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.”
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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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The Federal Circuit recently affirmed the ASBCA’s grant of summary judgment to the Government based on the Government’s affirmative defense that the court described both as a defense of fraud and a defense of prior material breach. In a case called Laguna Constr. Co. v. Carter, the court initially determined that the ASBCA had jurisdiction over the Government’s affirmative defense. It then affirmed the ASBCA’s grant of summary judgment to the Government because the contractor committed the first material breach. Along the way, the court rejected several arguments advanced by the contractor.
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On June 21, 2016, DoD published a notice in the Federal Register indicating that an advisory committee is seeking information to facilitate its review of 10 U.S.C. §§ 2320 and 2321 regarding rights in technical data and the validation of proprietary data restrictions. This is an excellent opportunity for contractors, Government contracts counsel, and others to provide input into rules that play an important role in DoD procurements involving rights in technical data. The notice requires submission of written comments in the very near future—on or before July 21, 2016. The Panel must submit its final report and recommendations to the Secretary of Defense no later than September 30, 2016.
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FAR 52.246-2 is a fundamental clause governing inspection of supplies under fixed-price contracts, and it is ordinarily construed in the course of routine contract administration. A recent Fifth Circuit decision analyzed the clause in the context of allegations under the civil False Claims Act (“FCA”). In a significant holding, the Court concluded in United States ex rel. Spicer v. Navistar Defense, L.L.C., that the delivery of nonconforming vehicles by the contractor—which had been rejected by the Government under FAR 52.246-2 (and were then replaced)—could not be the basis for FCA liability under the facts of that case. This is a helpful ruling and demonstrates an appropriate limitation on relators’ attempts to transform ordinary contract issues/disputes into FCA claims.
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