Afterthoughts: Flowdown Clauses

Posted on by
Reply

What are the three most significant errors contractors make when dealing with flowdown clauses? 1) I think the first error is just having a blanket provision in the front;  a blanket clause that says wherever you see the term “Government” insert “prime contractor” and wherever you see the term “contractor” insert “subcontractor”  because a number of the clauses just don’t work well that way. 2) Incorrect drafting or not complete enough drafting of a disputes provision that gives both parties the opportunity to resolve disputes in a reasonably efficient way.   This entails drafting  two provisions.  One provision for when a subcontractor claims that the government has caused it to incur additional expenses and will need  the prime to sponsor the claim.  The other provision is for … Continue reading →

CAS 409 – Depreciation of Tangible Capital Assets (Part 3 of 3)

Posted on by
Reply

*This is Part 3 of a 3-part blog.  Each part addresses the fundamental requirements and techniques for application related to the standard, and provides specific examples. Part 1 addressed the general requirements/techniques, as well as those related to determining the estimated useful life of a tangible capital asset. Part 2 addressed the areas of depreciation methods and the determination of estimated residual values. This Part 3 addresses the accounting for gains/losses, cost allocation, and accounting for assets acquired prior to the applicability of CAS 409. Background: This standard provides the criteria for assigning costs of tangible capital assets to cost accounting periods and for allocating such costs within such periods in an objective and consistent manner.  The basic concept is that the amount assigned to … Continue reading →

A Brief Note on the Pay-If-Paid Clause: An Occasional Thorn to US Government Construction Subcontractors

Posted on by
Reply

Subcontractors bidding US government construction projects often find themselves subject to both mandatory and non-mandatory FAR clauses and provisions flowed-down from the prime contractor’s RFP, as well as the prime’s particular special terms and conditions – and conflicts often exist between the two.  Contract payment is one area where discrepancies abound between the FAR clauses and the prime’s own subcontract terms and conditions.  It cannot be stressed enough that, prior to bidding work, subcontractors must be able to recognize and understand the various payment provisions contained in subcontract RFPs.  Quite simply, for subcontractors, it’s all about the money and how fast they get it. Thus, the type of payment provision is extremely important to subcontractors.  To be sure, a subcontract RFP for a government construction … Continue reading →

Termination for Convenience Case at Court of Federal Claims May Have Far-reaching Effect

Posted on by
Reply

The Court of Federal Claims issued a potentially very important decision in a Termination for Convenience case on April 2, 2013. In Tigerswan v. U.S., COFC 12-62C, Judge Firestone made a decision which could affect breach claims when the government acts in an illegal manner. With a number of potential terminations coming in the wake of sequestration, the nuances of this case may have a major impact. The Contractor alleged two bases for its breach of contract claim: 1. The government had breached the implied duty of good faith and fair dealing in its T for C decision; and 2. The government abused its discretion in the T for C decision, or it never intended to honor its contract. This is important because, generally, a … Continue reading →

FAR 52.215-16 AND FAR 52.215-17, Facilities Capital Cost of Money

Posted on by
Reply

Applicability: These FAR solicitations/clauses address the allowability/reimbursement of facilities capital cost of money. FAR 52.215-16, Facilities Capital Cost of Money, is included in solicitations expected to result in contracts that are subject to FAR Subpart 31.2 (the cost principles for contracts with commercial organizations). FAR 52.215-17, Waiver of Facilities Capital Cost of Money, is included in the contract if the contractor receiving the award did not propose facilities capital cost of money in its offer.   Key Requirements: The solicitation requirement at FAR 52.215-16 and the contract clause at FAR 52.215-17 work in tandem to address the allowability of cost of money under the awarded contract. FAR 52.215-16 states that facilities capital cost of money will be an allowable cost under the contemplated contract, if … Continue reading →

Coast Guard’s Fat Requirements for Dry Suits All Wet Says GAO

Posted on by
Reply

The Coast Guard issued a delivery order under a GSA Schedule contract to U.S.I.A. Underwater Industrial Apparel (“USIA”) for 777 underwater dry suits. USIA delivered the first 100 suits with an invoice for $59,000. The Coast Guard tested these suits and found they did not meet the specifications for an adjustable Velcro neck. After discussing the problem, the parties signed a bilateral modification “to change the delivery date, change the specification, and add a first article requirement.” The Coast Guard did not return the 100 suits to USIA. USIA then delivered 120 more suits with the new adjustable neckline. The Coast Guard again tested the suits and determined that 32.5% of the suits leaked. The Coast Guard then issued a cure notice for the delivery … Continue reading →

CAS 409 – Depreciation of Tangible Capital Assets (Part 2 of 3)

Posted on by
Reply

*This is Part 2 of a 3-part blog. Each part addresses the fundamental requirements and techniques for application related to the standard, and provides specific examples. Part 1 addressed the general requirements/techniques, as well as those related to determining the estimated useful life of a tangible capital asset. This Part 2 addresses the areas of depreciation methods and the determination of estimated residual values. Part 3 will address the accounting for gains/losses, cost allocation, and accounting for assets acquired prior to the applicability of CAS 409. Background:  This standard provides the criteria for assigning costs of tangible capital assets to cost accounting periods and for allocating such costs within such periods in an objective and consistent manner.  The basic concept is that the amount assigned … Continue reading →

Document, Document, Document!

Posted on by
Reply

Nexant, Inc. (“Nexant”) protested to the GAO the award of a US Agency for International Development (“USAID”) contract to Deloitte Consulting, LLP, on the grounds that USAID (1) failed to conduct meaningful discussions, (2) applied an unreasonable evaluation of the strengths and weaknesses of the proposals, and (3) failed to document the basis for its source selection decision. The GAO sustained the protest on all three grounds.   Agencies are not required to conduct discussions with offerors, but if they do, the discussions must be meaningful. Meaningful means that the agency must identify deficiencies and weaknesses in a manner that enables offerors an opportunity to address them. Here, the GAO found that USAID failed adequately to convey its concerns with Nexant’s proposal. For example, in … Continue reading →

Afterthoughts: Good Faith & Fair Dealing

Posted on by
Reply

What responsibilities are included in the duty of good faith and fair dealing/ what should be included? The Restatement of Contracts lists some examples but without trying to go into the specifics of that list, I always said that the duty of good faith and fair dealing was at the center a requirement that the two parties would reasonably respond to each other’s problems. If you go back to the Civil War and look at the case law, we talked about the duty of cooperation and the duty not to hinder contractor’s performance. Those were the original duties that our legal background is full of. When we started to talk about the broader duty of good faith and fair dealing, these two duties, the duty … Continue reading →

Bid Protests Get Bad Press

Posted on by
Reply

It is highly unusual for a scholarly paper on bid protests to generate excitement in the media, but Dan Gordon has triggered a virtual firestorm by finding, in a recent article, that “[i]t is rare for a protester to win a protest, and even rarer for a winning protester to go on to obtain the contract at issue in the protest.”  See Daniel I. Gordon, Bid Protests:  The Costs are Real, But the Benefits Outweigh Them, Geo. Wash. Law School Pub. L & Leg. Theory Paper No. 2013-41, at 20 (2013), 42 Pub. Contr. L.J. (forthcoming Spring 2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2228748.  Upon further reflection, however, the paper and its press coverage raise two points that are worthy of additional comment:  (1) the firestorm is the … Continue reading →