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.

FOIA

Citizens for Responsibility and Ethics in Washington v. United States, No. 21-5276 (D.C. Cir. January 31, 2023)

• The DC Circuit clarified what information an agency may properly withhold under FOIA’s Exemption 4, which protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” This case arose from the Bureau of Prisons’ decision to withhold the names of the contractors who supplied pentobarbital, a drug used for lethal injections in death penalties, and certain contract terms such as the quantities purchased under FOIA’s Exemption 4. The lower court had sustained the Government’s withholdings.
• The DC Circuit reversed and remanded the case.
  • First, the DC Circuit held that a government contractor’s business name is not “commercial information” protected under Exemption 4. The Court explained that Exemption 4 only protects information that is commercial “in and of itself,” i.e., information that serves a commercial function or is of a commercial nature. The DC Circuit rejected the Government’s argument that the names of its government contractors were “commercial” because disclosure may cause commercial repercussions from public hostility to the companies supplying the drug used in lethal injections. Such downstream commercial impacts were insufficient to show that information was commercial “in and of itself.”
  • Second, the Court held that the Government had failed to demonstrate that certain key contract terms were “confidential” under Exemption 4. Information is “confidential” if it is customarily and actually treated as private by the owner. The Government had argued that the withheld terms were confidential because they were potentially identifying information, and identifying information was treated as confidential by the contractors. The DC Circuit held that the Government was accordingly required to demonstrate that the withheld contract terms were in fact identifying information satisfying Exemption 4’s requirement for confidentiality.

Contractors should be aware that FOIA’s Exemption 4 may not protect against the release of information that can identify the contractor’s participation in a particular program, even if such identifying information may result in downstream commercial impacts.

Protests

AT&T Corp., B-421195, B-421195.2, January 17, 2023 (Publicly Released January 30, 2023)

• GAO sustained AT&T’s protest challenging the issuance of a US Secret Service task order for communications services to Lumen Technologies Government Solutions where the selection authority (SSA) disagreed with the underlying evaluation record without sufficient explanation.
• The agency’s technical evaluation team (TET) assigned AT&T’s higher-rated, higher-priced proposal a total of 42 strengths across the various evaluation factors.
• However, in selecting Lumen for task order award, the SSA listed only nine “benefits” of AT&T’s proposal, entirely disregarding 33 of the strengths that the TET had assigned to AT&T’s proposal, while also identifying four new strengths in Lumen’s proposal.
• GAO sustained the protest because the SSA failed to adequately document why they removed a significant number of AT&T’s strengths, and resultant downgrade in the number of benefits represented by AT&T’s proposal. In reaching this conclusion, GAO emphasized that changes made by the SSA to the TET’s evaluation record must be adequately documented.
• GAO also rejected the SSA’s post-protest explanations as inconsistent with the contemporaneous record, which offered no insight into the SSA’s decision to reject the AT&T strengths. Instead, the agency was effectively seeking to justify a widescale reevaluation of AT&T’s proposal entirely on the basis of post-protest explanations, and without adequate support and documentation within the contemporaneous record.

Although source selection officials may reasonably disagree with the ratings and recommendations of lower-level evaluators, they are nonetheless bound by the fundamental requirement that their independent judgments be reasonable, consistent with the provisions of the solicitation, and adequately documented in the contemporaneous record. Where an agency fails to adequately document the basis of its evaluation and best-value tradeoff, it runs the risk that GAO will be unable to determine whether the agency's evaluation was reasonable and sustain the protest.

CACI, Inc.-Federal, B-421224 et al., (January 23, 2023) (Published January 30, 2023)

• GAO denied a protest challenging the Agency’s determination that the protester’s use of a former government employee to prepare its proposal created an actual or apparent unfair competitive advantage.
• CACI, the protester here, hired a former government employee who was the Army’s source selection advisory council (SSAC) chairperson for the predecessor procurement and who also received briefings on the incumbent contractor’s performance that included cost and rate information.
• After retiring, this government official began providing consulting services to CACI via an agreement with a third-party consulting firm, including assistance in preparing its proposal for the present procurement. Following a thorough investigation during which CACI was afforded the opportunity to respond to the Government’s findings, the Army determined that CACI gained an unfair competitive advantage and was ineligible to compete.
• CACI protested this decision, but GAO denied the protest on all grounds, agreeing that the former government official had broad access to non-public competitively useful information, that he participated in CACI’s proposal preparation efforts, and that CACI failed to rebut the presumption of disclosure flowing from these facts.
• GAO noted that specific evidence showed that the government official participated in an analysis of the incumbent contractor’s pricing and specifically requested and received detailed information regarding that pricing. In light of this evidence, the contracting officer found the former government official’s credibility to be questionable because he submitted a declaration in response to the protest attesting that he accessed no such information.
• The Army also found the former official’s claim that he was a “hands-off leader” technical manager to not be credible; multiple government employees contradicted that assertion and explained that he was intimately involved.

GAO has explained that despite certain procedural differences, the standard for an agency’s consideration of unfair competitive advantage under FAR subpart 3.1 is “virtually indistinguishable” from the unfair competitive advantage arising from unequal access to information under FAR subpart 9.5. Here, where an offeror chooses to hire a former government official with recent access to non-public competitively useful information, and uses that official to prepare its proposal, there is a rebuttable presumption of prejudice.

SBIR Program

PublicRelay, B-421154 (January 17, 2023)

• In a rare decision discussing agency obligations with respect to the SBIR program, GAO denied a protest arguing that an agency was required to negotiate in good faith to award a Phase III contract to the protester rather than making award under a competitive solicitation.
• The protester argued that an SBA solicitation for media monitoring, daily briefing, and analytics would amount to an SBIR Phase III award for technology that the protester had previously developed under SBIR Phase I and Phase II efforts for the NSF. Therefore, the protester argued, SBA was required to enter good faith negotiations with the protester for a Phase III award rather than competing the requirement.
• After exchanging information with the protester, the SBA disagreed and concluded that the solicited effort would not constitute a Phase III effort because: (a) SBA was not aware of the prior SBIR effort at the time SBA drafted the requirement, (b) SBA did not require the technology that the protester developed, (c) SBA’s requirement predated the protester’s early SBIR contracts, and (d) SBA created the requirement without use of the protester’s concepts, findings, ideas, or research results. SBA added that just because the protester would propose to use its SBIR-developed technology to meet the SBA’s requirements does not mean SBA’s requirements are for a Phase III contract.
• During the protest, SBA submitted to GAO a statement from the Director of SBA’s Office of Innovation and Technology, the office that administers the SBIR program and issues the SBIR Policy Directive. The statement is partially excerpted in the decision and explains, in essence, that because SBA “did not solicit the specific SBIR-developed technology that [PublicRelay] has described in its proposal for a Phase II award from NSF,” the SBA solicitation did not qualify as Phase III work.
• After analyzing the SBIR Policy Directive, GAO concluded that, “although SBA may have been able to pursue an SBIR Phase III award with PublicRelay, the agency was not otherwise required to do so.” While GAO agreed with the protester that the reasons initially put forward by the agency were not necessarily dispositive, GAO explained that “where the agency is not specifically pursuing the production of technology developed under a prior SBIR Phase I or Phase II award, the agency has the discretion to fund such efforts only if it elects to do so,” and for that reason GAO denied the protest.

The SBIR program and the various obligations set forth in the SBIR Directives are rarely addressed in litigation, so decisions like this that reveal both SBA and GAO interpretations of the Directives can be quite significant. Although rarely litigated, disputes often arise among SBIR contractors, large businesses, the SBA, and procuring agencies about the circumstances under which an agency must (or may) procure a technology directly from an SBIR contractor or otherwise afford certain rights to an SBIR contractor. For better or worse, this GAO decision will likely play an important role going forward in the resolution of those disputes. For contracting personnel and counsel working in or around the SBIR program, the decision warrants careful attention.

Investigations and Enforcement

DOJ Announces Changes to Corporate Enforcement Policy

On January 17, 2023, Assistant Attorney General (AAG) Kenneth Polite, Jr., delivered a speech announcing several important revisions to the Department of Justice (DOJ) Criminal Division’s Corporate Enforcement Policy (CEP). These changes, which will apply to current and future corporate defendants in cases involving the Criminal Division—including all cases brought under the Foreign Corrupt Practices Act (FCPA)—include:

1. Preserving the possibility of securing a declination of prosecution for companies even when aggravating circumstances may exist;
2. Increasing the maximum potential fine reduction to 75% off the bottom of the applicable sentencing guidelines range in cases that warrant a criminal resolution but where the company voluntarily self-discloses the misconduct, fully cooperates, and effectively remediates; and
3. Increasing the maximum potential fine reduction to 50% off the bottom of the applicable sentencing guidelines range for companies that do not voluntarily self-disclose, but still fully cooperate and effectively remediate.

These policy modifications follow a September 2022 memorandum from Deputy Attorney General (DAG) Lisa Monaco announcing revisions to DOJ’s corporate criminal enforcement policies. As we wrote at the time, that memorandum reflected the Department’s stated goal of bringing more prosecutions of individuals responsible for corporate wrongdoing—and thus building an incentive structure that encourages companies to self-report more misconduct and cooperate more comprehensively and expeditiously with the government’s investigation.

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