Concept_Phone-in-Motel-Room_399638Medium-224x300Last Friday, the Federal Circuit issued another decision in the relatively long-running saga of the SUFI Network Services, Inc. v. U.S. litigation, which relates to a telephone network installed by SUFI Network for guests in Air Force lodging facilities in Germany. The decision is down in the weeds of several damages law issues, but it appears to break some new ground that may be helpful for other contractors pursuing damages claims against the Government.

By way of necessary background, a 2004 decision by the ASBCA established that the Air Force Nonappropriated Funds Purchasing Office materially breached a contract by allowing/facilitating service members’ attempts to avoid SUFI Network’s rates (e.g., by using calling cards), resulting in a partial settlement agreement under which the phone network became the Air Force’s property. That partial settlement left open possibilities for litigating lost profits and other damages claims. The ASBCA then the Court of Federal Claims had issued rulings differing with respect to the damages amounts; last May, the Federal Circuit vacated “much of” the Court of Federal Claims’ “lost profits” decision. The lost profits claims have been the subject of a subsequent ASBCA decision on remand. While we await further review of the recent ASBCA decision, the Federal Circuit’s decision from last week addressed SUFI Network’s claims for attorneys fees and expenses related to its pursuit of lost profits, as well as the extent to which a contractor litigating a non-CDA claim can recover lost profits and overhead related to pursuing damages claims. The Federal Circuit came down on the contractor’s side on most of these issues.

The Federal Circuit’s opinion addressed five different legal questions. The issues of “interest” on the awarded attorneys fees and the “standard rates” awarded (sections III and IV of the opinion, respectively) appear to apply relatively straight-forward legal rules and do not merit comment. The court’s rulings regarding “exhaustion” of claims, ability to pursue attorneys fees, and whether the contractor could be awarded an amount to compensate it for overhead and lost profits related to attorneys fees paid to pursue its expectancy claims merit discussion.
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GSA FSS LogoThe Federal Circuit’s decision in CGI Federal Inc. v. United States addressed the relationship between FAR Part 12—which applies to acquisitions of commercial items—and FAR Subpart 8.4, which addresses the Federal Supply Schedule (FSS) program. The case involved an RFQ issued under the FSS program by the Centers for Medicare & Medicaid Services

Task orders have become ubiquitous in the federal procurement system. Although the Federal Acquisition Streamlining Act (FASA) gives GAO exclusive jurisdiction over protests of task orders, contractors occasionally seek to challenge task order awards at the CFC. Earlier this year, SRA International survived a motion to dismiss in its challenge to an organizational conflict of interest (OCI) waiver issued with respect to a Federal Deposit Insurance Corporation award of a task order to another contractor/offeror. The trial court held that it had jurisdiction because the waiver was not issued “in connection with” the task order and then proceeded to dismiss the case on other grounds. Earlier this week, the Federal Circuit disagreed—and made clear that FASA’s “in connection with” language does not provide a backdoor into the CFC.
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Legal SettlementIn a recent decision, the Federal Circuit added to its precedent explaining how a trial court should analyze what would have occurred in a “non-breach world” for purposes of awarding expectancy damages in a contract case. In Stockton East Water District v. United States, the Federal Circuit held that the trial court failed to sufficiently consider the parties’ conduct during the six years leading up to the breach when awarding damages for the breach period. The Federal Circuit and Court of Federal Claims issued numerous decisions addressing expectancy damages and the non-breach world in the Winstar cases; Stockton East adds to that precedent with guidance for contractors presenting damages claims in the tricky situation of the Government announcing what is likely to happen several years before its conduct constitutes a breach of contractual obligations. The Federal Circuit’s decision makes clear that the contractor can point to the parties’ conduct during the pre-breach period to explain what the non-breach world would have looked like—and how expectancy damages should be measured.
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Last week, Marcia Madsen presented a paper to the ABA’s Tenth Annual Institute on the Civil False Claims Act and Qui Tam Enforcement. In her paper and during her presentation, she asked whether makes sense to litigate the meaning of procurement statutes, regulations, and contracts in civil False Claims Act cases in the federal district

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The Federal Circuit recently issued a decision in Kingdomware Technologies, Inc. v. US, resolving the two-year dispute concerning whether the Veterans Administration (VA) is required to invoke the “Rule of Two” before awarding a contract using GSA’s Federal Supply Schedule (FSS). In 2012, GAO held that the VA was required to first invoke the Rule of Two and, if satisfied, award a contract. The VA announced that it would not follow GAO’s recommendation, and Kingdomware, a service-disabled veteran-owned small business (SDVOSB), protested at the CFC. The CFC sided with the VA and held that the VA could order from the FSS without invoking the Rule of Two. This week, the Federal Circuit sided with the VA (over a dissent) and held that the VA is not required to first use the Rule of Two.


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Accountant swamped with financial documents

It is not uncommon for litigants in bid protest cases to seek to supplement the administrative record with materials generated by consultants or otherwise not considered by the agency during source selection. Indeed, litigants’ ability to provide supplementation is one of the principal differences between the bid protest forums. GAO’s process is relatively accepting of supplementation; in contrast, the Court of Federal Claims is bound by the Federal Circuit’s 2009 decision in Axiom Resource Management v. US, which permits supplementation only when “the omission of extra-record evidence precludes effective judicial review.”

During the five years since Axiom was decided, a fair number of CFC cases have been decided and articles/blog posts have been written addressing the proper scope of supplementation in CFC bid protest cases. As shown by three CFC decisions issued during the last week, the court’s application of the supplementation standard still appears to lack consistency.


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Editor’s note. As this blog focuses on Government contract developments, we are interested in the decisions issued by the Federal Circuit. Although we don’t generally comment on that court’s patent decisions in which the Government is not a party, this week’s important decisions from the Supreme Court regarding Federal Circuit patent cases deserve to

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“Lost profits” are a standard measure of contract damages and, under long-standing precedent, are available as a basis for a judgment against the Government in a breach of contract case. That said, there aren’t that many cases in which a Government contractor actually demonstrates to the Court of Federal Claims or a Board of Contract Appeals that the various elements of a lost profits award have been satisfied under the applicable standards of proof—and then can get such an award affirmed on appeal. In last week’s SUFI Network Services v. US decision, another “lost profits” plaintiff had the vast majority of its lost profits award gutted by the Federal Circuit—and sent back for substantial additional determinations in a long-running lawsuit. The court’s opinion is instructive regarding the level of scrutiny that is given to such awards and the approach that Government contracts plaintiffs should consider in structuring claims for lost profits.


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So far this year, the U.S. Court of Appeals for the Federal Circuit has issued opinions in four cases—one per month—involving the implied duty of good faith and fair dealing. The opinions are: Bell/Heery, Metcalf Construction (about which we have previously blogged), Century Exploration, and Lakeshore Engineering. The Federal Circuit obviously