but for which they had not yet been reimbursed.  Most outside observers would have agreed with the Court that it would have achieved what Scalia called “rough, very rough, equity” if this had been the final result of the case. 

 Unfortunately, it was not.  Instead, astonishingly, Justice Scalia, seemingly the advocate of finally bringing this decades long dispute to an end, added a paragraph late in the opinion which has every prospect of keeping the litigation going for several years more.  In remanding the case to the Federal Circuit, the Court specifically noted that no court had considered the Government’s claim that the well-established rule that the Government has an obligation to disclose superior knowledge to its contractors might not apply if the information was itself highly classified or if the contract had specified what information would be disclosed.  In this high stakes litigation (with interest, the swing between victory and defeat could be as much as $5 billion) this invitation to the Government to keep the litigation going at the Federal Circuit seems sure to be accepted.  So much for go away jurisprudence.

[Posted, on behalf of Neil O'Donnell, by JT]

 

May 25, 2011 in Commentary, Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, May 23, 2011

Unanimous Decision in General Dynamics: Heads We Win; Tails You Lose!

Back in January, we hosted a roundtable discussion on the General Dynamics v. United States/Boeing v. United States case that was decided today by the U.S. Supreme Court.  The last post from our roundtable, which includes links to all the previous posts can be found here.  

Supreme_Court_US_2010

Bobby Chesney provides an able synopsis of the case on the Lawfare blog here.  He also ventures a paragraph about the limited scope of the opinion, which is also highly persuasive.  

The issue in the case is what remedy is available to a government contractor when a court dismisses its prima facie valid affirmative defense on the ground that the issue cannot be litigated without posing a reasonable danger of the disclosure of national security secrets.  During oral argument, Justice Kagan noted that the government's position seemed to be that, when it comes to the invocation of the state secrets privilege, it can't lose.  It can rely on the state secrets privilege to withhold documents and thus prevent a party from making out a prima facie case or an affirmative defense, and it can also assert that the same privilege prevents it from asserting its own claims or affirmative defenses, all of which should result in the dismissal of the suit.  At the time, Justice Kagan seemed to be expressing incredulity at the government's position, but that is the position that the court has adopted -- unanimously -- in an opinion written by Justice Scalia.  Apparently, government contractors are like highwaymen.  The courts leave the parties in the state that it found them.  General Dynamics and Boeing are lucky they weren't hanged.

In upholding the lower courts' rulings on the application of the state secrets privilege, Justice Scalia invoked the Court's earlier rejection, in United States v. Reynolds of a proffered analogy to the criminal context in which the government must abandon any claims that it cannot make without recourse to secret evidence.  In the civil context, "the Government is not the moving party, but is a defendant only on terms to which it has consented."  And the government has not consented to civil trials that threaten the disclosure of national security secrets.  

But then Scalia proceeds to point out that Reynolds is not relevant in this context.  Reynolds simply involved an evidentiary ruling that allowed the government to refuse to produce certain documents.  In fact, Scalia acknowledged, the language he relied on in the preceding paragraphs was dicta -- and dicta from a case that is not really on point.  

The cases that are on point are the devastating one-two punch of Totten and Tenet v. Doe.  This case, like those, is simply non-justiciable to the extent that the resolution of any issues necessarily threatens the disclosure of national security secrets.  Justice Scalia acknowledges that this case is distinguishable from those others, which involved agreements that were secret by their very nature and ab initio, while secrecy only became an issue with respect to the set of agreements at issue in these cases when the government asserted the state secrets privilege.  Six of one, half-a-dozen of the other, says Justice Scalia.  

The Court of Federal Claims made a mess of things by allowing some claims to proceed while barring others.  The cleanest solution, the Court unanimously held, "is to leave the parties where they stood when they knocked on the courthouse door."  The petitioners take nothing on their claims and the government takes nothing on its claims.  Justice Scalia pronounces this "rough, very rough, equity."  

It's not really "heads I win; tails you lose" because the government's claims are also dismissed.  And now that the rule is clear, Justice Scalia contends that contractors can better protect themselves by demanding progress payments.  That may be true, and Justice Scalia and others may also be right that cases like this one are so unusual that the consequences of this decision may be limited to the parties to the case.  Still, given that the government alone has the power to invoke the state secrets privilege and bring an end to litigation, there is every reason for concern that it will do so opportunistically.

Thus ends[?] about twenty years of litigation.

Lyle Denniston provides a very different take on the case over at the SCOTUSblog.  He reads the opinion as leaving many questions undecided and remanding to the trial court to work out what parts of the case can proceed without involving state secrets.  

He suggests the following unresolved issues remain:

For General Dynamics and Boeing, the likelihood is that they will get to keep $1.35 billion that they were paid along the way (payments that the Pentagon does not dispute), but they have at most a diminished chance of holding on to another $1.35 billion paid for work that was not completed as they struggled, ultimately without success, to develop the so-called “A-12 Avenger,” a carrier-based plane that would have many of the enemy-evading detection characteristics of land-based “stealth” fighters.   Moreover, they may have next to no chance to collect another $1.2 billion they seek in damages for the Navy’s cutoff of the contract.

For the Pentagon, the decision gives it a new opportunity, in lower courts, to show that it never promised the contractors full access to highly classified data about “stealth” technology, so they cannot blame the Navy for the fact that they could not develop the know-how to complete the Avenger project on time.   If the Pentagon succeeds on that point, it could open the contractors to a new finding that they defaulted, and that cannot be excused.  Whether that would mean they must pay back the extra $1.35 billion is not clear at this point.

I read Scalia's "go away" message a bit more strongly and in any case hope that the parties are now so exhausted that they will walk away without throwing more good money after bad.  

[JT]

 

May 23, 2011 in Commentary, Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, May 16, 2011

SCOTUS Decides Schindler v. U.S. ex rel. Kirk

We blogged about this case one year ago when the Second Circuit ruled in favor of Mr. Kirk.  Here's how we described the case back then:

Daniel Kirk, a Vietnam War veteran, worked at Millar Elevator Industries beginning in the late 70s.  In 2002, Millar's operations were integrated into those of the Schindler Elevator Company.  In 2003, Millar was demoted and resigned.  Eight months later, Kirk sued, alleging that he had been fired in violation of VEVRAA, the VIetnam Era Veterans Readjustment Assistance Act.  That claim was dismissed and the dismissal was affirmed last year.  

Supreme_Court_US_2010 Meanwhile, Kirk brought suit under the False Claim Act in the name of the U.S. government.   In 2007, the government elected not to intervene and Kirk pursued his claim as a relator.  His suit alleged that Schindler had entered into hundreds of contracts subject to VEVRAA requirements but that Schindler had failed to comply with those requirements.  Among other claims, Kirk alleged that Schindler failed to submit required VETS-100 reports in some years and had filed false VETS-100 forms in others.   The district court dismissed the action finding, among other things, that the claim was bared under the FCA, 31 U.S.C. s. 3730(e)(4), which provides that information that has been publicly disclosed cannot be a basis for a FCA claim.  The information at issue here related to the allegedly missing and/or falsified VETS-100 forms that Mr. Kirk had discovered through FOIA requests.  

The relevant section of the FCA provides:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. 

The Second Circuit vacated and remanded. There was no question that Mr. Kirk was not the original source of the information, so the only question whether a FOIA request counts as "public disclosure" for the purposes of the statute.  The Third Circuit answered that question in the affirmative.  The Ninth Circuit concluded that only a FOIA request that results in the production of an "enumerated source;" that is, one of the types of sources expressly named in the statute, creates a jurisdictional bar to an FCA claim.  The Second CIrcuit followed the Ninth.  It was supported in its position by the U.S. government as amicus curiae.

At that time, we suggested that the rules regulating when the False Claim Act's jurisdictional bar precludes qui tam actions are complicated.  Mr. Kirk, the relator in the case, commented that, in his view, they are not complicated at all and the Second Circuit was obviously correct in its finding that the jurisdictional bar did not preclude his claim.

The Supreme Court split along party lines 5-3 (Justice Kagan did not participate) and reversed, with Justice Thomas writing for the majority.  The majority held that a government agency's response to a FOIA request constitutes a "report" and thus falls within the FCA's jurisdictional bar.  Justice Ginsburg wrote a short dissent, basically endorsing the Second Circuit's approach.  The opinion can be found here.  

SCOTUSblog provides coverage here.  

[JT]

May 16, 2011 in About this Blog, Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, May 12, 2011

Guest Post by Steven Feldman on the Horn Case

Feldman Our recent post on Horn v. United States elicited even more comments than our posts usually do -- i.e., more than none.  It has also generated this thoughtful response from friend of the blog and attorney for the U.S. Army Corps of Engineers, Steven Feldman (pictured), which we present below.

The Horn decision failed to mention that a conflict exists within the Federal Circuit's lower tribunals on whether Federal Acquisition Regulation (FAR) requirements contract clause 52.216-21 Alt I, analyzed in Horn, is valid. The Armed Services Board of Contract Appeals has explicitly rejected the Court of Federal Claims approach.  Disagreeing with Ralph Construction, Inc. v. United States, 4 Cl. Ct. 717 (1984), heavily relied on in Horn, the board said the following about this clause in Dynamic Science, Inc., ASBCA 29510, 85-1 BCA 17,710, 1984 WL 13911, 

In Maya Transit Co., ASBCA No. 20186, 75-2 BCA 11,552, the contract contained the same provision. We characterized the contract as a "limited form" requirements type. The limitation of the requirement to that portion that the Government did not choose to meet from its own capabilities did not render the promise illusory particularly because the Government was precluded from expanding its capabilities during contract performance at the expense of the contractor.

Later Board decisions also disapprove the Court of Federal Claims' reasoning.  See Operational Service Corp., ASBCA 37059, 93-3 BCA 26,190, 1993 WL 243152.  Because the Federal Circuit has not resolved the conflict, and because individual Court of Federal Claims judges are not bound by other decisions from the same court, it is puzzling why Judge Smith failed to consider contrary interpretations of FAR 52.216-21, Alt I. 

I also would like to bring to your attention another case from the Court of Federal Claims, Howell v. United States, 51 Fed. Cl. 516 (2002) that uses a Cardozo-like approach from the Restatement (Second) of Contracts to imply a missing consideration term in an Indefinite Delivery, Indefinite Quantity (ID,IQ) contract. As noted in Horn, Judge Smith considered the alternative that the contract could have been an ID, IQ contract rather than a requirements contract. The court in Horn did not cite the Howell decision, which is at odds with the Horn analysis. 

Here is what I have written about the Howell case (Tennessee Practice Services: Contract Law and Practice, Section 5:10):

In Howell v. U.S., 51 Fed. Cl. 516 (2002), the United States Court of Federal Claims analyzed a self-described IQ contract in a federal government contract that did not contain the requisite minimum quantity, although it did reflect the parties' established intent that there would be some minimum quantity.  The court noted that the inclusion of standard government contract clauses from the Federal Acquisition Regulation required the agency to purchase some minimum quantity of supplies or services, although the clauses were not filled in with the specific amounts. The court further noted that the parties' conduct after contract execution reflected their mutual belief that a binding arrangement existed. Accordingly, the court relied on the Restatement (Second) of Contracts, § 204, which permits a court to supply a missing term in a reasonable way where the record otherwise establishes a sufficiently definite and binding arrangement. The Howell court employed this theory to incorporate a minimum quantity term, which was more than a nominal amount, so that there would be mutuality of obligation.

The Howell decision reflects the courts' general dissatisfaction with technical consideration objections where the circumstances show the parties' intent to be bound. It bears emphasis, however, that the Howell court found an enforceable contract only because the record showed that these particular parties clearly intended to limit the buyer's freedom of choice. If the facts were that the buyer did have total discretion on whether it could purchase from the seller, then the Court of Federal Claims undoubtedly would have deemed the promises illusory for lack of consideration.

As Judge Smith ruled in Horn, both parties entered the arrangement with the intent to form a contract. The applicable clauses in Horn did limit the buyer's freedom of choice because the government promised to use Ms. Horn for services the government could not fulfill in-house. As in Howell, the record in Horn reflected a basis for determining a fair minimum obligation. Because the contract in Horn did not reserve the agency's total discretion to purchase all its needs from any other dental hygienists, Judge Smith should not have found the promise illusory for lack of consideration. 

Lastly, I disagree with your final thought that government lawyers either do not understand the FAR clauses or are willfully exploiting them "to take unfair advantage of their contracting partners." It was very unlikely that any government lawyers were involved in the award of this contract because the low dollar value ($49,920) is far below the legal review thresholds in most government agencies, which is typically $500,000. Further, I do not see any evidence of government overreaching in Horn and Judge Smith did not find any, either. As he commented, "[E]ven the government officials with whom she dealt did not seem to understand the document's lack of enforceability." Thus, I see some inadvertent oversights by both contracting parties that could have been resolved upfront with more attention to consideration issues.

[Posted, on behalf of Steven Feldman, by JT]

May 12, 2011 in About this Blog, Commentary, Government Contracting | Permalink | Comments (2) | TrackBack (0)