If you sign up to work in a war zone, you check certain rights on your way in.
POSTED ON Tuesday, Feb 7 2012
BY KENNETH B. WECKSTEIN and AMY WALBORN

Defense contractors are heavily involved in today's conflicts overseas. And, like our military members, these contractors often come into harm's way. Contract employees die in war zones. Contractors are at risk for liability. Recently the 5th Circuit Court of Appeals addressed these issues in Fisher v. Halliburton. See Fisher v. Halliburton et al., Nos. 10-20202, c/w 10-20371, (5th Cir. January 12, 2012). This case involved the deaths of two civilian drivers who were killed when Iraqi insurgents attacked their convoy. The families of the contractor employees sued Halliburton, Kellogg Brown and Root ("KBR"), and others, for negligence and fraud. Their negligence claims were based primarily on an allegation that KBR allowed the convoys to proceed despite knowing insurgent attacks on the convoys were likely to occur. The Plaintiffs' fraud claims were based on allegations that KBR intentionally misled the drivers into believing they only would be engaging in rebuilding activities, not combat.

The defendants argued that the claims were precluded by the Defense Base Act ("DBA"), which extends workers' compensation coverage under the Longshore and Harbor Workers' Compensation Act ("LHWCA") to employees of American contractors engaged in construction related to military bases in foreign countries, and to foreign projects related to the national defense whether or not the project is located on a military base. The Court explained that the DBA was adopted in order to save the government the expense of providing its contractors with insurance to cover its employees based on tort liability and full accident insurance. Under the DBA, employees are entitled to a limited and predictable relief without the expense and delay of pursuing tort actions. As long as the employee's injury is covered under the DBA, the employee may not pursue a tort claim for the same injury.

The DBA covers injuries caused by a willful act of a third person directed against a person because of their employment. The Court in this case found that this case was the "quintessential" case of compensable injury arising from a third party assault because of the employment. The Court found that it was clear that the Plaintiffs were attacked only because they were part of a convoy in support of the military mission in Iraq. Therefore, the injuries qualified for coverage under the DBA. As a result, the Plaintiffs could not pursue intentional tort claims. The Court also found that the DBA barred the fraud claims because it is accepted under workers' compensation law that an employer's deceit that precedes and helps produce an otherwise compensable injury merges into that injury in terms of compensation coverage.

These are heart-wrenching decisions. And attorneys try to be creative in getting around the limitations of the law. But that does not always win the day. The full decision can be accessed here.



TAGS:
government contracts, Weckstein, Walborn, Defense Base Act (DBA), Longshore and Harbor Workers' Compensation Act (LHWCA)
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For small businesses, there can be too much of a good thing.
POSTED ON Monday, Feb 6 2012
BY KENNETH B. WECKSTEIN and PAMELA A. REYNOLDS

If you are a small business, the federal government wants to help you. You may qualify for preferences in competitions for government contracts and financial assistance from the Small Business Administration. But first, you have to meet the size standards for your industry. Some standards set a maximum number of employees; others set a maximum average amount of annual receipts. The small business size standards and the methods to measure or determine whether a business meets those standards are set by regulation.

Obviously, the goal is to see small businesses grow into big businesses, which creates new jobs and grows the economy. And so when small business programs are successful, a small business is expected to exceed its size standard. While that’s good news, it also means that the small business will lose the government preferences that has helped it to grow. So, if you are a small business, your strategy may be to stay small as long as possible so you do not lose those preferences too soon. That, however, is tricky business.

Small businesses may lose their small business status prematurely because of affiliation issues. Receipts of an “affiliate” are added to those of a small business to determine whether the small business exceeds its size standard. And, according to the SBA regulations, companies may be affiliated if they have identical or substantially identical business or economic interests, which includes “firms that are economically dependent through contractual or other relationships…”

The SBA’s recent decision in TPG Consulting, LLC, December 13, 2011, SIZ-6-2011-115, is a good example of how tricky it can be for small businesses to “stay small.” There, the SBA found that TPG Consulting, LLC, a small business IT company that started in 2007, was “affiliated” with its biggest customer in 2009 - Toyota. In this case, according to the SBA, TPG was affiliated with Toyota because Toyota represented at least 70% of TPG’s revenues in a single year. It did not matter that Toyota was one of several customers or that TPG would have been profitable even without business from Toyota. And it didn’t matter that TPG and Toyota had no other connections to each other – they never competed together for any contracts, did not share officers or directors, and neither owned a portion of the other. Again, no one disputed that TPG was small based on its own revenues, including the revenues it earned from Toyota. TPG only was no longer small because of Toyota’s revenues.

Does this mean that dependence on a single customer will lead to affiliation and a finding that a small business is other than small? Not necessarily. But it highlights the importance of being sensitive to those factors that can be viewed as creating affiliation and leading to loss of small business status. Small businesses that are pro-active in managing small business size issues can maximize the benefits that they receive from the Government's small business preference programs.



TAGS:
government contracts, Weckstein, Reynolds, Small Business Administration (SBA), small business
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The $11,000 Steak
POSTED ON Monday, Jan 9 2012
BY KENNETH B. WECKSTEIN and TAMMY HOPKINS

We hope that the steak was not over-cooked. And tell us it didn’t have ketchup on it.

A former employee of a government contractor agreed to pay the United States $11,000 to settle allegations that he accepted illegal kickbacks while working for Fluor Hanford, Inc. at DOE’s Hanford Nuclear site. The two alleged kickbacks referenced in the settlement agreement are: i) a $100 Outback Steakhouse gift certificate; and ii) approximately $400 worth of Seattle Mariners tickets. Both kickbacks were received from the owner of Fast Pipe Supply, Inc., which was a subcontractor to Fluor.

In November 2005 -- the month when the employee received the Outback gift certificate, he reportedly purchased over $10,000 of materials from Fast Pipe. In February 2006 -- the month when he received the Mariners tickets, the employee reportedly purchased over $16,000 of material from Fast Pipe. The settlement agreement does not include any allegations suggesting that Fast Pipe did not provide the purchased materials – or that the purchased materials were unnecessary. Rather, the settlement agreement alleges that DOE would not have approved any of the amounts used to pay Fast Pipe if DOE had known the employee was accepting kickbacks. Fair enough. The presumption is that kickbacks ultimately are passed through to the Government in the form of increased prices.

Many Federal government contractors have adopted zero tolerance policies for gifts between subcontractors or vendors and their employees, period. Employees do not always view such policies – or compliance with such policies – to be that important or in their best interest. This recent settlement is a cautionary tale.

The settlement is related to an investigation in the Eastern District of Washington that has led to indictments filed against Fast Pipe's owner and others. According to the indictment of Fast Pipe's owner, Fast Pipe allegedly received $3.9 million in orders in exchange for approximately $40,000 in kickbacks the company's owner paid to 14 Fluor employees. Kickbacks alleged in the indictment include personal checks to employees, an airline ticket for one employee, $100 gift cards to Macy’s and Outback, Seattle Seahawks and Mariners tickets, and a parking pass for a Seahawks game. Seems like little stuff, but can lead to big consequences.

The New Year provides a good opportunity to review and update compliance programs to incorporate real world examples of questions/issues faced by employees.



TAGS:
Weckstein, Hopkins, government contracts, compliance programs, Department of Energy (DOE), kickbacks, Fluor Hanford, Inc., Fast Pipe Supply, Inc.
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New Proposed Obligations for Contractors and Subcontractors Regarding Individuals with Disabilities
POSTED ON Friday, Jan 6 2012
BY KENNETH B. WECKSTEIN and AMY WALBORN

Helping out individuals with disabilities is, or should be, as American as apple pie. Requiring contractors to implement procedures and take action to show that they are taking affirmative action in hiring persons with disabilities will create more of a debate. Should that be left to the private sector? Or should the Government use its contracts as a prod to dictate social policy?

The Office of Federal Contract Compliance Programs ("OFCCP") has issued a proposed revision to the regulations implementing the non-discrimination and affirmative action regulations of section 503 of the Rehabilitation Act. See 76 Fed. Reg. 77056. The goal of the proposed rule is to strengthen the affirmative action requirements for federal contractors and subcontractors to ensure equal employment opportunities for qualified workers with disabilities. The proposed rule applies to contractors and subcontractors who have any government contracts valued at $10,000 or more. Among the changes is a new proposed utilization goal for employment of individuals with disabilities of 7% for each job group in the contractor's workforce, as defined in the affirmative action regulations at 41 C.F.R. §§ 60-2.12 & 60-4. This proposed 7% utilization is a goal and not a requirement for contractors, although contractors are required to make an assessment as to whether they have met the goal. The proposed rule establishes steps for contractors to follow to make that assessment.

Other requirements applicable to contractors include: placing job listings with employment service delivery systems; conducting annual surveys of employees giving them the opportunity to self-identify as an individual with a disability; inviting applicants to self-identify as an individual with a disability at the pre-offer stage; and maintaining records on the number of persons with disabilities applying for positions and the number hired. In addition, some requirements that were previously recommendations now will become mandatory if the proposed rule is implemented as is. For example, a contractor would be required at a minimum to review its personnel processes by identifying vacancies and training programs for which applicants and employees with disabilities are considered, provide a statement of reasons explaining the circumstances for rejecting individuals with disabilities, and describe the nature and type of accommodations for individuals with disabilities who were selected for hire. Also, the proposed rule requires a contractor to engage in a minimum number or outreach and recruitment efforts to attract persons with disabilities and conduct a self-assessment of its outreach efforts.

To review all of the requirements of the proposed rule, go to the Federal Register . Contractors are invited to comment on the proposed rule by February 7, 2012.



TAGS:
Weckstein, Walborn, government contracts, Office of Federal Contract Compliance Programs (OFCCP), Federal Register, Rehabilitation Act
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Mission Accomplished in Iraq?
POSTED ON Friday, Dec 16 2011
BY KENNETH B. WECKSTEIN and MICHAEL D. MALONEY

The war in Iraq drew to a close this week. This time, there were no banners proclaiming victory. There were no sounds of horns blaring triumphantly, and celebrations were muted. It is said that more than one million U.S. troops and civilians served in the almost-nine year conflict and that the U.S. spent more than one trillion dollars on the war effort. The war has left more than 4,400 U.S. service men and women dead, with countless more injuries. The toll on civilians was almost unimaginable. President Obama said that history will be the judge of the decision to invade Iraq, which seems about right.

We wondered what the legacy of the Iraq war would be on government contracting. Even as the war ends, left behind are thousands of private security contractors who will be tasked with protecting U.S. diplomats in Iraq for the foreseeable future. Surely, there will be GAO reports that count the "fraud, waste and abuse." And there will be headlines and press accounts announcing bribery schemes and ethics scandals that seem almost inevitable when billions of federal dollars are thrown into the mix. But what about the many competent, conscientious, ethical, professional procurement officials who do their jobs well and do not get journalist and media attention? We hope their efforts will be recognized and commended. And is it fair in the middle of combat to fault contractors that are responsive to Government demands but do so without a required form or make an urgent or unconventional purchase for the war effort without getting a signed receipt?

At times, a lot is asked of the U.S. government procurement system. The war in Iraq was one such time where the limits of the system were strained, and any accounting of the American blood and treasure expended in Iraq should include an assessment of how that system performed. The bottom line, to channel Churchill and his comment about democracy, may be that the federal procurement system is the worst form of government contracting except for all the other forms that have been tried. History will be the judge.



TAGS:
government contracts, Weckstein, Maloney, Government Accountability Office (GAO), Iraq, President Obama
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