Accelerated Payments to Small Business Subcontractors Rule Finalize

Following up on a prior blog about what was then a proposed rule, a final rule was issued on November 25th requiring accelerated payments to small business subcontractors. The rule mandates that if a contractor receives accelerated payments from the Government, the contractor shall make accelerated payments to its small business subcontractors. The new FAR clause incorporating this rule is Part 52.232-40, and goes into effect  December 26th.

This new clause requires:

In subparagraph (a):
(a) Upon receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business contractor.

. . . and

In subparagraph (c):
(c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns for the acquisition of commercial items.

This new clause specifically notes though:

In subparagraph (b):
(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.

So what does this new rule actually do?  This is unclear since, among other things, there is no definition of "accelerated payments" or of "maximum extent practical."  And, since it specifically states it is not intended to affect the Prompt Payment Act, the remedy, if there is a violation, is unclear. Under Virginia law it's likely a violation could be deemed a breach of contract, and thus the "first to breach" under appropriate circumstances if violation is not waived by the small business subcontractor. We'll all collectively have to wait and see though how this new rule gets applied; both by the Government and by the Courts.

ASBCA Holds That Lack of Contracting Officer’s Decision Does Not Preclude Appeal Challenging Performance Evaluation

In a recently released decision (11/18/13, Metag Insast Ticaret A.S., ASBCA No. 58616), the Armed Services Board of Contract Appeals reaffirmed its earlier holding that performance evaluation disputes may constitute Contract Disputes Act (CDA) claims, if the contractor has sought a final decision, as being an appealable request for interpretation of contract terms and relief therefore arising under the contract. In Metag, the Board further allowed the appeal to proceed even though the Contracting Officer (CO) had not issued a final decision.

The government had moved to discuss Metag’s appeal on that basis. But the Board held that Metag had provided the CO a reasonable amount of time to issue a decision before appealing, considering the size and complexity of the claim. This is despite the fact that only 51 days had elapsed between the final decision request and the appeal, but the Board concluded that 176 days had elapsed between Matag’s claim submission and the government’s motion to dismiss without a CO’s decision on the claim; and so the CO’s delay was unreasonable.

Performance evaluations are a continuing critical aspect of government contracts projects, and with best value and other more evaluative procurement processes are very important in both the administrative processes for the project for which they are issues and future prospects. It is therefore important for contractors to review and formally respond to any performance evaluations; but particularly those resulting in “marginal” or “unsatisfactory” ratings. Ideally, performance disagreements can be resolved as part of that review and response process; but if not the ability to request a CO’s final decision about performance ratings is another important tool in the contractor’s toolbox. The Metag decision reinforces that right, and the obligations of COs to reasonably and timely address contractor’s concerns respecting evaluation ratings.

Vandeventer Black Partner Arlene Klinedinst to Speak About Fringe Benefit Compliance and Tracking

On Thursday, January 16, 2013, as part of AGC Virginia's Breakfast & Learn project, Vandeventer Black partner Arlene Klinedinst will speak with Lind Sawyer of Deltrack Fringe and Hunter Webb of Sullivan, Andrews & Taylor, CPA's about various fringe benefit compliance and tracking issues.  For more information about this program, please see the below brochure.  We look forward to seeing everyone there.

Virginia Mechanic's lLien: Complexities Revisited

As Virginia construction attorneys know, the mechanic's lien laws and interpreted issues in Virginia are many and complex. A good reference for many of those is found in the following 2013 Virginia Supreme Court case from procedural to priority and almost every major issue in between:

GLASSER & GLASSER, PLC, TRUSTEE FOR FIRST MORTGAGE BONDHOLDER, 2006 SERIES

v.

JACK BAYS, INC., ET AL.

CITIZENS BUSINESS BANK

v.

JACK BAYS, INC., ET AL.

CELTIC BANK

v.

JACK BAYS, INC., ET AL.

Record No. 120287

Record No. 120288

Record No. 120289

Supreme Court of Appeals of Virginia

February 28, 2013

PRESENT: All the Justices

OPINION BYJUSTICE DONALD W. LEMONS
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTYMary Grace O'Brien, Judge

Virginia Administrative Appeals

Administrative appeals in Virginia have a high standard for reversal of an agency decision. An earlier blog talked about the potential impacts of recent statutory change but this 2012 case is a good overview source on the courts' review role:

COMMONWEALTH OF VIRGINIA, DEPARTMENT OF PROFESSIONAL AND OCCUPATIONAL REGULATION, BOARD FOR CONTRACTORS

v.

KAREN MATHESIUS

Record No. 0285-12-3

COURT OF APPEALS OF VIRGINIA

NOVEMBER 20, 2012

Testimony Transcripts: Discoverable or Required to be Bought from the Court Report?

Sometimes facts in a case suggest the need to evaluate prior deposition or trial testimony. Does that make related transcripts subject to discovery production requests? Recently, Magistrate Judge Pamela Meade Sargent (Abingdon) said no, ruling instead that counsel needed to purchase a copy of the transcript from the court reporter who transcribed the testimony. This is certainly a win for court reporters who make part of their livings from transcript copies. It also relieves producing parties from the burden of copying and producing the transcripts. Whether other courts will follow Magistrate Judge Sargent remains to be seen.

The Federal Goverment is Shut Down . . . Now What?

A seemingly simple proposition often misunderstood is that during a Government shutdown contracts remain in force; not all do. Therefore, the first and most important thing to do in determining shutdown implications is to review your contract. The second most important thing to do is to follow all applicable administrative requirements, including respecting required notices.  Communication, both internally and externally, is critical.

 

Some additional specific considerations for Government contractors as the current shutdown continues include the following:

Pre-FY 2013 Funded Contracts: These contracts should not be shut down; however, it would be good to confirm with the Contracting Officer that performance is to continue. Payments may be delayed, and this should result in interest payments under the Prompt Payment Act. You are generally obligated to perform work even if payment is delayed; however, if payment delay is excessive and you are unable to perform because of that you should consider making an administrative claim, providing notice to the Contracting Officer.  Please note that even with this, though, reducing or stopping work may not be contractually allowed. Keep a cash flow record to justify any reduction or stoppage.

FY 2013 Funded Contracts: For contracts where work has already been funded, or if revolving funds are available, work may continue. If the Contracting Officer provides a shutdown notice though, promptly stop work and track any cost impact. Continued work without approval will likely be considered volunteer work and not be paid for. As with other adverse administrative actions, notice and otherwise following adjustment and claim processes are required, including notices. Communication with the Contracting Officer is critical.  But communication with lower tiers is also critical, including notices to them to stop work or deliveries. Additionally, consider any security requirements that may apply / be affected.

Fixed Priced Contracts: These contracts are generally funded at the time of award, and can include fixed price task orders; however, beware of unfunded change orders and task orders. Performing them without approval / funding will also likely be considered volunteer work and not paid for.  As with the above, both external and internal communication is critical.

Cost Type Contracts: Typically these contracts are funded only in part as the work progresses, and are subject to limitation on funds clauses. Do not continue to work if it is not funded (see above), provide notice to the Contracting Officer (see above), and communicate both externally and internally (see above and below). Similar rules apply to Time and Material (T&M) contracts. 

Supply Contracts: Products may be subject to changed delivery and payment terms. Make sure to advise your vendors. Communication with them and the Government is critical.

Service Contracts: Make sure you know where your employees are located. They might find that they do not have access to Government facilities during the shutdown. Unless advised not to report to work, employers may be liable to pay the employee with no reimbursement from the Government. Also, if an employee is on official travel, employers may need to order them to return or stay in place for a short time until further information is available. Employees on leave, vacation or sick leave should probably stay on that status if they were assigned to a shutdown contract. However, if the employees are covered by a Collective Bargaining Agreement (CBA), the CBA might govern how employers must treat their employees.  Employers may be required to bargain or discuss shutdown changes with the union under federal labor law or the terms of the CBA.

Employees: Attempt to mitigate costs by work reassignments. Consider vacation or leave as that may not be classified as voluntary work, and may be compensable after the shutdown ends. Some workers may need to be on "stand by" to perform emergency services, such as maintenance of an IT system. If employers need to furlough employees they should first verify applicable laws and regulations of the jurisdiction in which the work is performed; especially California and New York.  Under the federal Fair Labor Standards Act (FLSA), if non-exempt employees perform any work during the shutdown (whether from their homes, cars, or any worksite) then employers are required to pay those non-exempt employees at their regular rates, for all time they actually work, even though the Government may never reimburse the company.  For salaried, exempt employees, if those employees work any part of any week (e.g. a few hours on the first day of the Government shutdown), then employers are required to pay them their entire, fixed salary for that entire week.  Depending on state or local law, the terms of any applicable CBA, and/or company policy or practice, employers may be able to require employees to use their available, paid vacation or other paid leave for full or partial days of the Government shutdown.

Federal Employees: Determine if you need a federal employee to approve the work, payment, accept deliveries, provide access, information, or other reasons. If the contract is not shut down try to plan around such problems and notify the Government of any impacts.

Government Agencies: Certain Government agencies with significant Government contract responsibility, such the Small Business Administration (SBA), may be completely shut down. This will delay approval of 8(a) applications, mentor-protégé applications, loans, size determinations, and other issues.

Shutdown issues are many, varied, and complex. Knowing your contract and then communicating both externally with the Government, lower tiers, etc. and also with your employees are critical first steps.