Insights

On June 18, 2026, the U.S. Department of Justice (DOJ) announced that LOGZONE Inc., a defense contractor based in Huntsville, Alabama, agreed to pay $507,144 to resolve allegations that it violated the False Claims Act (FCA) by knowingly failing to satisfy cybersecurity requirements in its contracts with the U.S. Department of the Navy. The resolution is the latest action under DOJ’s Civil Cyber-Fraud Initiative and the first publicly reported settlement this fiscal year. It underscores a continued enforcement posture in which noncompliance with contractual cybersecurity obligations serves as the basis for potential FCA liability. Notably, this settlement did not arise from a whistleblower complaint but from a government-initiated assessment, signaling to contractors that proactive government assessments can pose enforcement consequences.

A recent U.S. Government Accountability Office (GAO) decision dismissing three pre-award protests as untimely highlights an important procedural trap for would-be protesters. In Oready, LLC, GAO dismissed three protests filed one business day too late, even though they were submitted prior to the solicitation closing date and time. 

The General Services Administration (GSA) is seeking public comment on a new GSA Regulation clause, 552.239-7001, Basic Safeguarding of Data within Large Language Model Artificial Intelligence Systems (LLMs), governing data safeguards and requirements prime contractors must comply with when providing or using LLMs under federal contracts. This updated clause (Revised Clause) reflects substantial revisions from an earlier version released in March 2026 (Original Clause) that faced substantial pushback from industry. Where the Original Clause cast a wide net — imposing obligations broadly across AI systems with little differentiation among supply-chain participants — the Revised Clause is more narrowly tailored. The Revised Clause:

On June 5, 2026, President Trump issued National Security Presidential Memorandum (NSPM) 11 (NSPM-11) to accelerate AI adoption by the U.S. military and intelligence agencies. It directs updated AI management, acquisition, and use policies and seeks to compel AI companies to comply with Trump administration policies.  It calls for expanded training and enhanced security in collaboration with the private sector and orders the “termination for default or for convenience” of government contracts with AI companies that wish to limit how the government uses their products. NSPM-11 could also herald a major change in autonomous warfighting policy by directing the update of the Pentagon’s primary directive on autonomous weapon systems.

On April 8, 2026, the Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA) denied an appeal arguing that a concern’s early submission of its proposal with pricing was an attempt to “end-run the regulations” for when size is determined. In Size Appeal of DecisionPoint Corporation, SBA No. SIZ-6379, OHA confirmed that a company’s size is determined on the date it submits its initial offer which includes price, even if the proposal is submitted in advance of the proposal submission deadline and the offeror becomes large before the provided deadline.

On May 14, 2026, the U.S. Court of Appeals for the Federal Circuit issued a stark warning to government contractors: when a bid protest is filed involving your contract, failing to timely intervene can cost you the ability to defend your award.  In Global K9 Protection Group, LLC v. United States, the Federal Circuit upheld the denial of K2 Solutions, Inc.’s motion to intervene, finding that K2 had waited too long to act despite having sufficient reason to do so.

The Department of Justice (DOJ) and the cross-agency Trade Fraud Task Force have upped the ante by an order of magnitude in the government’s pursuit of customs fraud. On May 1, 2026—only a few months after setting its previous record-high customs-related False Claims Act (FCA) settlement of $54.4 million with Ceratizit USA, LLC—the DOJ shattered that record with a $549.5 million settlement with Perfectus Aluminum Inc., its subsidiary Perfectus Aluminum Acquisitions LLC, and a set of four affiliated warehousing companies. The Perfectus settlement resolves allegations that the defendants violated the FCA by evading antidumping and countervailing duties (AD/CVD). The settlement resolves three separate qui tam complaints filed by two individual relators and the Aluminum Extruders Council, an international industry association. Defendants were previously criminally convicted on charges related to the same scheme, and those convictions were affirmed by the Ninth Circuit in 2024.

On May 7, 2026, the Department of War issued the long-awaited Proposed Rule to implement Section 847 of the FY 2020 National Defense Authorization Act (NDAA) regarding Foreign Ownership, Control or Influence (FOCI) requirements for contractors. The proposed rule would expand the applicability of FOCI reviews, requiring contractors and subcontractors on unclassified “covered contracts” — defense contracts and subcontracts valued in excess of $5 million that are not for commercial products and services — to submit FOCI disclosures to the Defense Counterintelligence and Security Agency (DCSA) for FOCI risk assessment (and as applicable, mitigation) as part of contract award. This would effectively require DCSA assessment and adjudication of FOCI considerations prior to contract award. Thus, both cleared and uncleared defense contractors would be subject to the rigorous DCSA disclosure requirements, scrutiny, and FOCI mitigation. Crowell discussed the Section 847 requirements in a prior alert.

On April 13, 2026, President Trump signed into law the Small Business Innovation and Economic Security Act, which reauthorized the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.  These programs are Small Business Administration-sponsored initiatives intended to encourage small business contractors to conduct early-stage research and development (R&D) and help foster technological innovation related to U.S. government needs across several federal agencies, including the Department of War, Department of Energy, National Aeronautics and Space Administration, and National Institutes of Health.  SBIR/STTR are sometimes referred to as “America’s Seed Fund.”  Consistent with that characterization, SBIR contractors performing in the defense and technology space are often the focus of venture capital and private equity interest and investment.

A recent Illinois appellate decision has narrowed a key protection that state and local government contractors have long been able to rely on under Illinois’ Biometric Information Privacy Act (BIPA). In Thomas v. Cornerstone Services, Inc., the Illinois Appellate Court held that BIPA’s government contractor exemption does not provide blanket immunity to contractors simply because they hold a contract or subcontract with a state agency or local unit of government. The ruling carries important compliance implications for contractors and subcontractors operating across both government and private-sector markets.

On April 30, 2026, the DOJ announced the launch of the Fraud Oversight through Careful Use of Statistics initiative (FOCUS) to increase coordination between the Department and the growing host of data miners who sift through publicly available government data to identify patterns of alleged fraud. The launch of FOCUS highlights a growing trend in False Claims Act (FCA) enforcement: civilian data miners with access to public data — but no other connection to the alleged defendants — are filing almost as many qui tam complaints as company insiders.

On April 30, 2026, President Trump issued an executive order (EO) titled Promoting Efficiency, Accountability, and Performance in Federal Contracting, requiring agencies to “default” to fixed-price contracting to “protect taxpayer dollars, hold contractors accountable, and achieve demonstrable returns on investment.” The EO directs new approval processes for contract awards going forward, modification of certain existing contracts, and amendments to the Federal Acquisition Regulation (FAR).

As discussed in our March 30, 2026, client alert, Déjà Vu: New Executive Order Outlines Restrictions on Contractor and Subcontractor DEI Activity, President Trump issued Executive Order 14398 (EO 14398), Addressing DEI Discrimination by Federal Contractors, on March 26, 2026. The EO declared DEI activities “unethical and often illegal,” required a new mandatory contract clause for federal contracts and subcontracts, and directed the Federal Acquisition Regulatory (FAR) Council to issue an implementing deviation. That deviation has now arrived. At the same time, a coalition of higher education and government contractor associations has filed suit seeking to block the underlying executive order.

In Danziger et al. v. U.S., No. 25-cv-1241 (Fed. Cl. Apr. 10, 2026) (a Crowell & Moring case), the Court of Federal Claims (COFC) denied the government’s motion to dismiss a complaint seeking breach of contract damages for improper terminations in bad faith and/or abuse of discretion. The case involves hundreds of contractors for the U.S. Agency for International Development (USAID), who were terminated in 2025 in connection with the dismantling of USAID. The government sought to dismiss the case for failure to state a claim, arguing that the complaint failed to sufficiently plead bad faith or abuse of discretion. The court rejected these arguments, noting that the complaint was “replete with allegations implicating bad faith,” and specifically rejected the “peculiar notion” “that governmental misconduct is immunized when a contracting officer acts pursuant to directives from higher-ranking officials.” The court also held that the government’s payment of certain termination costs was no defense to the contractors’ breach claim and confirmed that an improper termination for convenience entitles contractors to termination costs as well as breach damages.

In a significant decision for government contractors, on April 15, 2026, in Life Science Logistics, LLC v. United States, the U.S. Court of Appeals for the Federal Circuit held that bid protesters challenging an agency’s override of an automatic stay of contract performance under the Competition in Contracting Act (CICA) need not satisfy the demanding four-factor test traditionally required for preliminary injunctive relief.  In so doing, the Federal Circuit clarified that CICA stay override challenges need only demonstrate that the override decision was arbitrary and capricious—nothing more.

On Friday, April 10, 2026, the U.S. Department of Justice (DOJ) announced that International Business Machines Corporation (IBM) has agreed to pay just over $17 million to resolve allegations that it violated the False Claims Act (FCA) by failing to comply with federal anti-discrimination requirements incorporated into its federal contracts due to allegedly discriminatory diversity, equity, and inclusion (DEI) employment practices. This resolution marks the first FCA settlement secured by the DOJ under its Civil Rights Fraud Initiative, created in May 2025, and announced by then-Deputy Attorney General Todd Blanche as part of the administration’s coordinated efforts to target allegedly unlawful DEI practices. Per the agreement, the settlement is neither an admission of liability by IBM nor a concession by the United States that its claims are not well founded.

The Federal Risk and Authorization Management Program (FedRAMP) continues to advance its modernization agenda. On April 8, 2026, FedRAMP released RFC-0031, Updated Incident Communications Procedures for public comment. This RFC proposes replacing the current FedRAMP Incident Communications Procedures (ICP) with what FedRAMP calls “a clear set of reporting requirements … established using a modern rules-based format.” 

On April 13, 2026, President Trump signed the Small Business Innovation and Economic Security Act of 2026 (S. 3971) (the Act), extending the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through September 30, 2031. The legislation cleared the U.S. Senate on March 3, 2026 and then was passed by the U.S. House of Representatives on March 17, 2026 after a six-month interruption in program authority that halted the issuance of new awards across federal agencies. The programs’ previous authorization expired on September 30, 2025.

On April 7, 2026, Acting Attorney General Todd Blanche issued a memorandum establishing the National Fraud Enforcement Division (NFED) within the U.S. Department of Justice (DOJ). This new division will be dedicated to the centralized, coordinated investigation and prosecution of fraud against taxpayer dollars and taxpayer-funded programs. AAG Blanche acknowledged that, while DOJ has a “storied history of combatting fraud,” DOJ has “never adopted a comprehensive and coordinated approach to investigating and prosecuting fraud against taxpayer dollars and tax-payer funded programs.” The NFED was created to close that gap with its core mission being to “zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.”

On March 31, 2026, the Executive Office of the President, Office of Management and Budget (OMB), issued Memorandum M-26-10 titled, “Reinforcing Transparency, Accountability, and Oversight of Federal Technology,” (Memorandum) containing a new policy designed to reinforce oversight, transparency, and accountability across federal technology programs, increase accountability for agency chief information officers (CIOs), and enhance information sharing among government agencies.  OMB issued the policy in furtherance of several executive orders (EOs) issued by President Trump, including: EO 13833, “Enhancing the Effectiveness of Agency Chief Information Officers,” EO 14240, “Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement,” and EO 14243, “Stopping Waste, Fraud, and Abuse by Eliminating Information Silos.”