Gordon Rees Scully Mansukhani presents the latest insights from our Government Contracts group, offering a comprehensive overview of recent significant decisions, regulatory changes, and essential updates for businesses contracting with federal and state governments. Our team compiled the most pertinent legal developments to keep you informed in the dynamic landscape of government contracts.
Tune in to The Essential GovCon Brief podcast for an in-depth discussion of the issues highlighted here.
Recent Cases:
COFC Clarifies Ostensible Subcontractor Rule
Brief Facts
This Court of Federal Claims (COFC) matter involves a $45 million Department of Veterans Affairs (VA) construction project set aside for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). The VA awarded the contract to Veterans Electrical Group (VEG), which formed a teaming agreement with Roncelli, Inc., a general construction subcontractor. Daniels Building Company, an unsuccessful bidder, protested VEG’s small business status, arguing that VEG improperly relied on Roncelli.
Ruling from the SBA
The Small Business Administration (SBA) Area Office initially found VEG ineligible as a small business, concluding VEG was effectively acting as a subcontractor because Roncelli had overall project management responsibilities. However, on appeal, the SBA’s Office of Hearings and Appeals (OHA) reversed this decision, ruling VEG qualified as a small business. OHA determined that VEG’s CEO, as the designated project manager, had ultimate oversight, supervision, and management control over the entire contract performance.
Ostensible Subcontractor Rule Explained
The ostensible subcontractor rule prevents companies from qualifying as small businesses if they rely too heavily on large subcontractors. This rule is violated if either:
- The subcontractor performs the “primary and vital” elements of the project, or
- The prime contractor is “unusually reliant” on the subcontractor.
Daniels’ Argument
Daniels argued VEG violated the ostensible subcontractor rule, claiming:
- Roncelli, not VEG, was performing the critical management and supervision duties central to the general construction project.
- VEG was unusually reliant on Roncelli’s resources, including subcontractor relationships, bonding support, and management systems, to win and perform the contract.
Reasons OHA (and Court) Found VEG Qualified
Despite Daniels’ arguments, the court upheld OHA’s determination, citing that:
- VEG’s CEO had clearly defined management authority under the teaming agreement, overseeing all aspects of the project, including subcontractor performance.
- VEG was performing a significant portion of actual construction (electrical work), had relevant experience, and was not overly dependent on Roncelli’s resources or management tools.
- Assistance provided by Roncelli in obtaining bonds or soliciting subcontractor quotes, while relevant, was not sufficient evidence alone of unusual reliance.
Ultimately, VEG was determined to have sufficient control, responsibility, and capacity, negating any violation of the ostensible subcontractor rule.
Citation: Daniels Building Company, Inc. v. United States, No. 24-1787, 2025 WL 984884 (Fed. Cl. Mar. 31, 2025).
COFC: Army’s Non-Disclosure of Radioactive Waste Conditions Violated Differing Site Conditions Rule
Brief Facts
This dispute involved a government contract awarded to TPMC-Energy Solutions (TPMC), a joint venture approved by the Small Business Administration (SBA) under its Mentor-Protégé program. The U.S. Army contracted TPMC to remediate and decommission a low-level radioactive burial site (LLRBS) at a USDA research facility in Maryland. After encountering significantly different site conditions than those described in the contract documents—including contaminated soil and widely dispersed radioactive waste—the contractor sought an equitable adjustment under the Contract Disputes Act (CDA).
Court’s Ruling
The COFC ruled in favor of TPMC, holding that the contractor was entitled to an equitable adjustment for differing site conditions and breaches of contract due to the government’s superior knowledge and failure to act in good faith.
The Differing Site Conditions Rule Explained
The Differing Site Conditions clause allows contractors to seek additional compensation if they encounter physical conditions at the site that significantly differ from those indicated in the contract or that differ from conditions typically expected for such work. Contractors must prove:
- The actual conditions differed materially from those represented in the contract.
- The conditions were unforeseen.
- The contractor reasonably relied upon the contract documents.
- The contractor suffered damages due to the conditions.
TPMC’s Basis for Argument
TPMC argued it encountered two critical unexpected conditions:
- Contaminated Overburden: The contract represented the top five feet of soil (overburden) as uncontaminated. In reality, TPMC encountered significant contamination immediately beneath the surface.
- Liquid Scintillation Vials (LSVs): LSVs are small containers used in laboratory analysis that hold radioactive liquid samples to measure radioactivity levels, typically disposed of as low-level radioactive waste. The contract indicated LSVs were neatly packaged. Instead, TPMC discovered LSVs dispersed throughout the soil, significantly complicating cleanup efforts and costs.
TPMC further argued the government knew or should have known about these conditions but failed to disclose this superior knowledge, misleading TPMC into submitting a lower bid than it otherwise would have.
Reasons Why TPMC Qualified for Relief
The court found:
- Differing Site Conditions: TPMC reasonably relied on explicit contractual representations about the site conditions, which materially differed from reality, causing delays and increased costs.
- Superior Knowledge: The Army possessed critical knowledge of site conditions, was aware TPMC did not have this information, and failed to disclose it. This omission materially misled TPMC, breaching the duty of good faith and fair dealing.
- Duress and Unfair Conduct: A modification that attempted to waive TPMC’s claims for additional compensation was obtained under economic duress and thus unenforceable, further supporting TPMC’s claims.
Citation: TPMC-Energy Sols. Env’t Servs. 2008, LLC v. United States, No. 19-102C, 2025 WL 953599 (Fed. Cl. Mar. 28, 2025).
COFC Rejects Navy’s Task Order Argument Permitting Protest for Misleading Solicitation to Proceed
Brief Facts
Siemens Government Technologies sued the U.S. Navy to recover over $5 million in bid preparation costs after the Navy solicited Siemens for energy efficiency improvements at overseas bases, including Souda Bay in Greece and Camp Lemonnier in Djibouti. Siemens later discovered that the Navy had previously awarded contracts to other contractors for identical work at these locations, which the Navy had not disclosed.
Task Order Bar and Government’s Motion to Dismiss
The government moved to dismiss Siemens’ claims under the Federal Acquisition Streamlining Act (FASA) task order bar. FASA generally prevents bid protests related to the issuance of task or delivery orders, restricting contractors’ avenues for challenging certain government procurement actions.
Siemens’ Argument on the Task Order Bar
Siemens argued the task order bar did not apply because:
- The Navy’s solicitation was invalid from inception due to the duplicative contracts, meaning no legitimate task order could have been proposed or issued.
- Siemens was not challenging an existing task order or seeking to overturn or alter any awarded contract. Instead, Siemens was solely seeking compensation for costs incurred due to the government’s misleading actions.
Court’s Decision on the Task Order Bar
The court rejected the government’s motion to dismiss, ruling the task order bar was inapplicable in this unique scenario. Specifically, the court reasoned:
- Invalid Solicitation: No legitimate task order existed since the Navy solicited services that had already been awarded under earlier contracts, making its solicitation inherently void.
- Nature of Relief Sought: Siemens did not attempt to challenge or overturn a task order itself; it only sought reimbursement for its wasted costs arising from the Navy’s misleading procurement practice.
Key Takeaway
This decision highlights an important exception to the task order bar, clarifying that FASA does not shield the government from liability when its solicitation practices mislead contractors into unnecessary expenditures. Contractors may still recover bid preparation costs when a solicitation is fundamentally invalid due to the agency’s undisclosed, duplicative procurements.
Citation: Siemens Gov’t Techs., Inc. v. United States, No. 22-698, 2025 WL 1112602 (Fed. Cl. Mar. 28, 2025).
GRSM Government Contracts Practice Group
GRSM’s Government Contracts team has considerable experience defending and enforcing the rights of our contractor clients in disputes against government entities and private businesses. In addition to litigating claims in state and federal courts, we routinely handle matters before administrative tribunals, such as the Government Accountability Office, the Small Business Administration, and the Armed Services Board of Contract Appeals.
Our team of attorneys is located throughout the United States, which allows the firm to represent contractors, regardless of size, and in a wide variety of industries, including defense, information technology, construction, and aerospace, among others.
Please contact Patrick Burns, Meredith Thielbahr, or Jeremy Camacho for further information or with any questions.