CICA Violated Where Sole-Source Award Duration Was Too LongThe U.S. Court of Federal Claims (COFC), in Sierra Nevada Corporation v. United States, recently held that a contracting agency’s justification of a sole-source contract award ran afoul of the Competition in Contracting Act (CICA) because the duration of the sole-source contract was longer than reasonably necessary. The COFC’s decision in this case is noteworthy because it provides clarity for both procuring agencies and would-be protesters about the limits of an agency’s ability to invoke one of the enumerated statutory exceptions to CICA.

The Facts

In 2014, the Air Force awarded a contract to Sikorsky Aircraft Corporation to develop the Combat Rescue Helicopter (CRH) to replace an aging fleet of Pave Hawk aircraft. Over the past five and a half years of Sikorsky’s work on the CRH development contract “the requirements baseline has continued to evolve, driving the need for planning in support of a new contract vehicle to address a broad spectrum of known and undefined operational capabilities.”

During the summer of 2019, the Air Force determined that the CRH’s capabilities required updating “to ensure it [could] encounter modern threats and perform its critical mission.” In October 2019, the Air Force issued a Sources Sought Synopsis (SSS) indicating that the Air Force was conducting market research to assess the ability of companies to perform “a broad spectrum of capability upgrades.”

In response to the SSS, the Air Force identified “capable vendors,” meaning that each vendor was “evaluated as capable of performing required development contract activities to include development, integration, and verification,” when provided with a Technical Data Package (TDP). The Air Force included Sierra Nevada Corporation (SNC) as one of these “capable vendors.” For the CRH upgrade contract, “the TDP includes information such as interface control documents and wiring diagrams that are specific to the requested modifications.” Thereafter, in March 2020, the Air Force reviewed responses from the industry to the SSS and concluded that “[i]ndustry feedback verified need for full [TDP] to implement candidate [capability upgrade] requirements.”

However, the TDP, which eventually will be delivered to the Air Force by Sikorsky pursuant to its current CRH development contract, was “currently unavailable both because Sikorsky’s [] TDP delivery due date has not yet arrived and because of a nascent dispute between the government and Sikorsky over data rights.”

On January 19, 2021, after considering multiple options, the Air Force signed a Justification and Approval (J&A), representing a decision to move forward with an award to Sikorsky of a five-year sole-source CRH upgrade contract, with a seven-year delivery period. The primary stated reason for the Air Force’s sole-source award to Sikorsky was that Sikorsky was the only company who possessed the necessary TDP.

Thereafter, SNC filed a bid protest with the COFC alleging, among other things, that the duration of the sole-source award to Sikorsky violated CICA.

The Holding

The court agreed with SNC that the Air Force’s “J&A does not justify a long-term, $980 million, sole-source, single award ID/IQ [contract] to Sikorsky.” Specifically, the court noted that, although the record “generally supports a sole-source award to Sikorsky if and when the TDP is not delivered in a timely manner—and during any subsequent period in which the TDP remains unavailable—the Court concludes that the scope of the contemplated contract exceeds the government’s demonstrated need.” The court noted that “while the J&A and the administrative record demonstrate that the timing of the TDP delivery is somewhat uncertain, the TDP may be available in the near future.” The court further stated:

[T]he critical problem for the [Air Force] is that the J&A simply does not explain how the current unavailability of a TDP justifies a sole-source award for the entirety of the CRH upgrade contract, which contemplates a five-year order period and a seven-year delivery period. That omission is particularly glaring in light of the government’s admission that Sikorsky is contractually required to provide a full TDP in the near future, at which time [multiple] other contractors will be capable of performing the CRH upgrades.

The court went on to note that “CICA’s mandate for full and open competition is not excused simply because a sole-source award avoids additional, future effort on the part of the Agency.”

Accordingly, the court concluded that a permanent injunction was warranted to ensure that the Air Force competitively bids the subject work in accordance with CICA when and if the TDP becomes available.

The Takeaway

Most government contractors are aware that CICA requires agencies, when conducting “a procurement for property or services,” to use competitive procedures to obtain “full and open competition” (10 U.S.C. § 2304(a)(1)). Most government contractors are also aware that there are limited exceptions to CICA, such as where the property or services “are available from only one responsible source . . . and no other type of property or services will satisfy the needs of the agency” (10 U.S.C. § 2304(c)(1)).

However, many government contractors may not realize that an agency does not possess unlimited discretion to invoke the sole-source exception to CICA’s competition requirements. More specifically, contractors may not realize that they may challenge the duration of a sole-source award contract in a bid protest when the period of time for the sole-source award is unreasonable or not adequately justified. The Sierra Nevada Corporation case highlights this important limit on an agency’s discretion to invoke CICA’s sole-source exception.

Besides justifying why it needs to depart from statutorily mandated competition requirements, going forward an agency will have to be mindful of the need to explain for how long it will need the sole-sourced good or service, and be prepared to explain in the J&A why the period of time stated is both necessary and reasonable. The Sierra Nevada Corporation decision makes clear that an agency’s failure to do so might give contractors a valid basis to protest the duration of the sole-source award.

If you have any questions about the topics discussed in this article, please do not hesitate to contact Aron Beezley or Patrick Quigley.

You’ve Gotta Fight For Your Right To Get Paid: The Right To Stop WorkA contractor is halfway through the (timely) completion of a project and the owner’s payment is late. Days, weeks go by, and now the contractor is incurring all the costs of the work without any compensation. It might be tempting to simply walk off the job, but bear in mind that legally speaking, that might constitute the “first breach,” even if the owner is late on payment. Enter: the stop work clause.

The optimal stop work clause clearly provides the contractor the right to suspend its work if the owner fails to pay after a certain amount of time, and then get a time extension for any delays resulting from the suspension. The standard AIA language has it all and can be easily tailored to a contract’s payment mechanisms:

If the Architect does not issue a Certificate for Payment, through no fault of the Contractor, within seven days after receipt of the Contractor’s Application for Payment, or if the Owner does not pay the Contractor within seven days after the date established in the Contract Documents, the amount certified by the Architect or awarded by binding dispute resolution, then the Contractor may, upon seven additional days’ notice to the Owner and Architect, stop the Work until payment of the amount owing has been received. The Contract Time shall be extended appropriately and the Contract Sum shall be increased by the amount of the Contractor’s reasonable costs of shutdown, delay and start-up, plus interest as provided for in the Contract Documents.

Remember, the more details the parties include upfront in the contract, the less there is to argue over later.

Note that there are arguments a contractor can make to justify walking off the job: it was impossible to continue working without payment for labor and materials; the owner’s nonpayment was such an egregious breach that it nullified the contract; or, major subcontractors walked off, too. While some of these may win the day, without clear contract language justifying stopping work, doing so is a gamble.

Lawyer’s Advocacy in Arbitrations: No. 10 of the Top 10 Horrible, Terrible, No Good Mistakes Lawyers Make: Not Looking for Ways to Make Your Arbitrator Happy at the End of a HearingDavid K. Taylor, Bradley Arant Boult Cummings, Nashville, TN
dtaylor@bradley.com
615-252-2396

There’s a great argument that lawyer advocacy in an arbitration is more essential than at a trial in court. This is the last post of the 10 most horrible, terrible, no good, “bang your head against the door” mistakes that I have seen lawyers make in arbitrations, both when I served as counsel and as an arbitrator. Agreeing to arbitrate a dispute, whether in a contract or by agreement, is a serious decision for any business. There are pros and cons to binding arbitration versus trial in a court that go beyond a series of blog posts, but the fact is that when a dispute is arbitrated, finality is the rule. It is very difficult to appeal an arbitration award. In many instances, representing a party in an arbitration requires more due diligence and work than a trial. Great “arbitration” lawyering is therefore essential but… sometimes does not happen.

No. 10: Not Looking for Ways to Make Your Arbitrator Happy at the End of a Hearing

Prior to the time that the proof in an arbitration is formally “closed” and you pack up your bankers boxes and thank the arbitrator (and are gracious to your adversary), think through how you can help the arbitrator make a well-informed award. Especially with an arbitration where there are scores of claims (such as change orders, each of which may be factually complicated) and defenses, remember that while you may have lived with the dispute for years, the arbitrator only has her notes and the (many times) voluminous exhibit books. Depending on your working relationship with opposing counsel, they have the same general goal when the hearing ends: Make sure the arbitrator understands each sides’ claims and defenses.

Therefore, be creative. Would post-hearing “summaries” that link up specific issues or claims to witnesses and exhibits be helpful, even if you work with opposing counsel to do so?  If there are claims for the recovery of legal fees (such as who is the “prevailing party”) and allocation of arbitration costs (which can be significant and include the arbitrator’s compensation), while you should have determined prior to the hearing how the arbitrator wants to handle such claims, ask for direction. Are your damages clear and unambiguous and have they remained unchanged from when the hearing began? Many times, during the hearing, claims and defenses are modified/revised/withdrawn. What about proposing the submittal of a Word document or Excel spreadsheet that lists the claims and amounts sought with a blank space for what will be awarded on that claim? Most arbitrators want to and will address every “claim” in the written award and want to be 100% clear on the relief sought.

While most arbitrators do not want formal post-hearing briefs that address every single issue, it may help to offer to submit a short and to-the-point summary of your damages. Sometimes there are pure legal (such as contract clause interpretation) issues that were raised for the first time in the hearing. If you are unclear or unsure that the arbitrator understands your position on such issues, offer to submit a short memorandum or even an email.  Do remember that whatever is submitted (under most arbitration rules) the time frame for the issuance of an award (typically 30 days from the close of the hearing) does not formally begin until all “post-hearing” filings have been submitted.

The bottom line is this: If you were the arbitrator, what would you want from counsel to make your final decisions and the award easier to write? Especially in a dispute where there may be scores of issues and claims, any post-hearing efforts or offers to the arbitrator to make her job easier will win you brownie points; hopefully increase your and your client’s credibility; and will pay off in the final result.

Finally, since this is the last of the top 10 posts, thank you for all of the great feedback I have received from readers all over the country, including a number of suggestions and recommendations from full-time arbitrators. One suggestion I recently implemented in an arbitration where I served as counsel was well received by the arbitration panel. For the 10 jointly created exhibit books, instead of putting them all in typical black binders, we used different color binders for each book. It saved time for all involved by being able to ask a witness or the panel arbitrator to turn to the “green” binder.

Read numbers 1, 2, 3, 4, 5, 6, 7, 8, and 9 on the list.