Gilead Seeks Supreme Court Review of Outlier Ninth Circuit FCA Ruling

On December 26, 2017, defendant Gilead Sciences Inc. filed a petition for certiorari (case number 17-936), requesting the Supreme Court to review a major Ninth Circuit False Claims Act (FCA) ruling on liability in United States of America ex rel. Campie v. Gilead Sciences Inc. The petition argues that the Ninth Circuit adopted an approach to materiality that is inconsistent with the guidelines provided by the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar, and conflicts with other appellate interpretations of Escobar’s materiality guidance. This is a case with significant implications for the Government contracts community, as the Ninth Circuit’s approach dilutes the protections offered by Escobar to FCA defendants. Continue Reading

The RAND Bid Protest Study Performed Pursuant to the 2017 NDAA Fails To Support the Pentagon’s Desired Restrictions on Contractors’ Ability To Challenge Agency Procurement Decisions

The long-awaited study by the RAND Corporation (RAND) that was performed pursuant to Section 885 of the 2017 National Defense Authorization Act (NDAA) was delivered to Congress on December 21, 2017 and released to the public last week. Not only does RAND  clearly explain with data the reasons for the Government’s long-standing decision to have a robust bid protest system to review of agencies’ procurement decisions, but RAND’s data, analyses, and recommendations also undercut most of the incessant (and growing) calls for restrictions on bid protests. Among other things, the RAND report demonstrates that there is no basis for the “pilot program” of restrictions imposed by Section 827 of the 2018 NDAA—which requires payment of agencies’ “costs incurred in processing” bid protests by large Government contractors in the event a challenge is not successful.

As RAND explained, the Government, “is a powerful entity in the economy,” and  has a “moral duty to maintain fairness in how it awards large contracts.” The Government also needs to “deter and punish ineptitude, sloth, or corruption of public purchasing officials” (among other reasons for the bid protest system). For years, there have been complaints about the purported abuse of the bid protest process by contractors and unnecessary delays resulting from excessive bid protests. Although the officials calling for restrictions on bid protests were presumably able to present their best evidence and arguments to RAND’s independent analysts, the empirical data simply does not support the restrictions sought. The annual complaints about bid protests in the run-up to each year’s NDAA should cease—and Section 827 of the 2018 NDAA should be repealed.

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Fifth Circuit “Materiality” Ruling Recognizes FCA Limitations on Relators’ Ability To Second Guess Agency Decisions

Should whistleblowers be permitted to recover hundreds of millions of dollars when the Government steadfastly insists that the factual underpinnings of a False Claims Act relator’s allegations are flatly incorrect? Although a federal district court in Texas awarded more than $660 million in damages to a relator based on purportedly inadequate disclosures to a federal agency, the post-Escobar materiality standard served as an important guardrail for the U.S. Fifth Circuit Court of Appeals. The appeals court reversed and put an end to the abusive FCA lawsuit. Among other things, the court recognized that the federal agency’s repeated, “authoritative” findings that the design and product at issue was compliant with federal safety standards and eligible for federal reimbursement were fundamentally at odds with the notion that the disclosures at issue were material to the government’s decision to pay the claim. Continue Reading

New Executive Order on Manufacturing Sheds Light on Possible Regulatory Changes for Defense Contractors

On July 21, 2017, President Trump issued Executive Order No. 13,806 on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.” Noting that the ability of United States domestic manufacturers to supply “essential components” that are “critical to national security” is “essential to the economic strength and national security of the United States,” the Order announced a policy of fostering “healthy manufacturing and defense industrial base and resilient supply chains.” Continue Reading

What and How Obamacare Is Doing at the Court of Federal Claims

Millions of Americans who were able to obtain health insurance as a result of the Patient Protection and Affordable Care Act (“ACA” or “Obamacare”) are waiting to learn the extent to which Congress and the new administration will repeal, replace, or do something else with the ACA. At the same time, Government contracts lawyers are watching a group of ACA-related lawsuits being litigated at the Court of Federal Claims and the Federal Circuit. The cases involve “risk corridors,” which the ACA implemented to entice insurers to enter healthcare exchanges by reducing downside risk if, among other possibilities, enrollment did not meet projections. After the ACA was implemented (and control of the Legislative branch had shifted), Congress effectively defunded the ACA’s risk corridors (i.e., reduced necessary appropriations), leaving the Department of Health and Human Services (“HHS”) without sufficient funds to pay participating insurers. So far, approximately 20 of those companies have sued and are pursuing damages claims based on the Government’s failure to make promised payments.

Last November, the Court of Federal Claims issued its first merits ruling in one of the ACA risk corridor cases, Land of Lincoln Mutual Health Insurance v. U.S. Judge Lettow’s opinion in that case rejected the plaintiff’s claims based on “statutory entitlement,” breach of contract, and Fifth Amendment taking theories. A decision in a second case, Moda Health Plan v. U.S., was issued late last week by Judge Wheeler—who ruled in that plaintiff’s favor. In Moda Health, the court held that the relevant ACA provision “requires full annual payments to insurers” and, alternatively, that the Government’s non-payment constituted a breach of the implied-in-fact contract with the insurer.

How the current administration and Congress will change ACA—and the American healthcare system—is anybody’s guess. The ACA-related cases before the Court of Federal Claims are not getting the same amount of press as potential changes to the healthcare reform law, but they address important legal and financial consequences of the long-running policy dispute over the ACA. The cases raise complex legal issues that should be of substantial interest to Government contracts lawyers and practitioners before the Court of Federal Claims and the Federal Circuit.
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DoD Effectively Recognizes That Issues With Its New IR&D “Technical Interchange” Rule Are More Significant Than Previously Acknowledged

In a January 4, 2017 Memorandum, the Under Secretary of Defense for Acquisition, Technology and Logistics (“Under Secretary”), discussed implementation of a problematic DFARS rule issued on November 4, 2016, requiring “major contractors” to engage in a “technical interchange” with a DoD employee before IR&D costs are generated as a prerequisite for the allowability of such costs (“IR&D Rule”). The Memorandum effectively recognizes that issues with the IR&D Rule are more significant than DoD previously acknowledged. However, although the Memorandum addresses certain issues arising out of the IR&D Rule, it remains to be seen whether contractors will encounter different types of problems as the Rule is implemented.
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Supreme Court Refuses To Require Sanctions for Breach of the Seal Requirement of the False Claims Act

On December 6, 2016, the Supreme Court ruled that the False Claims Act (“FCA”) does not require the dismissal of lawsuits brought by relators who violate the requirement that information regarding the FCA complaint (and alleged fraud) not be disclosed to anyone (other than the district court and Department of Justice) and remain “under seal.” In State Farm Fire & Casualty Co. v. United States ex rel. Rigsby , the Court held that district courts retain discretion to fashion an appropriate remedy based on the facts of the case. Continue Reading

Federal Court Repudiates the Most Significant Provisions of the New DOL Rules

On October 24, 2016, a federal district court in Texas issued a preliminary injunction in a case called Associated Builders & Contractors, et al. v. Rung, in which it halted implementation of the most controversial aspects of the newly-minted “Fair Pay and Safe Workplaces” FAR rule and the corresponding Department of Labor guidance, including the disclosure provision and the restriction on arbitration agreements. This post discusses the district court decision, which represents a sweeping repudiation of the most significant provisions of the controversial Fair Pay and Safe Workplaces rule and guidance. Mayer Brown previously published a Legal Update explaining the new rule and the Department of Labor guidance in far greater detail. Continue Reading

Cybersecurity Services on the Multiple Award Schedule: Change is Afoot

Cybersecurity services soon will be available under new common provisions of the Multiple Award Schedule (MAS) Program administered by the General Services Administration (GSA). The MAS Program is the primary means to sell commercial products and services to federal agencies.

GSA announced the new provisions this week. In mid-August 2016, GSA issued a draft solicitation and engaged in industry outreach to explain the changes to the current ordering system, in which companies sell such services under a variety of provisions. GSA is now rolling out the new process, which will be available for use in October 2016. These changes will facilitate agency ordering of critical cybersecurity services. Continue Reading

Substantial New Rules Implementing “Fair Pay and Safe Workplaces” Executive Order Create Risks for Contractors and Subcontractors

On August 25, 2016, DoD, GSA, and NASA issued a final rule amending the FAR to implement President Obama’s Executive Order on “Fair Pay and Safe Workplaces” (“E.O.”) The Department of Labor (“DOL”) also issued final guidance to assist in the implementation of the E.O. The new FAR rule follows a proposed FAR rule that generated substantial comments. The final rule and guidance represent significant new obligations and risks for contractors and subcontractors, who should start preparing now to address them. This post focuses on the final FAR rule because it imposes specific requirements on contractors and subcontractors. Notably, this post provides only a high-level summary because the new rule, related commentary published in the Federal Register, and DOL’s guidance are lengthy and sometimes complex documents. Mayer Brown also published a Legal Update that discusses these developments in greater detail. Continue Reading


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