Using Standard Contracts for Federal Contracting and Teaming

Using Standard Contracts for Federal Contracting and Teaming Agreements Brian Perlberg Executive Director, Consensus. Docs perlbergb@agc. org (703) 837 -5318 www. consensusdocs. org

Why Contract Documents Matter For Projects Results Canadian Study 8 BAD CLAUSES INCREASES PRICE 20% CII Study on contracts Unnecessary Risk Contingencies Best Contractors Seek the Best Owners Worst contracts get worse results. 3

Einstein’s Rule for Construction Contracts “…the definition of INSANITY is doing the same thing, over and over again, and expecting different results. ”

Why Consensus is Needed in Construction Contracts Perception of Bias Favors interests of individual drafting association Modifications exceed the original “standard” Parties try to push risk away rather manage Industry trending towards collaboration

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Proven Results for St of Iowa DAS’ using AIA vs Consensus. Docs Using AIA Using CDs 68 project/year 98 projects/year $40 M/ year completed $80 M/year completed Claim/s on EVERY PROJECT NO Formal CLAIMS on $400 M in construction See Constructor Jan/Feb issue 2014.

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Why Use a Federal Subcontract? § Federal prime contract = unique § The construction, alteration or repair prime contract is contained in Standard Form 1442, a two-page document used for both design-bidbuild, design-build, Invitations for Bid (IFBs), and Requests for Proposals (RFPs) § Just “Part of the Story. ” 13

Why Use a Federal Subcontract? § Civil and Criminal Liability § False Claims Act prohibits the knowing submission of a false or fraudulent claim for payment or approval; the use of a false record or statement material to a false or fraudulent claim; and a conspiracy to commit a violation of the Act § False Statements Act prohibits the making of a false statement to the federal government. 14

Consensus. Docs 752 or Alternatives? § Consensus. Docs 752 – default on projects where the federal government is the owner § Other public projects, including federally funded state and local projects, Consensus. Docs 750 is likely to be more appropriate. 15

Subcontracting for Fed Work § Other standard forms contemplate project administration role by the Architect or Engineer § Federal projects – FAR gives the key role to the Contracting Officer or technical representative (COTR) § Essential to know who has the actual authority to bind the government. 16

Why Have a Specialized Form? § Most subcontracts DO NOT: § Adequately address federal prime contract requirements § § § Dovetail the prime contractor’s and subcontractor’s rights and responsibilities nor alert the subcontractor to mandatory flowdown provisions The cost – time and money – of creating a federal government subcontracting template is substantial Consensus. Docs 752 addresses these issues and has the buy-in of those organizations representing the majority of the stakeholders in this arena. 17

FAR Provides the Terms and Conditions § Many key clauses are incorporated by reference § Easily overlooked by prime contractors and subcontractors § Prime contractor must flow down many clauses to subcontractors and suppliers § Prime contractor typically certifies overall compliance with terms and conditions § False Claims implications and risks. 18

Don’t Get Sent FAR Down the River § Federal statutes and the FAR address subcontractor and supplier payment obligations at all tiers § Federal projects are subject to the Miller Act § Payment bond protection for some, but NOT all tiers of subcontractors/suppliers § Need for federal subcontract to comply. 19

Key FAR Clauses – Disputes § Disputes involving the federal government are resolved under the FAR Disputes clause § Prime contractor, in good faith, may require Sub to participate in the FAR Disputes process § Prime contractor’s liability to the subcontractor is limited to the amount, if any, the prime contractor recovers from the government on the subcontractor’s claim § Prime contractor and subcontractor are obligated to proceed with the changed work. § Request to stay a Miller Act proceeding was not made in good faith and Subcontractor is entitled to recover its reasonable attorneys’ fees 20

Payment Terms For Federal Contract § Consensus. Docs 752 payment provisions are consistent with and similar to FAR payment clause § Consensus. Docs 752 requires the subcontractor to give the prime contractor the same certification § Potential False Claims Act liability for both the prime contractor and the subcontractor if a false certification is submitted § Subcontractors need to flow down the certification requirement 21

Business Ethics & Compliance Obligations § BUSINESS ETHICS & COMPLIANCE 12. 7 Subcontractor, certifies that it (a) already has or will adopt a written code of business ethics and conduct § Exercise due diligence to prevent and detect criminal conduct § Promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law § Make timely disclosure of violations of federal criminal laws and the civil False Claims Act. 22

Davis-Bacon Act § Federal subcontracts should flow down the Davis-Bacon Act requirements through the inclusion of a number of FAR clauses § § § § § FAR 52. 222 -6 Davis-Bacon Act FAR 52. 222 -7 Withholding of Funds FAR 52. 222 -8 Payrolls and Basic Records FAR 52. 222 -9 Apprentices and Trainees FAR 52. 222 -10 Compliance with Copeland Act Requirements FAR 52. 222 -11 Subcontracts (Labor Standards) FAR 52. 222 -12 Contract Termination - Debarment FAR 52. 222 -13 Compliance with Davis-Bacon and Related Act Regulations FAR 52. 222 -14 Disputes Concerning Labor Standards FAR 52. 222 -15 Certification of Eligibility § Flow down FAR clauses are included in Consensus. Docs 752 Exhibit H. 23

E-Verify- 12. 6 Sub certifies that it has or will enroll w/i 30 days in EVerify Subcontractor/vendor shall furnish satisfactory evidence of its enrollment in and use of the E-Verify program and inclusion of this requirement in lower-tier subcontracts and purchase orders 24

Consensus. Docs Teaming Agreements CD 296 and 498 Teaming Agreements CD Joint Venture Agreements 297 JV Line Item 298 JV 299 JV LLC 499 JV for Design-Build 25

Critical Issues in Teaming Agreements Pre-Award / Proposal Issues: Team Relationship and Responsibilities Submission of the Proposal Confidential Information / Ownership of Documents Post-Award Issues: Negotiations of Prime Contract Awarding of Subcontracts to Team Members Dispute Resolution / Damages Withdrawal of Team Member

Critical Issues in Teaming Agreements Pre-Award / Proposal Issues: Team Relationship and Responsibilities What is the intended organizational structure of the Team? CD 296 – Uses Team Leader/Team Member concept “provide overall direction and leadership for the Team and be the conduit for all communication with Owner. What are the duties of the Team Leader/Team Members? CD 296 - Team Leader decides by default Ex. A - Proposal effort responsibilities / anticipated scope of Services

Critical Issues in Teaming Agreements Pre-Award / Proposal Issues: Submission of the Proposal Who controls final content/submission of the Proposal? CD 296 – Team Members jointly prepare Proposal. Team Leader makes final determinations as to form and content of Proposal. Exclusivity / Non-Competition CD 296 – No Team Member can participate in Owner’s selection process except as a member of the Team. Exceptions: Mutual agreement or Owner Agreement requires otherwise

Critical Issues in Teaming Agreements Pre-Award / Proposal Issues: Confidential Information How will confidential information be protected? CD 296 – Confidential information may not be shared with third parties except as required to submit Proposal; Team Members supplying confidential information can require separate confidentiality agreement Return of confidential Information CD 296 – Team Members must return confidential information within 30 days of contract completion, termination, or non-award by Owner

Critical Issues in Teaming Agreements Pre-Award / Proposal Issues: Ownership of Documents Who owns the property rights and copyrights to documents generated by the Team? CD 296 – Each Team Member retains ownership of property rights, including copyrights to all documents provided in furtherance of the Proposal Team Members must transfer non-exclusive, limited license to Team Leader for the Project

Critical Issues in Teaming Agreements Post-Award Issues: Negotiations of Prime Contract How does the Team conduct its negotiations among the team members and with the Owner? CD 296 – Team Leader is conduit for all communications with Owner Team leader has lead responsibility for negotiation of the Owner Agreement.

Critical Issues in Teaming Agreements Post-Award Issues: Awarding of Subcontracts to Team Members Is the Team Leader obligated to subcontract to its Team Members? CD 296 – if Owner Agreement includes work proposed by Team Member, then Team Leader and Team Member are required to negotiate a subcontract in good faith. If good faith negotiations are not successful, Team Leader has the right to enter into a subcontract agreement with another. Is the Teaming Agreement enforceable? Cyberlock Consulting Inc. v. Information Experts, Inc.

Critical Issues in Teaming Agreements Post-Award Issues: Dispute Resolution What is the governing law? CD 296 – Applicable law in effect at the location of Team Leader’s office.

Critical Issues in Teaming Agreements Post-Award Issues: Damages What damages/remedies are available? Non-Solicitation of Employees Confidentiality Agreement Post-Award (Enforceability) Is there a limitation on damages? CD 296 – Limited Waiver of Consequential Damages Exceptions: Insurance; Owner Agreement; Other

Critical Issues in Teaming Agreements Withdrawal of Team Member What role does a former team member have in the project? What becomes of documents owned by a former team member? CD 296 – No former team member shall participate in any way relating to the Project. CD 296 – Former team member must transfer to Team Leader a non-exclusive, limited license for the Project. What becomes of any confidential information that the former team member has obtained as part of the Team? CD 296 – Former team member must return within 7 days of removal or withdrawal from the Team.

Legal Landscape Recent Decisions: Cyberlock Consulting, Inc. v. Information Experts, Inc. , No. 1: 12 cv 396, 2013 WL 1395742 (E. D. Va. Apr. 3, 2013) District court held that a teaming agreement was an agreement to agree that was unenforceable under Virginia law. X Technologies, Inc. v. Marvin Test Systems, Inc. No. 12 -50230, 2013 WL 2493735 (5 th Cir. June 11, 2013) Court affirmed jury verdict finding that there had been a breach of an enforceable teaming agreement.

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