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CBCA further limits the Federal Circuit’s decision in Maropakis

On January 5, 2016, the Civilian Board of Contract Appeals (CBCA) issued a decision that is another in a line of decisions that erodes the Federal Circuit’s holding in M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323 (Fed. Cir. 2010). In Maropakis, the Federal Circuit held that certain contractor defenses to government claims are actually contractor claims under the Contract Disputes Act’s (CDA), meaning they must first be submitted to the contracting officer for decision and cannot be raised for the first time in litigation. Since that decision, both the Court of Federal Claims (COFC) and the boards of contract appeals have narrowed the scope of the Federal Circuit’s decision in Maropakis. See, e.g., Total Eng’g, Inc. v. United States, 120 Fed. Cl. 10 (2015) (The CDA does not require the contractor to jump through such an extra hoop and refile its defense to a government claim as a so-called contractor’s ‘claim’ where it is not seeking any separate monetary relief or contract adjustment.). For more information on the Total Engineering case, see our previous post here.

Most recently, in Jane Mobley Assoc., Inc., v. Gen. Serv. Admin., CBCA 2878, 2016 WL 73878, the CBCA explained the difference between an affirmative CDA claim and a defense to a government claim:

An affirmative CDA claim is an attempt to modify or adjust the contract to counter the liquidated damages assessment (e.g., compensable time extensions as a result of government delays). A factual defense to a liquidated damages assessment merely serves to attack the assessment itself (e.g., the government’s assessment was incorrect because the delay was excused as a result of government delays). Plainly stated, a CDA claim seeks affirmative relief under the contract through a contract adjustment; a factual defense only attempts to reduce or eliminate the liquidated damages assessment.
Id. (emphasis original) (citations omitted).

In distinguishing (and limiting) Maropakis, the CBCA stated:

In the CDA context, if we were to apply the rule of Maropakis to any defense raised by a contractor in response to a government claim that is not in the nature of an adjustment of contract terms or not seeking separate monetary relief, the “drastic consequence” could well be that the contractor’s appeal is never able to be heard on the merits. This is contrary to the intent and purpose of the CDA.
Id. (emphasis original).

This holding, and the steady departure from Maropakis, is beneficial for contractors because it promotes efficient adjudication in defending against government claims. Nevertheless, contractors should remain cognizant of the Federal Circuit’s holding in Maropakis and assess, on a case-by-case basis, whether their defense qualifies as a “claim” under the CDA.

CBCA further limits the Federal Circuit’s decision in Maropakis

DOD signals pivot away from proposed DFARS rule on evaluating price reasonableness for commercial items

The Department of Defense (DOD) published a report on the Open DFARS Cases as of December 7, 2015, which indicates that the controversial proposed rule on evaluating price reasonableness for commercial items (DFARS Case 2013-D034) was closed. As we previously reported, the proposed rule would have made significant substantive changes to what qualified as a commercial item under DOD-funded contracts and would have imposed significant data gathering burdens on prime contractors. In its place the DOD opened a new case, DFARS Case 2016-D006, Procurement of Commercial Items. The purpose of the new DFARS case is to implement the requirements of six sections of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2016, in addition to the requirements of section 831 of the NDAA for FY 2013. See National Defense Authorization Act for Fiscal Year 2016, Pub. L. No. 114-92; National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239. A brief overview of some key requirements within the applicable sections of the NDAA for FY 2016 is provided below.

The DOD opened DFARS Case 2016-D006 on December 7, 2015, and has proposed a rule within the agency, which its staff is processing. We will continue to monitor the progress and will report back here with updates.

Section 851, “Procurement of Commercial Items.” This section requires the Secretary of Defense to establish a centralized capability to oversee the making of commercial item determinations for DOD procurements and to provide public access to these determinations. The section also permits contracting officers (CO) to rely on prior determinations made by a military department, Defense Agency or other component of the DOD. Notably, the section permits a CO to require a contractor to supply additional information to support the reasonableness of a price, irrespective of whether a contractor was required to provide such information in connection to a prior procurement.

Section 852, “Modification to Information Required to be Submitted by Offeror in Procurement of Major Weapon System as Commercial Item.” Under this section, an offeror must submit: (a) prices paid for the same or similar commercial items under comparable terms and conditions by both the government and commercial customers; and (b), if the information for (a) is not available, (i) prices for the same or similar items sold under different terms and conditions; (ii) prices for similar levels of work or effort on related products or services; (iii) prices for alternative solutions or approaches and (iv) other relevant information. The section also permits the CO to request additional information, such as labor costs, material costs and overhead rates.

Section 853, “Use of Recent Prices Paid by the Government in the Determination of Price Reasonableness.” This section provides that a CO, in determining whether a price is reasonable, must consider prior prices paid by the government for the same or similar commercial item if these prices are provided by an offeror and represent reasonable prices based upon the totality of the circumstances (i.e., the time elapsed, the quantities and the terms and conditions).

Section 855, “Market Research and Preference for Commercial Items.” This section requires the Under Secretary of Defense for Acquisition, Technology, and Logistics to issue guidance that: (a) prohibits an agency from contracting for noncommercial information technology products or services in excess of the simplified acquisition threshold, unless the agency determines in writing that commercial items cannot meet the agency’s needs; and (b) mandates that agencies conduct market research, where appropriate, prior to making a price reasonableness determination.

Section 856, “Limitation on Conversion of Procurements from Commercial Acquisition Procedures.” Under this section, for a CO to convert a procurement of commercial items or services valued over $1,000,000 from commercial acquisition procedures to noncommercial acquisition procedures, the CO must make a written determination that: (a) the commercial acquisition procedures were erroneously utilized or were utilized because of inadequate information; and (b) the conversion will result in cost savings. In making such a determination the CO must consider: (a) estimated research and development costs for improving future products or services; (b) transaction costs for both the DOD and contractor; (c) changes in purchase quantities and (d) potential delay costs resulting from the conversion. If the procurement is valued over $100,000,000, the head of the contracting authority must also approve the determination. The requirements in this section terminate in five years.

Section 857, “Treatment of Goods and Services Provided by Nontraditional Defense Contractors as Commercial Items.” This section permits the head of an agency to treat the items and services provided by nontraditional defense contractors as commercial items.

As previously stated, DFARS Case 2015-D006 will also implement section 831 of NDAA for FY 2013, which directed DOD to, among other things, issue guidance including “standards for determining whether information on the prices at which the same or similar items have previously been sold is adequate for evaluating the reasonableness of prices.” National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239.

DOD signals pivot away from proposed DFARS rule on evaluating price reasonableness for commercial items