Number 1: Chevron deference no more: How Loper Bright has changed the game
In June 2024, the United States Supreme Court fundamentally reshaped administrative law by ending the doctrine of Chevron deference in its landmark decision, Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). This ruling introduces significant changes to how courts will evaluate an agency’s statutory interpretation, with substantial implications for federal contracting, particularly in the context of Contract Disputes Act (CDA) claims and bid protests. Previously, under Chevron, the Court of Federal Claims and Boards of Contract Appeals were obligated to defer to an agency’s reasonable interpretation of federal statutes when resolving CDA claims or assessing the reasonableness of an agency’s contract award decisions. Now, these adjudicative bodies can independently interpret statutory provisions, without giving weight to an agency’s expertise. This is a true game-changer. The Loper Bright ruling is expected to not only increase judicial scrutiny of federal agencies’ procurement decisions, but also alter how agencies manage their federal contracts, without the significant deference that long existed under the now-obsolete Chevron doctrine.
Number 2: More setbacks for socially disadvantaged and minority-owned small businesses
Government programs for disadvantaged and minority-owned small businesses have faced significant setbacks in the past year. In a recent trend against programs seeking to set aside contracting opportunities for historically disadvantaged contractors, a series of federal courts have held that several of the federal government’s equal opportunity initiatives within the federal procurement space violate the Constitution’s Equal Protection Clause.
A September 2024 ruling, in Mid-America Milling Co., LLC v. U.S. Department of Transportation (Mid-America) by a federal judge in Kentucky partially blocked the U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) program which seeks to direct ten percent of transportation infrastructure funding to women and minority-owned firms. Similarly, in March 2024, a federal judge in Texas struck down a federally sponsored racial preference extended to minority-owned businesses seeking to access government contracts in Nuziard v. Minority Business Development Agency (Nuziard). The courts in Nuziard and Mid-America both determined the presumption that certain racial minorities and women are socially disadvantaged violates the Equal Protection Clause. These cases follow the trend set by the 2023 decision in Ultima Services Corp. v. U.S. Department of Agriculture, which also challenged the presumption of social disadvantage by designated groups under the Small Business Administration’s 8(a) Business Development program. With the incoming administration vowing to put an end to any federally funded programs focused on diversity, equity, and inclusion, contractors that currently benefit from such initiatives should prepare for a continued claw back of these longstanding efforts to level the playing field.
Number 3: Bid protest jurisdiction and standing in focus
In June 2024, the United States Court of Appeals for the Federal Circuit issued a major decision addressing bid protest jurisdiction and standing at the United States Court of Federal Claims (CFC) in Percipient.ai, Inc. v. United States. Percipient, an AI solutions provider, filed a CFC protest challenging a task order award. Percipient did not compete for the task order but wanted to provide a computer vision (CV) system as a subcontractor under the task order. The agency and awardee, CACI, Inc., ultimately opted not to pursue Percipient’s CV platform. Percipient protested, asserting the agency’s decision violated 10 U.S.C. section 3453, a statute establishing a preference for readily available commercial products and services.
CFC granted the government’s and CACI’s motions to dismiss, ruling that the Federal Acquisition Streamlining Act (FASA) barred its jurisdiction over protests “in connection with the issuance or proposed issuance of a task or delivery order.” Percipient appealed the decision, and the Federal Circuit reversed CFC’s ruling. The Federal Circuit concluded that Percipient's protest fell outside FASA’s task order bar because it did not challenge the task order itself but rather the agency’s failure to consider a commercial solution. The court also addressed standing, determining that Percipient had the right to challenge the award because it had a substantial opportunity to meet the agency’s needs, had the agency and CACI explored potential commercial products and services as required by statute.
This decision is widely understood as a significant expansion of the CFC’s bid protest jurisdiction and standing, as it represents a clear rejection of the traditional notion that only direct offerors can challenge the governments’ procurement decisions. The decision potentially opens the door to protests from potential subcontractors, suppliers and other parties that did not participate in the procurement process but nevertheless have a vested interest in the outcome. In granting the government’s petition for a rehearing, however, the Federal Circuit will revisit standing with a particular focus on who qualifies as an “interested party” capable of challenging alleged violations of statutes or regulations in procurement matters. The upcoming en banc decision is expected to set new precedents on standing in CFC bid protests, likely shaping the interested party standard for future protests.
Number 4: The SBA’s efforts to break the payment bottleneck
In December 2024, the U.S. Small Business Administration (SBA) released a proposal to revise the regulations of the Small Business Subcontracting Program in 13 C.F.R. pt. 125.3 to encourage faster payments to small business subcontractors and streamline the reporting process for prime contractors.
Under the proposed revisions, prime contractors will be required to notify contracting officers – provided the subcontractors’ responsibilities have been completed – if payments to small business subcontractors are past due by 30 days. Prime contractors will then be required to cooperate with small business subcontractors to mitigate the failure to pay, regardless of a subcontractor’s performance. The contracting officer will also have the option to include the prime contractor’s failure to pay within its past performance review.
These proposed changes, designed to expedite payments to small business subcontractors and make subcontract reporting more efficient, will require additional diligence on the part of prime contractors as it relates to these payments.
Number 5: Civil cyber fraud initiative takes aim
In August 2024, the Department of Justice (DOJ) filed a complaint-in-intervention against the Georgia Institute of Technology (Georgia Tech) for knowingly failing to comply with required cybersecurity standards for federal defense contracts. The U.S. Department of Justice (DOJ) alleges that the Astrolavos Labs (Astrolavos), a cybersecurity research lab run by Georgia Tech, failed meet multiple information technology security requirements under its agreements with the Air Force and the Defense Advanced Research Projects Agency (DARPA) and submitted a false assessment of its cybersecurity compliance to the U.S. Department of Defense (DOD).
The lawsuit, originally filed by whistleblowers from Georgia Tech’s cybersecurity compliance team, further alleges that when Astrolavos finally implemented its security plan, it was incomplete because it failed to account for most of the computers in the lab used for the contract. Additionally, the lawsuit alleges that Astrolavos submitted a false cybersecurity assessment score to DOD and failed to timely install antivirus or antimalware tools on the computer and networking equipment in the lab, in violation of both federal cybersecurity requirements and the university’s own policies.
The lawsuit is a significant example of enforcement under DOJ’s Civil Cyber Fraud Initiative, focusing on holding federal contractors accountable for poor cybersecurity practices that put federal information systems at risk.
Number 6: FAR Council eases SAM registration requirements after GAO protest
In April 2024, the Government Accountability Office (GAO) issued a bid protest decision in TLS Joint Venture, LLC, holding that the Navy unreasonably awarded a custodial services contract to Silas Frazier Realty, LLC (SFR) because SFR’s System for Award Management (SAM) registration had lapsed during the agency’s proposal evaluation period. SFR submitted its SAM renewal on December 8, 2023, and its SAM registration expired on December 11, 2023. SFR did not renew its SAM registration until December 12, 2023, one day after SFR was awarded the contract. The one-day lapse in registration required that GAO sustain the protest and direct the Navy to terminate the contract awarded to SFR, positioning the award to go to TLS Joint Ventures, LLC as the next-in-line offeror. In November 2024, however, the Federal Acquisition Regulation (FAR) Council issued a rule clarifying that contractors do not need to be continuously registered in the SAM system throughout the entire contractual pre-award process. The FAR council clarified that the offeror must be registered at the time of offer submission and at the time of contract award but would not be required to be registered at every moment in between those two points. While contractors should be vigilant about ensuring their SAM registrations remain accurate and up to date, the new rule provides a bit of breathing room for companies that would have previously faced the loss of a contract award due to a lapsed registration.
Number 7: The Rule of Two: Challenging the boundaries of fair competition
In August 2024 – for the first time in nearly a decade – GAO sustained a protest challenging an agency’s decision to set aside a procurement for small businesses in Knudsen Systems, Inc. The decision involved FAR 19.502-2(b) (total small business set-asides), also known as the “Rule of Two,” which requires that an agency’s market research adequately demonstrate that there is a reasonable expectation that at least two responsible small business offerors can meet the agency’s requirements at a fair market price before setting aside a procurement.
In Knudsen Systems, the protestor, a woman-owned small business, challenged the agency’s set-aside decision after the agency amended the solicitation to include the nonmanufacturer rule, which requires offerors to either manufacture items themselves or source them from a domestic small business manufacturer. Knudsen Systems, which had planned to supply equipment from a Canadian manufacturer, was deemed ineligible for award following the amendment. In response, Knudsen Systems argued that the agency’s set-aside decision was based on inadequate market research, as the agency failed to assess whether two or more small businesses could meet the requirements of the amended solicitation under the Rule of Two.
GAO, in turn, determined that the agency’s market research and resulting set-aside decision were based on the mistaken assumption that the nonmanufacturer rule did not apply to the procurement. As a result, the agency’s Rule of Two analysis failed to consider whether prospective offerors could comply with the amended terms of the solicitation, particularly the nonmanufacturer rule. GAO rejected the agency’s argument that it was entitled to rely on pre-amendment market research and concluded that the decision to restrict the procurement to small businesses was unreasonable. Among other takeaways, Knudsen Systems highlights the significant implications of the Rule of Two and the nonmanufacturer rule for all government contractors, including small businesses. While Rule of Two protests are typically used by small businesses to challenge overly restrictive set-aside decisions, large businesses can also use these arguments to advocate for competing in procurements on an unrestricted basis.
Number 8: When going low pay doesn’t pay off
In October 2024, GAO sustained in part a protest filed by IBSS Corporation, a small business, challenging a task order award by the Department of Commerce, National Oceanic and Atmospheric Administration (NOAA). IBSS argued that NOAA improperly evaluated Blue Glacier Management Group, Inc.’s total compensation plan, claiming that the proposed compensation levels for professional employees were unrealistically low compared to those offered by the incumbent contractor. GAO agreed with IBSS, finding that NOAA had failed to reasonably evaluate Blue Glacier’s compensation plan, as Blue Glacier’s proposed salaries were lower than the incumbent’s in at least five labor categories. NOAA also failed to conduct additional analysis to assess whether the proposed compensation levels would be adequate to recruit and retain personnel and maintain program continuity. As a result, GAO recommended that NOAA reevaluate the proposals under the staffing plan factor.
This decision shows how unsuccessful offerors can successfully challenge a contract awardee’s low compensation rates by raising concerns about the capability to properly staff and execute the contract. And agencies may also risk having their award decisions overturned by accepting offers with compensation levels lower than those of the incumbent contractor.
Number 9: Navigating changes: Key updates to the HUBZone and other small business programs
In December 2024, the U.S. Small Business Administration published a final rule to amend its regulations governing the Historically Underutilized Business Zone (HUBZone) Program to clarify certain policies. Under these revisions, the rule requires any certified HUBZone small business to be eligible as of the date of offer for any HUBZone contract. The rule also makes several changes to the SBA’s size and the Small Business Act section 8(a) business development regulations, to the women-owned small business program, and the Veteran Small Business Certification program. Size and recertification rules are no longer program-specific and will be uniformly applied to avoid ambiguities and alleviate confusion caused by different language being used for different programs. Additionally, annual recertification is no longer required, and instead, triennial (every three years) recertification will be required.
Number 10: DOD revamps pricing rules: New DFARS proposal raises TINA threshold
In September 2024, DOD released a proposed rule that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to update requirements for contractors to submit cost or pricing data. Offerors will be required to submit data other than certified cost or pricing data upon the request of the contracting officer to help determine the reasonableness of the price of a contract, subcontract, or modification. Under this proposed rule, the threshold for Truth in Negotiation Act (TINA) requirements for all contractual actions will be raised from $750,000 to $2 million, establishing a uniform TINA threshold. This threshold will be implemented for all DOD contractual actions executed after June 30, 2018. Contracting officers will be required “as soon as practicable” to modify contracts entered into on or before June 30, 2018 to reflect the $2 million threshold. This uniform TINA threshold is intended to benefit both the government and the public by promoting efficiency and reducing costs associated with administering contracts. The rule will provide government contracting officers with the ability to determine fair and reasonable prices when certified cost or pricing data is not required.
