Insights

In Lockheed Martin Aeronautics Company, ASBCA No. 62209 (a C&M case), the Armed Services Board of Contract Appeals (Board) awarded $131,888,860 in damages plus applicable interest in connection with Lockheed Martin’s claim for the cumulative disruptive impacts it experienced in performing over and above work on the C-5 Reliability Enhancement and Re-Engining Program.  The underlying contract related to the modernization of a fleet of C-5 Galaxy Aircraft, which is the largest U.S. military transport plane and has provided heavy intercontinental strategic airlift capabilities since the 1970s.  The Board sustained the appeal after finding that Lockheed Martin had met its burden of proof on entitlement and quantum, using the measured-mile methodology, which compares an affected period of performance with an unaffected period.  This case is a prime example of marshalling fact and expert witness testimony, and documentary evidence, to demonstrate the impacts of cumulative disruption on performance to justify causation and damages.

On April 22, 2024, the Office of Management and Budget (OMB) issued a Final Rule significantly revising the Uniform Guidance for grants, cooperative agreements, and other federal financial assistance.  The Final Rule (titled “OMB Guidance for Federal Financial Assistance”), and OMB’s accompanying memorandum to agencies and reference guide, state that the revisions aim to streamline and clarify the grant rules and improve management, transparency, and oversight of federal financial assistance.  Agencies must implement the Final Rule by October 1, 2024; however, agencies may apply it to federal awards as early as June 21, 2024.

In JE Dunn Construction Company, ASBCA No. 63183, the Armed Services Board of Contract Appeals (“ASBCA”) issued its first published decision applying the Federal Circuit’s recent holding that the FAR sum-certain requirement for Contract Disputes Act claims is not jurisdictional. The Board held that, because the government did not raise the issue until after a hearing on the merits, the government forfeited its right to challenge the contractor’s satisfaction of the sum-certain requirement.

On May 15, 2023, the Armed Services Board of Contract Appeals (“ASBCA” or “the Board”) in J&J Maintenance, Inc., d/b/a J&J Worldwide Services, ASBCA No. 63013 issued an instructive analysis of its jurisdiction to hear monetary and nonmonetary claims.  Partially granting a government motion to dismiss, the ASBCA explained that, if a contractor does not seek monetary relief in its claim to the contracting officer (“CO”), then the contractor cannot seek monetary relief on appeal to the Board.  Addressing the contractor’s claim for contract interpretation, however, the Board denied the government’s motion to dismiss and held that, where a contractor can reasonably articulate “significant consequences” of its claim other than the recovery of money, the fact that the claim may also have a financial impact on the parties does not strip the Board of jurisdiction. 

Concerns about the federal debt limit have simmered since the Government reached the limit in January, but things are coming to a boil with the Treasury Department confirming that, as early as June 1, “extraordinary measures” may be insufficient to prevent the U.S. from defaulting on its obligations. A default would be unprecedented, creating uncertainty about how the Administration will proceed. It is important, therefore, that contractors understand the circumstances and be prepared to respond effectively to a range of scenarios.

In Lockheed Martin Aeronautics Company, ASBCA No. 62209 (a C&M case), the Armed Services Board of Contract Appeals (“Board”) denied the Air Force’s motion for summary judgment, which had argued that the “measured mile” approach to calculating disruption was legally untenable.  In its decision, the Board noted that it has “accepted the measured mile approach as an appropriate method of determining impact to productivity” referencing extended discussion in King Aerospace, Inc., ASBCA No. 60933, 19- 1 BCA ¶ 37,316.  The Board also granted Lockheed Martin’s cross-motion for summary judgment on the issue of release, holding that the express language of modifications signed by the parties indicated that Lockheed Martin did not release any portion of its claim.  The recent decisions follow on the heels of two other Board decisions.  In April 2022, the Board granted Lockheed Martin’s cross-motion for summary judgment on the Air Force’s statute of limitations defense because Lockheed Martin’s claim did not accrue before the events that fixed the government’s liability occurred (discussed here).  In June 2021, in a case of first impression, the Board granted Lockheed Martin’s motion for summary judgment on the Air Force’s affirmative defense of laches, holding that laches is no longer applicable in CDA cases at the Board (discussed here).

On May 18, 2022, President Biden issued Presidential Determination No. 2022-13, delegating certain authorities under Section 101 of the Defense Production Act, 50 U.S.C. § 4511 (DPA) for purposes of ensuring an adequate supply of infant formula. Implicit in this directive, the President determined that the ingredients necessary to manufacture infant formula are scarce and critical material essential to the national defense, and that such national defense requirements cannot be met without creating a significant dislocation of the normal distribution of such material in the civilian market. Specifically, the Presidential Determination stated that, the supply chain “disruption threatens the continued functioning of the national infant formula supply chain, undermining critical infrastructure that is essential to the national defense, including to national public health or safety.” The President delegated to the Secretary of Health and Human Services authorities to require performance of contracts or orders for such national defense needs over performance of other contracts or orders, and to allocate materials, services, and facilities with respect to all health resources, including ingredients needed to manufacture infant formula. The President also authorized the Secretary to exercise DPA authorities to determine the proper nationwide priorities and allocation of all ingredients necessary to manufacture infant formula, including controlling the distribution of such materials in the civilian market for purposes of responding to the domestic shortage of infant formula. Frequently asked questions concerning the DPA are included here.

In Lockheed Martin Aeronautics Company, ASBCA No. 62209 (a C&M case), the Armed Services Board of Contract Appeals (Board) held that the contractor’s claim, seeking recovery for impacts of over-and-above repair work during contract performance, was timely filed under the Contract Disputes Act’s six-year statute of limitations—rejecting an Air Force Motion for Summary Judgment and granting cross-motions filed on behalf of Lockheed Martin.  Recognizing that a contractor’s claim cannot accrue before the events that fix the liability of the government, the Board held Lockheed Martin’s claim did not have a single accrual date but, rather, multiple accrual dates based upon when the government approved each repair.  The Board separately held that those government approvals represented “the type of single-topic . . . yet repeated and distinct events” making Lockheed Martin’s claims timely under the well-recognized “continuing claim doctrine.”

Congress has not passed crucial funding bills for the start of FY 2022 and, on September 28, 2021, Treasury Secretary Yellen informed Congress that Treasury now estimates that the Federal government will reach the debt ceiling by October 18.  As a result, we again face the prospect of a government shutdown for lack of funding.  While Congress may yet take action, agencies across the government are likely to begin taking steps to prepare for a shutdown, and contractors should do so as well.

In Lockheed Martin Aeronautics Company, ASBCA No. 62209 (a C&M case), the Board granted Lockheed Martin’s motion for summary judgment on the issue of whether the Government can assert laches as an affirmative defense to a Contract Disputes Act claim. In a case of first impression, Lockheed Martin argued that the affirmative defense of laches is not available in CDA appeals because laches is an equitable doctrine, which may not be applied when there is an applicable statute of limitations, such as the CDA’s six-year statute of limitations. The Air Force argued that FAR 33.203(c) preserves the equitable defense of laches because the clause states that the Boards of Contract Appeals “continue to have all of the authority they possessed before the Disputes statute with respect to disputes arising under a contract, as well as authority to decide disputes relating to a contract.” The Board held that, consistent with the U.S. Supreme Court’s decisions in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954 (2017) (a patent case) and Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014) (a copyright infringement case), laches is not available when there is a “legislatively-enacted statute of limitations,” and FAR 33.203(c) does not preserve the pre-FASA affirmative defense of laches. The Board noted that while the Federal Circuit has not yet applied SCA Hygiene in a CDA case, the Board is bound by the precedent of the United States Supreme Court, and therefore does not need to await a Federal Circuit decision.

The American Rescue Plan Act of 2021 (the Act), signed into law by President Biden on March 11, 2021, extends Section 3610 of the CARES Act (previously discussed here, here, and here) through September 30, 2021. The extension allows federal agencies to reimburse contractors for six additional months of paid-leave costs if employees are unable to access worksites to perform their duties and unable to telework during the pandemic. Without this latest extension, Section 3610 relief would have ended on March 31, 2021. Consistent with the original enactment and previous extensions, the Act does not provide funding specifically for this relief, but agencies are authorized to use any available funds. 

The Biden administration has identified the Defense Production Act (DPA) as a key part of its new “National Strategy for the COVID-19 Response and Pandemic Preparedness” (Strategy), buttressed by a new “Executive Order on a Sustainable Public Health Supply Chain” (Executive Order). Issued on January 21, 2021, the Biden administration’s Strategy calls for immediate action to address critical shortfalls of vaccination supplies, testing supplies, and personal protective equipment (PPE). The Executive Order, issued the same day, directs agencies to use “all available legal authorities, including the Defense Production Act, to fill those shortfalls as soon as practicable by acquiring additional stockpiles, improving distribution systems, building market capacity, or expanding the industrial base.”

On December 11, 2020, Congress presented to President Trump H.R. 6395, National Defense Authorization Act for Fiscal Year 2021. On December 23, 2020, President Trump vetoed the bill. Subsequently, the House voted on December 28, 2020 and the Senate voted on January 1, 2021 to override the veto. 

On December 9, 2020, the Department of Defense Office of Inspector General (DoD OIG) released its Audit of Department of Defense Implementation of Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act. The audit report assesses several aspects of how the DoD has issued relief under Section 3610, including how well contracting officers have complied with guidance, issues with contractor disclosures, and common reasons for denying relief. For an in-depth summary of the report, read the full article here.

On August 18, 2020, the Acting Principal Director for Defense Pricing and Contracting (DPC) issued updated guidance regarding contractor and subcontractor reimbursement of paid leave costs under the CARES Act § 3610, including two key Class Deviations, both effective immediately. First, it issued Revision 1 to Class Deviation 2020-O0013, which revises and supersedes the original class deviation (issued April 8, 2020) to FAR 31 and DFARS 231, which added a new cost principle, DFARS 231.205-79, “CARES Act Section 3610 – Implementation,” governing the allowability of paid leave costs under § 3610. Second, it issued Class Deviation 2020-O0021, which establishes guidance for contracting officers to follow when reviewing and processing § 3610 requests for reimbursement, including detailed checklists that describe the cost and other information contractors should provide with their requests. It also establishes a new contract clause, DFARS 252.243-7999, “Section 3610 Reimbursement Requests,” to be used to reimburse approved costs. Together, these class deviations revise, clarify, and amplify the earlier version of Class Deviation 2020-O0013, which we discussed here. 

On May 14, the President issued an Executive Order (EO) delegating funding and loan authority under Title III of the Defense Production Act (DPA) to the U.S. International Development Finance Corporation (DFC) to support domestic production of strategic resources to respond to the COVID-19 outbreak and strengthen domestic supply chains. The DFC’s loan authority under the EO is limited to loans that “create, maintain, protect, expand, or restore domestic industrial base capabilities” supporting “the national response and recovery to the COVID-19 outbreak” or “the resiliency of any relevant domestic supply chains.” Thus, while Congress established the DFC in 2018 to foster America’s investment in overseas development projects, the DFC now is expected to establish a separate investment team to, among other responsibilities, administer loans for this domestic support and to issue new implementing regulations.

Agencies continue to release and refine Section 3610 billing guidelines. There continue to be substantive differences between agencies, creating compliance challenges for contractors. Crowell & Moring continues to track the latest Section 3610 billing guidance. Click here to view the updated table, current as of May 1, 2020.

On April 28, the President signed an Executive Order on Delegating Authority Under the DPA with Respect to Food Supply Chain Resources During the National Emergency Caused by the Outbreak of COVID-19. The new EO delegates to the Department of Agriculture (“the Department”) Defense Production Act (DPA) Title I priorities and allocation authority with respect to food supply chain resources, expressly including meat and poultry, during the COVID-19 national emergency. The new EO specifies that the Department shall use this authority to ensure the continued supply of protein, specifically meat and poultry to Americans, consistent with the Center for Disease Control and Occupational Safety and Health Administration COVID-19 guidance. The EO also grants the Department authority to identify other at-risk food supply chain resources that should be subject to its Title I priorities and allocation control. This EO builds on previously-issued COVID-19 Executive Orders concerning the delegation of DPA authorities that we have previously discussed.

The ongoing COVID-19 crisis has caused unprecedented harm to nearly all industries, including those involved in federal government contracts. This article provides information and guidance to prime contractors (and higher-tier subcontractors) who might be dealing with subcontractors devastated by COVID-19. A contractor may find that a subcontractor’s financial problems not only jeopardize subcontract performance but also threaten an otherwise profitable project and the contractor’s own reputation. Consequently, and especially in the COVID-19 era, contractors must monitor the financial affairs of their subs and be prepared to act decisively when a subcontractor’s deteriorating financial condition becomes apparent.