The federal government continues to use the False Claims Act (FCA) as one of its prime enforcement tools against government contractors. To keep you informed on the status of the law, Bradley’s Government Enforcement and Investigations Practice Group is pleased to present the False Claims Act: 2018 Year in Review, our seventh annual review of significant FCA cases, developments and trends. This year’s publication maintains the magazine-like format we introduced last year, making it an easy-to-read, printed resource as well as a convenient and searchable digital tool.
Federal Contractors May Be Able to Recover Costs Caused by the Government Shutdown
The current government shutdown is now the longest in U.S. history, and many federal contractors are incurring costs as a result of shutdown-related work stoppages and delays. Luckily, many federal contracts contain clauses that provide a potential avenue for recovery of such costs. Further, there are practical steps that contractors can take to increase their chances of recovering shutdown-related costs from the government.
What contract clauses might apply?
Several Federal Acquisition Regulation (FAR) clauses, including the following ones, could provide contractors with an avenue to recover costs incurred as a result of shutdown-related delays or work stoppages:
- FAR 52.242-14 (Suspension of Work)
- FAR 52.242-15 (Stop Work Order)
- FAR 52.242-17 (Government Delay of Work)
- FAR 52.243-2 (Changes – Cost-Reimbursement)
- FAR 52.243-3 (Changes – Time-and-Materials or Labor-Hours)
It is very important to note that these clauses generally impose very short timeframes in which a contractor must provide the government with notice and/or assert its right to an adjustment. For instance, FAR 52.242-15 (Stop Work Order) requires a contractor to assert “its right to the adjustment within 30 days after the end of the period of work stoppage[.]”
How can my company increase its chances of recovering shutdown-related costs?
One way federal contractors can increase their chances of recovering costs caused by the government shutdown is by setting up separate charge codes in their accounting systems to identify and segregate all costs incurred as a result of shutdown-related delays or work stoppages. These types of costs often include, but are not necessarily limited to:
- Idle facility/staff/equipment costs
- Costs to implement a stop work order
- Severance pay if layoffs are necessitated
- Recruiting costs for replacement employees
- Unabsorbed overhead
- Remobilization costs once work recommences
Moreover, contractors would be wise to document justifications for shutdown-related costs and document steps taken to mitigate the impact of the shutdown.
Finally, contractors should document any and all communications with the government regarding shutdown-related delays and work stoppages, as these may come in handy if the government attempts to invoke the Sovereign Acts Doctrine as a defense against a contractor’s claim for shutdown-related costs.
Wait, I have more questions!
If you have any questions about the topics discussed in this article or about any related issues, please do not hesitate to contact Aron Beezley.
Fifth Circuit Reverses Course after 37 Years; Holds OSHA Has Authority to Enforce Multi-Employer Citation Policy
On November 26, 2018, the Fifth Circuit released its opinion in Acosta v. Hensel Phelps Construction Co., which held that despite prior rulings to the contrary, OSHA is authorized to issue citations against contractors for safety violations regardless if the employer actually employs the employee(s) exposed to the hazard.
Under OSHA’s multi-employer worksite policy, an employer who causes a hazardous condition, often referred to as the “creating employer” or a general contractor or other employer having control over a worksite who should have detected and prevented a violation through the reasonable exercise of its supervisory authority, often referred to as a “controlling employer” may be cited for a violation, whether or not its own employees were exposed to the hazard. Generally, this gives compliance officer’s authority to issue citations to general contractors responsible for safety violations of subcontractors and others not employed by the general contractor.
However, in 1981, the Fifth Circuit held that OSHA’s multi-employer worksite policy was unenforceable in Texas, Louisiana and Mississippi because an employer can only receive a citation for safety violations that expose its own employees to the hazard. Fast forward thirty-seven years – the Fifth Circuit was given the opportunity to confirm this holding but decided to side with seven other circuit courts and ruled that OSHA has the authority “to issue a citation to a general contractor at a multi-employer construction worksite who controls a hazardous condition at that worksite, even if the condition affects another employer’s employees.”
The factual background of the case helps set the stage for the Fifth Circuit’s decision. Hensel Phelps was hired as the general contractor to build a public library in Austin, Texas. Hensel Phelps subcontracted portions of the work, including the excavation on the project. The regional OSHA office received complaints about safety issues for the project, so a compliance officer conducted an inspection at the worksite. The compliance officer found subcontractor employees working next to an excavated wall without proper sloping or other protections from cave-in hazards. The compliance officer reported that Hensel Phelps knew of this practice and directed subcontractors to continue work regardless. This investigation prompted OSHA to issue citations for violations of the cave-in protections under the general trenching and excavation rules. Hensel Phelps received a willful citation from OSHA under OSHA’s multi-employer worksite policy even though Hensel Phelps employees were not exposed to the hazard. Under the multi-employer worksite rule, OSHA could issue citations to more than one employer for a hazardous condition regardless if the employer actually employs the employee(s) exposed to the hazard.
Hensel Phelps appealed the citation to the Occupational Safety and Health Review Commission (the “Commission”). The Commission found that Hensel Phelps had sufficient control and authority over the jobsite including the sub-subcontractor and the employees working in the cited condition. The Commission pointed out that normally, the citation would be affirmed under applicable Commission case law. However, the Commission acknowledged that the project was located in the geographical jurisdiction of the Fifth Circuit which did not recognize the multi-employer worksite rule. Thus, the Commission ordered that Hensel Phelps could not be liable for an OSHA violation based solely upon a subcontractor’s employees’ exposure to the dangerous condition.
OSHA, through the Secretary of Labor’s office, appealed the Commission’s decision to the Fifth Circuit Court of Appeals in an attempt to overturn the Fifth Circuit’s prior rulings. On November 26, 2018, the Fifth Circuit issued an opinion in the case reversing 37 years of precedent. Specifically, the Fifth Circuit indicated that its prior decision in 1981 was obsolete and given changes in the law (mainly due to US Supreme Court decisions), the courts should defer to the Secretary of Labor’s interpretation of the statutes it enforces.
Contractors operating in the region should be mindful of this change in the law as it affects risk management and safety issues on almost all construction projects. OSHA officers will likely be briefed on the change and ready to apply it to each job site they visit. While contractors should always be mindful of safety on the job, they should pay particular attention to ensure that all subcontractors on a job site are following the contractor’s safety protocols.