The Department of Energy website explains ESPCs as follows:

An ESPC is a partnership between a Federal agency and an energy service company (ESCO). The ESCO conducts a comprehensive energy audit for the Federal facility and identifies improvements to save energy. In consultation with the Federal agency, the ESCO designs and constructs a project that meets the agency’s needs and arranges the necessary funding. The ESCO guarantees that the improvements will generate energy cost savings sufficient to pay for the project over the term of the contract. After the contract ends, all additional cost savings accrue to the agency. Contract terms up to 25 years are allowed.

To read the full article, click HERE.

The unclassified report does not identify any entities believed to be engaged in a coordinated strategy to acquire critical technologies, though the classified version may identify such entities.  As the first of its kind, it is difficult to anticipate the impact of this new CFIUS finding.  It is likely that future transactions involving entities suspected of being engaged in a coordinated strategy to acquire critical technologies will be under greater scrutiny and mitigation requirements, or be blocked entirely.  Mitigation refers to a means of alleviating a national security concern arising from a proposed transaction.  Such mitigations measures can include requiring the businesses involved to establish a Corporate Security Committee, security officers, and other mechanisms to ensure compliance with all required actions (including annual reports and independent audits); mandate that a proxy entity perform certain functions and activities of the U.S. business; create compliance programs to ensure compliance with established guidelines and terms for handling existing or future government contracts and government customer information; to agree and ensure that only U.S. persons will handle certain products and services, and that certain activities and products will be located only in the United States; notify relevant government parties in advance of foreign national visits to the U.S. business or of any material introduction, modification, or discontinuation of a product or service (as well as any awareness of any vulnerability or security incidents). etc.

Contractors who are involved with the critical technologies described above should be vigilant whenever a potential acquisition, merger or takeover is under consideration that involves a foreign government, company, or person.  While the national security issues at stake may not prevent the transaction from moving forward, it may yet impact your operations through a stiff mitigation plan.  That CFIUS now for the first time has found that the U.S. Intelligence Community believes at least to some measurable degree that there likely is a coordinated strategy to acquire U.S. companies involved in research, development, or production of critical technologies, approval of such ventures are presented with even more risks and possible challenges.

   Questions about Export Control Law?
Contact Gregory C. Dorris, Pepper Hamilton LLP

Most significant, immediately effective is Section 4 of the Order that now prohibits non-U.S. companies that are owned or controlled by a U.S. Person from engaging in transactions with Iran, as if that non-U.S. company was itself directly subject to U.S. jurisdiction.  Should that foreign owned entity engage in a prohibited transaction with Iran, the U.S. parent company, not the foreign owned entity, is subject to penalty.  The new Order provides that U.S. Persons can divest or terminate their Iranian business by February 6, 2013, but OFAC has indicated that the effective date for enforcement of the new Order remains its date of issuance.  OFAC also has indicated, however, that it will be receptive to reviewing applications for a specific license to permit a U.S. controlling entity to in effect “wind-down” its Iranian transactions by foreign subsidiaries of U.S. companies by the February 6, 2013 deadline.

The Act already had defined the term “entity” to mean a partnership, association, trust, joint venture, corporation, or other organization.  The Act also clarified that the term “own or control” means, with respect to an entity (1) to hold more than 50 percent of the equity interest by vote or value in the entity; (2) to hold a majority of seats on the board of directors of the entity; or (3) to otherwise control the actions, policies, or personnel decisions of the entity.  One clarification in the new Order provides guidance with respect to the term “subject to the jurisdiction of the Government of Iran.”  As used in Section 218 of the Act and in Section 4 of the Order, that term applies to a “person ordinarily resident in Iran” or “in Iran,” meaning Iranian nationals outside Iran are not included unless that person ordinarily is resident in Iran.  Another direction given is that a non-U.S. subsidiary will be treated as a U.S. person for purposes of license application and issuance and that either it or its U.S. parent can apply for an OFAC license.

What is most clear from the new Order is that any U.S. company that has offshore subsidiaries that conduct business with Iran should immediately analyze their activities.
They should either determine they are in compliance with the requirements of the new Order or take action to come into compliance, through termination of their foreign subsidiary’s Iranian transactions or divestiture of that foreign subsidiary where required (applying for a specific license as needed to complete any such termination or divestiture).

Questions about Export Control Law?
Contact Gregory C. Dorris, Pepper Hamilton LLP

Across the board, the volume of bid protests is up, way up.  Both the Government Accountability Office (GAO) and the United States Court of Federal Claims have seen huge increases in their protest dockets over the past couple of years.  As the Obama Administration moves forward with its goal of cutting wasteful spending on contracts and getting better value for the taxpayer dollar, there is no doubt that this bid protest frenzy will likely continue.

This coming Wednesday, April 25, 2012, Michael R. Golden and Heather Kilgore Weiner, Pepper Hamilton LLP, are presenting a Webinar entitled “Bid Protest Explosion – An Overview of Federal Bid Protests.”  Topics will include an overview of the different bid protest forums including agencies, GAO and the Court of Federal Claims, and the pros and cons of each forum, as well as a discussion on how to decide whether to protest or intervene in a protest.  In addition, this webinar with discuss common issues related to pre-award and post-award bid protests, the importance of a government debriefing and the implications of the statutory Competition in Contracting Act (CICA) stay of contract performance and temporary restraining orders.

For more information about this Webinar or to sign up, click here.

Additional questions, feel free to contact Michael R. Golden
(202-220-1244) or  Heather Kilgore Weiner(202-220-1212)

As we reported in a previous post, the FAPIIS system creates a clearinghouse for contractor-related data, including past performance evaluations; nonresponsibility determinations; default terminations; criminal, civil, and administrative proceedings in connection with federal contracts; suspensions and debarment information; administrative agreements; and contracts terminated for fault.  Contracting officers began to insert the new FAPIIS clause (FAR 52.209–9) into contracts on January 24, 2011, and the system went “live” on April 15, 2011.

However, on January 3, 2012, a final rule was released that fine-tunes the ways in which companies must respond to information the Government posts to FAPIIS.  As we reported previously, companies must diligently scrutinize their FAPIIS entries to avoid the inadvertent disclosure of inaccurate or confidential information.  Under the new rule, companies will now have seven calendar days in which to review information proposed for public release on FAPIIS and to make a formal objection to the posting.

The types of information that the Government could post to FAPIIS include:

• Terminations for Default
• Non-responsibility Determinations
• Recipient Not Qualified Determinations
• Defective Pricing Determinations
• Administrative Agreements, and
• DoD Determinations of Contractor Fault

Under the new procedure, all information posted by the Government will be subject to a 14-day waiting period before it becomes publicly available on FAPIIS.  The Government will provide notice to the contractor when the new information has been put on the FAPIIS system, at which point the contractor will then have 7 calendar days (not working days) to object to the public release.  The information will not be available to the public until the end of the 14-day period.

If the contractor objects, it must cite to the FAPIIS FAR reporting clause and request removal of the information.  Importantly, the contractor must also explain how the information falls under one of the disclosure exemptions to the Freedom of Information Act (FOIA) that protects the information from public release.  Some of the most frequently used FOIA exemptions include:

• The information relates to classified matters of national defense or foreign policy (Exemption 1)

• The information is protected by another law that specifically exempts the information from public release (Exemption 3)

At the end of the day, as we have previously advised, contractors must be proactive in monitoring their past performance and other conduct that may bear upon their responsibility, including all of the information concerning the contractor and its past performance that is contained in any government database or in news articles, or that is obtainable by an Internet search of the contractor. This way, contractors can act immediately to correct any information that may be inaccurate or misleading.

Previously, the $693,951 limit only applied to contractors’ top five highest-paid executives.  Under the new legislation, this limitation will apply to all employees whose labor is charged to government contracts.  So, what does this mean for contractors.

Although contractors are not limited in what they can pay their employees, any compensation over the limit is unallowable under the Government’s cost accounting rules.  In addition, even allowable amounts, like all costs, are subject to the requirements that the compensation be reasonable and allocable to firm’s government contracts.

Initially, the Senate and the Obama Administration also proposed lowering the cap to $400,000 (the President’s salary), but this was scrapped in favor of simply extending the cap to all contractor employees.  Note, that the rule allows the Department of Defense to create an exemption for scientists and engineers – some of the highly-talented non-executive employees that the contracting community feared would be most affected by the compensation cap.

The restriction became effective on January 1, 2012 and will be implemented in the Federal Acquisition Regulation (FAR) in the next 180 days.

A work around to this law exits for corporations – that is, corporations may effectively bypass this prohibition by establishing and administering a separate segregated fund for the purpose of influencing federal elections (i.e., a political action committee or “PAC”).  However, no such alternative is available for individuals who hold government contracts.  This disparity has led to the filing of a suit in the U.S. District Court for the District of Columbia challenging the constitutionality of this campaign finance rule as applied to individuals. 

The plaintiffs in the Wagner v. Federal Election Commission case hold various personal services contracts with federal agencies, including a human resources advisory contract with USAID and an environmental law research contract with the Administrative Conference of the United States, which are paid with congressionally appropriated funds.  These contractors argue that the Government cannot support the narrow application of this ban on individuals who have federal contracts since they often work along side federal employees who are not similarly prohibited from making contributions.  The plaintiffs argue that there is no compelling rationale for distinguishing between these groups of people – which violates the plaintiffs’ First Amendment rights.

The outcome of this case will directly impact individuals with government contracts, but it could also signal the continued weakening of the campaign finance limitations imposed on government contractors.  In the wake of the Supreme Court’s Citizen United decision, which enabled corporations to spend directly from their treasury funds to influence elections, the existing regulations that strictly proscribe the ways in which government contractors may donate to federal elections are rapidly changing.

The Plaintiffs have sought immediate certification of the constitutional issues to the U.S. Court of Appeals for the District of Columbia Circuit.  We will provide updates as the case develops.

On November 1, 2010, the Air Force sent Hawker notice of its exclusion from the competition by certified mail to Hawker’s designated  point of contact at the address contained in Hawker’s proposal.  The certified return receipt showed the signature of the Hawker employee that received the notice by November 4.  However, it was not until November 15^th that Hawker contacted the contracting officer to request a pre-award debriefing.  Hawker advised the contracting officer that the Notice of Exclusion had been received on November 15^th.  The next day, the contracting officer denied the request for a debriefing as untimely because Hawker had failed to comply with the requirement of Federal Acquisition Regulation (FAR) 15.505(a), which provides that an offeror may request a pre-award debriefing within 3 days after receiving notice of exclusion from the competition on November 4th.  On November 23, Hawker protested to GAO its exclusion from the competition.

The Air Force argued that because Hawker received notice of its exclusion on November 4^th and failed to request a timely debriefing, that its protest filed at GAO on  November 23^rd was untimely as having been filed more than 10 days after the notice was received.  Hawker argued that its protest should be measured from November 15^th because the Air Force sent the notice of exclusion to an “incorrect address.”  The Air Force used the company’s physical government business address, not Hawker’s designated mailing address identified on its most recent proposal revision and in the Central Contracting Registry (CCR).

GAO disagreed with Hawker that the Air Force had used an “incorrect address.”  GAO noted that the Air Force used the address Hawker had provided to the Air Force throughout the procurement.  GAO also concluded that a firm’s CCR information has never been established as a requirement for providing adverse action notices.

In any event, and perhaps the most important take-away from the case, is GAO’s view, following its precedent, that the timeliness rules do not turn on whether the agency has sent information to a particular designated address, but rather, whether the relevant information was in fact received by the offeror.  GAO found that “it is beyond dispute” that Hawker received the notice on November 4, and that Hawker’s internal delay of 11 days to route the notice to the appropriate Hawker official did not toll the filing deadlines imposed by GAO’s Regulations or the statutory deadline to request a required debriefing.

Therefore, GAO dismissed Hawker as untimely.  As an aside, Hawker argued that GAO should consider its protest under the “significant issue” exception to its timeliness rules.  GAO concluded that  the issue raised by Hawker–its exclusion from the competitive range– was not of widespread interest to the procurement community to warrant its resolution in the context of an otherwise untimely protest.  Having been dismissed at GAO, the automatic statutory stay on the procurement required based on the filing of a protest at GAO disappeared as well.

Under the statutory and regulatory scheme, a potential protester needs to be diligent in seeking its debriefing and then pursuing its protest.  The federal procurement system provides tight deadlines for debriefings and protests to avoid unwarranted delays  for the Government in obtaining needed goods and services.  The Hawker protest decision by GAO illustrates the need for a company to institute a system that provides that Government notices get to the right people quickly and that allows it to promptly request debriefings and to follow-up with a protest if warranted.    As the GAO decision points out, internal communication delays are the protester’s responsibility, not the Government’s.

Postscript—After being dismissed from GAO, Hawker filed its protest at the United States Court of Federal Claims.  This means, Hawker might still have its protest issues heard and an opportunity to seek delay of the award pending resolution of its protest.  As of now, Hawker may yet still be able to keep this significant business opportunity alive.

In NCI Information Systems, Inc., B-405745, Dec. 14, 2011, the deadline for the submission of Final Proposal Revisions (FPR) was “by close of business on 31 August 2011.”  The Contracting Officer advised one of the offerors – Harris IT Services (Harris) – in an email that “[U]ntil 5:00 PM Central Time is acceptable as meeting the close of business deadline.”  Relying on the Contracting Officer’s written statement, Harris “timely” submitted its FPR to the Contracting Officer prior to 5PM Central Time on the required date.  After evaluation, the Agency determined that Harris’ FPR offered the best value to the Government and selected Harris for award.  Subsequently, however, another offeror protested the Agency’s award to Harris claiming that Harris was ineligible for award because it missed the deadline set for receipt of FPRs.  GAO agreed that Harris was ineligible for award, and as is discussed below, explained why Harris’ reliance on the Contracting Officer’s written statement was misplaced.

GAO first explained that, in accordance with FAR 52.215-(c)(3)(i), where the solicitation does not state a specific time for receipt of proposals, 4:30 p.m. local time is considered to be the close of business.  Accordingly, because the offerors had been advised only that the deadline submission was “by close of business on 31 August 2011”, GAO determined that Harris was required to submit its FPR prior to 4:30 p.m. local time, which it did not do.

Next GAO addressed Harris’ reliance on the Contracting Officer’s statement.  Specifically, GAO stated: “The contracting officer’s e-mail, which was sent only to Harris, cannot be considered an amendment to the solicitation’s due date, and [GAO has] held that an offeror acts unreasonably when it relies on the informal advice of a contracting officer rather than following the solicitation’s instructions.”  While GAO admitted that its application of the late proposal rules “may sometimes seem harsh,” it also cautioned that “offerors who rely on such informal advice do so at their own risk.”

The Moral of this story: Only rely on the Contracting Officer’s advice or instruction if it is provided to all offerors in writing in an official procurement document, such as a Solicitation, Request for Proposals, Amendment or Modification.  As the above case reminds us, reliance on anything else – even a written instruction directly from the Contracting Officer – can put you at risk.