The Court of Federal Claims recently
determined that a federal agency can be determined to have issued a Termination
for Convenience even if they really didn’t. You know it must still be 2020 for this type
of ruling to have been issued. In JKB Solutions and Services, LLC v. United States,
the Court held that the Army constructively terminated a contract for
convenience and, therefore, did not breach it. The Court was not swayed by the fact that the
Army did not, in actuality, terminate the contract. Importantly, the
company’s claim was based on the fact that the Army contract specified that a
certain number of training classes were to be delivered, but that the Army
never actually ordered all of the classes. This is just the latest example of a frequent
occurrence: a federal customer contracts
for one thing, only to have the task orders not match it. Whether in this case, or others like it, way
too many contractors just “go with the flow” and don’t insist that task orders
be consistent with the underlying contract. This approach NEVER works in the company’s
favor if there is a dispute later on.
Here, the company’s claim for payment on the classes contracted for, but
not actually held, was denied. Adding insult
to injury, the firm had to pay extensive legal fees for the benefit of having
the Claims Court invent new protections for the government. There are two main take-aways from this case
that contractors should remember: 1. The
government’s Termination for Convenience authority is, indeed, very broad.
2. It is only worth the time and effort
to ensure that task orders match with the awarded contract if you actually want
to get paid.
“Low-risk/high volume items” will be
exempt from Section 889B requirements for two more years thanks to a waiver
granted by DOD earlier this month. This is the same waiver that had been in
place until September 30th.
While there is no precise definition of what constitutes a “low
risk/high volume item” potential examples include a camera used as part
of a security system on a building not involved in any government
business. Conversely, any covered
equipment that captures and stores data or images may not be considered low
risk, especially if the device(s) are used to store government information or
on a site a contractor uses to support government business. Section 889B
definitely still applies to any area not exempt. Industry and DOD leaders had both wanted to
the waiver extended to give companies time to identify the types of IT and
telecommunications equipment that have to be removed. The identification process, itself, could
take months, meaning that no company would have been able to certify that they
had conducted the “reasonable inquiry” required by the regulation implementing
the statute, let alone removed any identified equipment. The publication of this waiver has not been
well publicized. Contractors should ensure that they have the proper information
to show any DOD customer that is unaware of it. While some had hoped that Congress would
lessen the impact of the requirement in the FY’21 defense authorization bill,
there is currently no such provision expected to be in the final version. It is unclear whether there may be a
realistic opportunity to modify the applicability of the law in the FY’22 bill,
though it is important to note that no observers expect the provision to
be overturned or seriously modified even if it is addressed.
A provision in the House version of the FY’21 National Defense
Authorization Act (NDAA) requiring GAO to conduct a study on whether
cybersecurity insurance should be mandated for government contractors has industry
groups concerned. The fear is that the report,
coupled with recommendations by the influential Cyberspace Solarium Commission,
will result in companies having to buy potentially costly cybersecurity
insurance or risk losing government business. Supporters believe that cybersecurity
insurance could perform the same role of government regulations in improving
organizations’ cybersecurity practices.
Instead of a regulation, companies that did not take out such insurance
would be at risk of being at a competitive disadvantage when being evaluated
for a contract award or excluded from procurements all together. Opponents believe that having
insurance, itself, will do little to advance real cybersecurity and, in fact,
may drain company resources away from investing in actual improvements to pay
for the insurance. Others see it
as a give-away to the insurance industry.
This is not, however, the first-time contractors have had consider
government-only insurance requirements.
Unlimited liability requirements, especially at the state level, were a
true fad in the late 1990’s as public sector officials worried about unproven
technology impacting their missions.
Whether the push cybersecurity insurance will largely fade away as that
issue did remains uncertain. What is
certain is that there is a true sense of urgency on the part of
legislative and executive branch officials to try and ensure iron-clad security. It is unfortunate that they don’t hold
government agencies to the same standard, as anyone involved with Fairfax
County Public Schools will note with irony.
Regardless of who wins the election held two weeks from tomorrow,
contractors can expect to see only minimal disruption as the deck of appointees
and other senior officials inevitably shuffles. The business of government will still move
forward, though companies may see larger, new projects delayed not only due to
the operation of government under a Continuing Resolution (CR), but the impact
of many “acting” people in temporary jobs.
Acting officials tend to be more risk averse than permanent
appointees. Conversely, work on
almost all existing projects will likely continue without a change,
unless there is a special political angle that may garner unique oversight. New people, again regardless of party,
will bring in their own ideas.
Similarly, priorities do tend to change every four years. It wasn’t until well into the second term of
President Obama, for example, that Category Management was launched. This may have an impact on future work, as
priorities and people change. As
quickly as contractors might want that to become clear, however, it is
important to note that acquisition-related positions tend to be lower
priorities than others when new jobs are being handed out. There will be considerable guidance and
information about how and whether government spending priorities will change
for FY’22 and beyond coming soon.
Stay tuned.
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