Hi, my name is Shlomo Katz. I'm a counsel in the law firm of Brown Rudnick LLP, where I focus on government contracts and also lead the Wage Hour group. A little later in this presentation, we'll actually talk about some intersection of government contracts and wage hour law. But the main the main subject of the talk today is just an introduction to government contracts, how it is similar and how it is very, very different from contracts 101 that you took in law school and probably practice more regularly. So as you may or may not recall, from Contracts 101, there are some basic contracting concepts like an offer and acceptance. In order to form a contract, one side has to make an offer and the other side has to accept it. If the acceptance takes exception to any part of the offer, like I say, I will sell you my car for $10,000 and you say I will buy your car for $9,000. That's not an acceptance. There has to be a meeting of the minds and an agreement on the principal terms in order to have an offer and acceptance, the parties have to have capacity to contract. So if you say, I'll sell you my car for $10,000 and the you that you're talking to is a five year old, and he says, I'll buy your car for $10,000. He does not have the capacity to contract and the contract will not be valid. As I mentioned, it has to be a meeting of the minds, a mutual understanding of what it is that you're agreeing to. There has to be some consideration, some kind of payment, whether monetary or otherwise, exchanging hands. In the case of the example I gave, it would be the car going in one direction and the $10,000 going in the other direction. And of course, there are lots of interpretation rules like what if, you know, we had a misunderstanding about which of your cars you were selling me. You were. You thought you were selling me your Chevy Impala for $10,000, and I thought you were selling me your Rolls-Royce. How do we interpret what the contract covered? Or maybe in that case, there was no meeting of the minds. So all of these are basic contracting concepts that apply every day. And they apply when you go buy a coffee in the morning and they apply as well to government contracts. But government contracts is highly regulated, are highly regulated and are subject to many laws and regulations and executive orders. And that's what we're going to talk about today. So first, I'm going to run through at a very high level some of the laws that are very important. And then we'll get into some more details on specifics. So the Bible of government contracting comes from a law called the Office of Federal Procurement Policy Act. It established the Office of Federal Procurement Policy, which establishes basic, as the name implies, basic procurement policies. A very important part of that law is Section 27, which is the Procurement Integrity Act, and we will talk about that in more detail later. The Contract Disputes Act of 1978 is the law that governs how contractors resolve disputes with the government. Unlike if I buy your car or I buy a cup of coffee from you and I'm dissatisfied where I can sue you in whatever court has jurisdiction, it doesn't work that way in government contracts. If if the contractor or the government is dissatisfied, there are there are processes and procedures to follow. We'll talk about that a little more later. The Competition and Contracting Act of 1984, as the name implies, says that contracts should be awarded competitively. There are exceptions. We are sole source or limited competition. Contracts are available if you sometimes this comes up in in the popular news where they are for some reason referred to as no bid contracts. That's not really correct. Because to get a sole source contract, you do have to still submit a proposal or bid or an offer and buy. Actually, bids and offers are technically different things. We'll talk about that later, too. But you have to submit something. So it's not a no bid offer, no bid contract. It's a sole source contract or a limited what's technically called less than full and open competition contract. And there are situations where that is permitted. We'll we'll talk about that. The Federal Acquisition Streamlining Act of 1994 was a law in which Congress said, you know what, some people are not doing business with the government because there's too much regulation and we need to cut that back. Make make more. More of government contracting like commercial contracting. And in some cases, that now is the case. Another thing, all of these things really we'll talk about more later. So don't need to keep saying that The Small Business Act is a law designed to promote the entry of small businesses into government contracting. The Buy American Act and Trade Agreements Act. The Buy American Act is exactly what it says. And then the Trade Agreements Act is a law that creates loopholes in the Buy American Act that you could drive a 747 through the Bayh-dole Act is a law which is designed to regulate who owns the intellectual property that's invented under contracts, whether it's the person or the who invented it, or the contractor or the government. And. Lastly on the slide, the Antideficiency Act is a law which makes it a crime for a contract for any any government employee to spend money that was not authorized by Congress. So if Congress says we're giving the Department of Defense, you know, a gazillion dollars this year, so the Department of Defense may not spend a penny more than that, but even more specifically, if Congress says we are giving $1,000,000.39 for this specific project, if that's spelled out in the Appropriations Act, that they're giving 1 million $1,000,000.39 for a specific project, then the government better not spend $1,000,000.40 on that project. It would be a crime for whichever government official made that happen. It is not a crime for contractors. It's a crime for. Uh, government officials and occasionally people actually get prosecuted for violating the Antideficiency Act. Probably not for overspending by a penny, but in other situations. On Slide four, we have some more laws and some executive orders. The Service Contract Act and the Davis-Bacon Act are two labor laws specific to government contractors. They both require that workers on the contract receive what are called prevailing wages, which are higher than the minimum wage and fringe benefits. Service Contract Act applies to workers on service contracts, which could be anything from janitorial work running a cafeteria. Fixing airplanes, doing professional services like architectural services and accounting services. Although some people are exempt, architects and accountants would typically be exempt, but the people working under them are not necessarily. The Davis-Bacon Act is, which actually came first 34 years before the Service Contract Act. The Davis-Bacon Act does the same thing for construction contracts, requires prevailing wages and fringe benefits for workers on construction contracts. The Davis-Bacon Act is much broader than the Service Contract Act in the sense that it applies not only to government contracts, but also what's called federally assisted contracts, construction contracts. So, for example, if I'm building an apartment complex for low income. The low income residents, and I get a grant from the Department of Housing and Urban Development to cover part of the cost of that construction, even though it's otherwise an entirely commercial project that would very likely be covered by the Davis-Bacon Act. It's called a Davis-Bacon related act. The most recent of these is the Inflation Reduction Act that just passed Congress earlier and was signed by the president earlier this year. It provides for tax credits for certain clean energy projects, and that's considered federal assistance. Getting a tax credit is federal assistance and therefore projects under the Inflation Reduction Act are largely subject to the Davis-Bacon Act. Then some executive orders. Executive Order 11 246, which was enacted or issued by President Lyndon B Johnson in 1964. And amended many times since. Requires giving equal employment opportunity on government contracts, and in some cases it requires affirmative action plans. And it's been amended a number of times in a number of ways, including most recently to by under President Obama. To broaden the categories of protected workers. Executive Order 11 246 is unique in that it has withstood the test of time through both Republican, Democratic and Republican presidents. The rest of the executive orders you see listed here, as well as many others, are not like that. They are like a ping pong ball where ever since President George H.W. Bush. The Republican presidents will issue one set of executive orders. The Democratic presidents, usually on the first day or first week in office, will rescind them and issue a different set. And then the when the Democratic president is replaced by a Republican president, it goes back in the other direction. And this has happened now under President George H. W Bush or Republican President Clinton or Democrat President Bush, Republican, President Obama, Democrat, and so on. And I mention this because not to be political, hopefully. I don't sound like I'm saying anything political, but rather so you understand that how it works. These requirements change depending or some some of them change depending on who's president. So Executive Order 13 706 was issued by President Obama and it required federal contractors to provide paid sick leave at the rate of one hour for every 30 hours worked up to 56 hours a year. Of paid sick leave. And this is unusual in that president. The Republican president who followed President Obama, namely President Trump, did not withdraw this. In fact, he had promised as a campaign promise that he would work on paid sick leave for all workers. So he did not withdraw this. And it does still stand and it is in at this point, it's in most government contracts, increasing the minimum wage for federal contractors. This is a President Biden executive order that established a minimum wage of $15, which has since increased to $16.20 and will increase every January 1st thereafter. Uh, Executive Order 4242 Ensuring adequate Covid safety protocols was an executive order that, among other things, required all contractor workers to be vaccinated for Covid. This never went into effect. Uh, and. And it's been mired in the courts and probably by now, for most people, Covid is an old issue and no one's really thinking about this too much anymore. Non displacement of qualified workers under service contracts. This is a Biden executive order and it's a good example of one that was issued originally by President Clinton, then withdrawn, then issued again by President Obama, then withdrawn, then issued again by President Biden. And it requires the essentially giving a right of first refusal if I win a a service contract. At a government, at a government site. And there are workers there who worked for the prior contractor. I need to offer them jobs. That's that's the gist of it. There are exceptions and caveats and definitions and so on. But that is that is the gist of this executive order. There is a different set of executive orders relating to that that would be on this list if we now had a Republican president. But we don't. So they're not there. They involve saying various orders that try to limit unionization of workplaces and and the like. So so this is an area to watch if if government contracts is of interest to you because these things change as the administrations change. The last thing on the and really. A lot of a lot mean other things change, too, in terms of enforcement of of these various laws and orders and regulations because different administrations prioritize enforcement of different areas. A Democratic administration will tend to give more money to the Department of Labor, and they will then, you know, enforce labor laws against government contractors more. So there are a lot of a lot of variables. But returning to the list, the last item on the list, the Federal Acquisition Regulation, which is what we're going to focus on now for a good part of the rest of this presentation and. For first. The government has unilateral powers that you will not see in a typical commercial contract, and that includes the right to make changes. Take a simple example. If if I'm the government and I award you a contract to build a house for me and the House says the plans say that there's going to be a one car garage. And I suddenly decide I want a two car garage on the house. I have the right to do that. I, as the government, have the right to do that. You have to go build me the two car garage even before we've agreed on the price and you do not have the right to stop work and say, no, I'm not building that until we agree on the price. If it is a change within the general scope of the contract, you are obligated to do it. So if I if I order 100 computers and then I say, you know what, make that 95 or make that 105, I have the right to do. I as a government, have the right to do that in a commercial contract. Usually don't disputes. As I mentioned, there are unique dispute procedures. We'll come back to that. Terminations. The government in addition to the right to terminate for default or breach which is in typical commercial contracts. Government also has a right to terminate for convenience. Hey, I decided I don't want that anymore. This might happen. For example, if. Congress. Let's say Congress in 2023 authorized money to to begin construction on a project. And then when the budget comes out for 2024, there's no money to continue that project. So the government says, well, sorry, you got to terminate for convenience. I don't want it anymore. And the contractor has certain rights, but it cannot challenge the termination. That's an absolute right of the government. Another absolute right is the right to audit and investigate audit costs under a contract to determine whether they're allowable. We'll talk about that concept later and investigate, for example, investigate compliance with labor laws. So these are rights that the government has as a contracting party that typical parties to a commercial contract do not have. Okay. So the Federal Acquisition Regulation, Title 48 of the Code of Federal Regulations, the CFR, and it's meant to establish uniform policies and procedures for acquisition by all executive agencies so that whether you're doing business with the Department of Defense or Department of Education or the Department of Justice or the Environmental Protection Agency, the ground rules are all pretty much the same. The Federal Acquisition Regulation or the FA consists of the the body of the FA, which applies to all agencies as well as agency acquisition regulations that are that implement or supplement the FA. For example, the Defence Federal Acquisition Regulation Supplement or the Dfars. The Energy Department of Energy Acquisition Regulation. The deer. The. And so on. The General Services Administration Acquisition Regulation. The Gsas and most agencies have them in the Department of Defense. There are also sub sub sub supplements. So there's the the Navy supplement and then the Navy facilities command supplement. Navfac and so on. So if you're doing business, you have to be familiar with these and they are all available. Well, certainly the major ones, the agencies and some of the sub agencies are available on a website called acquisition.gov. The FA system does not include internal agency guidance, which is not regulations, but sometimes agencies in an effort to. Give contracting officers more flexibility. Some agencies, including Department of Defense, have moved stuff out of the regulations and into what they call internal agency guidance, because since it's only guidance and not a regulation, it gives the contracting officers more flexibility. The FA is maintained by something called the FA Council under the which has three heads the Administrator of the General Services Administration, Secretary of Defense, and the Administrator of NASA. Uh, the reason for this is that at one time, those were the big spenders. I'm not sure that NASA is today a bigger spender than, say, the Department of Energy, but historically, these were the big spenders. The General Services Administration is the federal government's landlord. Essentially. They run, among other things that they do. They run the they they actually may own most government buildings and they run them. Other agencies may lease space from them. General Services Administration also runs one of the biggest and longest running and most successful successful what's called multiple award schedule contracts, which is a way that. Motto. If want to buy paper clips, I shouldn't need to issue a go through the whole procurement process to buy a box of paper clips. So GSA has set up contracts for common items, and I can now go and I don't know if they do or not, but let's just say that Staples and Home Depot both have what are called federal supply schedule contracts, which are a type of of multiple award contract. I could go to the website and I could buy paper clips from, you know, Staples or Office Depot. And again, just those are office supply stores that I'm familiar with in the area where I live. So I just pick them at random. But. The GSA administers those very large multiple award schedule contracts. Uh, and the FA is based on broad policy guidelines issued by the Office of the Federal Procurement Policy and what are called oftp letters, and they come from statutes and executive orders. Uh, the FA is like any regulation has to be published in, in proposed form in the Federal Register and, and interested parties can comment on it. Uh, I should say a word about executive orders because. Uh, that's something that there's some misunderstanding about back, particularly when Obama was president. Uh, and he was issuing a lot of government contracts, related executive orders, more than any president before him. Clients would call me and they would say, I heard on the news that there's this new executive order, let's say sick leave. What do I do now? And the answer is you don't do anything. Now, an executive order is not an order that requires a contractor to do anything. An executive order is an order from the president to his department heads. In the case of these Labor government contracts and labor related executive orders, it would be an order to the Department of Labor and the head of the council that I just talked about to come up with regulations to implement a policy. So let's say Executive Order 13 706, which requires paid sick leave. The order itself was an order to the Secretary of Labor and the head of the council to come up with regulations under which contractors would be required to give their give their employees sick leave. Paid sick leave. Now that process of issuing regulations takes a while. First, they have to write a draft. Then they have to send it out for public comment for at least 90 days. Then they have to consider the comments. Then they have to publish the final rule. So we're talking about some significant amount of time and then even once the regulations are issued. Contractors still don't need to do anything because what these what happens is that. Uh, the regulations say that there should be a a fa clause which will become a contract clause, and that if you have this clause in your contract, then you must do the thing that it says, well, existing contracts don't have that clause in them. Only new contracts issued awarded after the date that these regulations came out or after the effective date of these regulations are going to have that new clause. So the paid sick leave went into effect on January 1st, 2017. By now, six, six and a half years later, nearly all contracts have the paid sick leave clause in it. But in 2017 and 2018 and 2019, and probably through 2022, five years after, there were a lot of contracts out there that did not have it and did not require paid sick leave. And that's generally how executive orders work. And so it's important to understand that and not to not to panic that you have to you or your client has to do something just because you heard about something on the news. So what is the FA talk about? So for the next several slides, we're going to go through the table of contents of the FA and I'm going to elaborate on some of the more important things. So on slide eight, we have parts one through four. Part two contains definitions. Definitions are very important because you need to you need to know what you're talking about. For example, I mentioned earlier that the Federal Acquisition Streamlining Act Fafsa was intended to make doing business with the government a little more like commercial business. Well, part two of the FA has a definition of commercial item. What is a commercial item or a commercial service that's entitled to a different kind of treatment under the acquisition regulations? In addition, there are words like contract and subcontract and lots and day lots, lots of different words that have definitions terms specific to the FA. In addition, every part and sometimes sub part of the FA has additional definitions and so you need to check both places for any potentially relevant definitions at the beginning of a part or sub part of the FA and also in part two where there are general definitions. Part three relates to improper business practices and personal conflicts of interest. This includes procurement integrity, which I mentioned before and we'll talk about more later. It also includes rules about hiring former government officials to work on your contract. We'll talk about that some more later, includes various other things that could lead to. Bribery or improperly receiving a contract. On slide nine, we have parts five through 12. Part five talks about publicizing contract actions in order to obtain competition. The potential competitors need to know about a potential contract opportunity. We'll see a little later how that's done. But there are a couple of things that that can be done or must be done. One thing that must be done is to advertise the contract on what's called the government wide point of entry. And I'll show you later where that is. But it's it's a website and all contract actions are supposed to be publicized there unless there's some specific reason why they're not like a top secret contract that nobody's supposed to know exists. Government might also use mailing lists. People who came to the Pre-proposal conference can get on a mailing list and the government is supposed to respond to that. But. Everyone is on notice of what's on the website. The government wide point of entry. Everyone's deemed to be on notice and you can't complain that you were not included if you failed to check the government wide point of entry and see what was posted there. Part six contains the requirements for competition. As I mentioned, the default is full and open competition, which means it's open to the whole world. But there are exceptions. One of the exceptions is most of the exceptions are in part six. One of them is in part 19. We'll talk about that when we get there. The exceptions in part six include national security, which is very vague. It includes. Only one responsible source, which means that after doing proper market research, the government concluded that there is only one responsible contractor that can that can do this work. I'll explain what responsible means when we get down to Part nine. Another exception is urgency, but the government. The rule is that the government's delay cannot in. Putting out a proposal, a request for proposals or starting a procurement cannot be a justification for claiming urgency. In addition to which contracts awarded under these exceptions need to be limited. So I had a case once it was a bid protest. We'll talk later about what a bid protest is. But my client's competitor was awarded a sole source five year contract on the grounds of urgency. And my client protested. We and we won the the what was then the General Accounting Office. Today, it's called the Government Accountability Office ruled that urgency might be a basis for awarding a one year contract. But during that one year, the government can conduct a procurement for the future years, the out years. So you cannot use urgency to award a five year contract. So that's an example of of urgency and its limitations. Part eight required sources of supply and services. Sometimes the government is required to use certain sources. This is where you'll find discussion about the federal supply schedule that I mentioned earlier. There also are various times or have been special. Requirements to use prison industries or to use or to contract out to. Organizations for for the visually impaired under what's called the Javits-wagner-o'day Act. So that's in part eight. Part nine deals with contractor qualifications. And we're going to talk about that in some more detail later. That includes responsibility. It includes. Organizational conflicts of interest and some other things. Market ten A Part ten is market research. As I mentioned earlier, when I talked about only one responsible source, the government has to do market research to to know whether to set aside a contract or sole source or to set it aside for small businesses. We haven't talked yet about much about small businesses, but that's coming. Part 12 acquisition of commercial items contains special streamlined provisions for buying things that are commercial items. And basically a commercial item is defined in part two of the FA as something that is offered and sold in regular quantities in the commercial marketplace. That does not mean that. It has to be exactly the same. So let's say the government is buying a car and it wants the car to be customized with armor because it's going to carry the president or some other high official. A car is a commercial item. The fact that it needs to be customized does not stop it from being a commercial item because lots of people buy cars and have them customized and they buy a car and tell you the dealer to paint it a color that nobody's ever painted a car before. So that's customizing a car. Or maybe I'm paranoid about somebody wanting to assassinate me, and I want the same kind of armor on my car that the president of the United States has. So that doesn't stop it from being a commercial item, the fact that it needs to be customized. Slide ten parts 13 through 18. Part 13 contains simplified acquisition procedures such as the government credit card. So I talked to before about buying a box of paper clips really for something as small as a box of paper clips. I might just take a government credit card and walk down to the corner office supply store and buy a box of paper clips. That's one of the simplified acquisition procedures. There are some others. Parts 14 and 15 deal with how proposals are received and evaluated. And I mentioned before that there's a difference between the term bid and offer. The term bid falls into part 14. That a bid technically means. That only price is being considered. So for construction projects most commonly, perhaps less frequently than today, than in the past, less frequently today than in the past. Construction projects were. Once an architect would draw up plans, architect, engineer would draw up all the all the construction documents, and then they would be put out to bid and the lowest bidder would would get the job. And that's called sealed bidding. And that's those procedures In Part 14. Part 15 talks about offers contracting by negotiation where. The government issues a request for proposals that have both a price component and a technical proposal component. And there might be negotiations where the government will say, we think your price is too high or we think your price is too low, you might not actually understand the work. Or we looked at your staffing plan and we don't think you have enough people there or, you know, we looked at the materials you're planning to use and we don't like the quality. Those are discussions. We'll talk more about discussions. They're also called negotiations. And if that can happen, then it's in Part 15, which is contracting by negotiation. People use the words bid and offer interchangeably as well as, in other word, quote often use those interchangeably. Technically, they're different, as I explained, but you might see them used interchangeably. Part 16 talks about different types of contracts. There are fixed price contracts. There are cost reimbursement contracts. The fixed price contract says you're going to be paid X dollars, and if you spend less, you make a profit. And if you spend more, you lose money. A cost reimbursement contract says we're going to reimburse you for every dollar you spend. Plus, that includes direct dollars as well as indirect dollars like profit and overhead and general and administrative costs. Then there are time and materials contracts where we will pay you an hourly rate. That the hourly rate is let's say you're paying somebody $20 an hour, you'll add your overhead and your A and your profit and whatever else you want to add, and you'll bid a time and materials rate and materials is the cost of materials. So that's those are the major types of contracts. There are other variations within them. Mr. Part 17 Special Contracting Methods. The most important one here is the option in which sometimes, often I should say, the contract is awarded for one year with options, meaning the government has the option to make you work for another year or make you work for another two years or four years. Those are options. On Slide 11, we have parts 19 through 26, Part 19 deals with small business programs. So the first thing here is to define what is a small business. And this is defined in greater detail in Title 13 of the Code of Federal Regulations Part 121. There are also special kinds of small businesses like. Uh, a day. What's called a day, because they come from Section eight A of the Small Business Act. Uh. They are for my disadvantaged minorities. There. That's eight contracts. There are service, disabled, veteran owned small businesses. There are women owned small businesses. Excuse me. There are economically disadvantaged, women owned small businesses. These are all special categories that and they may may be entitled either to sole source awards or to limited competition that's limited for small businesses or limited to women owned small businesses. I. Just. Had a client that won a contract as a woman, owned small business and a protest was filed against it, saying, hey, they're not a woman owned small business. So that's that would fall under part 19, as well as under the regulations of the Small Business Administration in in Title 13 of the Code of Federal Regulations. Another thing about small business programs is requiring large businesses to have small business contracts, small business subcontracting plans where the large business sets goals for. A awarding. We're going to you know, we're going to award X percent of our subcontracts to small businesses, X percent to minorities, x percent to women, X percent to veterans. And they are required to use their best efforts to adhere to that plan. And there can be consequences if the prime contractor, the large business, fails to adhere to that plan. Uh. So these are are some of the things that are addressed in in part 19 under small business programs, part 22 application of labor laws to government acquisitions. These are largely the things we talked about before The Service Contract Act, the Davis-Bacon Act paid sick leave. The. Uh, somebody call the contract Work Hours and Safety Standards Act and. And similar requirements. Part 23 has a long. The longest title Environment, Energy and water efficiency, Renewable energy technologies, Occupational safety and drug free workplace. The major requirement here is the Drug Free Workplace Act, which requires employers to take certain steps to promote a drug free workplace. This has other things like encouraging double sided printing and encouraging use of recycled paper and stuff like that. Part 25 Foreign Acquisition. This is where you'll find the regulations under the Buy American Act and the Trade Agreements Act. Certain. Uh, certain things must be purchased American. But there are. But there are exceptions. Certain countries get special treatment, certain products get special treatment and. And so on. Turning to slide 12, parts 27 through 33. Part 27 deals with intellectual property and there are several different types Patents deals with tangible physical objects that can be patented. Now certain non tangible things can be patented also. And there are rules about who's who owns the patents and what rights the government has. One of the rights that government has is the right to infringe any patent and to pay a royalty, but not to be sued for other damages. That's a right that the government has. Data. Data deals primarily with computer software and documentation, and the government gets certain data rights that will vary depending on who on who paid for the development. So if data is developed with private funding and then brought to use on a government contract, the government's rights are the most limited. It typically will be something like government purpose rights, which limit it to being the data to being used for very limited government purposes. If the government paid for the development of the data and again data here, not data like how many wins did the Cy Young Award winner have last year? Not that kind of data, but we're talking about data like software and software documentation. That's that's what data means. So if it was developed with government funding under another contract, then the government is likely to have unlimited rights in that data. And there are other other levels in between. And copyrights. There are rules about copyrights. Sometimes contractor can negotiate special rights if it has something the government really wants. I had a client that had a program that was unique, a computer program. It was unique and the government really wanted it. And and the client was able to negotiate very unique data rights, which then added a lot of value to that company when when it was ultimately sold. Uh. Part 30 and 31 Deal with costs. Part 30 is the Cost Accounting Standards Administration. Administration. The cost accounting standards are actually found in part 99 of the far Part 30 just has some short rules about administering them. And these cost accounting standards are basically a way to ensure that contractors are being consistent in how they treat different costs. Is a cost a direct cost or is a cost? An overhead cost is a cost. If you treat it different ways on different days, then it it makes it easier to defraud the government and not be discovered. And therefore, for the sake of consistency, as well as comparing apples to apples, the contractors are supposed to disclose their cost accounting standards and stick to them. There are different levels of coverage of cost accounting standards depending on the size of the company and the size of the contract. Part 31 is the contract cost principles and procedures. So here's where you find costs broken down into direct and indirect. Direct cost is a cost that's going straight to the contract. So if I have a construction contract and I need to buy lumber and nails, that's a direct cost. I buy a hammer. So if that hammer is going to be used up on this contract, it would be a direct cost. But if that hammer is going to go in the back of my truck and be used on a future contract, then it should be an indirect cost. Paying the laborer who's banging that the nails with the hammer. That should be a direct cost. Paying the president of the company. That should be an indirect cost. And so there are rules about this. And again, as I mentioned, consistency is important. The cost principles then are rules about what the government will and will not pay for. And that's true whether you have a cost reimbursement contract where the government is paying you directly for things or whether you have a fixed price contract and you're putting overhead on top as part of your price. So certain things should not be included, like liquor. Cost of suing the government cost of discouraging. Your employees from joining a union as well as a course of encouraging employees to join a union. All of those things are not allowable costs. There are. 49 or something like that cost principles and and there are some of them are pretty complicated. The cost principle on compensation 31 205 six. What is reasonable compensation? If I that the government should reimburse me for if I give an employee a bonus several times what the market justifies. The government doesn't want to pay for that. So those are all dealt with in the cost principles as well as lots of other types of costs legal insurance, other professionals and so on. Many other things, costs of business combinations. So if two big contractors merge and they reorganize as after the merger, government doesn't want to pay for that because presumably if two companies are merging, they're doing it because they think they'll be more profitable. Why should they, on top of that, have the government pay those costs? And again, the way some of those costs would get into a contract is through indirect costs when when they're counted in overhead and then that overhead is applied to a contract cost. Part 33 Protests, disputes and appeals. We'll talk more detail about protests shortly. Disputes. As I mentioned, if I have a dispute with the government, let's say you told me to change that garage to a two car garage and we can't agree on the price. So that will become a dispute. And I have to submit my claim, my certified claim to the contracting officer who has to decide it, and then I can appeal that if I'm not satisfied, I can appeal that to the Board of Contract Appeals or to the US Court of Federal Claims. And protest I said will come back to. Turning to slide 13. Uh, that's you Here. See here. Rules about specialized methods of contracting for certain things. For research and development, for major systems, for construction and architect, engineer contracts and. And so on. Slide 14 Part 42 Contract Administration and Audit Services. This is where you'll find rules about how the government evaluates a contractor's performance. Government is supposed to evaluate the contractor at least once a year and put the evaluation into what's called the CPR system, the Contractor Performance Assessment Reporting system, where other agencies can look at those evaluations and decide, do I want to do business with this company? Another thing you'll find in Part 42 is procedures. When the contractor is sold to another company and there's a merger or a name change or change. What are the procedures there? Part 44 has subcontracting policies and procedures cannot always just go out and subcontract with whoever you feel like it. There are rules about it. Part 45 Government property. Sometimes the government, maybe the government will supply a government computer or a government supercomputer for the contractor to use. Or maybe the government is supplying desks and chairs for the contractor to use. And so there has to be an accounting of government property. On Slide 15, Part 49 termination of contracts. As I mentioned, there are terminations for default and terminations for convenience. In the event of a termination for default, the government has the right to re procure the services. If I was going to do it for $100 and I get terminated for default, the government could go to you and you say, But I want $110. Government can then charge me $10 and termination for convenience where the government just doesn't want to work anymore. Yeah. In that case, I'm entitled to be paid for all work that was done and accepted, as well as the costs of shutting down my operation, laying off workers, returning materials to the suppliers and so on. Now, all of those as well as 50 and 51, which I'm not going to talk about, are those are regulations In order to get implemented into the contract, there needs to be a contract clause. And those contract clauses are found in part 52, which you see mentioned on Slide 15. So to go into a little more detail on some some of the areas procurement integrity for 3.1043 in paragraph B, it says that a person was not knowingly obtained contract or bidder proposal information or source selection information before the award of a federal agency procurement contract to which the information relates. And there are severe penalties. This can. Apply to a government official who gives out information or to a contractor, employee or representative who obtains information. Uh, there was a case of a very high ranking Air Force official who had a great career ahead of her, and she violated the Procurement Integrity Act in to favor a contractor with whom from whom she had a job offer. And not only did she not rise to high places in the in the Air Force, she did not get that job with the big contractor because she went to jail. And there have been many less sensational cases than that one. Uh, people do get punished and companies do get punished for violating the Procurement Integrity Act. In addition, there may be other. Excuse me. In addition, there may be other federal or state trade secret laws that you could be sued for privately for violating. So if you obtain your competitor's information that you're not supposed to have, in addition to being a crime for violating the Procurement Integrity Act, it may also violate the Trade Secrets Act or some other federal or state law. Other things that are addressed in part three of the FA under Procurement Integrity are not making improper payments to influence federal contracts, whistleblower protections, post-government employment restrictions. This is a big one that we see in our practice regularly where a contractor wants to hire a former government official. Or when you want to do that, you should have that official get what's called an ethics letter from the agency where that official worked. And that should lay out what the official former official may or may not do for a contractor. Contractors can lose contracts for hiring people in ways into positions where where those people are not eligible to work. I've seen that many times. And contingent fees. There are limitations on paying an agent to help you get a federal contract. It's not outright illegal, but there are limitations on it. Part three also discusses the contract or code of business ethics, which is, as you see here on Slide 18, covered contractor. And the word covered contractor is very important in many contexts because just because a rule exists does not mean a particular contractor is covered. Some contractors are covered. Some contractors are not. It depends on the definitions of who's covered and who's not. But covered contractors must have a written code of business ethics that's available to employees. They have to exercise due diligence to prevent and detect criminal conduct and promote an organizational culture that encourages ethical behavior. This is a big one. They must timely disclose credible evidence of certain crimes to the government. If you discover that one of your employees, if you discover credible evidence that one of your employees mischarged a contract or either charge the wrong contract or charged for time when the employee was not really working or used a different material, maybe the contract required use of an American product in a certain way and somebody in your company switched out, switched it out for a foreign product. You need to timely disclose that to the government. You might. That's counterintuitive. But there are penalties. The penalties are greater if you're caught than if you turn yourself in. You need to establish an ongoing business ethics awareness compliance program and not enough to have good policies. And this applies also in the area of labor law and all areas really not enough to have good policies. If you don't train your employees and your managers on those policies. I talked about the government wide point of entry for obtaining competition. Here you have it. Sam.gov Sam stands for System for Award Management, and this is the current link to where you'll find contract opportunities, solicitations, amendments, notices, requests for information. If somebody is awarded a sole source contract, it needs to be posted here. You then have ten days to protest. If you don't think that sole source award was proper, you can't say, Oh, but I didn't know it was there. You are deemed to know whatever is here and and that triggers timeliness requirements for different types of actions. We talked about types of competition full and open, full and open after exclusion of sources, including set asides for small businesses and circumstances that permit other than full and open. We covered this earlier. When there is something other than full and open competition, there needs to be a written justification for it, which the agency is supposed to post on the website that I showed you on the previous slide so that anybody can look at it and challenge it through a protest. Of course, agencies don't always do that, but they're supposed to. How are source selection decisions made? So the solicitation or the request for proposals needs to say what the basis of award is. It might be best value, which means that, yeah, your price might be higher, but your proposal is better. Or it might be low price technically acceptable, or it might be low price responsive. Meaning you answered all the questions and your low price, you get the contract that's typically reserved for straightforward construction contracts. The solicitation needs to say what the evaluation criteria will be. Not all of these criteria are used in every procurement, but these are the typical ones. Technical approach. How are you going to do the work and why are you going to do it that way? Why do you think your way of doing it is the best way of doing it? In other words, you need to explain that to the government so the government can help can reach a best value. Somebody who explains a contractor that explains its approach well, how it's going to do it and why. That's a good approach. We did it this way 17 times before and we encountered these problems, and here's how we're going to solve these problems that we encountered the last 17 times. That contractor may be the best value, even if its price is higher. Uh, management and personnel. Who are you? Who's going to run the contract? And who are you going to hire and how are you going to hire? And how are you going to retain workers? What's your experience? Have you done it before? What's your past performance? How well have you done it before? This is usually done by submitting questionnaires to your customers. We then return them to the government. You don't see them because you don't know if your client praised you or trashed you. And what's the price or cost price means? If I say my price is $17, it means my price is $17. If I say my cost is $17, that's an estimated cost and means you're going to pay me what it costs, which hopefully it will be around $17. So that would be a cost reimbursement contract. A price is for a fixed price contract. The evaluation factor is a significant. Some factors and the relative importance are subject to broad discretion of the agency. But price or cost always has to be evaluated and in some way or other, the quality of the product or service has to be evaluated, whether it's through, you know, past performance or whether by actually full blown proposals, technical and so on. As I mentioned, the government can have discussions which are also called negotiations. Those are exchanges between the government and the and the Offerer for the purpose of allowing the Offerer to revise its proposal if one offerer gets a chance to revise its proposal. All offerors must get a chance to revise their proposal. That doesn't mean discussions are going to be the same with all offerors because maybe my price is too high and yours isn't. Or maybe my price is too low and yours isn't. Or maybe I'm misunderstanding something and you're not. But so we might not have the same discussions, but we do need to have the same opportunity to revise our proposals. Discussions are supposed to be tailored to each offer, and you're not supposed to tell one offer or one another offer or did you can say you can say, you know, your offer is much higher than all the other offers or but you cannot say your offer is X dollars higher than Shlomo Katz's offer that you can't do. Uh, and the objective is to help the government get the best value. So on Slide 25, the government may not engage in conduct that favors one offer over another, reveals an offer as technical solution or price, or reveals the names of individuals who gave past performance information and certainly not allowed to give out source selection information saying, you know, here we our our evaluation team includes Shlomo Katz and Shlomo Katz really likes proposals done this way. Not allowed to do that. Sure. And you're not allowed to reveal our first price. As I mentioned before, you're not allowed to reveal to one offer or what another offers. Price is. So. There are bid protests. Bid protests are as the GAO, the Government Accountability Office, explains on occasion, which is kind of ironic. On occasion, bidders or an understatement, I should say bidders or other interested. Others interested in government procurements may have reason to believe that a contract has been or is about to be awarded improperly or illegally, or that they were unfairly denied a contract or an opportunity to compete. And for that there is bid protest bid. Protest can be brought at the Government Accountability Office or at the US Court of Federal Claims. They can be brought free proposal due date. If you see something in the solicitation that you think is unreasonable or unfair or ambiguous or impossible to meet. So first you should talk to the contracting officer. But if that doesn't resolve it, you could file a protest. For example, we had a bid protest once where the Navy wanted a fixed price. Navy said give me a fixed price to maintain an unknown amount of equipment at this site. Well, how in the world am I supposed to give you a fixed price to maintain an unknown amount of equipment? And we protested and the Navy said, Oh, yeah, that doesn't make any sense. We're going to fix that. Uh, any protest like that must be filed before the due date for submission of proposals. You cannot hedge your bets and say, Well, I think this doesn't make sense, but I'm going to submit a proposal. And if I don't win, then I'll protest. You can't do that. Uh, the next kind of protest is after the evaluation. It might be pre award or post award. Post award means the government told you Shlomo Katz won this contract and now you want to protest. Or it might be where the government told me, Hey, Shlomo Katz, we haven't decided yet who is getting the contract, but it's definitely not you. Because of this reason or that reason, your price is way too high. Out of line with everyone else or your technical proposal is way worse than everyone else's and you're just out. So that would be a pre award protest against the evaluation. Each of these different types of protests has strict timeliness requirements and there are some variables there, but these timeliness requirements are found in part 33 of the FA as well as in GAO regulations in part four I'm sorry, Title four of the Code of Federal Regulations, Part 21 The US Court of Federal Regulations. Us Court of Federal Claims, Timeliness regulations are judge made, so they're found in case law. But basically they're ten days after you knew or should have known. Most protests are denied because of the immense agency discretion, but that's most protests that go to a decision are denied. But in a substantial number of cases, the government will acknowledge that it needs to be a do over and it will take what's called corrective action. And the corrective action might be saying, hey, we're going to reevaluate proposals and make a new award decision. The corrective action might be saying, Hey, Shlomo Katz, I threw you out of the competition, but I'm putting you back. The corrective action might be saying this solicitation makes no sense, but we're going to fix it. Uh, so those are very or if it's a protest against somebody hiring a former government official that they should not have hired, the corrective action might be the government saying, hey, we're going to investigate this. So that's the corrective action. And that would end the protests because there's no more there's no more controversy. So common Pre-proposal Protest grounds Ambiguities in the RFP. Overly restrictive or anti-competitive specifications. The specifications contain your proper proprietary data. The response time is too short. The wrong clauses are included like it's a construction contract and they put in the Service Contract Act instead of Davis-Bacon Act or it's a fixed price contract, and they put in cost reimbursement clauses instead of fixed price clauses or the other way around, or the solicitation is improperly set aside for small businesses or it was not set aside. And it should be generally it should be set aside. If the government can expect to get two offers from responsible small businesses. And so you could protest that and you could protest that, that the evaluators are biased, but you're going to lose that. So generally, don't waste your time with that kind of. Of, you know, protest, really, unless the source selection official is your spouse or your ex spouse's brother or sister or something, or an employee who you fired for stealing. And now that person is a source selection official for the government. You know, something really, really egregious like that. Then maybe you have a shot. Maybe you have a shot at a biased protest. But otherwise, don't waste your time. It just will aggravate your customer or your client's customers. Post evaluation. Protest grounds. Failure to follow the evaluation criteria. Failure to make a proper trade off or best value. That is, trade off between price and technical. Improper assignment of weaknesses. Failure to sign strengths. Uh, failure to do a cost price realism or definitive responsibility criteria. For example, the project manager must have, if the solicitation says the project manager must have previous ten years of experience with contracts of $100 million or greater. And the awardees project manager does not have ten years of experience with contracts, $100 million or greater. That's called definitive responsibility criteria. Common reasons why protests are denied. A lot of these are kind of summary language, but the GAO will say the agency's evaluation was reasonable and it was in accordance with the evaluation criteria. Your merely disagreeing with the agency and you don't get to disagree. The agency gets to make those decisions. The trade off was reasonable because the official doing the trade off identified technical distinctions, distinctions between the competing proposals and said, Yeah, this one is worth more money because it offers the government these benefits. More common reasons. Protests are denied. The proposal didn't explain it said, Yeah, we're going to give you what you want. And it didn't explain how or why. That's not a good proposal and you're not going to win a contract that way. The one who suffers from this the most is often the incumbent was bidding on a competition. They figure, Hey, the government knows us, the government knows how good we are. We don't really need to write a serious proposal, consciously or sometimes subconsciously. Incumbents don't write good proposals and lose, and they're surprised. How could we lose? The answer is you aren't. You're not being judged just on what you do. You're being judged on your proposal. It's a writing competition, really. How good was your proposal? Uh, your proposal showed that you don't understand the work or the agency reasonably determined. You don't understand. You don't understand the work. Protests may be denied because your allegations of bias or favoritism were speculative, or you protested that the incumbent got an unfair competition, unfair advantage when it didn't. Obviously, being an incumbent gives you an advantage, but that's not considered unfair or the protest is untimely because, as I said, there are strict timeliness rules. On the remaining slides. Well, not the remaining. The next couple slides are some examples of winning protests. Basically the opposite of what I showed you before. The agency did not follow the evaluation criteria. The agency agency's evaluation included factors that were not in the solicitation. So you didn't tell me that you were looking for a computer that had a blue logo or, you know, or had a. Nurse. You didn't tell me you were looking for a car that was white. So how was I supposed to know? Obviously, those are simplistic examples. Uh, the agency. The agency's evaluation experience relied on distinctions between the offers experienced that are not supported by the records. Source selection decision was based on a bad evaluation, or it was based on undisclosed evaluation criteria. A part nine of the FA, as I mentioned, talks about contractor qualifications. One of those is responsibility. Does the contractor have financing a facility, a solid record of integrity and other things that are needed just to be a responsible contractor? Debarment. If you if a contractor commits a crime. Contractor might be debarred or even for other reasons that are not crimes where the contractor might be suspended or declared ineligible. And the other thing that's in part nine of the FA contractor qualifications has to do with OCI, organizational and conflicts of interest. For example, if you wrote the specification for something, you generally don't get to bid on it because you might have written the specification in a way that favors you. If you have a contract to evaluate. Another government contractor. You can't be that other government contractor because you can't evaluate yourself. Government does use contractors to evaluate other contractors, but you cannot evaluate yourself. So those are examples of oci's. Right size issues. Thus, we largely talked about there are size standards. How you know who is a small business? They vary depending on the type of business which is identified by something called a NAiCs code North American industry classification system. And then those are those size standards are used to determine who is a small business for different programs. There are rules about when a contract should be set aside, i.e. if two offers can be expected from a small business or a specific category of small businesses. The subcontracting program we talked about the ADA program, which is sole source contracts for ADA contractors, service disabled veterans, veteran owned businesses and women owned businesses are each entitled to various preferences. And there are something called a Mentor Protege program, which allows a small business to team with a large business to get certain benefits and still be counted as a small business. And but there are very strict rules about how that is done. And if you don't follow those rules, you could be out of luck. You know, that is somebody could protest and say, hey, this is they're not a small business because they're affiliated with a large business, because they're mentor protege agreement was not done correctly. Labor policies talked about a lot of these already. The Davis-Bacon Act, which involves contract construction contracts. Service Contract Act, also known as a service contract labor standards law, which talks about service contracts. Executive Order 11 to 46 Equal Employment opportunity. And there are other laws having to do with opportunity for veterans and opportunities for disabled workers. And then some of the presidential executive orders that we talked about before. These things are mostly addressed in part 22 of the FA. Cost issues we talked about in part 30 and 31 determining allowability reasonableness and applicability cost is allowable if it does not violate the cost principles which I mentioned, which say we will not pay for certain things. The cost is reasonable if it's reasonable, if it's close to the market price and it cost is applicable if it belongs to that contract. So I should not be charging one contract for a cost that belongs on a different contract even if the same government agency is getting the benefit. Oh, I need to account for unallowable costs so I could exclude them. So if I have a holiday party with liquor, I need to account for that so I can exclude it from my overhead and my contract costs and direct costs and indirect costs we talked about already. So here are some examples of selected cost principles. Compensation I mentioned is a big one. Costs for independent research and development interest generally the government will not pay interest on that is interest that you incur as a business expense. There are circumstances where the government needs to pay interest, for example, on a certified claim. If the government ultimately pays the claim and needs to pay interest. But interest as a business expense is generally unallowable labor relations costs professional and consultant costs, training and education, legal costs, research and development. All of these have cost principles, and there are many others. As I mentioned, the contracting officer may make changes within general scope of the contract. There may be constructive changes where the contracting officer did not directly tell you to change something, but the contracting officer made you do something that causes additional costs and that is a constructive change. If the. If you win a contract. And. There's a protest. And now your performance of the contract is delayed 100 days while that protest is decided. And in the meantime, you're pushed. You say it's a construction contract and you're pushed into the winter months. Now, construction costs are different in the winter months. That could be a constructive change. That could be an example of a constructive change. Or when the government just tells you to do something and doesn't acknowledge that it's a change, that would be a constructive change. And there are notice requirements and then you can submit a request for equitable adjustment, meaning increase the price and or push out the schedule. And it's a good idea and sometimes required, but always a good idea to have change order accounting where you establish new accounting codes for the new costs that are being incurred as a result of the change to be able to prove to the government what the increased costs were. That's not always possible to do change order accounting, but contracting officers, Contractors rather, should at least try to show the contracting officers that they did change order accounting. Contract disputes. A routine request for payment is not a dispute. A claim after a request for equitable adjustment is ignored or is not paid fully. It can become a claim by being certified to initiate a claim by certifying it. You have to continue performance while the claim is pending. If it's over a certain amount, it may require a certification. Interest will accrue on the claim. Contracting officer has to issue a decision within 60 days, but the contracting officers can give themselves extensions and contractors have appeal rights. Termination for convenience. Talked about. And it can be in whole or in part. Contracting officer does not need to terminate the whole contract for convenience. It might be part of the contractor. Part of the contract. Contractor must stop work and mitigate damages. For example, if you have a truck on its way with materials, you need to call the trucking company and say, turn around, go back to the supplier. We don't want it. That's mitigating damages. If you have parts that are out in the cold, you need to bring them inside or protect them from the weather. So that's another example of mitigating damages. And then you'll submit a termination settlement proposal and the government will pay for should pay for work that was accepted plus profit and overhead and your termination costs, including the cost of a lawyer to help you prepare the termination proposal. Lawyer and accountant and so on. Termination for default will be if you fail to meet the schedule or you fail to make project progress. So it looks like the schedule is in danger. Uh, under certain circumstances, the the government has to give you a cure notice and give you a chance to cure. As I mentioned, the government can get reprocurement costs if you appeal successfully from a termination for default. You don't get the contract back. It just becomes a termination for convenience, which gives you the rights we just talked about on the previous slide. All right. The last subject to talk about is false claims. Don't submit a false claim. It's a crime to knowingly present or cause to be presented a false claim which includes a false invoice. And that could include issues of, you know, submitting a product that isn't up to the quality you promised and then submitting an invoice for it, failing to comply with the Buy American Act, substituting a foreign product, not complying with the Davis-Bacon Act, where you promise to pay certain wages and submitting false payrolls and the like. Those are false claims, serious, serious financial and other consequences. So just tell your clients, don't do it. It's not worth it. So lastly, key takeaways. Government contracting shares, basic principles of other contracting, but it's very highly regulated. The government has a lot of rights that ordinary contractors could never negotiate, like termination for convenience, the right to just walk away whenever you feel like it, the right to make changes whenever you feel like it. And the consequences of breaches of a government contract can include damages. Losing the right to do business with the government and civil and criminal penalties. So it's not an area anybody should go into without a solid understanding of of what's involved. Uh, and and good, good counsel from professionals, both lawyers, accountants and others who are familiar with the with the unique areas. Thank you very much for listening. I'm happy to hear from anybody who has any follow up questions of a general nature or if you'd like a copy of my Subcontract Negotiation Quick Reference Guide. Here's my contact information. Please don't hesitate to be in touch. Thank you very much for listening.