In The Supreme Court Of The United States

Transcription

1 No In The Supreme Court Of The United States UNITED STATES EX REL. THOMAS UBL, Petitioner, v. IIF Data Solutions, Inc. and Charles Patten, Sr., Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT BRIEF OF AMICUS CURIAE PROJECT ON GOVERNMENT OVERSIGHT, IN SUPPORT OF PETITIONER Katharine L. Elliott Counsel of Record 116 SOUTH STATE STREET UKIAH, CALIFORNIA Phone (707) Fax (707) kitatlaw@sbcglobal.net

2 PROJECT ON GOVERNMENT OVERSIGHT S MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF The Project On Government Oversight ( POGO ), by counsel, has requested consent from counsel for all parties for filing this brief. Counsel for the petitioner consents to this filing. Counsel for the federal government has not responded, nor has. Counsel for respondents responded to this motion. The amicus plays an important role in ensuring that federal contract dollars are spent wisely. Founded in 1981, the Project On Government Oversight ( POGO ) is an independent nonprofit that investigates and exposes corruption and other misconduct in order to achieve a more effective, accountable, open and ethical federal government. POGO made its mark by looking into Pentagon waste, fraud, and abuse, spotlighting overspending, including on overpriced toilet seats ($640), coffee makers ($7,600), and other spare parts ($436 hammers). POGO s investigations have expanded to include national defense and homeland security concerns, government subservience to commercial interests, abuse in government contracting, excessive secrecy, and mismanagement of natural resources by federal agencies. POGO is often asked to testify at congressional hearings and to provide background information to Members of Congress, executive branch agencies, the Government Accountability Office ( GAO ), and Inspectors General. By applying i

3 internal and external pressure through the media, the public, elected officials, and other policymakers, POGO helps ensure that the federal government implements policies and programs in a manner that benefits all Americans. Additional information can be found at In those efforts, POGO has worked with thousands of whistleblowers who have shed light on government misconduct and systemic problems that harm the public. Given this involvement, the amicus is particularly well-suited to provide this Court with supplementary evidence and to comment on the facts and law of the case at bar. Respectfully submitted, /s/ Katharine L. Elliott Katharine L. Elliott kitatlaw@sbcglobal.net 116 South State Street Ukiah, California Phone (707) Fax (707) Counsel for Project on Government Oversight ii

4 TABLE OF CONTENTS MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF... i TABLE OF CONTENTS... iii TABLE OF AUTHORITIES... iv INTRODUCTION... 1 SUMMARY OF THE ARGUMENT... 5 INTEREST OF THE AMICUS... 5 ARGUMENT... 7 I. The Fourth Circuit Erred in Allowing Unapproved Labor Rates Under the Government Knowledge Defense... 7 CONCLUSION iii

5 TABLE OF AUTHORITIES Cases Page Shaw v. AAA Eng g & Drafting, Inc., 213 F.3d 519 (10th Cir. 2000)... 7 United States ex rel. Bettis v. Odebrecht Contractors of Cal., 297 F. Supp. 2d 272 (D.D.C. 2004)... 7 United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416 (9th Cir. 1991)... 7 United States ex rel. Ubl v. IIF Data Solutions, Inc., No (4th Cir. April 19, 2011)... 2 United States v. Fiske, 968 F. Supp (E.D. Ark. 1997)... 7 United States ex rel. Kriendler & Kreindler v. United Techs. Corp., 985 F.2d 1148 (2d Cir. 1993)... 7, 8 United States ex rel. Longhi v. Lithium Power Techs., Inc., 513 F. Supp. 2d 866 (S.D. Tex. 2007)... 7 United States ex rel. Milam v. Regents of Univ. of Cal., 912 F. Supp. 868 (D. Md. 1995)... 7 Varljen v. Cleveland Gear Co., 250 F.3d 426 (6th Cir. 2001)... 7 iv

6 Statutes 10 U.S.C (Competition in Contracting Act)... 9, U.S.C. 2306a (Truth in Negotiations Act )... 2, 8, U.S.C et seq. (False Claims Act)... 2, 7 41 U.S.C. 253 (Competition in Contracting Act)... 9, U.S.C. 254b (Truth in Negotiations Act )... 2, 8 Administrative Regulations/Bid Protests 48 C.F.R C.F.R (a) C.F.R C.F.R C.F.R , 8 48 C.F.R FAR Subpart 6.102(d)(3)... 2, 10 FAR Subpart 8.404(a)... 2, 10 FAR Part , 10 FAR Subpart FAR (a)(1)... 8 FAR Subpart (b)... 8, 9 REEP, Inc., B (2002) v

7 Introduction Pursuant to Supreme Court Rule 37.3(a), the Project On Government Oversight ( POGO ) respectfully submits this amicus brief in support of the United States of America ex rel. Thomas M. Ubl the Petitioner ( Ubl ). 1 Imagine, if you will, that you have contracted with a third party to provide your college-aged child a 2012 top-of-the-line Volvo sedan, a sedan that has won several awards for its safety features. You paid the third party $40,000 for the sedan, and you are told that delivery of the vehicle has been made. However, two weeks later when you visit your child at college, you find out that a Volvo sedan was not delivered. Instead, the third party delivered a 69 Camaro that most certainly has seen better days, and though you express your anger about the substitution your child tells you that he is happy with the Camaro. When you ask the third party about the Camaro, the third party tells you that your child agreed to the substitution, which thereby absolves the third party of any wrongdoing. End of story. And, oh, by the way, the third party gets to keep the difference in cost between the new Volvo sedan and the 69 Camaro, as was agreed to by your child. Welcome to the world of service contracts through the U.S. General Services Administration 1 Pursuant to Rule 37.6, amicus curiae states that no person or entity other than POGO or its counsel has made any monetary contribution to the preparation or submission of this brief. Further, no counsel for Petitioner or Respondent authored this brief in whole or in part. 1

8 ( GSA ) interagency contracts as seen through the prism of the Federal False Claims Act. The present case arises under the False Claims Act ( FCA ) 31 U.S.C , and involves GSA Schedules, which are also referred to as Multiple Award Schedules ( MAS ) and Federal Supply Schedules. United States General Services Administration (GSA) Schedules are predominantly governed by Federal Acquisition Regulation ( FAR ) Subpart 8.4 that is considered to be a fulfillment of competition pursuant to FAR 6.102(d)(3). FAR (a). Compliance with the applicable regulations is required for exemption from the Truth in Negotiations Act ( TINA ), which usually governs contracting that is supported by the submission of cost or pricing data. 10 U.S.C. 2306a and 41 U.S.C. 254b. In the case underlying this Petition, United States ex rel. Ubl v. IIF Data Solutions, Inc., No (4th Cir. April 19, 2011) (as noted, the Opinion ), the GSA awarded the defendant contracts. The GSA administered the contracts, and the defendant billed the GSA for services it provided to various agencies where it charged for services provided by personnel that did not meet the qualification as specified by the contracts. The defendant presented a Government knowledge defense stating that an employee at the ordering agency knew about the substitution of underqualified personnel for personnel qualified as specified under the MAS contract. The defendant did not present evidence of knowledge of the GSA Contracting Officer or any other GSA employee. Op. at

9 On appeal from the United States Court of Appeals for the Fourth Circuit rejected Ubl s argument that the United States District Court for the Eastern District of Virginia erred in not admitting evidence that would have proved that it is GSA knowledge not knowledge of the ordering agency that must support a government knowledge defense, and thereby NGB s material changes to the terms and requirements of the contract were entered into in violation of contracting laws and regulations. Op. at 12. It held that: testimony from Bureau officials that they were pleased with the work performed by specific IIF employees and that they were pleased with IIF s work overall was relevant to the issue of IIF s intent and fit sufficiently within the scope of what is generally referred to as the government-knowledge defense or inference. Id. However, despite referencing evidence that IIF staffed the MAS contracts with unqualified and underqualified employees and thus billed the employees at rates higher than they were entitled to under the contracts, Op. at 23, the Fourth Circuit failed to take into consideration the District Court s errors in not admitting evidence of the following: (1) the contracts were GSA contracts; (2) the GSA contracts stated that they could be modified only by the GSA contracting officer; (3) the GSA contracts explicitly stated that deliveries to other agencies must comport with the terms of the GSA contract; 3

10 (4) the GSA was billed, and (5) there was no evidence that anybody within or outside the GSA knew that IIF was billing unqualified personnel at rates that had been negotiated for personnel with far more qualifications than had been provided by IIF under the contracts. Thus, this case is special and unique as it will determine whether pricing safeguards apply to IDIQ contracts. POGO urges this Court to enforce the Most Favored Customer ( MFC ) clause and Price Reduction Clause ( PRC ), 2 which serve as the only protections of the $50 billion in taxpayer dollars contracted under the MAS program. If this Court affirms the Fourth Circuit s ruling, ordering agencies will be allowed to substantially alter material terms and conditions in MAS contracts, thereby unraveling the program that was created to provide an efficient, effective, and predictable buying tool for commercial items one that leverages the government s buying power. From a public policy standpoint, allowing ordering agencies to materially alter the terms and conditions of MAS contracts substantially undermines the intent and operation of GSA s MAS program. Affirming the Fourth Circuit s decision in this case would affirm MAS contractors ability to defraud the government, provide nonconforming goods or services to federal agencies, allow agencies and contractors to rewrite pre-established MAS contract prices, permit sole source contracts to be 2 48 C.F.R (MAS price reductions); General Services Administration Acquisition Manual ( GSAM ) Subpar (price reductions). 4

11 entered into illegally, and invalidate the entire MAS program as well as other federal interagency contracting vehicles. Summary of the Argument This Court should grant Ubl s Petition, reverse the holding of the Fourth Circuit Court of Appeals, and remand this case for retrial with instructions on the scope and the limits of any Government knowledge defense. In sum, schedule contractors and buying agencies should not be permitted to void a GSA schedule contract, but rather they should award the contract under an appropriate procurement vehicle the original GSA Schedule contract or as sole source-negotiated or competitive non-gsa procurement. The actions of IIF and the National Guard Bureau (NGB) resulted in a sole source procurement and a nullification of the GSA MAS program in violation of federal law. Material alteration of GSA MAS contracts by the schedule contractor and/or buying agency without the knowledge of the GSA Contracting Officer undermines the integrity of the government procurement process, and places fundamental contracting principles and taxpayer dollars at risk. Interest of the Amicus The amicus plays an important role in ensuring that federal contract dollars are spent wisely. Founded in 1981, the Project On Government 5

12 Oversight ( POGO ) is an independent nonprofit that investigates and exposes corruption and other misconduct to achieve a more effective, accountable, open, and ethical federal government. POGO made its mark by looking into Pentagon waste, fraud, and abuse. POGO s investigations have expanded to include national defense and homeland security concerns, government subservience to commercial interests, abuse in government contracting, excessive secrecy, and mismanagement of natural resources by federal agencies. By applying internal and external pressure through the media, the public, elected officials, and other policymakers, POGO helps ensure that the federal government implements policies and programs in a manner that benefits all Americans. Additional information can be found at Amicus interest in the case is to assist this Court in a proper analysis of the consequences of allowing vendors and buying agencies to materially alter GSA MAS contracts. Amicus has an interest in ensuring that the MAS program does not become a secretive vehicle for awarding sole source contracts and that the government has the necessary tools to prevent, detect, and prosecute procurement fraud and government waste. These policy implications are supportive of, but distinct from, the issues raised in Petitioner s Petition for Writ of Certiorari. 6

13 Argument I. THE FOURTH CIRCUIT ERRED IN ALLOWING UNAPPROVED LABOR RATES UNDER THE GOVERNMENT KNOWLEDGE DEFENSE. The government s knowledge is not an absolute defense to a FCA action. Shaw v. AAA Eng g & Drafting, Inc., 213 F.3d 519, 534 (10th Cir. 2000) ( [G]overnment knowledge of a contractor s wrongdoing is no longer an automatic defense. (citing United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1420 (9th Cir. 1991); 31 U.S.C (2000))); see also Varljen v. Cleveland Gear Co., 250 F.3d 426, 430 (6th Cir. 2001) ( [E]ven the government s knowledge of a fraud does not necessarily absolve a contractor from liability under the FCA. (citing Hagood, 929 F.2d at 1421)); United States ex rel. Kriendler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1156 (2d Cir. 1993) (concurring with Hagood, which expressly rejected the contention that government knowledge of the falsity of a claim automatically bars an FCA action ) citing Hagood, 929 F.2d at 1416)); United States ex rel. Longhi v. LithiumPower Techs., Inc., 513 F. Supp. 2d 866, (S.D. Tex. 2007); United States ex rel. Bettis v. Odebrecht Contractors of Cal., 297 F. Supp. 2d 272, 294 (D.D.C. 2004) ( [T]he government's knowledge, while perhaps not a complete defense, is not irrelevant. ); United States v. Fiske, 968 F. Supp. 1347, 1352 (E.D. Ark. 1997); United States ex rel. Milam v. Regents of Univ. of Cal., 912 F. Supp. 868, 888 (D. Md. 1995) ( not an 7

14 absolute defense (citing Kriendler, 985 F.2d at )). Generally, under the Truth in Negotiations Act ( TINA ), a government contractor or subcontractor is required to provide cost or pricing data when a negotiated contract, subcontract, or modification is expected to exceed $700,000, based on inflation price adjustments. 10 U.S.C. 2306a and 41 U.S.C. 254b; See FAR (a)(1) (Requiring cost or pricing data); See also 48 C.F.R (MAS price reductions). As defined by the FAR, cost or pricing data comprise all facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. FAR Subpart The submission of that data allows the contracting officer, the GSA contracting officer in this case, to ascertain the reasonableness of the offered prices. A price analysis will be performed where prices are determined to be fair and reasonable based on historical data, sales information provided, and other factors. Pursuant to TINA, if it is found after award that the contractor submitted data which were not accurate, current, and complete, the contract price may be reduced accordingly. MAS contract pricing safeguards the MFC clause and PRC operate in a TINA-like manner and serve as the only protections of the $50 billion in taxpayers dollars contracted under GSA s MAS program. Other contracting regulations also provide protections so that the MAS program operates as intended. MAS contracts contain a variation of the FAR Subpart clause (Ordering (Oct. 1995)) 8

15 which states that All delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control. FAR Subpart (b) (Emphasis added.). The clause is C.6 in so-called Schedule 70 IT solicitations and was included in IIF s contract, stating All task orders are subject to the terms and conditions of the contract. In the event of conflict between a task order and the contract, the contract will take precedence. IIF, Contract Number GS-35F-0066L, Clause 3.b (Emphasis added.). Additionally, contract modifications under task orders, as in this case, may not increase the scope, period, or maximum value of the task or delivery order contract under which the order is issued. The scope, period, or maximum value of the contract may be increased only by modification of the contract. 10 U.S.C. 2304a(e) and 41 U.S.C. 253h(e) (Emphasis added.). In this case, any knowledge of nonconforming service by NGB was moot because IIF s GSA s MAS contracts required a college degree and relevant work experience, and NGB s order cannot waive that requirement because the MAS contract, not the NGB task order, controls the requirement pursuant to the regulatory authorities cited above. Because GSA and IIF never modified the terms or conditions of IIF s MAS contracts, the actions of the NGB and IIF were nothing more than an indirect creation of a new sole 9

16 source contract award one that did not comply with CICA, TINA, or MAS contract pricing regulations. 3 The government knowledge defense does not apply in this case because NGB should have complied with the terms and conditions of the awarded GSA schedule contract, and those terms and conditions should prevail over the task orders, except to the extent that lower prices were offered and take precedence over the GSA Schedule contract s higher prices. Contracting officers for ordering agencies do not have authority to waive the terms and conditions of the MAS contract or any other MAS program requirements, although they may, on occasion, negotiate more favorable terms to the government. Agency contracting officers must obtain authorization from GSA prior to deviating from MAS solicitation provisions or contract clauses. 48 C.F.R , , In the case of entering a procurement that is outside the scope of the umbrella MAS contract, the agency had two options. First, NGB could have 3 See Competition in Contracting Act, 10 U.S.C. 2304; 41 U.S.C. 253; see also 48 C.F.R (a). Given the GSA s vetting and negotiation of the terms and prices in the GSA MAS contracts they award, agency orders under those MAS contracts are considered to satisfy the requirements of full and open competition, FAR 6.102(d)(3), and are not subject to FAR Part 15, which prescribes competitive procedures for most negotiated contracts. FAR 8.404(a). The MAS contractor s catalog with the approved items and prices may be used by agencies throughout the Government and those [a]gencies are not required to conduct competitive acquisitions when making purchases under the FSS.... REEP, Inc., B , 2002 CPD

17 brought the matter to the attention of GSA and the MAS contract should have been revised to reflect the new personnel education and experience requirements and, concomitantly, a reduction in IIF s MAS contract prices. Second, NGB could have avoided the use of the MAS contract and entered into either a sole source-negotiated procurement with IIF or hold a competitive procurement. Instead, NGB decided that it would change the terms and conditions of the MAS contract and enter into what essentially became an illegal sole source contract with IIF. The District Court stated in its April 28, 2010 Memorandum Order (R-377, p. 5) that it appeared that it was NGB which had the responsibility for determining whether a particular employee met the relevant qualifications. The District Court and Fourth Circuit failed to recognize that only GSA could correct nonconformance with the GSA MAS contract and that NGB had authority limited to getting a better deal, getting GSA to amend the MAS contract, or conducting its own contracting process pursuant to law. GSA is the only relevant government agency for the purpose of government knowledge not the contracting agency NGB as federal law required GSA to approve the contract. In the case at bar, the Fourth Circuit erred in affirming the District Court s finding that NGB s knowledge and acceptance of the falsity in IIF s prices and terms and conditions excused IIF s alleged false statements to GSA when the IT MAS contract was awarded. NGB s material alteration of IIF s GSA MAS contracts should not be held as 11

18 having an effect on the actions GSA could potentially have taken. Conclusion WHEREFORE, and for all the foregoing reasons, Amicus POGO respectfully requests that the Court consider and grant the Petition of a Writ of Certiorari. Respectfully submitted, /s/ Katharine L. Elliott Katharine L. Elliott, kitatlaw@sbcglobal.net 116 South State Street Ukiah, California Phone (707) Fax (707) Counsel for Project On Government Oversight 12