United States: Government Contracts Legal Round-Up | 2023 Issue 20

Welcome to Jenner & Block's Government Contracts Legal Round‑Up, a biweekly update on important government contracts developments. This update offers brief summaries of key developments for government contracts legal, compliance, contracting, and business executives. Please contact any of the professionals at the bottom of the update for further information on any of these topics.

Former CIO's False Claims Act Suit: A Warning for Universities (And Beyond) over Controlled Unclassified Information Compliance, The Government Contractor (October 11, 2023)

Jenner & Block Partner David Robbins and Associate Moshe Broder highlight a recent decision by a Pennsylvania court to deny the government's request to keep under seal a False Claims Act (FCA) qui tam suit against Pennsylvania State University. The authors provide background on the complaint, which alleges that Penn State failed to follow government contracting requirements to safeguard controlled unclassified information, or CUI. They observe: "As experienced FCA defense lawyers, we know well that complaints can exaggerate facts and the truth is not always as colorful. Nevertheless, this complaint highlights the complexity of compliance with difficult and highly technical cybersecurity requirements."

GAO Releases Its Annual Bid Protest Statistics (October 30, 2023)

Our Government Contracts team breaks down the numbers in the Government Accountability Office's (GAO) Bid Protest Annual Report to Congress for Fiscal Year 2023. As we explain, the report shows that the number of bid protests filed and GAO's "effectiveness rate" increased this past fiscal year, but these statistics were largely inflated by hundreds of protests emanating from one procurement. We also stress that "in more than half of the cases GAO resolved in fiscal year 2023, the bid protest forum was an effective avenue for the protester to obtain at least some relief."

Bid Protest Updates

Sierra7, Inc., B-421299.2 (October 11, 2023)

• GAO denied in part and dismissed in part a protest where the protester was not an "interested party" to maintain its protest.
• After the protester filed its initial protest, the agency revealed that an intervening offeror submitted a quotation that was rated equally under the non-price factors but lower in price. The agency sought dismissal because that intervening offeror was next in line for award of the task order.
• To avoid dismissal, the protester alleged that the intervening offeror's quotation should have been assigned a weakness because the agency determined that one price element was unbalanced.
• GAO disagreed, noting that unbalanced pricing is ordinarily required only in connection with the award of negotiated contracts under FAR Part 15 unless the requirement is specifically stated in the solicitation. In this competition conducted under FAR Part 16, the solicitation did not require an assessment for unbalanced pricing; indeed, the RFQ expressly disclaimed the applicability of FAR Part 15 procedures. In any event, the agency's conclusion that the unbalanced price element did not pose an "unacceptable risk" was broadly consistent with the requirements of FAR Part 15.

Interested party status can be a trap for the unwary. Protesters must carefully assess the competitive landscape, including whether intervening offerors stand in the way of reaching a decision on the merits.

Small Business Updates

Karthik Consulting, LLC v. United States, No. 23-944 (October 4, 2023)

• Court of Federal Claims Judge Dietz issued an important opinion on the SBA 8(a) program's eligibility requirements relevant to contractors who may graduate (or have graduated) from the program.
• In December 2022, DHS issued a solicitation set aside for 8(a) vendors under the GSA Highly Adaptive Cybersecurity Services (HACS) Special Item Number (SIN) 54151 vehicle. The solicitation asked quoters to indicate their 8(a) status and noted that "quotes that are not submitted by 8(a) quoters under GSA HACS MAS SIN 54151 8(a) at the time of initial task order quote submission shall not be considered and will be further removed from the competition."
• Karthik, which was awarded a GSA HACS MAS SIN 54151 contract as an 8(a) firm but had since graduated from the program, submitted a quotation. Although identified as the intended awardee, based upon SBA guidance, DHS deemed Karthik ineligible for award.
• Karthik protested, arguing that there was a safe harbor for companies that obtain their seat on a multiple award contract as an 8(a) awardee, and then graduate from or exit the 8(a) program during the base period of contract performance.
• Judge Dietz disagreed, finding that there was no continued right to compete for and receive 8(a) task order awards where the task order awardee has graduated from the 8(a) program. Instead, he specifically noted the SBA was correct in asserting that FAR 19.804-6 does not provide a safe harbor for firms bidding on a multiple award contract that is not an exclusive 8(a) set aside.

It is not always easy for 8(a) participants to understand their eligibility to bid on a certain contract. Karthik Consulting is an important reminder to contractors that the interplay of relevant SBA regulations requires careful consideration, and that—where it is at all ambiguous—it is important to seek counsel before responding to solicitations containing these requirements.

FOIA Exemption Updates

Buzzfeed Inc. v. United States, No. 19-1977 (D.D.C. October 17, 2023), No. 19-1977 (D.D.C. October 17, 2023)

The DC District Court recently denied a motion for summary judgment challenging the agency's use of FOIA Exemptions 4, 7(A), and 7(E) to withhold responsive documents. Buzzfeed sought documents related to the Los Angeles FBI field office and procuring services from several genetic genealogy testing companies, and when rebuffed, argued that the agency had failed to justify invoking the claimed FOIA exemptions.

• The district court disagreed. The court explained that to withhold documents under FOIA Exemption 4, the information must be (1) commercial or financial, (2) obtained from a person, (3) privileged or confidential, and (4) it is reasonably foreseeable that disclosure would harm the interest protected by the exception.
• The court found that the FBI's Vaughn Index and declaration submitted to support the agency's exemptions adequately demonstrated that the withheld documents, which included "confidential contractual and transactional documents and communications, including terms, conditions, privacy agreements, and procedural guidelines, and details relating to advancements for use of genetic genealogy services for law enforcement investigation purposes," contained commercial information obtained from a person.
• The court also held that the documents were "confidential" as defined by the Supreme Court in Food Marketing Institute v. Argus Leader Media because the information was both customarily and actually treated as private by the genetic genealogy companies and provided to the FBI under an assurance of privacy. The information provided to the FBI had not been publicly disclosed, and the companies had confidentiality policies that prohibited the disclosure of the information shared with the government. With respect to the second prong of the Argus standard, the court noted that the contractors had submitted proposals after being told that "the contractor services requested would remain confidential even if the service contract is not accepted."
• Finally, the court agreed that the agency had sufficiently explained how the disclosure of the information would foreseeably harm the interest protected where the FBI specified that disclosure would place the contractors at a competitive disadvantage by revealing pricing, financial, and proprietary genetic services information, especially where competitors were vying for the same contracts with the same potential customer.

This case serves as an important reminder that to shield confidential information from disclosure under FOIA Exemption 4, contractors should not only have in place confidentiality policies protecting the disclosure of information but must also be careful to indicate that information submitted to the agency—for example, in response to a solicitation—is shared with the expectation that the agency would keep it confidential.