Category Archives: Government Contracts

What Public Contractors Should Know About the False Claims Act & Federal Taxes: Qui Tam?

By Coleman Jackson, Attorney & Counselor at Law & Certified Public Accountant
March 03, 2022

The Latin term Qui Tam in plain English simply means a legal process by which an individual sues or prosecutes in the name of the government and shares in the proceeds of any successful litigation or settlement. The term individual could be an entity, a state, or a local governmental agency in the case of the federal government, or a natural individual. There are qui tam rights or proscriptions in numerous federal and state statutes. Texas and many other States for example have a False Claims Act. Also, there is a qui tam provision in the Internal Revenue Code proscribing that eligible individuals, as defined in the Code, is eligible to file a claim for award and to receive an award under Internal Revenue Code Section 7623 and U.S. Treasury Regulations Sections 301.7623-1 through 301.7623-4 (The Whistleblower Tax Claims). I am not going to talk about qui tam claims as it relates to Texas law or any other State’s law in this blog either. Watch our blogs because if our audience expresses an interest; we could, in the future, write a blog or do a podcast or video on qui tams in Texas. But for, a brief overview of federal taxation of qui tam awards in this blog; this blog is not about taxation, but it’s all about the qui tam proscriptions found in the federal False Claim Act, which can be found at 31 U.S.C. Sections 3729 through 3733 as expanded in 1986 and again in 2009. My focus with regards to qui tam in federal law is going to be limited even still because I’m talking about qui tam in public contracting only. This blog by no means intends to be exhaustive on this complex and arcane subject, nor do I make any attempt to review all of the statute where qui tam proscriptions can be found.

Government contractor, be aware, the King has many eyes. Let’s look into qui tam and public contracting.

The False Claims Act and Public Contractor Code of Business Ethics and Conduct:

The False Claims Act permits a private person, known as a relator, to bring a qui tam civil action “in the name of the [Federal] Government,” 31 U.S.C. §3730(b), against “any person” who “knowingly presents… a false or fraudulent claim for payment” to the Government or to certain third parties acting on the Government’s behalf, §§3729(a), (b)(2). The Government may choose to intervene in the action. See §§3730(b)(2), (4). See Cochise Consultancy, Inc., ET AL. v. United States EX REL. Hunt (139 S.Ct. 1507(2019)).

(1) Federal Acquisition Regulation (FAR) Part 52.203-13 Code of business ethics and conduct prescribes that (1) “within 30 days after contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall –

Have a written code of business ethics and conduct;
Make a copy of the code available to each employee engaged in performance of the contract;

(2) The Contractor shall –

Exercise due diligence to prevent and detect criminal conduct; and
Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

(3) (i) The Contractor shall timely disclose, in writing, to the agency Office of Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract there under, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed –

A violation of Federal criminal Law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, or
A violation of the civil False Claims Act (31 U.S.C. 3729 –3733).

Government Contractor beware, the King has many eyes. The Federal Acquisition Regulations (FAR) Part 52.203-14 requires that the Contractor display fraud hotline posters in plain sight at the contract work sites. Potential whistleblowers from company janitors to company leaders and from casual visitors to subcontractors are all around the work site by day and by night. Anyone with credible evidence may initiate a civil lawsuit. The relator receives a share of any proceeds from the action—generally 15 to 25 percent if the Government intervenes, and 25 to 30 percent if it does not—plus attorney’s fees and costs. See §§4730(d)(1)- (2). See also Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 769 – 770 (2000).

What should public contractors and relators know about Qui Tam Awards and Taxes?

Both relator and contractor must realize that False Claims Act recoveries tallies in the billions of dollars in the United States. Qui Tam federal tax fraud claims, on the other hand,may not be as costly or as numerous as claims under the FCA. Note that federal tax fraud claims are expressly exempted from the False Claims Act. See § 3729(d) of the FCA. As I mentioned at the top of this blog, the Internal Revenue Code, (IRC) contains special provisions and methods for whistleblower claims involving administration of the United States federal tax laws. Underpaying of tax and tax fraud awards to eligible whistleblowers are filed and handled pursuant to Internal Revenue Code §7623. Awards to eligible relators can range from 15 percent to 30 percent of the proceeds collected as the result of the judgment or settlement of the claim filed in the IRS Whistleblower Office. Arguably awards under the False Claims Act and Internal Revenue Code are taxable income to the relator or whistleblower and are none deductible losses to the wayward contractor or other violator; few exceptions might apply for certain types of expenses like attorney fees and other investigatory costs and trial costs paid in prosecuting the qui tam matter. See Reg. Sec. 1.61-2(a) __ qui tam payment is the equivalent of a reward or other income to the relator; and qui tam payments paid by a trade or business is none deductible under Internal Revenue Code Sec. 162(f).

Stay clear of anti-relator behavior– Relators and contractors or taxpayers should be represented by counsel in Qui Tam cases. Successful relators under the FCA are entitled to recover, in most instances, attorney fees, expenses and costs.Both the FCA and the IRC contain anti-discrimination provisions which can make the situation worst for alleged violators of the law if they handle the whistleblower situation badly either intentionally or unintentionally. Contractors and taxpayers alike should maintain tight internal controls, conduct lawful investigations and comply with all applicable laws. A lot of federal statutes—civil and penal;might be implicated in Qui Tam cases cautioning all involved to be represented and exercise due diligence. See 26 United States Code, Internal Revenue Code; 41 United States Code§4712, Whistleblower Protections for Contractor Employees;Title 48 of the Code of Federal Regulations, 48 CFR 1., The Federal Acquisition Regulations, which covers all federal procurement practices, including solicitations from small business concerns and small business teaming arrangements or joint ventures;Title 31 United States Code and §42121(b) of Title 49, United States Code, Protection of Employees; to reference only a few.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

Federal Government Contracting and the Subcontractor – How Does Subcontractors Avoid Legal Problems in Public Contracting?

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By: Coleman Jackson, Attorney and Certified Public Accountant
February 1, 2022

The first Step in Avoiding Litigation:

The subcontractor must understand the federal market place— the rules and regulations governing federal acquisition of goods and services by the U.S. federal government are codified in the Federal Acquisition Regulations. Subcontractors who fail to understand the Federal Acquisition Regulations (commonly referred to as the FAR) and the related policies, agency memorandums and court decisions interpreting the FAR are flying in the dark. The first step in avoiding legal problems in general is not to make legal mistakes. It is difficult to avoid making legal mistakes when you don’t know the applicable rules, regulations and laws! Subcontractors and their advisors must be skilled in the FAR and the related Cost Accounting Standards applicable to all federal contracts, except defense department contracts which are governed by the Defense Federal Acquisition Regulations otherwise known as the DFARs. The Federal Acquisition Regulations can be found at Chapter 1 of Title 48 of the Code of Federal Regulations, 48 CFR 1 and etc., as amended.

Consider Selling to the Federal Government:

Why bother selling your goods and services to the United States government? The federal procurement market is huge! The United States government is one of the most potent consumers of goods and services in the world. This 500 hundred-billion-dollar industry requires setting aside at least 23 percent of these contracts specifically for small businesses. Set aside policies are built into the federal procurement market for small businesses, historical disadvantaged businesses, veteran owned businesses and more which are all designed to increase the competition and participation of small businesses like yours. Are you feeling a little intimidated by the prospect of jumping right in and selling your expertise and products to the federal government? You don’t have a clue as to how and where to begin? Would you consider an ideal scenario where you can ease into this potentially profitable business of government contracting; take it slow; learn the rules of the road at your pace; and not take on more than your company can handle? Subcontracting is a fantastic way to go slow, learn the rules, learn the players and gradually introduce your business to public contracting.

The FAR expects the federal government to announce the majority of purchases greater than $25,000 at the point of entry for the entire government located in www.fedbizopps.gov. Companies interested in becoming subcontractors for a specific acquisition should contact the agency to obtain a copy of the application and, perhaps most importantly, attend the agency’s proposal conference in person to get additional information about the acquisition and interact with other companies, especially potential prime contractors and higher-level subcontractors.

While most federal procurement is subject to “full and open competition” requirements, whereby all responsible sources must be allowed to compete, these requirements do not apply to subcontracting, giving prime contractors ample leeway in the competition of subcontractors. The only exception is for cost-reimbursement contracts that include the “Competition in Subcontracting” clause in FAR 52.244-5, which requires prime contractors to select subcontractorson a competitive basis to the maximum practical limit. Further under FAR, the prime contractor must determine the availability of subcontractor sources unless the government includes a guarantee of source availability or directs all potential prime contractors to use a specific subcontractor.

Sometimes the government must consent to the placement of subcontracts. If a prime contractor has a government-approved procurement system, the government’s prior consent will be limited only to the subcontracting limitations defined by the Contracting Officer (CO) in the “Subcontracting” clause of the prime contract. If there is no such approval, consent to subcontract is required to reimburse costs, time and materials, labor hours or arrangements by letter, and for uncharged actions under fixed-price contracts that exceed the simplified procurement limit (currently $100,000). For cost-type contracts, the contractor must notify the agency before award of any cost-plus flat rate subcontracts and any fixed-price agreements that exceed the dollar limits specified by regulation.

Rather than getting too deep into government contracting and cost principles in this blog; let me just say that subcontractors or their advisors must be aware of procurement standards, various types of government contracts and standard cost accounting principles applicable to government procurement contracts. These principles and rules are set-forth in the Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).

The Federal Acquisition Regulations is where Subcontractors Should Begin:

Why should you begin with the FAR? The Federal Acquisition Regulations governs federal procurements therefore in order for you to understand your rights and obligations in this market place, you and your advisors must become skilled in the FAR. If you are interested in becoming a federal procurement subcontractor, visit the FAR and read on because you must understand the rules and the various parties:

The government subcontractor is defined by Federal Acquisition Regulation (FAR) 3.502-1 as:

Any person, other than the prime contractor, who offers to furnish or furnish any supplies, materials, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such a prime contract and included any person who offers to furnish, or a subcontract provides general supplies to the prime contractor or a higher tier subcontractor.

A prime contractor contracts directly with the client, which is the federal government. The subcontractor would agree with the prime contractor (prime) to provide goods and services for them to be able to fulfill the requirements of the original government contract.

The subcontractor to a government prime contractor arrangement is common in public contracting and is an excellent opportunity for the subcontractor to gain valuable experience in government contracting, build their reputation in doing quality work, and meeting quality government contract attorneys and other advisors, contract officers and other government officials in various agencies.

As such, there are lucrative opportunities for both prime contractors and subcontractors coming from a contractual relationship with the US government. Because of this, both need to understand the fundamentals of subcontracting. In the rest of this blog, we provide a brief overview of the central procurement rules that affect subcontracts, especially regarding the legal provisions on the rights or not of subcontractors against termination for convenience in government contracts.

Most of the federal statutes and regulations that apply to prime contractors do not apply to subcontractors because the federal government and subcontractors generally lack “privity of contract”. That simply mean that as a subcontractor to a prime contractor, you do not have a direct contractual relationship with the U.S. government. Subcontractor’s do not have a contract with the government.

Various provisions of the FAR deals with government immunity. Just know for now that prime contractors and subcontractors are not considered governmental agents. State or local tax exemptions may be available to subcontractors pursuant to the rules and guidelines at FAR 29305.

Sometimes subcontracting is not a possibility in government contracting!

Specific regulations or terms of the contract may limit the offeror’s ability to use subcontractors. The public contract clause “Limitations to Subcontracting” which is set-out in FAR 52. 219-14,restricts the amount of subcontracting in service contracts where the principal must use at least 50% of the cost of contract performance incurred with personnel of the employees themselves. Construction contracts generally prescribe specific percentages of work performed. Several clauses strongly encourage major government contractors to subcontract to small businesses and disadvantaged small businesses, and FAR 52.219-10 requires each successful bidder of contracts with a value more than $500,000 ($1 million for construction contracts) to present an acceptable subcontracting plan with monetary incentives for exceptional performance pursuant to FAR 52.219-10 and provides penalties for non-performance in good faith pursuant to FAR 52-219-6. Subcontracting is important in research and development contracts. But note that FAR 35 requires the government agencies know whether proposed subcontractors are qualified and require advanced notification of subcontracts for technical or scientific work. These FAR provisions are but a few that touches on the rules and regulations that applies to subcontracting in federal procurement.

In general, since subcontractor agreements are essentially private matters between prime contractors and subcontractors, aggrieved subcontractors have few rights in a federal forum to challenge alleged violations of procurement rules before contract award.

The Bid Protest:

The General Accounting Office, “GAO” is the usual forum for “protests” – a written objection by an interested party to a request or award. The complaint alleges improprieties in awarding a contract. In the FAR an “interested party” is defined as an “actual or potential bidder or offeror whose direct economic interest would be affected by the award”; therefore, a subcontractor would not meet this definition. A subcontractor cannot file a protest! This stakeholder exclusion also applies to protest efforts in the United States Court of Federal Claims. Note that GAO rules; however, recognizes an exception for subcontractor protests where subcontractor selection is “by” the government. This process occurs when all or most of the significant aspects of the procurement are controlled by federal agency officials, and the prime contractor is merely an agency channel whose primary concern is administrative. In addition, subcontractors may be entitled to monetary relief when their direct contractors prevail in a joint effort protest before the GAO. Successful protesters can recover bid costs, proposal preparation costs, and protest costs.

Termination for Convenience:

Termination for convenience means the exercise of the Government’s right to wholly or partially terminate the performance of work under a contract when it is in the Government’s interest. See Federal Acquisition Regulation (FAR) 2.101. The federal governments right to terminate a procurement contract for convenience is the exercise of the sovereign. The right to terminate is made part of almost all federal government contracts by including the standard Termination for Convenience of the Government clauses into the contract. See FAR 52.249-1 through FAR 52.249-5. The Termination for Convenience clause in commercial item contracts issued under FAR Part 12 can be found in paragraph (l) of FAR 52.212-4. Even when the termination for convenience clause is left out of the government contract, that means nothing because the clause nonetheless is generally read into the contract by the operation of law under the “Christian Doctrine.” See GL Christian & Assoc. v. the United States, 312 F.2d 418 (Ct. Cl. 1963).

FAR 49.104 states, in part, that “the notice and clause applicable to convenience terminations” generally requires that the contractor: “(1) Stop work immediately on the terminated portion of the contract and stop placing subcontracts thereunder; (2) Terminate all subcontracts related to the terminated portion of the prime contract; (…).” The contractor must notify its project team, including suppliers and subcontractors, to stop work immediately on the terminated portion of the contract and stop placing subcontracts thereunder. The contractor must complete all agreements related to the closed part of the contract, preferably through a written notice referencing the flow down clauses and circumstances.

When the government closes a principal contract, the principal terminates the corresponding subcontract, and the provisions of FAR 49 explain the procedures for settling the central contracts and subcontracts. The fundamental principle is that the subcontractor has no contractual rights against the government upon the termination of the main contract. The main contractors and subcontractors are responsible for the prompt settlement of their proposed termination agreement.

FAR 49.105 (Duties of Termination Contracting Officer After Issuance of Notice of Termination), in turn, states that “[c]onsistent with the termination clause and the notice of termination, the TCO shall”: (1) Direct “the action required of the prime contractor;” (2) Examine the prime contractor’s termination settlement proposal and, when appropriate, the settlement proposals of subcontractors; (3) Promptly negotiate a settlement with the contractor and enter into a settlement agreement; and (4) Promptly settle the contractor’s settlement proposal “by a determination for the elements that cannot be agreed on if unable to negotiate a complete settlement” (see FAR 49.105(a)). Moreover, FAR 49.105(c) states that the TCO “should promptly hold a conference with the contractor to develop a definite program for settling.” In addition,

FAR 49.105(c) goes on to state that “[t]opics that should be discussed at the conference and documented include”:

(1) General principles relating to the settlement of any settlement proposal, including obligations of the contractor under the termination clause of the contract;

(2) Extent of the termination, point at which work is stopped, and status of any plans, drawings, and information that would have been delivered had the contract been completed;

(3) Status of any continuing work;

(4) Obligation of the contractor to terminate subcontracts and general principles to be followed in settling subcontractor settlement proposals;

(5) Names of subcontractors involved and the dates termination notices were issued to them;

(6) Contractor personnel handling review and settlement of subcontractor settlement proposals and the methods being used;

(7) Arrangements for transfer of title and delivery to the government of any material required by the government;

(8) General “principles and procedures to be followed in the protection, preservation, and disposal of the contractors and subcontractors’ termination inventories, including the preparation of termination inventory schedules;”

(9) Contractor accounting practices and preparation of SF 1439 (Schedule of Accounting Information FAR 49,602-3;

(11) Accounting review of settlement proposals;

(12) Any requirement for interim financing like partial payments;

(13) Tentative “schedule for negotiation of the settlement, including submission by the contractor and subcontractors of settlement proposals, termination inventory schedules, and accounting information schedules (see [FAR] 49.206-3 and [FAR] 49.303-2)”;

(14) Actions taken by the contractor to minimize the impact upon employees adversely affected by the termination (see paragraph (g) of the letter notice in FAR 49.601-2); and

(15) The “[o]bligation of the contractor to furnish accurate, complete, and current cost or pricing data, and to certify to that effect by FAR 15.403-4(a)(1) when the amount of a termination settlement agreement, or a partial termination settlement agreement plus the estimate to complete the continued portion of the contract exceeds the threshold in FAR 15.403-4.”

The hallmark of subcontracting in government contracts is the requirement to flow-down specific prime contract provisions to subcontractors. The FAR outlines mandatory and suggested flow-downs, but the prime will also want to evaluate with counsel whether to include additional requirements in subcontracts. Subcontractors would want to evaluate with their counsel the implication of flow-down clauses prior to executing any prime contract associated with a government contract. Even without the flow-down clause, subcontractors must be aware of other government contract rules that could place obligations on them.

One example of a government contract provision that can apply to subcontractors even if it’s not mentioned in the four corners of the contract is the termination for convenience provisions of the FAR. As we have said before in this blog, this is an essential aspect of procurement contracting that is not controlled by flow-down clause but will undoubtedly be one of the clauses that everyone would want to include in their subcontracts. If the government terminates the prime contract for convenience and the subcontract does not have a parallel provision, the prime may face opposition from its subcontractor regarding termination. The subcontractor may argue that the government’s termination for convenience is not adequate to cause the prime to terminate the subcontract.

The easy fix (and one I see in most subcontracts) is including a provision that allows the prime to terminate the subcontract for convenience. Subcontractors will want to ensure that the termination for convenience flow-down is based on similar action from the government and that the clause includes the same rights for submitting settlement proposals

Under the Contract Disputes Act, otherwise known as the CDA, a “contractor” has the right to file a contract claim against the federal government. Even if a subcontractor think they have suffered damages through government action, federal procurement law may say no. This is because the CDA and the FAR “Disputes” clause FAR 52.233-1 says “contractor”. Subcontractors generally do not have the right to seek and collect indemnity because they have no privity of contract with the government. Consequently, when the subcontractor seeks government relief, it can proceed indirectly through the prime contractor in one of two ways: first, the prime contractor must sponsor and certify the subcontractor’s claim where the certification reflects the prime contractor’s belief that there is a “good basis” for the claim, and second, a prime contractor filing a lawsuit may include a component of its responsibility to with a subcontractor.

There are rare exceptions to the general rule of “non-direct right of action” for subcontractors in CDA cases:

First, the subcontractor has direct right of action against the United States government when the contract terms provide that the parties give the subcontractor the right of immediate recourse against the government. Still, since the FAR prohibits Contracting Officers from consenting to such an agreement, this circumstance is practically non-existent. Second, privity for CDA purposes will exist when the contract stipulates that the contractor will act as a purchasing agent for the government. Third, subcontracting privity will be present when the government circumvents the contractor’s authority to become a mere agent of the government. For example, the Small Business Administration awards an agency a contract under “Program 8(a).”

Summary of Main Points — Become Familiar with the Federal Procurement Market Place &Know the Federal Acquisition Regulations:

Subcontractors generally do not have a direct contractual relationship – privity of contract- with the federal government and therefore have few contractual rights and responsibilities with each other.
FedBizOps has valuable information for potential subcontractors looking to do business with prime contractors. Potential subcontractors should also be familiar with other possible business paths, such as pre-bid conferences for prime contractors listed on various federal agency’s website.
Protect yourself against inappropriate abatement clauses in the main contract, especially when they conflict with other subcontract clauses. Also, make sure that applicable vital provisions, such as those dealing with contract terms, changes, data rights, adjustment of costs and pricing, and government termination rights, are included in the subcontract. This might require the company to hire experienced government contract counsel either inside or outside counsel.
As prime contract awards are often dependent on the quality of the proposed subcontractor’s technical qualifications and past performance; work closely with your prime contractor to ensure they are in order.
Major contractors must ensure that their proposed subcontractors are not excluded or suspended. Subcontractors must also do appropriate due diligence of the prime and any subcontractors that could impact their work performance or reputation.
Subcontractors generally do not have the right to protest. Still, a restricted exception is the possibility to recover the costs of preparing the subcontract proposal when the main contractor prevails in a protest. Subcontractors should hire their own counsel independent of prime contractor counsel in any dispute matter since prime contractor counsel is obligated to represent their client even at the expense of subcontractors.
Subcontractors have limited rights to obtain assistance from government COs when the main contractors do not pay on time. However, the Miller Act on construction projects offers subcontractors extra protection when a payment bond is available. Counsel representing subcontractors must be independent of prime contractor.
Subcontractors who have a dispute with the government generally do not have rights of direct appeal, so if they believe that government action justifies a resolution, they should try to persuade their prime contractor to “sponsor” a claim or include its costs in the main contractor’s complaint. Also, investigate whether one of the rare circumstances of privity exists. These are legal matters for which appropriate counsel should be advising the subcontractor with respect to its legal rights, if any.
Familiarize yourself with FAR Part 49 if your subcontract is terminated to maximize your recovery.

Subcontracting is an excellent way to begin working with the government and a profitable avenue for profitability for any small business; but, make any company desiring to participate in the federal procurement market place must be well informed with regards to the Federal Acquisition Regulations and the Cost Accounting Standards and other rules applicable to government contracts.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

Strategies for Responding to Bid Protests in Government Contracting

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By: Coleman Jackson, Attorney & CPA
October 20, 2021

Suppose your company is an unsuccessful bidder for a government contract or has won an award, and an unsuccessful bidder is protesting your prize. In that case, it is essential to defend your rights vigorously. In the federal market, bid protests are an integral oversight mechanism, ensuring that procurement statutes and regulations carry out federal acquisitions policy goals. Or Suppose a company believes the federal government failed to comply with the terms of a solicitation (i.e. IFB, RFP, RFQ, etc.) or applicable laws or regulations in a procurement transaction. In such instances as these, the company (bidder) must follow strict rules or face losing the right to protest. What is a bid protest? A bid protest is a legal challenge to the government’s actions during the procurement phase, including evaluating bids/proposals and the award of a government contract. The how, when, and where of bid protests are controlled by various laws and regulations.

Bid protests can be brought in different forums and are subject to strict timelines that must be followed appropriately. Whether defending a protest as a successful awardee, or prosecuting a protest as a disappointed bidder, all government contractors must understand the bid protest process to defend their contract awards from protest successfully or vindicate their rights to full and open competition as a protester. First of all, let’s clear up some confusion and doubts about the bid protest process.

Bid Protest Overview

Bid protests are legal challenges brought by bidders against the way the Government has conducted a procurement transaction.

An interested party may protest to the agency, the Government Accountability Office (GAO), or the United States Court of Federal Claims (COFC).

Which venue is best to bring a bid protest will depend upon various facts. Primary considerations include the value of the procurement to your company, the cost of pursuing a protest in the particular venue, whether the protest would be timely in the venue (i.e. a protest that is untimely in the GAO may be timely in the COFC), and whether the protest will involve information that requires a protective order (i.e., competitive communication is limited to the attorneys, and not disclosed to the companies involved). In recent years, most bid protests are filed with the GAO, so in our blog, we will focus on the GAO bid protest process.

GAO has defined the basic standard of its review of a bid protest as follows:“ The evaluation of an offeror’s proposal is a matter within the agency’s discretion. A protester’s mere disagreement with the agency’s judgment in its determination of the relative merit of competing proposals does not establish that the evaluation was unreasonable. While we will not substitute our judgment for that of the agency, we will question the agency’s conclusions where they are inconsistent with the solicitation criteria and applicable procurement statutes and regulations, undocumented, or not reasonably based.”

How many days you have to file a protest will depend the basis for the protest to begin with. In general, if a protest is based on an obvious problem with the solicitation documents, the protest must be filed before the date the bid or proposal must be submitted. The purpose of this rule is to prevent a contractor from sitting on their rights to challenge what they believe to be an unfair solicitation, rolling the dice to see if they win, and then, if unsuccessful, filing a protest.

The time requirements for other protests, such as a challenge to the government’s decision to award the project to another company, will depend on the protest venue. At the GAO, a protest must be filed within ten days after the basis for the protest is known or should have been known. If a debriefing is requested, and the government is required to provide the debriefing (i.e., negotiated procurement under FAR Part 15), then the protest may be filed within ten days after the debriefing.

However, there are benefits to filing the protest even earlier because of automatic stay rule. An automatic stay (i.e., the government is required to withhold award and suspend contract performance) if the protest is filed with the GAO within five days of the offered mandatory debrief date or within ten days of contract award. A stay of performance can be very consequential since it can impact your remedy or ultimate relief. Without auto stay, the contract will continue to be performed, and there may not be any contract requirement left to award to you even if your protest is successful.

Once your protest is filed with the GAO, the agency has 30 days to provide the agency report (AR). The AR will include documents responsive to your protest arguments, including documents requested explicitly in your protest. The AR will consist of a statement by the contracting officer regarding the grounds of the protest and a legal memorandum from the agency’s lawyer. In addition, the AR will show what the agency did during the procurement process, which may bolster the initial protest or provide additional grounds for protest. Sometimes the agency refuses to provide certain requested documents, and the dispute has to be settled by the GAO attorney assigned to the protest.

The agency or an intervening awardee may request that all or part of your protest be dismissed. Such requests by the agency or intervenor are often based upon arguments of timeliness, standing, ripeness, and lack of prejudice. If a request for dismissal is filed, the protestor will have to file a response opposing the bid. If a dismissal request is submitted, it is often before the 30-day deadline for filing the AR. This AR should be reviewed carefully and with skill because it often is a source of very helpful historical information pertaining to the government officials actions in award of government contracts under open and fair competition laws.

Once the AR is provided, the protestor has ten days to file comments responding to the agency’s arguments. If the protestor fails to address any ground of protest in its words, the GAO will deem the omitted environment as abandoned by the protestor. The protestor must be meticulous when marshaling the facts; and the bid protestor must cogently and thoroughly apply relevant government contracting legal principles when challenging government contract awards at the GAO or any other legal forum.

In addition to comments, as I mentioned in pasting before, a protestor often discovers additional grounds of protest upon reviewing the AR. Review the AR right away; because time is of the essence. These different protest grounds have to be filed within ten days of receiving the AR (i.e., within ten days of knowing the basis for the protest ground). The agency will be required to file a supplemental AR in response, and the protestor will have to file additional comments. The process for supplemental protests is truncated (e.g., the GAO may require the supplemental AR to be filed within ten days instead of the 30 days allotted for the initial AR).

The agency may take corrective action at any point in the process. Remedial action by the agency is a recognition that they failed to comply with some part of the procurement process, and they are therefore correcting that mistake. The agency has broad discretion in corrective action, and it often includes a reevaluation of proposals or amendments to the solicitation. If the agency takes corrective action, the GAO will dismiss the portion of the protest related to the corrective action.

The GAO will issue its decision within 100 days of the filing of the protest. The GAO may deny or sustain the protest, in whole or part. If the protest is supported, the GAO will direct the agency to remedy the problem. If the GAO denies a protest, the protestor may refile the protest with the Court of Federal Claims.

Understandably, clients often want to know the likelihood that their protest will be successful. However, the possibility of success or failure is fact-specific to each protest. Moreover, many successful protests are based upon the supplemental protest, which is not available to the protestor until the AR is filed. Statistically, however, the GAO has reported that the effectiveness rate of protests in the last several years is between 42% to 45%. That means nearly half of the protests filed result in the GAO sustaining the protest or the agency taking corrective action to remedy the mistakes cited in the protest.

You should promptly speak with an attorney and counselor if you believe the government has not abided by the terms of a solicitation or applicable government contracting laws and regulations. Timely guidance and evaluation of your potential bid protest are essential to meeting the stringent requirements for protesting government contract awards. This is merely an overview of Strategies for Responding to Bid Protests in Government Contracting; knowledge and skill in government contract law, and proper evaluation of all the facts and circumstances are extremely important when pursuing legal strategies.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

Choice of Entity and Public Contracting

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By: Coleman Jackson, Attorney and Certified Public Accountant
July 01, 2021

As you set out to begin your next public contract, one of your first tasks will be to evaluate the choices in structuring your business. Entity selection is important, as each type of entity carries its own set of legal and tax attributes. Before you consult with your CPA firm and legal counsel, you will need to give some thought to the following questions:

How many owners will we have?
Who will our owners be?
What type of potential liability will exist for the ownership team?
How will the business be financed?
How do we want our business profits to be taxed?
What is our exit strategy?

These are just a few of the questions that should be addressed before you begin to acquire startup capital, initial loan funding or seek teaming opportunities. Choosing the right entity structure for your construction company, for example, depends on many aspects and factors of your business. One of the main concerns for any business is personal liability. Although no entity structure can guarantee exemption from all liabilities, there are ways to protect yourself and your business, based on your company’s needs. In other words, your business structure affects how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability.

You’ll need to choose a business structure before you register your business with the state. Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits.

Choose carefully. While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications.

Consulting with business counselors, attorneys, and accountants can prove helpful.

Generally, there are five main entity types: sole proprietorships, limited liability companies (LLCs), partnerships, S corporations, and C corporations. The most common of these for construction contractors are LLCs, partnerships, S corporations, and C corporations. Below are brief descriptions of these four main types as well as some advantages and disadvantages of each.

Partnerships

In order to have a partnership, you must have more than one owner. Unlike proprietorships, they are separate legal entities apart from their owners. There is no tax rate schedule for partnerships, as they typically do not pay any tax at the entity level, and in a general partnership the income or loss is passed through to the owners on a Schedule K-1. Each general partner has responsibility for the debts of the partnership. Of course you may have both general and limited partnership interests.

Partnerships have a lot of flexibility when it comes to income allocation. Income or loss allocation does not always follow the ownership of the business, as partnership taxation provides some opportunities for special allocations of income, provided the allocation carries ‘economic substance’ within the terms of the tax code. Partners overseeing specific divisions, contracts or tasks could be rewarded with specific allocations of their department’s financial performance.

A partnership is a pass-through entity owned by two or more persons. Partnerships offer the ability to grow the company with each partner assuming less risk than they would as the sole owner of the business. However, there is a loss of control for partners in a partnership since all partners must approve each business decision. A few things to consider before electing the partnership status are:

Advantages:

Flexibility in ownership structure
Collaboration on contracts and moral support from additional owners
Increased ability to raise capital
No double taxation
Reduced financial burden on partners
New 20% deduction for qualified business income possible (owner tax return)

Disadvantages:

Potential disagreements amongst partners
Sharing profits with others
Applicability of self-employment tax
Taxed on the individual level (potential highest rate = 37%)
Lack of limited liability (unless operating as a LLC)

C-corporation

A C-corporation is an independent legal entity that exists separately from the company’s owners. Shareholders (the owners), a board of directors, and officers have control over the corporation, although one person in a C-corp can fulfill all of these roles, so it is possible to create a corporation where you’re in charge of everything.

This being said, with this type of business entity, there are many more regulations and tax laws that the company must comply with. Methods for incorporating, fees, and required forms vary by state.

Advantages:

Owners (shareholders) don’t have personal liability for the business’s debts and liabilities.
C-corporations are eligible for more tax deductions than any other type of business.
C-corporation owners pay lower self-employment taxes.
You have the ability to offer stock options, which can help you raise money in the future.
No restriction on ownership
Separate legal entity from owners
2018 flat tax rate of 21%

Disadvantages:

Income faces double taxation
Tax burden is potentially greater than pass-through entities
No personal tax credits
More expensive to create than sole proprietorships and partnerships (the filing fees required to incorporate a business range from $100 to $500 based on which state you’re in).
C-corporations face double taxation: The company pays taxes on the corporate tax return, and then shareholders pay taxes on dividends on their personal tax returns.
Owners cannot deduct business losses on their personal tax returns.
There are a lot of formalities that corporations have to meet, such as holding board and shareholder meetings, keeping meeting minutes, and creating by laws.

Most small businesses pass over C-corps when deciding how to structure their business, but they can be a good choice as your business grows and you find yourself needing more legal protections. The biggest benefit of a C-corp is limited liability. If someone sues the business, they are limited to taking business assets to cover the judgment—they can’t come after your home, car, or other personal assets.

This being said, corporations are a mixed bag from a tax perspective — there are more tax deductions and fewer self-employment taxes, but there’s the possibility of double taxation if you plan to offer dividends. Owners who invest profits back into the business as opposed to taking dividends are more likely to benefit under a corporate structure.

S-corporation

An S-corporation preserves the limited liability that comes with a C-corporation but is a pass-through entity for tax purposes. This means that, similar to a sole prop or partnership, an S-corp’s profits and losses pass through to the owners’ personal tax returns. There’s no corporate-level taxation for an S-corp.

Advantages:

Owners (shareholders) don’t have personal liability for the business’s debts and liabilities.
No corporate taxation and no double taxation: An S-corp is a pass-through entity, so the government taxes it much like a sole proprietorship or partnership.
Limited liability
No double taxation
New 20% deduction for qualified business income possible (owner tax return)

Disadvantages:

Like C-corporations, S-corporations are more expensive to create than both sole proprietorships and partnerships (requires registration with the state).
There are more limits on issuing stock with S-corps vs. C-corps.
Taxed on the individual level (potential highest rate = 37%)
Limits long-term growth plan

You still need to comply with corporate formalities, like creating bylaws and holding board and shareholder meetings.

In order to organize as an S-corporation or convert your business to an S-corporation, you have to file IRS form 2553. S-corporations can be a good choice for businesses that want a corporate structure but like the tax flexibility of a sole proprietorship or partnership.

LLCs

LLCs have grown in popularity over the recent years because they generally afford the owners with many of the positive attributes of the both the partnership and corporate structures. They are generally flow through entities taxed as partnerships, however, they may make elections moving forward to be taxed as a C Corporation or an S Corporation. The ability to ‘morph’ the LLC into whatever you desire it be for tax purposes had made this an increasing entity selection for business owners.

Regardless of your entity selection, please be sure to consult your professional advisors to insure that your business is protected in case any of its owners desire to exit the business, sell their interest, retire, or die unexpectedly. Think of your teaming opportunities with that next prime or subcontractor and how structure could play an important role in your organization’s success.

Limited liability companies are a popular choice among construction contractors because they provide protection to an owner’s personal assets. All customer or creditor claims against the company are limited to the assets owned by the business. Additional advantages and disadvantages of the LLC structure are:

Advantages:

No restriction on who may own an LLC (dependent on tax structure chosen)
Flexibility to choose between a partnership or S corporation tax structure
LLCs may also be considered single-member LLCs

Disadvantages:

Taxed on the individual level (potential highest rate = 37%)
Not all states recognize LLCs
LLC statutes are not uniform in every state

As you can see, sole props and GPs are light on liability protections, so they expose you to greater legal risk if someone sues your business. But, taxation is simple when you have a sole prop or GP, and you don’t have nearly as many government regulations to comply with. That means more time to do what you love—running your business.

This being said, the simplicity of a sole prop or a partnership makes either of these business entity structures a good starting point for freelancers and consultants, particularly if the industry they’re in brings little legal risk with it.

If your business is in a more litigious industry, on the other hand, such as food service, child care, or professional services, that’s a strong reason to create an LLC or corporation right off the bat. And regardless of industry, as your business grows and more dollars are at stake, that can be the ideal time to “graduate” to an LLC or corporation. What works for a freelancer or hobbyist likely won’t work for someone who is trying to hire employees, bring on additional owners, or expand.

Although it’s certainly possible to change business structures at any point in your business’s journey, some changes are easier to make than others. For instance, it’s relatively simple to convert from a sole prop or partnership to an LLC by filing the right paperwork with your state.

Converting to a corporation, however, is more difficult, particularly if you plan to issue stock. Additionally, converting from a C-corp to an S-corp can bring unexpected taxes. Therefore, before changing your business structure, you’ll want to think through the possible advantages and potential problems associated with doing so and consult a business attorney for professional advice.

Moreover, you’ll want to keep in mind that the IRS places certain limits and deadlines on how often you can change your business’s entity type. Plus, it’s also worth remembering that different government tax plans can change how business entity types are taxed, and this may contribute to how taxes factor into your ultimate decision.

There is a lot of literature available to assist you with this decision, but the experience and guidance of your professional advisors is most helpful in avoiding unforeseen outcomes

All in all, you’ll want to keep the following in mind when deciding among the different types of business entities:

Sole proprietorships and general partnerships are good “starter” entities.

As your business grows and generates more income, you might consider registering as an LLC or corporation.

Think through the pros and cons of each business entity type in terms of legal protection, tax treatment, and government requirements.

Compare the general traits of these business structures, but remember that ownership rules, liability, taxes, and filing requirements for each business structure can vary by state.

https://www.sba.gov/business-guide/launch-your-business/choose-business-structure

Work with a business lawyer and accountant to get specific help for your business.

Ultimately, although there’s not a single best business entity choice for all small businesses, by referring to this guide and consulting legal or financial professionals, you’ll be able to determine which type is right for your business.

If you have any questions on setting up your entity or considerations to make for switching from one entity type to another, please contact us.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432| Portuguese (214) 272-3100

Best Practices for Managing Government Contracts Disputes – Claims Avoidance Techniques

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By: Coleman Jackson, Attorney & Counselor at Law
April 27, 2021

For many businesses, landing a government contract can become a much-welcomed source of steady income. Often snagging a public contract is a big deal; big break and big win! But proper and timely performance of the public contract will be of utmost importance since government agencies and entities will not tolerate any lapses, delays and crummy work. Obviously, all contracts should be handled in a professional manner, but the consequences of breaching a government contract can be even more dire than is the case with private party-to private party contracts. The issue is managing risk, such that a party receives the benefit of its bargain; which is, the essence of contracting. How is a public contractor to manage government contract risk? The ideal strategy is by claims avoidance but that is not always possible. In this blog we review five best practices for managing government contracts.

1. Know the Government: Public Contracts are Complex in terms of scope, requirements, specifications and regulatory rules and policies:

Before entering into a contract with any local, state, or federal governmental agency, a company must first ensure that it truly has the capability to meet the outlined requirements. Oftentimes, a government procurement contract is large, complex and multifaceted. Depending on the scope and complexity of the governmental agency’s demands, some companies simply may not have the physical resources, technological resources, or personnel to perform with precision, core competencies and with the punctuality required. Many companies, although they have years of experience in the private sector, simply do not have the accounting systems and internal controls in place to meet the exacting regulatory accounting standards and audit standards required by the highly regulatory environment of public contract law. In light of the importance of maintaining good relationships with government personnel and the agencies they oversee; it would be unwise to take on more than the company can really handle. Count the costs before bidding on the public contract because a government contract breach can lead to shame, allegations of false claims and other serious financial and even criminal consequences.

One of the trickiest aspects of engaging in government contracting is that there are often quite a few stringent rules and regulations governing the arrangement. These rules usually entail fairly strict compliance mandates, which cannot be taken lightly. Thus, in addition to examining your company’s own strengths and potential shortcomings, it is critical to ensure a full understanding of the legal constraints that will be at play. In many cases, it is a good idea to run some of the more nuanced aspects by legal counsel to ensure there is sufficient understanding and preparation.

As mentioned at the top, governmental agencies will not tolerate delays or disruptions to the contracting process. There could clearly be financial ramifications in the event of a breach, such as fines or penalties. But there is also a good chance that the contract will be rescinded at the time of the mishap or perhaps not renewed for another cycle. And, if either scenario happens, it is quite likely that a company will have a hard time winning another government contract down the line.

Thousands of businesses contract with local, state and federal governmental agencies every single day to help the government to serve its citizenry and carry out very important public functions; such as, building and maintaining roads, bridges, water systems, schools, colleges, broadband internet, libraries and shopping and leisure districts, correctional facilities and camps, parks and entertainment venues and everything in between..

2. Know yourself! Is your company up to the task? That indeed is the first question that any aspiring public contractor should ask of themselves! It is critical that your company know its capabilities before entering into the public contract environment. Sometimes it is easier to see the shortcomings of others than to see our own weaknesses. Your company might want to compensate for these blind tendencies by:

Considering teaming agreements with more experienced players in the government contract market place;
Considering counseling with government contract attorneys;
Considering counseling with accountants and others experienced in government accounting and auditing standards;
Considering business structures with other small, middle size and larger companies that could bring in additional expertise, skills, talents and intelligence.
Once you have examined your organization and structure from top to bottom, you must now turn and take an exacting look at the specific government contract’s scope, specifications and requirements. As I said before, government contracts are not quite like private contracts. First of all, the government is a sovereign. That means, the government writes the laws, enforce the laws and interpret the laws of public contracts. So, the question is this one: How can a public contractor protect itself when contracting with the government? Contract claims avoidance; that’s how! Contract disputes avoidance begins in the contract’s negotiations process and continues throughout contract performance and ends with successful public project completion and file closing. Therefore, make sure you have skilled public contract counsel and advisors on your company’s team from the first salvo of reviewing a request for proposals throughout the performance process through successful completion of the public project. You want to know and appreciate the contract terms, conditions and risk before you sign the contract, while you perform the contract and when you close the contract file. You want to sign the contract before you begin the work. Know what you are getting into before you get into the contract. Watch for blowing sand and government changes throughout the performance stage and be ready to respond within the four corners of the contract with cogent public contract legal principals. These practices alone could minimize the potential of protracted and expensive government procurement disputes. But not all government contract disputes are avoidable.

3. Know when an actionable contract dispute arises. Obvious, not all disputes can be avoided in life; and that is true in the public contract law environment as well. Government contracts, unlike private contracts, can be terminated for the convenience of the government. That simply means that the government can terminate the contract for its convenience, even though, your performance has been perfect. Furthermore, sometimes local, state and federal governmental agencies breach public contracts and doesn’t pay for goods and services provided by individuals and businesses. Federal, State and local public contract laws permit private parties to sue local, state and federal governmental agencies when they breach their contracts or fail to perform. Public contact disputes and claims are an exception to the rule of sovereign immunity. But in order to preserve your rights and pursue your rights against the government, you must be able to recognize that a breach of contract has occurred since every disagreement that might develop during the course of performance of a contract does not satisfy the legal definition of a breach of contract. The breach must diminish your bargain; it must somehow dampen or poor shade on the bargained for benefit. Knowing the various types of breach of contract cognizable or actionable in public contract law could be helpful to you:

The four main categories of public contract breach are as follows:

a. Material Breach of Contract

A material breach occurs when one party receives significantly less benefit or a significantly different result than what was specified in the contract. Material breaches can include a failure to perform the obligations and conditions within the four corners of the contract or a failure to perform contracted obligations timely. When a material breach occurs, the other party may pursue damages related to the breach and both its direct and indirect consequences.

b. Minor Breach of Contract

The minor breach of contract is also sometimes called a Partial Breach of Contract or an Immaterial Breach of Contract, a Minor Breach of Contract refers to situations where the deliverable of the contract was ultimately received by the other party, but the party in breach failed to fulfill some part of their obligation. In such cases, the party that suffered the breach may only be able to pursue a legal remedy if they can prove that the breach resulted in financial losses. A late delivery, for example, may not have a remedy if the breached party cannot show that the delay resulted in financial consequences.

c. Anticipatory Breach of Contract

A breach need not actually occur for the responsible party to be liable. In the case of an Anticipatory Breach, an actual breach has not yet occurred, but one of the parties has indicated that they will not fulfill their obligations under the contract. This can occur if the breaching party explicitly notifies the other party that they will not fulfill their obligations, but such a claim could also be based on actions that indicate the parties does not intend to or will not be able to deliver. I remind you again that in public contract law, the government can terminate a contract for the convenience of the government. Its extremely important that government contractors study this public contract clause, the changes order clause and scope clause of public contracts very carefully.

d. Actual Breach of Contract

An Actual Breach of Contract refers to a breach that has already occurred, meaning the breaching party has either refused to fulfill their obligations by the due date or they have performed their duties incompletely or improperly.

4. What can a public contractor do when a breach occurs? When a breach of public contract does occur, there are several types of remedies available to either party. These include compensatory damages to address direct economic losses stemming from the breach, and consequential losses, which are indirect losses that go beyond the value of the contract itself but are the result of the breach. Although below I am mentioning only process and remedy for breach of federal contracts, similar processes and rules apply to State and local public contracts:

a. Contractor Must Pursue Administrative Remedies

The CDA requires that a private contractor follow specific steps. The first is to seek a decision on the contract dispute from an official — called the contracting officer – -in charge of administering the contract. The claims of both the private contractor and the government agency that is the party to the contract are subject to the contracting officer’s decision. If the private contractor is not satisfied with the decision, she moves to the next step and has two choices.

b. Appeal to the Board of Appeals

The contractor can continue to seek administrative relief or can file a lawsuit against the government. The first of these options is accomplished by appealing the contracting officer’s decision to the agency board of appeals, where it is reviewed de novo; that means the board will decide the issue without reference to the conclusions or assumptions made by the hearing officer. If the private contractor is unsatisfied with the decision of the appeals board, he can appeal to the United States Court of Appeals for the Federal Circuit.

c. United States Court of Federal Claims

The second avenue for a private contractor unsatisfied with the contracting officer’s decision is to seek competent counsel and file lawsuit directly in the United States Court of Federal Claims. This will begin the civil litigation process, which requires attorney representation. An adverse decision by the court can be appealed by the contractor to the United States Court of Appeals for the Federal Circuit. The appellate court will review the trial court’s rulings de novo.

5. Business Decisions: Don’t forget pursuing government contracts is a business decision. The decision as to whether to pursue a government contracts claims when claims avoidance fail is also an important business decision. Cost considerations and other business impacts must be considered before deciding whether to pursuelegal remedies in breach of public contract claims. The contractor must weigh the probability of success, the probable amount of the damages awarded and the expenses involved in pursuing the claim when deciding to sue the government for breach of contract. Generally, pursuing relief through administrative remedies is significantly cheaper than litigation in court. On the other hand, a case before a court involves an impartial judicial process separate and independent from the agency, which may be worth the extra expense to some contractors.

As I have said before the government is not quite like a private party. Whenever a contractor is dealing with the government, this fact should be front of mind. For example, in Texas, direct and indirect limitations insuing and obtaining remedies and judgments against the State of Texas and local governmental agencies in Texas must always be considered in government contracts litigation matters against Texas and its agencies and local governmental entities in Texas.

The ability to bring a claim against a governmental entity in Texas, the scope of the public contract claim and extent of recovery could be drastically impacted by various well-established legal principles in Texas law. Examples of these legal principles and legal limitations are as follows:

a right of action for a county, incorporated city or town is not limited by most statutes of limitation under Texas law (TEX. CIV. PRAC. & REM. CODE §16.061)
damages recoverable from a governmental entity may be limited to exclude damages other than direct actual damages ( Gov’t Code Ann. §2260-001)
any action against a county must be brought in that county, and
Court of jurisdiction may be limited to the Courts situs in Austin, Texas.

However, the most important, and most litigated, restriction on enforcing claims against the State of Texas, its agencies and local governmental entities is that of sovereign immunity.

A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right against the authority that makes the law on which the right depends.

The Texas Constitution contains waivers of immunity that are effective irrespective of any statutory waivers. These constitutional waivers are self-executing if they provide “a sufficient rule by means of which the right given may be enjoyed and protected, or the duty imposed may be enforced; and it is not self-executing when it merely indicates principles, without laying down rules by means of which these principles may be given the force of law.” Examples of these self-executing waivers are the waivers that relate to the Texas Constitution’s Takings Clause and that relating to the Bill of Rights for claims alleging a taking, these claims will not be permitted if they are breach of contract claims disguised as takings claims in order to avoid immunity. For claims alleging a violation of the Bill of Rights, this waiver exists only for the purpose of holding acts contrary to the Bill of Rights to be void, thereby permitting equitable relief but providing no private right of action for damages.

Contractors must perform the due diligence to make sure the government officials with whom they are dealing with have the authority to bind the government. This fact is true whether the public contract is a federal, state or local contract. Again, claims avoidance begins with the request for proposal, continues all through the performance stage and ends with successful contract completion and successful project file closing.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

A GOVERNMENT CONTRACTS LAWYER’S OVERVIEW OF BID PROTEST

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By: Coleman Jackson, Attorney & CPA
March 12, 2021

What is a bid protest?

A bid protest is a challenge to the award or proposed award of a contract for the procurement of goods and services or a challenge to the terms of a solicitation for such a contract.

What kinds of bid protests can be filed at GAO?

Protests may be filed against procurement actions by federal government agencies.

What kinds of protests cannot be filed at GAO?

Protests may not be filed against procurement actions by non federal government agencies, such as state, local, or foreign governments, or actions by certain exempted federal agencies, such as the Postal Service. For more information, see Bid Protest Regulations (4 C.F.R. § 21.5) and Bid Protests at GAO: A Descriptive Guide.

Who can file a bid protest at GAO?

Only “interested parties” may file protests. In the case of a solicitation challenge, an interested party is generally a potential bidder for the contract. In the case of a contract award challenge, an interested party is generally an actual bidder that did not win the contract. In addition, other factors, such as the bidder’s standing in the competition and the nature of the issues raised may affect whether it qualifies as an interested party. For more information, see Bid Protest Regulations (4 C.F.R. § 21.0(a)) and Bid Protests at GAO: A Descriptive Guide.

When must a protest be filed?

In general, a protest challenging the terms of a solicitation must be filed before the time for receipt of initial proposals. A protest challenging the award of a contract must be filed within 10 days of when a protester knows or should have known of the basis of the protest (a special case applies where, under certain circumstances, the protester receives a required debriefing). Please be aware that the regulations regarding the timely filing of protests depend on all facts and circumstances of each case and are strictly enforced. For more information, see Protest Regulations (4 C.F.R. § 21.2) and Bid Protests at GAO: A Descriptive Guide.

How is time calculated for filing deadlines?

“Days,” under GAO’s regulations, means “calendar days.” In the event a deadline falls on a weekend, federal holiday, or other day when GAO is closed, the deadline is extended to the next business day. For more information, see Bid Protest Regulations (4 C.F.R. § 21.0(e)) and Bid Protests at GAO: A Descriptive Guide.

I was awarded a contract and was told that the award has been protested – what must I do, and what am I allowed to do?

Parties that have been awarded a contract are permitted to participate in a protest as an intervenor. They are not required to do so, however, as it is the agency’s responsibility to respond to the protest and defend the award of the contract.

Are employee unions or representatives allowed to file protests or participate as intervenors?

Government employees and their representatives may participate as protesters and intervenors in protests involving competitions conducted under Office of Management and Budget Circular A-76. For more information, see Bid Protest Regulations (4 C.F.R. § 21.0(a)(2), (button) (2)) and Bid Protests at GAO: A Descriptive Guide.

Do I need an attorney to file a protest or participate as an intervenor?

No. Parties may file a protest or participate as an intervenor without being represented by an attorney. However, only attorneys are permitted to have access to material subject to a protective order. Bid protest rules, procedures and practices are governed by the rule of law(The Federal Acquisition Regulations (FAR) for federal contracts); therefore, an understanding of relevant statutes, regulations and case law would be extremely helpful for framing and presenting a credible bid protest.

Federal Bid Protest Jurisdiction and Filing Deadlines:

This reference lays out the filing deadlines, jurisdictional requirements, stay rules, and appeal processes for each place a bid protest can be filed: the Government Accountability Office,the U.S. Court of Federal Claims, and the procuring agency.

The rules differ by type of procurement. Chart 1 lists the rules for protesting contracts awarded under FAR Parts 13, 14, and 15. Chart 2 lists the rules for protesting task and delivery orders issued under most IDIQ contracts. Chart 3 lists the special rules that apply to protests of task orders issued under the General Service Administration’s Federal Supply Schedule contracts.

GAO Procedures:

Over the years, GAO’s decisions on federal contract awards have created a uniform body of law applicable to the federal procurement process upon which the Congress, the courts, agencies, and the public all rely.

Automatic Stay?

For pre-award protests, the agency must suspend award of the contract once it receives notice from GAO that a protest has been filed. FAR 33.104(b).For post-award protests, the agency must suspend performance if it receives notice of the protest from GAO within 10 days after contract award or within 5 days after the debriefing date offered to the protester for requested and required debriefings under FAR 15.505 or 15.506, whichever is later. FAR 33.104(c). (Note: Debriefings are not “required” for procurements under FAR Part 13 (FAR 13.106-3(d)), or Part 14 (except 14.5 (two-step sealed bidding) FAR 14.503-1(g))).In DoD procurements, for debriefings requested and required under FAR 15.506(d), contracting officers must provide an opportunity for unsuccessful offer or to submit additional questions within 2 business days of receiving a debriefing. The agency then has 5 business days to respond in writing. See10 U.S.C. § 2305(b)(5). The 5-day filing period to trigger an automatic stay does not start until after the agency delivers the written responses. See31 U.S.C. § 3553(d)(4).

Jurisdictional Timelines:

A pre-award protest based on alleged improprieties in the RFP that are apparent prior to receipt of proposals must be filed prior to the time set for receipt of proposals. Improprieties subsequently incorporated into the solicitation must be protested by the next closing time for receipt of proposals following incorporation. See 4 C.F.R. § 21.2(a)(1). Where a basis for challenging the terms of a solicitation does not arise until after proposal submission, a protest is due 10 days after the basis of protest is known or should have been known. See 4 C.F.R. § 21.2(a).
An offer or excluded from the competitive range before award must request a debriefing in writing within 3 days after receipt of notice of exclusion to obtain a “required” debriefing. See FAR 15.505(a)(1). The offer or then must file its protest not later than 10 days after the date on which the debriefing is held. See 4 C.F.R. § 21.2(a)(2).
For competitions where a debriefing is requested and required, post-award protests must be filed not later than 10 days after the debriefing is held, but not before the offered debriefing date. See 4 C.F.R. § 21.2(a)(2), for DoD, 10 days run from when DoD answers timely “additional questions.”
For all other protests not covered above, the protester must file its protest within 10 days after the basis of protest is known or should have been known, whichever is earlier. See 4 C.F.R. § 21.2(a)(2).

Subject Matter Jurisdiction Limits:

Only an “interested party” may protest improprieties in an RFP or award or termination of a federal contract. See 4 C.F.R. § 21.1(a). An “interested party” is an actual or prospective offer or whose direct economic interest would be affected by the award of a contract or the failure to award a contract. See 4 C.F.R. § 21.0(a)(1).

Note: An alleged Procurement Integrity Act violation must be brought to the Agency’s attention within 14 days of discovery, or it cannot be raised in a GAO protest. See FAR 33.102(f); 41 U.S.C. § 2106.

Process for Appealing Unsuccessful Decision:

A Request for Reconsideration may be filed at GAO not later than 10 days after the basis for reconsideration is known or should have been known, whichever is earlier. See 4 C.F.R. § 21.14.

A protester may “appeal” a GAO decision to the Court of Federal Claims by filing suit alleging that the agency’s procurement was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law” in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). 28 U.S.C. § 1491. There is no strict timeline for filing such an “appeal.”

A contractor may also file suit in the Court of Federal Claims alleging that an Agency’s proposed or actual corrective action, even if recommended or approved by GAO, is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

Readers interested in following our blogs on government contract law, such as, relevant federal, state and local public contract decisions should visit our website at www.cjacksonlaw.com where we post our most recent blogs. Our blogs in government contracting covers relevant decisions issued by the GOA, case decisions issued by the Court of Federal Claims and various state court decisions on public contract law. Readers can also subscribe to our taxation, government contract litigation and immigration law Legal Thoughts Podcast where ever they listen to their podcast.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

A LAWYER’S OVERVIEW OF GOVERNMENT PROCUREMENT CONTRACTS

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By: Coleman Jackson, Attorney & Certified Public Accountant
March 06, 2021

NOTE: This is merely and overview of government procurement contracts and just scratch the surface of this complex and intricate area of contract law. This area of law is also known as Public Contract Law.

General Concepts: Each year, the U.S. federal government and its various agencies procure more than $300 billion of everything in more than 4,000 categories, ranging from airplanes to zippers. For many products and services, the U.S. government is the biggest buyer on the planet.

In 2020, the federal government spent more than $6.5 trillion, that is, spending exceeded collections by about $3.3 trillion resulting in a deficit. If broken out in terms of minutes, it would mean that the government spent more than $9 million every minute. However, a more accurate realization is that Covid-19 impacted the 2020 budget; also, budgets and government spending is spread out throughout the year, and high spending periods will fluctuate between agencies and will be impacted by health factors and other unknowns. Typically speaking, one of the biggest spending periods is in the months of August and September, as government agencies that have extra funds available (through the allocation from Congress) need to spend the money or risk losing it. Any money not spent goes back to the U.S. Treasury. Note: The 2020 fiscal year ended on September 30, 2020, and the new fiscal year started on October 1, 2020.

Another important thing to consider is that the federal government is not just one buyer. It is a collection of tens of thousands of buyers that purchase everything from nuts and bolts, and paperclips, to aircraft carriers.

With so many needs – from the simple, to the complex, to the classified – government buyers will order things in bulk or small, one-offs. Other times buyers will say they know they need certain products or services, but they do not know how much, how often, or when their next order will come. This creates a unique feature within government contracting that is not present in the private sector resulting in the use of different contract types or contract vehicles to accomplish the governments requirement needs.

Contract vehicles are ways in which a government agency or department can buy what it needs. They all have different rules. Government agencies are often looking for contract vehicles that will get them what they need, as quickly as possible and at the best cost point as possible. One of the most commonly known to businesses is the General Services Administration (GSA) Schedule. The GSA Schedule is a listing of products and services with pricing. Government buyers use the GSA to buy a wide variety of things, and businesses work hard to get on the GSA Schedule to make sure their products and services are readily available at the fingertips of government buyers.

U.S. government is also an attractive customer for a few other reasons:

The government makes its needs publicly known through such media as the Commerce Business Daily, a publication listing numerous public contracting opportunities. (You can find this publication at many large public libraries.) This is quite different from most markets, wheresuppliers have to thoroughly research to identify the purchasers needs.
Government sales are conducted in an open environment where there are many rules to ensure that the process is fair.
The government frequently buys in very large volumes and overlong periods of time. That kind of customer can provide a solid foundation for growing your company.
Laws set aside all or part of many contracts for women-owned businesses, small businesses, minority-owned businesses, and other firms the government identifies as disadvantaged historically and that the government desires to equalize, support and include in the economic growth of the country.

Having the U.S. government as a customer can give a business a stamp of approval. If you can meet the government’s standards for quality, price and service, odds are good you can meet other customers’ requirements as well.

But there are downsides to selling to the government. It can be hard to find the proper purchasing agent among the thousands employed by various branches and agencies of the federal government. In addition, the rules and paperwork are daunting. The good news is that there are many sources of help. The SBA’s website is one good place to start looking for help selling to the government. Agencies like the U.S. Postal Service, the Department of Interior and the Army, as well as many others, send out solicitations to businesses that are on their mailing lists. To find out how to get on the lists, contact the agency you’re interested in.

And don’t restrict yourself to selling to the federal government. State and local governmental entities, including cities, counties, school districts and others, actually purchase more goods and services than the federal government. There are more of them and they are smaller, but these government customers can provide alternative tracks to growth that are just as viable as the opportunities in Washington, DC.

You can sidestep many of the hassles of winning a government contract if you subcontract with the main or prime contractor. Prime contractors, ranging from large defense contractors to companies that may be smaller than yours, do most of the work to land the government job. Then they may hire you to fulfill all or part of it. Find prime contractors by perusing many of the same resources you would to sell directly to the government. Many government contracts require small disadvantaged businesses based on race, gender, disabilities, veteran set-asides.

Definition: Agreements that outline business transactions between companies and government entities. Government contracting is the process where businesses provide products or services to federal, state, and local governmental agencies and entities.

An Overview of Government Contract Law:

The government of the United States buys more products and services than any other entity worldwide. The United States Department of Defense (DOD) makes up a large portion of the country’s purchases.

There are three main differences between government purchases and those of the private consumer:

Government contracts are highly regulated to ensure the most competition, guarantee proper use of government funds, and promote a healthy economy.
Government contracts include clauses, like the “changes” or “default” clauses, that allow the government to enact special rights within the contract like being able to change the terms of the contract or even end it.
Government contracts follow the procedures laid out in the Contract Disputes Act should there be any claims or legal action, because the government is a sovereign entity.

The Competition in Contracting Act and Federal Acquisition Streamlining Act are both important laws that regulate government contracts.

The Federal Acquisition Regulation (FAR) controls acquisitions made by the United States Executive Branch, and it is outlined in title 48 of chapter one in the Code of Federal Regulations parts 1 through 53.

Agencies like the DOD, NASA, and the General Services Administration (GSA) can create supplements to the Federal Acquisition Regulation. Those three specific agencies actually amended the FAR in pursuant to the Administrative Procedure Act.

The United States Government can only be contract-bound by an authorized contracting officer (or CO) who has been issued a warrant by the executive agency. These contract warrants (or certificates of appointment) can be held to a specific amount or allowed an unlimited amount of money.

A contract officer is authorized to grant, manage, or terminate a government contract. CO’s play a pivoted and major role in government procurement law.

The Contract Disputes Act (CAS)govern legal issues regarding government procurement contract issues and disputes which must first be submitted to a contract officer for resolution.

Once the contract officer makes a decision regarding the legal claim, the complaining entity represented in the contract can appeal the decision with the United States Court of Federal Claims (CFC) or a board of contract appeals. Note there must be privity of contract in government contract disputes. Typically, subcontractors cannot file a complaint under CAS.

The claim can then move on to be appealed before the Court of Appeals of the United States for the Federal Circuit, and even eventually to the Supreme Court.

Any company that sells its products or services to other business entities or nonprofits could probably also sell to the government.

The United States Government can make a great customer or client because of the following:

Government needs are easy to see through publications like Commerce Business Daily.
Rules and regulations ensure fair trading practices.
Government purchases are usually large and long term, providing a reliable income for the business.
As I mentioned before, contracts are set aside for businesses owned by minorities and women, as well as small businesses.
Government business will give your company a good reputation as it means that your products or services meet high standards.

An Overview of Some Difficulties of Government Contracting:

Conducting business with the government can also be very difficult as it can be tough to find the right channels for marketing your company with so many employees throughout different branches. They also require certain standards in terms of bookkeeping, record keeping, cost accounting and overall compliance cost accounting standards and government accounting principles.

Moreover, government contracts are typically subject to review and exacting audit compliance procedures and examination.

Bottom line is government contracts are subject to detailed paperwork where government contractors must comply withdetailed regulations from the bid process through completion of the contract. Invoices for payment must often be certified under the penalty of perjury. These requirements can also be a bit overwhelming as a business owner new to the government procurement procedures. Thankfully, there are lots of options for assistance.

If you’re interested in working with a particular federal government agency, like the Postal Service or the DOD, you can contact that particular agency and get your business on their mailing list.

The federal government isn’t the only option, state agencies and local entities, like school districts, also make great customers.

Smaller, non-federal agencies have more opportunities for trading and, even though they are smaller, they can offer just as much potential for growing your company as working with the federal government would.

Overview of Some Benefits of Government Contracting

Government contracts are a tremendous financial opportunity for small businesses.

The U.S. government is the largest customer in the world. It buys all types of products and services — in both large and small quantities — and it’s required by law to consider buying from small businesses.

The government wants to buy from small businesses for several reasons, including:

To ensure that large businesses don’t “muscle out” small businesses
To gain access to the new ideas that small businesses provide
To support small businesses as engines of economic development and job creation
To offer opportunities to disadvantaged socio-economic groups

How it all works:

The process of requesting proposals, evaluating bids, and awarding contracts should take place on a level playing field. The government should consider a bid from any qualified business.

Set-aside and sole-source contracts:

Federal agencies must publicly list their contract opportunities. Some of these contracts are set aside exclusively for small businesses and historically disadvantaged businesses based on race, gender, disabilities or other factors.

In some cases, these so-called set-aside contracts might consist of certain types of tasks on larger contracts. In others, entire contracts may be reserved for small businesses or historically disadvantaged businesses. When a contract is set-aside for one specific small business, it’s called a sole-source contract.

The Small Business Administration (SBA’s) role in Government Contracting:

The SBA works with federal agencies in order to award approximately 23 percent of prime government contract dollars to eligible small businesses. It also offers counseling and help to small business contractors.

The United States Government is the single largest procurer of goods and services in the world, and the Department of Defense (DOD) accounts for the lion’s share of federal acquisitions. Three major characteristics distinguish Government acquisitions from private sector contracts. First, Government contracts are subject to a myriad of statutes, regulations, and policies which encourage competition to the maximum extent practicable, ensure proper spending of taxpayer money, and advance socioeconomic goals. Second, Government contracts contain mandatory clauses which afford the Government special contractual rights, including the right to unilaterally change contract terms and conditions or terminate the contract. The most important clauses are the “Scope Clause, “Changes” clause, the “Termination for Convenience” clause, and the “Default” clause. Third, due to the Government’s special status as a sovereign entity, claims and litigation follow the unique procedures of the Contract Disputes Act. It is critical that Contractors; especially small businesses who are new in government procurement, to be fully knowledgeable of how the “Payment” clause works because long delays in payment could cause budgetary difficulties and performance issues to the naïve.

Government contracts are subject to several statutes, including the Competition in Contracting Act and the Federal Acquisition Streamlining Act. In addition to statutes, there are a multitude of regulations which govern acquisitions by executive branch agencies. Foremost among these is the Federal Acquisition Regulation (FAR), which is codified in Parts 1 through 53 of Title 48, Chapter 1 of the Code of Federal Regulations. Executive branch agencies may issue their own regulatory supplements to the FAR, such as the Defense Federal Acquisition Regulation Supplement (DFARS). The FAR is amended pursuant to the Administrative Procedure Act, with proposed changes issued jointly by the DOD, the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA), in coordination with the FAR Council.

Only Contracting Officers have the authority to contractually bind the United States Government. This authority is vested in the executive agency, which then delegates this authority by issuing a certificate of appointment or “warrant.” The warrant provides signature authority up to a specified amount of money, or it can be an unlimited warrant. Contracting Officers have the authority to award, administer, and terminate Government contracts.

Overview of Government Contract Dispute Resolution”

Government contract claims are subject to the Contract Disputes Act, which requires the claim to be presented first to the Contracting Officer (“CO”). After the Contracting Officer’s Final Decision or deemed denial, the claim may be appealed to either the United States Court of Federal Claims (CFC) or to the appropriate Board of Contract Appeals. The forum to file the law suit challenging the CO’s decision is chosen by the contractor. Note that the contractor does not have file suit within the administrative process; but the Board Judges are government procurement experts who deal exclusively with government procurement contract disputes; whereas, the Judges on the Court of Federal Claims may not have government procurement experience and may handle all kinds of complaints filed against the federal government. Resolution of federal procurement disputes by the Board process could likely be quicker as well. Numerous issues are involved in the contractor’s decision of which forum to choose to litigate their CAS claim. Whether CAS litigation occur in the Court of Federal Claims or in one of the Boards of Appeal, after trial on the merits in either venue, the tribunal decision may be appealed to the United States Court of Appeals for the Federal Circuit, and finally to the Supreme Court. It is very important to note that the Court of Federal Claims has the exclusive authority to hear bid protests, which are challenges to an award, proposed award, or terms of a solicitation of a federal contract. The Boards do not have any authority to hear bid protest or any other none-CAS matters.

What are Some of the Different Types of Government Procurement Contracts?

Government contracts generally fall under a few different categories, each of which involves different requirements and varying risk to the contractor. Understanding the type of government contract, you’re competing for can help give you a better sense of what to expect, the risk involved and how to put together and negotiate a more compelling and competitive proposal. To give a brief overview, we’ve laid out the top four most common types of government procurement contracts and what they entail below:

1. Fixed-Price Contracts

Fixed-price contracts are just that — they ask contractors to submit a bid to complete a project under a predetermined price (and often within the bounds of a target price). They are not subject to any type of adjustment unless certain provisions (such as changes in the contract, pricing, or defective pricing) are included in the original agreement. Contract price can sometimes be renegotiated through different contract clauses (depending on the variety of fixed-price contract in question), but these bids will be low-risk if the government and contractor carefully communicate on a reasonable price. The risk inherent to fixed-price contracts will increase if deliverables, standards and other measures are unclear or if the contractor must execute custom development with a yet-to-be completed solution. All federal agencies use fixed-price contracts and they’re the most common type of contract requested at a state and local level.

In Fixed-Price contracts, the contractor is paid a set fee for their goods or services, regardless of incurred costs. Accurately planning and forecasting your expenditure (in terms of time, available personnel, expertise and capital) is absolutely vital to ensuring that you see a positive return on your investment once you’ve won a bid. While some degree of risk may be present, these contracts provide great profit opportunities for successful contracts that are well executed. These contracts can also be dangerous for the naïve or businesses who are new or unfamiliar with government procurement contract procedures, policies, regulations and so forth. Silent clauses and provisions could be applicable to the contract.

2. Cost-Reimbursement and Cost-Plus Contracts

These types of contracts allow a contractor to seek reimbursement for incurred costs up to a prescribed allowance. Usually, costs will be estimated upfront to establish a ceiling that a contractor cannot exceed without first gaining approval. As long as incurred costs do not exceed the stipulated maximum, then a contractor can seek reimbursement for any justified expenses as they fulfill the contract.

This kind of contracts are typically used when there are uncertainties or contingencies involved in a proposal that cannot be estimated upfront with complete accuracy. Examples of agencies that use these types of government contracts include the Federal Transit Administration, National Weather Services and US Department of Defense.

Cost-plus contracts are often more concerned with the final quality of a project rather than cost (an example of this type of project would be ones executed in support of United States space and satellite programs). Because there is less built-in incentive to be efficient, these types of contracts usually require closer oversight to ensure maximum efficiency and thrift. The contract itself can be supplemented with additional award or incentive fees to help encourage efficiency, but designing and implementing these programs also requires additional contract administration. While these contracts are often lower risk than Fixed-Price contracts, the profit margins may also be lower and bidding requires that you offer competitive pricing (i.e. low rates) in order to win. Contractors must be very careful when bidding on cost-reimbursement and cost-plus contracts because the potential to bid too low can be damaging. This is particularly a danger that the naïve or unsophisticated small business could face.

3. Time-and-Materials Contracts (T&M)

Time-and-materials contracts are a cross between fixed-price and cost-reimbursement contracts and often require the government to shoulder more risk than the contractor (making them a less popular option for government agencies). Like cost-reimbursement and cost-plus contracts, T&M contracts are only used when it’s not possible to nail down an accurate cost or timeline estimate for a project at the time when a proposal is submitted. The government is basically paying for your services by the hour, including your fees and profit, so competitive pricing is key to winning and net profits are often (but not always) lower.

4. Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts

IDIQ contracts are often used to supplement or amend fixed-price or cost-reimbursement contracts in order to provide flexibility with regard to specific supplies, services or aspects of a project required by the government. In contrast to other contract types, IDIQs allow the government contracting agency to “down select” multiple entities that will compete for future break-out contracts (often called “task orders”) under the umbrella of the main contract. This results in the contracting agency receiving bids from the pool of awardees for each follow-up task order, which theoretically provides them with the best possible value, flexibility and service. It also streamlines the process for issuing, awarding and executing task orders in the event of a national emergency.

The umbrella, or main contract, usually runs for a period of five to ten years, during which time the individual task orders are announced on an as-needed basis. Typical response times required for down selected entities range from a few days to a month or more, depending on the urgency of the requirement. In extreme cases, the government can ask for a response on the very same day a task order is issued. These responses are purely pricing requests for vendor equipment to aid first responders in a natural or man-made disaster, such as supplying temporary lighting and generators.

IDIQs often specify that a contractor supply a minimum quantity of suppliers and services and agree to a fixed timeline and maximum price ceiling for the contract tasks. They also ask contractors to identify a few different consultants and suppliers that they might leverage for a task and submit these names as part of the initial bid. This can help the government streamline the contracting process by limiting their decision process to a few pre-approved options for each task.

Awards are given out in base year period intervals for each task order (usually 1 to 5 years) and are eligible for renewal after the base period concludes. At the time of renewal, each task order can be “re-competed” for by the incumbent contractor and those previously down selected under the umbrella contract. For contract renewals, responding to specific task orders is not required.

This has been a general overview of government procurement procedures, practices and legal principles. This is a complicated area of law and this brief presentation does not attempt to cover the breath of this legal area in any respect. Public Contract Law

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

Consequences to Employers Who Hire Undocumented Workers

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September 16, 2016
By: Coleman Jackson, Attorney

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Immigration law imposes certain hiring requirements on employers under the Immigration and Nationality Act (INA) section 274A. The law requires every employer to maintain up-to-date Form I-9 demonstrating that they are in compliance with their responsibility to ensure that workers hired or recruited are authorized to lawfully work in the United States. Hiring undocumented workers is illegal in the United States.

Violations of these hiring requirements could lead to civil fines, criminal prosecution; debarment from government procurement contracts, and possibly violation of anti-discrimination laws which prohibit discrimination against workers based on nationality.

In addition to the legal jeopardy employers face who hire undocumented workers, from a practical perspective, publicly disclosed Form I-9 audit investigation information gives competitors a wealth of information, some of it quite proprietary and quite often this publicly disclosed I-9 investigation information is used by competitors to poach customers or otherwise secure competitive commercial advantage over companies suspected of hiring undocumented workers. Competitive disadvantage is a very real possibility for an employer being investigated by Immigration Customs Enforcement suspected of hiring undocumented workers.

Companies who rely on government procurement contracts as a main stay of their revenue stream, also- in the real world- has an awful lot to lose when hiring undocumented workers. Government contract violators can be debarred from any future participation in government procurement which could mean bankruptcy for the offending government contractor.

So, from a real world perspective, the biggest dangers of non-compliance with immigration employment laws governing hiring undocumented workers under current U.S. Government immigration enforcement practices are (a) debarment of government contractors and (b) loss of competitive advantage due to disclosure of private company information to competitors and disparagement in the public eye.

For the last few years, criminal penalties don’t seem to be the weapon of choice in enforcement of Form I-9 regulations. But this could change!

Over the last few years, civil money penalties have been the legal weapon used with regularity to enforce Form I-9 prohibitions against employers hiring or continuing to employ a person, or recruiting or referring for a fee a person, knowing that the person is not authorized to work in the United States are as follows:

Civil Violations	First Offense		Second Offense		Third Offense
	Minimum	Maximum	Minimum	Maximum	Minimum	Maximum
Hiring or continuing to employ a person, or recruiting or referring for a fee, knowing that the person is not authorized to work in the United States.	$375 for each undocumented worker	$3,200 for each undocumented worker	$3,200 for each undocumented worker	$6,500 for each undocumented worker	$4,300 for each undocumented worker	$16,000 for each undocumented worker

Employers desiring to expand its work force by use of foreign labor need to make all efforts to do so legally by filing proper immigration petitions with the Department of Homeland Security and obtaining certifications from the Department of Labor (when required). Under current immigration laws, there are regulations and procedures by which an employer can legally hire temporary and permanent skilled and unskilled foreign workers. Employers can pursue these processes with counsel of an immigration attorney. Finally, employers should annually review their Form I-9 practices and policies under the watchful eye of an immigration lawyer to ensure compliance with employment immigration laws against hiring, recruiting or continuing to employ undocumented workers to limit or minimize their exposure to the civil, criminal, public shame, and competitive disadvantage risks we discuss in this blog.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432