MD Schedules Bethesda BRAC Construction

The State of Maryland has scheduled the beginning of $111 million of construction at three intersections around Walter Reed Military Medical Center.

- Brad Aaron

Maryland BRAC Grants Awarded Today

Maryland awarded nine education grants today to help the state prepare for the arrival of BRAC-related jobs.

- Brad Aaron

Potential Long Term Solution to Ft. Meade Traffic . . .

. . . moving folks closer to Ft. Meade.

- Brad Aaron

More Worries about Anticipated Ft. Meade Traffic

Expected "gridlock" is going to require "unique solutions."

- Brad Aaron

Over $17 BILLION in APG Contracts

APG is expected to enter into contracts worth over $17 billion (that's billion with a "B") over the next five years.

- Brad Aaron

Future Ft. Meade-Related Traffic Challenges

Although not anticipated to be as bad as the expected gridlock around Mark Center in Alexandria (assuming that move happens as scheduled), a new report from the Fort Meade Regional Growth Management Committee anticipates that the traffic generated by the influx of additional BRAC-related workers to Ft. Meade will exceed the capacity of local roads for the next decade and maybe longer.

- Brad Aaron

Where APG's New Arrivals are Landing

No surprise here but 60% of those folks relocating to APG in connection with BRAC are choosing to live in Harford County, according to a report by Chesapeake Science & Security Corridor.

- Brad Aaron

BRAC Impact on Harford County Commercial Real Estate

Harford County commercial real estate getting a big assist from BRAC.

- Brad Aaron

VDoT Chimes in on Mark Mess

The Virginia Department of Transportation has come up with its own (unfunded) suggestions to address the anticipated BRAC-related traffic mess around the Mark Center.

- Brad Aaron

Update on Alexandria's Mark Center

The DoD's IG has commenced an investigation in response to concerns about the impact (i.e., traffic gridlock) of moving 6,400 jobs to the Mark Center.

- Brad Aaron

Report on BRAC's Local Impact

Commercial real estate firm Cassidy Turley has released an interesting report nicely describing where BRAC 2005 is today and anticipating its impact on local businesses and real estate over the next couple of years. A link to the report can be found here.

- Brad Aaron

New State of Maryland BRAC Blog

The State of Maryland has just launched its own blog dedicated to BRAC in Maryland at BRAC@U. Check it out.

- Brad Aaron

Help in Harford

Harford County is establishing a commission to help developers get the credit needed to build tax-generating homes and buildings to meet local BRAC-related growth.

- Brad Aaron

Rights in Data and Software

For any company that does business with the federal government, (the “Government”) protecting its intellectual property and proprietary information rights is important in order to maintain a competitive advantage. Nevertheless, to do so, companies must know what its rights are, particularly with respect to its technology and computer software. Since the Government obtains broad rights when data and software are created with Government funds, contractors are required to grant the Government a license to use the technical data or computer software. In general, the level of protection that technical data and computer software receive or the scope of license granted under a Government contract depends on the source of funding and the stage of development. For the most part, the more Government funding that is used to create such technology, the greater the Government's rights in the product. For example, the Government gets “Unlimited Rights” in all data first produced in the performance of a contract and any data delivered under a contract except for “Limited Rights Data,” “Restricted Use Computer Software,” and “Copyrighted Data.” That is, if the Government contracts for a specially designed, ostensibly single-purpose software product, it would want to receive Unlimited Rights to the data and software. Unlimited Rights means the Government has the right to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly, in any manner and for any purpose, and to have or permit others to do so. That is certainly most favorable to the Government.

However, often a contractor performs under a Government contract using technical data or software developed by the contractor before the Government contract started or otherwise outside of the Government contract. For example, the Government may contract to purchase a commercially available, off-the-shelf software product. Normally, such a product is protected at least by copyright. This is a typical example of Restricted Use Computer Software, which is computer software developed at private expense and that is a trade secret, is commercial or financial, and confidential or privileged, or is copyrighted computer software, including minor modifications of the computer software. In this case, the Government gets no more license than any other commercial purchaser does.

Sometimes, however, the Government contracts for a specific application or modification of pre-existing technology. Limited Rights Data means data, other than computer software, that embody trade secrets or are commercial or financial and confidential or privileged, to the extent that such data pertain to items, components, or processes developed at private expense. The data may include trade secrets that the contractor desires to protect. In this case, for the contractor to protect its rights in privately financed technical data or computer software that it used in the performance of the contract, the contractor must identify the proposed restricted data or computer software and mark each copy of the restricted data or computer software with a Notice having specific language according to the Federal Acquisition Regulation. Essentially, the Notice describes the limits on use of the data or computer software.

Finally, unless otherwise prohibited by the terms of the contract, a contractor may generally assert copyright in a work first produced during the performance of its contract, and hold the Government liable for infringement of a lawfully asserted copyright. The contractor must obtain permission of the Contracting Officer and mark the material it intends to copyright with an appropriate legend that acknowledges the work was produced under Government sponsorship. In this case, the Government retains a broad license in the copyrighted work, but the Government license in computer software does not include the right to distribute it. Failure to mark the material appropriately can allow the Government to acquire unlimited rights to use and distribute the contractor's work.

Bear in mind, regardless of the scope of the Government's rights, the contractor may continue to use the same data or software for its own commercial purposes. In any event, if you transact business with the Government, you need to know which rules apply to your business, what those rules require, and how to abide strictly with those rules, or you may find your rights compromised.

- Jeff Maynard

Arundel Gateway Update

Although the Anne Arundel County Council overrode County Executive Leopold's veto of the Arundel Gateway project, environmentalists have filed an appeal of the zoning decision in Anne Arundel County Circuit Court.

- Brad Aaron

Other BRAC Winners

Maryland is not the only state benefiting from BRAC. In fact, Texas' Fort Bliss "is . . . among the biggest winners."

- Brad Aaron

BRAC-Driven Arundel Gateway Gets Green Light with Veto Override

The Anne Arundel County Council’s recent override of County Executive John R. Leopold’s veto of a rezoning amendment gives a green light to Arundel Gateway, a mixed use project proposed on 300 acres near Route 198 and the Baltimore-Washington Parkway in Laurel. The developers, Ribera Development and Greenberg Gibbons plan to construct 1,600 residential units, 360,000 square feet of office, 160,000 square feet of retail space and a 150-room hotel. The rezoning amendment was needed to change the property’s current zoning from industrial to mixed use.

Opponents of the County Council’s veto argue that the rezoning amendment is tantamount to “spot zoning,” an always controversial and sometimes, but not necessarily, illegal process in which a planning office seeks to amend the zoning classification of a particular parcel of land without changing the zoning of surrounding property also within the original classification. Typically, applications for rezoning are addressed during the county’s comprehensive rezoning process occurring once every 10 years. The County Executive’s position is that the rezoning application for Arundel Gateway should be included in the comprehensive rezoning process along with hundreds of other rezoning applications, and the grant of the zoning amendment for a single property amounts to preferential treatment being given to one group of developers. On the other side, the County Council believes the amendment to allow Arundel Gateway’s rezoning classification change is necessary for the good of the entire community in order to meet the infrastructure needs for the approximately 15,000 new BRAC-related jobs anticipated for the Fort Meade area in 2011.

Whether the rezoning amendment benefiting the Arundel Gateway project is challenged in court, we will have to wait and see. The BRAC Blog will furnish updates.

- Tami Daniel

Update on DISA's Move to Ft. Meade

Most of DISA's move will be completed 2 months before the end of BRAC 2005 in September 2011.

- Brad Aaron

CECOM Officially Arrives at APG

U.S. Army Communications-Electronics Command (CECOM) officially arrives today at Aberdeen Proving Ground from Ft. Monmouth.

- Brad Aaron

Five BRAC Numbers

Here are five important numbers related to BRAC's impact on Fort Meade.

- Brad Aaron

MD and Ft. Meade Agree on Road Improvements

DoD and the State of Maryland have come to agreement on transportation infrastructure improvements in and around Ft. Meade in preparation for the BRAC influx.

- Brad Aaron

Little BRAC Impact at Andrews

While Andrews Air Force Base will gain additional jobs as part of BRAC 2005, such jobs "are unlikely to result in the kind of economic boom that will take place near other military installations across the Washington region, including Fort Meade."

- Brad Aaron

Transportation Troubles in Virginia: "$1 billion BRAC mistake"

A look at an "anticipated traffic catastrophe" at Alexandria's Mark Center.

Evidence of Powerful Economic Impact of Maryland's Military Bases

From a recent University of Baltimore study, "Maryland's 17 military installations — places like Aberdeen Proving Ground, Fort George G. Meade and Andrews Air Force Base — employ 3.4 percent of Maryland’s work force . . ."

- Brad Aaron

Quick Update on Ft. Meade

The Washington Post takes a brief look at what's happening at Fort Meade.

- Brad Aaron

What You Need to Know About Taxes – Maryland vs. New Jersey

If you have recently relocated to Maryland you are still getting used to the transportation, shopping, schools, amenities, and other attributes of the region. As you are getting acclimated don’t forget to consider the following basic tax distinctions between Maryland and New Jersey. From an income tax perspective, Maryland has a slight advantage.

Corporate income tax is based upon federal taxable income after state modification. In Maryland the corporate income tax rate is 8.25%. The rate is slightly higher in New Jersey at 9% for income of $100,000 or more, but lower rates apply if the corporation’s income is less than $100,000.

Individual income tax is calculated on the total income received with certain allocations made for income earned in other states. Both states use a graduated scale with New Jersey’s individual income tax rates ranging from 1.4% on the first $20,000 of income to 8.97% on income over $500,000. Maryland’s individual income tax rates range from 2% on the first $1,000 of income to 6.25% on income over $1.0 million.

Maryland also permits a local tax rate which is levied by 23 counties and Baltimore City. The local tax rate ranges from 1.25% in Worcester County to 3.2% in Montgomery, Prince George’s, and Howard County. Harford County’s tax falls somewhere in the middle at 3.06%.

Business Tax Incentives and/or credits are offered by both states. Specific information on the business tax credits available in Maryland can be found at http://business.marylandtaxes.com/taxinfo/taxcredit/default.asp.

When it comes to estate and inheritance taxes, Maryland and New Jersey are the only two states that impose both taxes.

Estate and gift taxes are imposed on the value of assets transferred by a person at death (estate tax) or during his life (gift tax). Although the federal estate and gift taxes are currently in a state of flux, the estate and gift taxes in Maryland and New Jersey remain pretty constant. Although both states have a maximum estate tax rate of 16%, the estate tax exemption in Maryland is $1.0 million and in New Jersey it is $675,000. Estates in excess of the applicable estate tax exemption are subject to the tax. Luckily neither state imposes a separate gift tax. As a resident of Maryland, the only gift tax that applies is the one imposed by the Internal Revenue Service on gifts in excess of the annual exclusion limit which is currently $13,000.

One big distinction is that New Jersey recognizes civil unions and permits the surviving partner in a civil union to be treated in the same manner as a surviving spouse for purposes of the marital deduction. Maryland does not recognize civil unions or domestic partnerships for the purposes of estate taxes.

Inheritance tax can also be imposed by the state and/or county government on most inherited assets. The advantage in Maryland is that the inheritance tax rate is 10% and applies to most assets inherited by a non-lineal descendant or non-charitable beneficiary. New Jersey’s inheritance tax range from 11% to 16% and certain exemption also apply.

Again, the biggest distinction is that New Jersey recognizes civil unions and exempts the surviving partner from inheritance tax. In Maryland, the surviving domestic partner is not exempt from inheritance tax except on the receipt of an interest in a joint primary residence if the primary residence was held in joint tenancy by the decedent and the domestic partner and the primary residence passes to or for the use of the domestic partner, but the individuals must meet Maryland’s requirements for domestic partnership. All other assets transferred to a domestic partner will be subject to the 10% inheritance tax.

- Content McLaughlin

If you build it, will they come?

Some BRAC-inspired office space isn't filling up with government contractors as quickly as initially hoped.

- Brad Aaron

Record Federal Dollars Flow into Maryland

BRAC-related construction fueled a record 35% increase in the flow of federal dollars into Maryland last fiscal year.

- Brad Aaron

Maryland and Cuts in Pentagon Spending

Although the Pentagon has announced plans to reduce spending, Maryland likely will be spared the brunt of those cuts due, in large part, to BRAC.

- Brad Aaron

BRAC in Maryland and Virginia

Maryland gets almost $10 million for BRAC-related traffic improvements while Virginia lawmakers look to the BRAC Act in their efforts to slow or stop the closing of JFCOM.

- Brad Aaron

GAO Looks at DoD's BRAC Efforts

The GAO recently sent a letter to Congress detailing the results of an audit of DoD's efforts to meet BRAC deadlines. The letter notes in particular the "cascading effects" of delays in construction at Ft. Lee, Virginia on APG.

- Brad Aaron

A Challenge to Maryland's Minority Contracting Laws

Maryland is currently undergoing a significant challenge to the constitutionality of its Disadvantaged Business Enterprise (DBE) contracting laws, which may very well impact the future of Maryland MBE/WBE set aside contracts, particularly those awarded under and in connection with BRAC. The case, Kline v. Porcari, case number 1:08-cv-03197-RDB, is currently pending in the US District Court for the District of Maryland, Baltimore Division.

In the case, Kline was bidding as a prime contractor on a $10 million Maryland Department of Transportation (MDOT) construction project. The solicitation initially contained a 10% goal for DBE participation, but the goal was increased to 30%. Kline used good faith efforts to meet the goal, but selected bids from subcontractors offering the lowest prices to the State, rather than merely basing his choice on DBE qualifications. As a result, Kline’s price was lower by over a million dollars, but Kline was able to achieve only 10.8% DBE participation. After bid opening, but before award, Kline was asked to submit a DBE waiver request – which he did. After nine months, the State denied the waiver request. After some additional administrative proceedings, Kline filed an action in federal court challenging the constitutionality of Maryland’s DBE laws as written and as applied.

The Kline case is worth watching because it will undoubtedly have an impact on future MDOT projects to build the additional transportation infrastructure necessary to support BRAC in Maryland, and whether local minority and woman-owned contractors will benefit from MDOT contracts set aside to increase minority and female participation in Maryland BRAC contracting opportunities.

Maryland is not the only regional jurisdiction facing a challenging to state minority/female contracting statutes, however. The Fourth Circuit Court of Appeals just yesterday issued a ruling partially overturning North Carolina’s H.B. Rowe Co., Inc. v. Tippett, 4th Circuit No. 09-1050 (July 22, 2010).

North Carolina, like Maryland and many other states, has enacted non-mandatory regulations to promote minority and women representation in state construction projects. Specifically, North Carolina encourages state-funded road construction projects to meet Minority Business Enterprise and Woman Business Enterprise (MWBE) program goals of 10% minority-owned and 5% woman-owned subcontractor participation (or, in the absence of MWBE goal attainment, at least demonstrable evidence of good faith efforts towards achieving those goals). In 2002, the appellant, H.B. Rowe Co., Inc. (Rowe), submitted the low bid on a State road construction project. The State rejected Rowe’s bid because it failed to at least demonstrate good faith efforts to achieve the MWBE subcontracting goals. Rowe challenged the State MWBE contracting requirements under the 14th Amendment Equal Protection clause of the U.S. Constitution, among other grounds.

The District Court ruled for the State on all points. On appeal, the Fourth Circuit affirmed, under strict scrutiny standards, the statutory provisions for African American and Native American subcontractors. However, the Court partially reversed the District Court ruling, finding that the State has failed to justify its application of the statutory scheme to women, Asian American, and Hispanic American subcontractors. Rowe won and now the constitutionality of the North Carolina MWBE program, at least with respect to female, Asian American and Hispanic American small business owners, is in doubt. One of the many interesting aspects of this case is that the court refused to accept the presumption, without strict evidence to support it, that woman-owned construction firms face discrimination in the construction industry, of all places.

Cases challenging contracting programs for minority-owned and other small disadvantaged businesses are not limited to the state minority contracting regulations, either. In late 2008, the Department of Defense (DoD) lost its Small Disadvantaged Business (SDB) program, after a disappointed bidder launched a successful constitutional challenge to the program. In Rothe Development Corporation v. Department of Defense, 545 F.3d 1023 (Fed. Cir. 2008), the U.S. Court of Appeals for the Federal Circuit ruled that the DoD SDB program was unconstitutional because Congress failed to adequately justify the program when enacting the legislation authorizing it. To briefly summarize, the DoD has a policy goal to award 5% of its total contracting dollars to small businesses owned and operated by socially and economically disadvantaged individuals. The DoD SDB program permitted DoD to apply a pricing preference to the bids or offers of minority-owned businesses, and other small businesses whose owners that could demonstrate historical social and economic disadvantage. The appellant, Rothe Development Corporation challenged the constitutionality of the SDB program after losing a contract to a Korean-American-owned business, which received the benefit of the 10% price evaluation preference under the SDB program. The Federal Circuit found that DoD’s SDB program was unconstitutional because, when it re-enacted the SDB program in 2006, Congress lacked a “strong basis in evidence” for concluding that race-conscious contracting was necessary to remedy discrimination in the defense industry. The DoD SDB program is still suspended, and will remain so until Congress decides to collect sufficient evidence of historical discrimination the defense contracting industry and re-enact the SDB program.

Do these cases signal the end of federal and state minority contracting programs?

- Heather James

WaPo's Look at the U.S. Intelligence Community

Check out Part 1 of this Washington Post story.

Federal Funding for Ft. Meade and APG Passes a Critical Hurdle

A House subcommittee has approved significant funding for Ft. Meade and APG.

- Brad Aaron

Pax River and the Enhanced Use Lease (EUL) Process

Last month over 100 people, including representatives from the Naval Air Station Patuxent River Naval Facilities Engineering Command, the St. Mary’s County community, and local, regional and national developers, assembled to learn about the Enhanced Use Lease (EUL) being pursued by the Navy for the Naval Air Station Patuxent River. This event -- known as an Industry Forum -- is only one of series of critical steps in the EUL process by which underutilized military land and/or facilities are improved cooperatively with a non-federal entity to develop a project meeting the requirements of the military, its contractors, and the local community. This article will outline the steps in the EUL process with the NAS Patuxent River as an example.

The first step in the EUL process is the identification of the military installation as “underutilized”, meaning that all or a portion of the land or the buildings at the base are not functioning at the highest level. This is in contrast to “excess” property which is not required by the military and may be targeted for disposal. Following identification of a base as containing underutilized property, an analysis is conducted to determine how to obtain the best use and highest value from the facility. In the case of NAS Patuxent River, the study found that EUL would allow for a modern work campus to meet the future expected growth of its work force which is currently housed in substandard space.

After issuance of the preliminary RFQ (Request for Qualifications) describing the required level of experience of the private developer and the general goals of the EUL project, an Industry Forum is scheduled to gauge the extent of interest by private developers. The Industry Forum involves a tour of the site under consideration for the EUL which in the case of NAS Patuxent River includes more than 45 acres on seven parcels throughout the 6,000 acre base. EUL projects may encounter opposition by the local community if the proposed facilities could compete with existing office space in the surrounding community that may be experiencing high vacancy rates. This has become an issue at NAS Patuxent River where local investors, who constructed office space the past 15 years in response to BRAC, could suffer financially as a result of competition from the availability of new office space on-base. Should the local investors decide to mount a challenge to the EUL, they will likely be unsuccessful. Courts have held that, because the EUL statute (10 U.S.C. 2667) grants authority to the military to lease property to private developers, any action taken pursuant to the EUL statute is entirely committed to military discretion. Judicial review of a EUL project based on a challenge to the judgment of the military is, therefore, precluded; although challenges premised upon a violation of the EUL statute or other regulatory law would be subject to review.

Following the Industry Forum, a deadline is set for the submission of developer proposals followed by evaluation and selection. For NAS Patuxent River the deadline for developer proposals is August 30, 2010, and it is anticipated that a selection could occur by year-end. Negotiation of a business and leasing plan with the developer selected ensues concluding with the execution of a lease agreement. Throughout the process, the EUL project undergoes strict review for environmental impact and compliance with the National Environmental Policy Act as well as review by the Office of Management and Budget for budgetary implications. A strict timeline for any EUL project is difficult to ascertain given the unknown factors of the time needed to negotiate with the private developer, assess environmental impact, and provide opportunities for the public to weigh in.

-- Tami Daniel

Update on Fort Meade Plans for BRAC-Related Traffic

Plans are firming up regarding widening of Route 175, and Maryland commits funds to a guaranteed ride home program.

- Brad Aaron

Developing Your Technology and Business through a CRADA

The BRAC-mandated expansion of the missions of Fort Meade and Aberdeen Proving Ground presents technology companies numerous opportunities to expand their own businesses. And Cooperative Research and Development Agreements - CRADAs – can be a valuable tool in exploiting those prospects.

In its simplest form, a CRADA is a technology transfer tool made possible by the Federal Technology Transfer Act of 1986 (“FTTA”). Technically, it is a contractual relationship between private industry, a state or local government or a university (each, a “partnering party”), and a federal research laboratory for the joint development of a specific deliverable or general research.

Under the terms of a CRADA, a lab is permitted to provide personnel, services, facilities, equipment and intellectual property, but no funds. The partnering party (e.g., a technology company) brings the same resources as well as the funding.

Any federal research laboratory (a facility where research, development or engineering is performed by federal government employees) may enter into a CRADA if the work is consistent with the mission of the agency running the lab. APG hosts two such labs: Aberdeen Test Center and Army Research Laboratory - Aberdeen Proving Ground Site. A comprehensive list of these laboratories and their missions is maintained at www.federallabs.org.

Initiating a CRADA

Potential partnering parties can initiate a CRADA to incorporate federally-owned technology into a new or existing commercial product. As mandated by the FTTA, small businesses and businesses located in the U.S. that agree to manufacture any products resulting from the CRADA in the U.S. are given special consideration by federal labs. Additionally, a lab may seek out CRADA partners to commercialize its technology or gain access to the technical or financial resources of a partnering party.

All CRADAs share certain features. Each CRADA identifies the resources each party must provide and how any intellectual property will be owned and/or licensed (discussed below). It also sets forth the key legal terms, such as the length of term (which can vary from a month to several years), dispute resolution, warranty, and indemnification. The lab will typically disclaim all warranties related to performance of any research, and require the partnering party to indemnify the lab for damages resulting from the partnering party’s commercialization of any resultant inventions. CRADAs are not subject to the Federal Acquisition Regulation.

Protecting Your Intellectual Property

Because a CRADA is a technology transfer, the most important provisions in a CRADA relate to intellectual property.

A partnering party may license a lab-owned invention created before the CRADA if the invention is within the scope of the CRADA for reasonable compensation when appropriate. A lab may also license or assign any inventions created by the lab while performing work under the CRADA to the partnering party. In exchange for an assignment of ownership, the lab will retain a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license to the invention.

If the lab assigns invention ownership rights or grants an exclusive license to the partnering party, the lab is entitled to certain rarely exercised “march in” rights that permit the lab to grant a license to use the invention to a third party in limited circumstances. These circumstances include a determination by the federal government that such a license is necessary to meet health or safety needs or public use requirements according to applicable federal regulations. Another circumstance is the failure of the partnering party, under the CRADA, to comply with the requirement that it manufacture the products embodying the invention in the United States.

If the partnering party makes an invention under the CRADA, the partnering party owns the invention, and the lab will receive a worldwide, non-exclusive, non-transferable, irrevocable, paid-up license for governmental purposes only.

Trade secrets and confidential information disclosed by the partnering party under the CRADA are protected from disclosure by the lab. Additionally, any information developed in the course of the CRADA is considered a trade secret, and confidential information may be protected from disclosure for up to five years after development.

Summary

CRADAs, like all tech transfer agreements, are complicated arrangements. While the assistance of counsel is strongly recommended, following are five key points for a contractor to keep in mind when negotiating a CRADA:
1. Do the necessary due diligence. Before negotiating a CRADA, a contractor needs to be sure the government has the technology that the contractor thinks it does. Understanding the technology upfront can save a contractor from disappointment with a CRADA that may have been months in the formation.
2. Identify each party’s intellectual property upfront in the CRADA. This will help ensure there is no confusion at a later date as to which party owns what intellectual property.
3. Understand the licensing scenario being created through the CRADA. If a contractor’s intellectual property will be shared by the government with the contractor’s competitors at a later date, the contractor needs to consider the impact this may have on its business.
4. Know when to step away from CRADA negotiations. Because entering into a poorly drafted CRADA can adversely impact a contractor’s business, a contractor should be prepared to walk if the deal is not meeting the contractor’s needs.
5. Consider whether the long term goals of commercialization and/or research are reflected in the agreed-upon CRADA.

- Brad Aaron

Award of Virginia BRAC-Related Contract

The DoD just awarded General Dynamics Information Technology a three year, $146.2 million contract to provide IT services in support of the BRAC-related influx of DoD workers at the Washington Headquarters Services located in Alexandria, Virginia - the same site that has been the subject of some recently proposed legislation.

- Brad Aaron

Potential BRAC Slowdown in Virginia

The U.S. House of Representatives recently approved a provision restricting the expansion of BRAC into Northern Virginia pending development of a plan by the Pentagon to insure that any shift of BRAC-related employees will not increase the traffic congestion on and around Interstate 395 in Alexandria. This provision, part of the annual defense authorization bill, is not included in the Senate’s version of the same bill and, consequently, will be addressed during reconciliation of the two bills. The Senate bill is scheduled for a vote this month.

- Brad Aaron

Growing Scrutiny of Independent Contractor Classification

In order to effectively leverage the potential contracting opportunities of BRAC, businesses need to be able to draw upon a skilled workforce at a moment’s notice. Of course, given the vagaries of the government contracting process, oftentimes it is not financially practical for a business to maintain a full time complement of employees. Rather, many businesses engage independent contractors, which give a business the flexibility of quickly ramping up to meet the needs of its customers without costly overhead.

Unfortunately for the unwary contractor, federal and state agencies have begun to crack down on the use of independent contractors. Specifically, government authorities, concerned about the potential misclassification of employees as independent contractors, are stepping up investigation efforts and imposing stiff penalties. And small businesses in particular will be a major target for the IRS effort, reports BusinessWeek, because these organizations typically do not have the attorneys and tax consultants employed by large businesses to maneuver through the complex rules governing classification or the financial wherewithal to defend the business through a lengthy investigation. Additionally, government contractors of all sizes appear to be under stricter scrutiny as well. For example, a Connecticut labor union may have prodded Connecticut state officials to investigate possible misclassification by a Skanska unit on a UConn construction project. Doubtless, the government contractor’s substantial payroll and subcontracting reporting requirements present ample fodder for these independent contractor misclassification investigations.

And with the recent introduction of H.R. 5107 in the U.S. House of Representatives amending the Fair Labor Standards Act to impose additional recordkeeping requirements on businesses that utilize independent contractors on both public contracts and for private work, more scrutiny and greater fines may be on the way. Potential new requirements include the maintenance of records of the hours of independent contractors and the amounts paid to the independent contractor. Additionally, civil penalties could be increased to $5,000 per misclassified worker.

These increased enforcement efforts and the potential tightening of related regulations are aimed at what is believed to be a significant, costly problem for workers and for federal and state governments. Some businesses purposely misclassify employees as independent contractors to avoid payroll taxes and workers compensation and unemployment insurance premiums. Many other businesses misclassify out of a failure to understand the law. Either way, the practice is believed to cost federal and state governments millions in tax dollars.

In order to avoid liability for misclassification, employers must understand the requirements and restrictions and take the necessary steps to ensure that those requirements and restrictions are properly implemented before classifying any personnel as an independent contractor.

Dennis Robinson, an attorney in WTP’s Baltimore office, has been tracking this issue. He recently wrote two articles that offer some practical tips for employers who wish to ensure proper classification of their employees and independent contractors. One, for the Winter 2010 issue of the Whiteford, Taylor & Preston Construction Newsletter, addresses the Maryland Workplace Fraud Act of 2009, which imposes civil penalties of up to $20,000 per employee for knowing misclassification of workers in the construction and landscaping industries. The other, for the April 2010 issue of the Perry Hall/White Marsh Business Association Newsletter, analyzes the increased federal effort to investigate and penalize misclassification.

- Dennis Robinson and Will Pearce

U.S. Cyber Command Update

And if you thought BRAC was going to impact Ft. Meade . . .

- Brad Aaron

APG Fraud Hotline and False Claims Acts

The FBI announced last month the establishment of a hotline for the reporting of fraud in connection with the awarding of approximately $2 billion in BRAC–related construction contracts at Aberdeen Proving Ground, exposing the unwary or unscrupulous contractor to a variety of sanctions.

The most typical form of fraud associated with these contracts is submission by a contractor of a false claim for payment from the Government, which is prohibited under both the Civil and Criminal False Claims Act (“FCA”) statutes. Under the Civil FCA, lawsuits may be brought against contractors by either the U.S. Department of Justice or by a whistleblower, usually a competitor or a disgruntled employee of the contractor being sued, who stands to recover up to 30% of any money recovered from a contractor under the Civil FCA.

The Civil FCA broadly defines “claim” to include “any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” While the most obvious examples of a “false or fraudulent claim” include a contractor’s presentment of an invoice to the Government for work it never performed, or for supplies never delivered, in recent years, the U.S. Department of Justice and some federal courts have significantly broadened the definition of what constitutes a false claim for purposes of Civil FCA liability to include a number of situations far more subtle than flagrant mischarging and fraudulent invoicing. For example, the Government may elect to impose civil penalties against a contractor if the work for which the contractor seeks payment does not conform to the contract specifications. In addition, some courts have interpreted the Civil FCA to also prohibit a contractor from making false statements or records in order to avoid an existing obligation to the Government. Liability can also arise under the Civil FCA if a contractor fails to comply with the various laws and regulations incorporated into most federal contracts – including wage and hour laws, equal employment opportunity laws, OSHA regulations, environmental laws, and the like. In theory, if a contractor is required to comply with such laws and regulations in the performance of its contract, and the Government’s payment under the contract is contingent upon a contractor’s compliance with these laws and regulations, a contractor that violates any such regulation but still gets paid may be liable under the Civil FCA for submitting a false claim. Moreover, since Government contractors must certify compliance with these and other federal laws and regulations to first, obtain a Government contract and second, remain eligible to perform it, any false certification of compliance with applicable laws and regulations may also constitute a violation of the Civil FCA. Thus, for example, if a contractor falsely certifies that it pays applicable prevailing wages in accordance with the federal Davis-Bacon Act, when in fact it does not, such a false certification could form the basis for a Civil FCA violation against that contractor.

Civil penalties for FCA violations can be stiff. Under the Civil FCA, the Government can recover an amount equal to three times the actual damages sustained, plus penalties of between $5,000 and $11,000 per violation. Such penalties can multiply rapidly since each false claim, invoice, or material misstatement is counted as a separate violation. Significantly, a contractor does not escape liability under the Civil FCA even if the Government ultimately does not pay on the claim, which means that a contractor may be liable for civil monetary penalties under the Civil FCA even if the Government has suffered no damage.

Note that with the passage last year of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), the scope of potential FCA liability now includes not just fraud against the Government but also fraud against Government contractors (e.g., a subcontractor submitting a false claim for payment to a prime contractor). Further, FERA has lowered the threshold for a FCA claim. Formerly, a contractor had to make a false claim or submit a false invoice with the intent to fraudulently obtain money from the Government; under FERA, a contractor need only knowingly make a false statement or submit a false claim, without the intent to fraudulently obtain monies from the Government.

- Brad Aaron

Intellectual Property Rights in Government Contracts

One of the many business concerns for a newly formed company or even for an existing company moving to the Maryland/Virginia area due to BRAC is the protection of intellectual property. Intellectual property is often a hidden or under exploited asset. Since 1980, entities doing business with the U.S. government can elect to retain title to the intellectual property that may be created during the performance of a contract with the government. While the government must typically be granted a license to use the intellectual property, the fact that the private entity can retain actual ownership is a powerful incentive to develop and exploit innovations.
In general, trademarks protect consumer expectations while patents, copyrights, and trade secrets protect inventors, authors, and entrepreneurs.

With regard to trademarks, typically, the government does not want to own the trademark, nor does it control the use of a trademark. A trademark is used to identify to the consumer the source of goods or services. In a government contract, appropriate use of a mark prevents faulty goods from being attributed to a legitimate contractor and avoids harm to the government recipient as well as to the reputation of the contractor.

With regard to patents, there are particular, mandatory requirements in the acquisition regulations to secure rights and title in new technology. As many companies struggle to identify, manage, and protect their intellectual property in a variety of technologies, it is important for the contractor to work with the Contracting Officer and their own artisans to identify and protect their intellectual property developed during the performance of the contract, and to ensure the rights and obligations under the contract are secured. If a contractor determines that a new invention is created during the contract, the contractor must disclose the invention within two months after the inventor disclosed the invention internally, and then the contractor must elect whether or not to retain title to the invention. If the contractor elects to retain title, they must file a patent application within one year of the election. Additionally, the contractor must file interim reports periodically during the performance of the contract. The specification of any U.S. patent application under the contract and the resulting patent must include a statement that the government has certain rights in the invention. The contractor must institute internal program to ensure employee compliance with the acquisition rules at the risk of loss of title to the invention.

- Jeffrey Maynard

The Role of SCIFs in BRAC Space Construction: Issues for Building Owners

One of the major challenges facing building owners and developers in response to BRAC is addressing the defense and intelligence agencies’ and contractors’ need for a room, group of rooms, or an entire building for the purpose of discussing, handling, processing and/or storing Sensitive Compartmented Information or SCI. SCI is classified information which is required to be handled within formal access control systems established by the Director of Central Intelligence. The facility created for SCI is called a SCIF, short for SCI Facility. The physical elements of a SCIF are designed in line with the directive of the Director of Central Intelligence to “prevent and detect visual, acoustical, technical, and physical access by unauthorized persons” to ensure that activities and conversation taking place therein are private. The construction requirements vary based on the purpose of the particular SCIF but generally involve attachment of metal shields in the perimeter walls, floors and ceilings of the space, which are constructed with reinforced concrete or steel-linings, so there is no unauthorized access; sound insulation to preclude inadvertent disclosure of conversations; single primary access door installed with automatic door closures; alarm features with short response force capabilities; protected grills or bars over all vents and ducts; and windows covered with opaque drapes so there is no visual evidence of activities taking place in the SCIF and no forced entry from outside thereof. The SCIF must be accredited by the Director of Central Intelligence through a formal certification process. Governmental agencies can share a SCIF using a co-utilization agreement. The construction standards for SCIFs vary depending on whether or not the SCIF is located in the United States and whether SCI is actually being stored in it. Efforts are being made to prepare for the significant demand for SCIFs in buildings being constructed to support the infusion of defense and intelligence agencies and their contractors relocating to the area as a result of BRAC. Community colleges, including Frederick, Harford and Anne Arundel, have begun offering training to persons in the various building trades in SCIF construction. There are numerous building contractors specializing in SCIF construction with some also offering assistance in obtaining accreditation.

Constructing SCIF space in buildings impacts many facets of the lease between the building owner and the government agency/contractor tenant, many of which place additional burdens on the landlord. In addition to the obvious increased upfront construction costs, the tenant of SCIF space will be required to impose limitations on landlord’s standard right of access to inspect and clean the premises, likely requiring that access be available only upon advance notice, at prescribed times, and only when accompanied by tenant representatives. Of even greater concern is how and who handles removal of the SCIF improvements and restoration of the space at the expiration of the term. Building owners should be aware that the presence of SCIF improvements may have an adverse impact on the ability of the landlord to lease in the future to tenants not needing SCIF space. It is, therefore, critical to negotiate for the tenant to remove the SCIF improvements or, in the alternative, include the costs of removal in the rent stream.

These are just a sample of the lease provisions impacted by SCIF space leases. As the demand for SCIF space increases in response to BRAC, building owners and government agency/contractor tenants will likely discover the need to negotiate other lease provisions to address the unique features involved in leases constructed with SCIF space.

- Tami P. Daniel

Bid Protests in the BRAC Era

NCI, Inc., an IT services firm out of Reston, Virginia, recently received an $83.7 million BRAC task order award to support the Defense Information Systems Agency (DISA)’s relocation to Fort Meade, Maryland, a move that by law must be completed before September 15, 2011. The task order NCI won involves critical support of the relocation move of DISA’s Command, Control, Communications, Computers, and Intelligence/Information Technology (or, in government contracting circles, C4I/IT) activities from Arlington, Virginia to Fort Meade. For those of you who are less familiar with DISA, it is a Combat Support Agency whose primary objective is to translate cutting edge information technology into U.S. competitive military advantage.

Needless to say, time is of the essence in BRAC relocation contracts generally and in particular, contracts involving the speedy and seamless relocation of military support programs such as DISA’s C4I/IT. Under its new task order, NCI was to start work immediately upon receipt of the task order award to meet BRAC timeline mandates.

And then one of NCI’s competitors filed a bid protest with the Government Accountability Office (GAO). Everything came to a halt.

A GAO bid protest is essentially an administrative lawsuit that challenges the legality of either (1) a solicitation prior to award of a contract, or (2) the contract award itself. If the protestor files its bid protest within certain time periods set forth in GAO’s bid protest regulations, a bid protest of either type stops the procurement process in its tracks, because the rules require an automatic stay of contract performance pending resolution of the protest (usually a 100 day process at GAO). Section § 3553 of Competition In Contracting Act (CICA) provides that “if the Federal agency awarding the contract receives notice of a protest in accordance with this section . . . the contracting officer shall immediately direct the contractor to cease performance under the contract. . . . .” 31 U.S.C. § 3553(d)(3)(A)(ii). The same automatic stay applies if the contract has yet to be awarded. In that case, the agency may not award a contract until the protest is resolved.

A contracting agency may be able to override the automatic stay during a GAO bid protest only if it makes a “written finding that . . . performance of the contract is in the best interests of the United States; or . . . urgent and compelling circumstances that significantly affect interests of the United States will not permit waiting for a decision of the Comptroller General concerning the protest.” Id. § 3553(3)(C)(i)(I) & (II). If the agency cannot demonstrate that an override of the automatic stay is warranted, everyone must wait until GAO renders a decision.

In the case of the bid protest against NCI’s task order award, the impact of an automatic stay on NCI’s deadline to relocate DISA’s C4I/IT operations became a moot point since the protester (who remains unidentified) withdrew its protest on April 7, 2010. That means NCI will be able to start contract performance immediately, albeit after a nearly seven week delay.

- Heather James

Sustainability Efforts at Aberdeen Proving Grounds

Last month, Whiteford, Taylor & Preston joined the Maryland Green Registry, a list of organizations that have green initiatives with some quantifiable results maintained by the Maryland Department of the Environment. While we’re proud of this accomplishment, we were not the most interesting new registrant for March 2010.

That honor lies with the U.S. Army Garrison, Aberdeen Proving Ground. Check out its registry profile here. There is some significant recycling being undertaken by Aberdeen Proving Ground – 67 tons of tires, 32 tons of antifreeze, an eighth of a ton of mercury. It makes the recycling paper bin next to the copier seem quite pedestrian, of course, and we’re much better off with these materials being recycled than sent to the landfill.

Most of the profile underlines the federal government’s increasing emphasis on sustainability goals up and down the supply chain. Its five LEED Silver-compliant buildings are just a small portion of the what the Army expects to have completed in the near future – indeed, all new Army building construction will comply with the requirements of the LEED Silver level for New Construction. Its energy reduction goals are in line with those mandated by President Obama in Executive Order 13514. That’s why those who do business with APG are making sure their products and services will be in line with the Army’s sustainability goals. The Army’s Sustainability website can be found here.

-- Will Pearce, LEED AP BD+C

WTP Green Building and Sustainability Newsletter

Whiteford, Taylor & Preston’s Green Building and Sustainability Industry Group publishes a biweekly e-newsletter covering sustainability issues that impact a wide array of industries, including Real Estate, Construction, Government Contracts, Manufacturing, and Intellectual Property. The latest edition can be found here. It features articles by Tom Kimmitt on the new Virginia Green tourism initiative and Lisa Sparks on a just-released green certification system for the design and construction of highways and roads.

Security Clearances - Who Will Need Them and How to Get One

Most of the jobs coming to Maryland and surrounding areas as a result of BRAC will require a security clearance. Some vacancies will be created by federal employees leaving their jobs because they do not wish to relocate. Some job openings will be the result of contracting activities moving into the area and requiring additional contractor support. Still other job openings will come from new government programs concurrently arriving in the area such as the anticipated U.S. Cyber Command, which will assume responsibility for the defense of the military’s portion of cyberspace. The vast majority of these positions will require a clearance at the SECRET or higher level.

In general, people who work for any organization or government office that handles information designated as "classified" by the federal government will probably need a clearance. This includes military personnel, people working for defense contractors, and federal workers who handle "sensitive" information in medicine, telecommunications, education, and finance. Even people who do not handle "sensitive information" but who work in a secured facility where other people do, will probably need a security clearance. In addition, companies or non-profits that have federal contracts or grants, including think-tanks, research organizations, defense manufacturers, and software development companies may also require employees to hold security clearances.

A security clearance is the process of determining an applicant's trustworthiness and reliability before granting him or her access to national security information. Essentially, it is a license issued by a federal government agency and authorizes a worker to handle "classified" information--that is, information deemed "CONFIDENTIAL," "SECRET" or "TOP SECRET" by the U.S. government. Such "classified" information could damage national security if it were to fall into the wrong hands. Basically, anyone who requires access to classified information to perform his or her duties must have a clearance at least to the level of access. That is, if the job requires access to CONFIDENTIAL information, then the person requires a CONFIDENTIAL security clearance; if the job requires access to TOP SECRET information, then the person requires a TOP SECRET security clearance. Having a certain level of security clearance does not mean that one is authorized to view classified information. To have access to classified information, one must possess two necessary elements: a level of security clearance at least equal to the classification of the information AND an appropriate “need to know” the information in order to perform their duties. Just because someone has a SECRET clearance, would not give him or her access to all SECRET information. They would need to have a specific reason to know that information, before they could be granted access. Any person who is employed by an organization that is sending, receiving, or developing information that the government has deemed as important to National security will need to obtain a security clearance. Many people erroneously think that they can go to a company or agency and apply for their own security clearance. Not so. Only the federal government can grant someone a security clearance, and to get one the applicant must work for a government agency or contractor and conduct business that justifies granting him or her access to highly sensitive information. No company without a contract with the federal government can independently give or seek a security clearance, and no individual who is not working for the federal government or a contract organization can get a security clearance.

Getting a personnel security clearance is a long process and depends on the type of clearance a person needs to obtain. There are three main phases to receiving a security clearance:
The first phase is the application process. This involves verification of U.S. citizenship, fingerprinting, and completion of the Personnel Security Questionnaire (SF-86) and other supporting documents. Some of the information required on the application may include phone numbers and resident addresses of friends and family members who may serve as personal references, a list of travel outside of the U.S. within the last ten years, and a complete list of credit cards and loans. The applicant’s signature on the SF-86 documents will allow the agency to check their medical history, credit/financial history, military background, police record, and other areas of life.

The second phase involves the actual investigation of the applicant’s background. Most of the background check is conducted by the Defense Security Service (DSS). This may include interviews with co-workers, family, friends, associates, and others, a review of medical, credit, financial and other history, a background check to determine the use of illegal drugs, criminal record, and contact with foreign nationals and a check on many other areas of the applicant’s life. For some high level clearances, a polygraph test may be required.

The final phase is the adjudication phase. The results from the investigative phase are reviewed. The information that has been gathered is evaluated based on factors determined by the Department of Defense (DoD). Some examples of areas that may be considered are: allegiance to the United States, criminal and personal conduct, and substance abuse or mental disorders. Clearance is granted or denied following this evaluation process.

Once the applicant has turned in the documentation, the designated agency will begin the security clearance/investigation/adjudication proceedings, depending on backlog and priority. The amount of time it takes to receive a security clearance depends largely on backlog, need for more information, depth of the investigation/adjudication process and other factors. If the applicant has lived or worked in several geographic locations or overseas, or has relatives who have lived outside of the United States, the investigation may take longer. Additionally, the more international travel the applicant has had within the last ten years, the more complicated the security clearance process will be. In general, it can take the government from six months to one year to conduct the complete investigation of a lower-level clearance status. The highest-level clearances can take up to two years. Once a clearance has been granted, it generally has to be updated at least every five years.

- Jeff Maynard

Proposed Senate Bill S.2989 Would Require Agencies to Reconsider Bundled Requirements and Remove Obstacles to Small Business Contracting Opportunities

Many small business contractors in the area looking to break into government contracting, particularly with the opportunities presented by BRAC, experience a series of difficult obstacles to entering the government market. It is often a real challenge for small businesses to secure their first contract, or their next contract, and although BRAC brings new business opportunities to local contractors, too often the opportunities exclusively benefit larger businesses.

On March 4, 2010, the U.S. Senate Small Business and Entrepreneurship Committee unanimously passed the Small Business Contracting Revitalization Act (S. 2989) (the “Act”), and the bill is now headed for a full Senate vote. Click the link below to read the bill in its entirety:

http://thomas.loc.gov/cgi-bin/query/z?c111:S.2989.IS:

The Act aims to address four key hurdles that prevent small businesses from fairly competing for BRAC-related and other contracting opportunities: contract bundling, subcontracting, acquisition, and small business size and status integrity.

One reason small businesses are unable to pursue many contracting opportunities is the prevalence of bundling in government contracting, which unquestionably favors large businesses in the procurement process. “Contract bundling” refers to the practice of consolidating two or more contract requirements that were previously separate, smaller contracts into a single, larger contract. Government agencies tend to favor bundling requirements into larger, more comprehensive contracts because they save money and resources. At the same time, however, small businesses are often unable to compete for bundled contracts because they are too large, with diverse performance requirements that many small businesses simply do not have the capacity to cover. The Act will minimize contracting agencies’ use of contract bundling and will require agencies to consider small businesses when placing orders on large contracts. The Act also contains a provision requiring acquisition officials to review contracts worth more than $2 million to determine if they could be broken into smaller pieces so that small businesses would have a chance to compete for the work. Contracting officers must certify that bundled contracts in excess of $2 million are not suitable for small business participation, although the certification requirement does not apply to Department of Defense contracts.

The foregoing requirements would have the greatest potential impact on multiple award contracts, GSA Schedule contracts among them, since agencies would now be required to set aside orders on multiple award contracts, and would also be required to set aside at least one contract for small businesses.
Subcontracting practices are another target. The Act increases oversight of large business prime contractors to ensure they are actually using the small businesses that they proposed in their RFP responses and that they are actually meeting their small business subcontracting requirements. This provision is intended to assist small businesses that spend time and money preparing bid proposals with a large prime contractor and then never receive any part of the work once the contract is won. Once a small business is awarded a subcontract by a prime, the Act imposes strict oversight requirements to ensure that subcontractors receive payment within 90 days after the subcontractor completes work.
The Act also closes other loopholes that favor large businesses – for example, the current small business recertification requirements. Right now, small businesses are only required to recertify their size under certain circumstances, namely, after an acquisition or merger, at the end of the fifth year in a long term contract, or when options are exercised thereafter, or at the contracting officer’s request. The lax nature of small business recertification can allow businesses that are no longer small to qualify for small business set aside contracts. The Act closes this loophole. Under the Act, contractors will be required to annually recertify their size status. In addition, the Act establishes a presumption of loss to the government if a large business performs a contract set aside for the benefit of small business.

The Act also requires a GAO study to determine whether the current SBA mentor-protégé program is effectively supporting the goal of increasing participation of small businesses in government contracting and not, as many complain, simply serving the interests of large businesses which can pursue small business set aside contracts if they do so as a mentor-protégé team.

Finally, the Act relaxes regulations concerning joint ventures and teaming arrangements to encourage small businesses to partner together so that they can land larger contracts. SBA will set up a new

The Act, which has strong bipartisan support, will become part of the next jobs bill the Senate brings to the floor this spring and is expected to pass as part of that legislation.

- Heather James

Update on the Government and Technology Enterprise Park (GATE) Project Near Aberdeen Proving Ground

While much of Maryland continues to be mired in a commercial real estate slow down of epic proportions, BRAC is helping to initiate a much needed boost to Maryland’s economy. Evidence of this can be found at the St. John’s Properties project in Aberdeen where construction is currently underway on two separate commercial office buildings leased by L-3 Communications and Raytheon Company which will occupy a total of 75,000 square feet of space each at “The Government and Technology Enterprise” (GATE) project, a 416 acre parcel, 2-3 million square foot business community located within Aberdeen Proving Ground in Harford County. The GATE is being developed to meet anti-terrorism and force-protection standards and will house both defense contractors and military and federal agencies. L-3 Communications’ Command and Control Systems and Software unit plans to relocate 400 employees to a 3-story, Class A, LEED silver-certified building. Raytheon Company is expected to employ 300 workers at a separate 75,000 square foot 3-story, Class A, LEED silver-certified building. Both buildings are expected to be finished this summer.

Ever since St. John Properties was assigned the exclusive development rights for GATE in the summer 2009 from Opus East, LLC, there has been significant real estate activity at GATE, including:

In October 2009, the company acquired an existing 60,000 square foot single-story building fully leased to CACI International, Inc., a national security and defense company. CACI is subleasing 45,000 square feet to the U.S. Army Joint Satellite Command.

The main entrance into Aberdeen Proving Ground, known as Maryland Boulevard, was upgraded by $23 million to improve access to the fort.

A new 2.4 million square foot facility for the U.S. Army Command, Control, Computer, Communication, Intelligence, Surveillance and Reconnaissance operations (known as C4ISR) is anticipated to be delivered in 2010 and in 2011 will be the workplace for up to 10,000 workers who are expected to relocate from among other places, Fort Monmouth, New Jersey.


The tangible examples of BRAC’s ability to spur commercial real estate development as evidenced by GATE are encouraging to the 2010 Maryland economic forecast.


Tami Daniel

Funding BRAC Infrastructure Through Tax Increment Financing

Alabama will become the latest BRAC jurisdiction to use tax increment financing (often referred to as “TIF” for short) to support the infrastructure and commercial development related to BRAC issues. Its legislature recently approved the use of such financing to cover the cost of infrastructure improvements for a new office park outside the main gate of the Redstone Arsenal in Huntsville.

The specifics of tax increment financing often vary from jurisdiction to jurisdiction, but the basic concept is the same -- governments and developers seek to leverage the increased tax revenue generated by contemplated development to facilitate lending to build such development. Local or state governments typically issue bonds backed in some manner by the increased tax revenue, and lend the proceeds to developers to fund the improvement or reimburse the developer for expenditures already made. In some cases, these governments contract for themselves for infrastructure improvements underwritten by TIF bonds.

The Anne Arundel County (Md.) Council is in the process of approving the use of tax increment financing for an expansion of the National Business Park, a commercial office park just outside the borders of Fort Meade whose tenants are mainly government contractors and subcontractors in the defense and national security fields. And tax increment financing has underwritten revitalization efforts following the closure of military bases in Denver and in Glenview, Illinois, among others. Because credit has recently been increasingly difficult for developers to obtain, tax increment financing, developers who had not utilized TIF bonds in the past have started actively seeking such financing from local governments.

Maryland’s BRAC Revitalization and Innovation Zones (“BRAC Zones,” for short) contemplate the use of tax increment financing for improvements within such zones, intended to be in areas in which BRAC commercial and residential growth will be channeled. Counties and cities with BRAC Zones get a bonus: the State will pay over to eligible counties or cities with BRAC Zones an amount equal to the increased State property tax resulting from the new development and one-half the increased county or city property tax resulting from the new development. This money can then be used by the county or city to repay TIF Bonds or to fund additional infrastructure improvements relating to BRAC. Notably, the Westport Waterfront project in Baltimore City lies in a BRAC Zone, and its improvements are being financed with tax increment financing.

Because tax increment financing necessarily involves one or more government entities, the money may come with conditions intended to further particular socioeconomic goals of the government, or it may end up being considered a subspecies of government procurement -- even if the improvements are developed by a private developer.

To the construction contractor, the most relevant of these concerns is the potential application of prevailing wage legislation. In the District of Columbia, for example, projects funded by tax increment financing are subject to the wage standards of the Davis-Bacon Act, the federal government’s prevailing wage law. In Pennsylvania, state courts have broadly construed Pennsylvania’s prevailing wage law to include TIF projects built by private developers.

Additionally, tax increment financing projects built by private parties may be subject to subcontracting goals for minority business enterprise and/or women-owned business enterprise participation, as is the case in the District of Columbia and Kansas City, Missouri, among others.

Where the infrastructure improvements are actually being built through the public entity’s procurement regime, of course, whatever prevailing wage requirements and MBE/WBE programs that public entity has in place will govern.

-- Will Pearce, LEED AP BD+C

Public/Private Construction Projects - Part III

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Guest-bloggers Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not? was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, the two of them are guest-blogging here on the BRAC Blog, reviewing the hybrid public/private projects covered in their paper and discussing the relevance of such hybrids to BRAC initiatives.

The remedies available to the unpaid contractor or subcontractor on a hybrid project and the procedures by which those remedies can be enforced unfortunately remain unclear and unsettled. In many situations, it is uncertain whether mechanic’s liens, prompt payment acts, or construction trust laws will apply to hybrid projects. Payment bonds on a federal hybrid project may be governed by the Miller Act, but they might instead be treated as private project bonds, governed by applicable state law, and there is no bright line test for making this determination. Presumably, as hybrids grow more prevalent, court decisions providing clarity will be handed down. Until then, it is imperative that construction contractors proceed with caution and ensure compliance with all potentially applicable notice and claims bar dates.

Mechanic’s Liens

Whether a contractor can get a mechanic’s lien on a hybrid project remains murky and will likely vary from case to case, depending on the specific nature of the project and, where the project is on a federal installation, whether and how the state in which the property lies consented to the purchase of such property by the federal government. The mechanic’s lien is an important asset in the arsenal of a construction contractor who wants to get paid, making the real property underlying the project security for the debt owed to the contractor for his work on the property. The government’s interest in real property is generally not lienable. However, where a contactor performs work on a project lying on land leased from the federal government (as in an Enhanced Use Leasing (“EUL”) project), the contractor conceivably could obtain a lien on the leasehold held by the developer/lessee; most states permit such liens where the work is performed pursuant to a contract with a lessee.

But state mechanic’s lien laws may not apply on federal enclaves. The application of state laws on federal enclaves within a given state is a complex issue. What follows is an oversimplification for present purposes. Article I, Section 8, Clause 17 of the U.S. Constitution provides that federal law exclusively applies on land held by the federal government for military installations “and other needful buildings” where the state legislature has consented to the purchase of such lands. Without the consent of the state legislature, in contrast, all state laws apply, provided such state laws do not intrude upon the federal government’s sovereignty. States are permitted to condition their consent to the federal purchase of land, and they often do, seeking concurrent jurisdiction over the property. The states’ conditions are far from uniform, and the conditions imposed by a state typically change over time (Maryland has enacted at least four different consent statutes over the last century or so, each with differing terms; the consent in effect at the time of the purchase is determinative as to application of state laws on the purchased land), so the applicability of state law on a federal installation is generally dependent upon where and when the federal government acquires the land. The bottom line is that a contractor on a hybrid project on a federal installation cannot be sure it has any mechanic’s lien rights.

The contractor on a project not lying on federally owned land that will be leased to the government may have slightly better lien rights, though it can lien only the reversionary interest held by the fee simple owner; the government’s leasehold cannot be liened. Moreover, where disputes arise, the subcontractor seeking to claim a lien will likely be dragged into the federal claims process under the Contract Disputes Act before it can obtain a final lien.

Contract Disputes Act

The federal Contract Disputes Act (“CDA”) channels federal procurement claims through contracting officers and boards of contract appeals or the Court of Federal Claims, rather than through federal district or state courts of general jursidiction. Its procedures are mandatory and apply to all claims by the contractor – meaning the person with a direct contract with the federal government -- on federal construction and lease contracts entered into by executive agencies. Most states have claims procedures on government contracts that bear some similarity to the CDA. Subcontracts on such governmental projects typically require the subcontractor to assist in preparation by the contractor of any claim to the government where the government is responsible for the basis of the claim, and often mandate that any other dispute resolution not be undertaken until the claim to the government is complete. This effectively drags the subcontractors into governmental dispute resolution scheme.

While the CDA could conceivably apply to the in-kind goods and services provided by a developer of an EUL project, the CDA will not typically apply to the EUL construction project itself, as that project will be undertaken pursuant to private contracts between the developer and contractors. The CDA will apply to those projects where new projects are constructed through governmental lease of real property, whether the contract is characterized as a lease of real property or as a construction contract.

Payment Bonds

Due to the cost and complexity involved, most hybrid projects will require payment and performance bonds of the construction contractor. It is not clear, however, whether such bonds will be treated as public works bonds (under the federal Miller Act or the applicable state Little Miller Act) or as private bonds. This will likely vary, depending on the specific facts involved in a given project. Whether a bond is a public works bond or a private bond determines when and how a claimant must give notice to the surety, the limitations period for a suit on the bond, what sort of damages the claimant may recover, how many tiers of subcontractors are protected by the payment bond, and in which court the suit must be brought.

The cases are not consistent as to whether a hybrid project involving the federal government is governed by the Miller Act. The Miller Act mandates the provision of payment and performance bonds “before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government.” Some cases, including this one decided last year by a Georgia federal court, hold that the United States must be a party to the construction contract to bring bonds issued therewith within the Miller Act. Others focus on whether the end use of the project constitutes a “public work.” There is a line of cases, for example, holding that military housing projects built by contractors under construction contracts with private developers funded by private financing are nonetheless “public works” because they are intended to house American soldiers. The second approach is more likely to result in Miller Act coverage.

Prompt Payment Acts and Construction Trust Fund Statutes

For the reasons discussed in the applicability of mechanic’s liens section, above, prompt payment acts and construction trust laws may or may not apply to a hybrid project. Courts are increasingly comfortable applying state prompt payment act statutes to subcontracts on a traditional federal construction project; such subcontractors have been permitted relief under the Louisiana, California, and Pennsylvania prompt payment acts, for instance. However, state remedial acts vary in scope and state legislatures may not have intended them to apply to projects on federal enclaves. A Maryland federal court, for example, has ruled that Maryland’s General Assembly did not intend that its construction trust law apply to traditional federal projects on federal land.

- Bob Carney and Lisa Sparks

Public/Private Construction Projects - Part II

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Guest-bloggers Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not? was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, the two of them are guest-blogging here on the BRAC Blog, reviewing the hybrid public/private projects covered in their paper and discussing the relevance of such hybrids to BRAC initiatives.

Part II

The hybrid project categories most relevant to BRAC are the Enhanced Use Leasing (“EUL”) program and the use of governmental lease of real property as a vehicle for new construction. EUL projects permit private developers to lease military base property, and are being utilized for commercial office space and hotel and retail projects at major BRAC installations such as Aberdeen Proving Ground and Fort Meade in Maryland, Redstone Arsenal in Alabama, and Fort Bliss in Texas. In the D.C. area especially, governments are also using the lease of real property from private entities as a means of funding and completing new construction projects.

Enhanced Use Leasing

Military agencies can lease property owned by the federal government to private developers under the EUL program. Under the program, an agency may lease out property on its installations and keep for itself half of the monetary rent revenues; the other half must be paid into the federal government’s general fund. But in-kind consideration – including but not limited to maintenance, repair, or improvement to other property or facilities owned by the agency -- may be provided by a developer in lieu of cash rent, and the leasing agency may keep 100% of such in-kind consideration. No matter what form the consideration takes, the property may not be leased at less than fair market value, and discounted leasebacks of EUL property to the agency are expressly forbidden under federal law.

The EUL program is being utilized to further BRAC realignment at a number of federal installations. At Fort Meade, for example, the lessee under the enhanced use lease will provide in kind consideration in the form of the construction of a new golf course, in return for its lease of the land on which the old golf course site, on which commercial office facilities for federal contractors are being built.

Governmental Lease of Real Property as a Vehicle for New Construction

Governmental units increasingly acquire newly constructed buildings, built to their specifications, through a lease for years rather than by public construction. Where the new construction is to be leased, a private entity undertakes the responsibility for financing, constructing, operating, and/or maintaining a building to be occupied by a governmental agency under a lease for years. This has the effect of shifting expenditures from a capital improvements budget to an operating expenses budget.

For example, the NIH chose to have a new biomedical research center built at the Johns Hopkins Bayview Medical Campus in Baltimore by signing a long-term lease with the private company that owned the land underlying the project. That company in turn made the arrangements for the construction of the project. However, the NIH remained actively involved in reviewing the project’s progress and changes in design. Remarkably, the private construction contract appears to make the NIH a third party beneficiary, entitled to liquidated delay damages from the construction contractor, with whom the NIH is not otherwise in privity.

Often, the underlying land is governmental property, transferred to the developer by lease or sale, with an agreement to lease back part or all of the finished building to the governmental unit. Such lease-back arrangements have at times been held to be construction procurement rather than real estate procurement for purposes of procurement law, but the cases are not entirely consistent. Recently, a Georgia federal district court found that a leaseback arrangement for new construction on the grounds of Fort Stewart, an Army installation, was not a federal construction contract and thus was not subject to the Miller Act.

Public/Private Construction Projects - Part I

For the 2010 ABA Forum on the Construction Industry MidWinter Meeting, held January 27-29, 2010 in San Francisco, Bob Carney and Lisa Sparks prepared a paper on hybrid public/private construction projects. The paper, Is It Public or Not?, was presented by Bob Carney at the MidWinter Meeting on Thursday, January 28. Over the course of three posts, Bob Carney and Lisa Sparks will review the hybrid public/private projects covered in their paper and discuss the relevance of such hybrids to BRAC initiatives.

Part I

The traditional view of construction projects conceives of these endeavors as falling into one of two mutually exclusive categories: (1) public construction – those projects for public works, paid by government funds, for which the government contracts with a construction contractor or contractors in accordance with acquisition regulations; or (2) private construction – those projects where a private entity develops the project, secures financing necessary to complete the project, and contracts for its construction.

The classification of a construction project as public or private dictates how a construction contract is let, as governmental entities typically have specific procedures for bidding and/or negotiating such contracts. It also impacts the remedies available to contractors and subcontractors. Public contracts generally involve a limited waiver of sovereign immunity on the part of the governmental entity, typically dependent on the contractor’s compliance with strict claim submission requirements and characterized, at least in the early stages, by resort to administrative rather than judicial proceedings. Public lands, as a general rule, are not subject to mechanic’s liens, though subcontractors are offered a rough substitute in the form of Miller Act (federal) or Little Miller Act (state and local) payment bonds.

But the strict dichotomy between public projects and private ones is breaking down. Increasingly, there are areas of gray where the two categories overlap – hybrid projects that feature some private funding, some public, and often sit on lands owned in whole or in part by a governmental unit. Many of the projects related to BRAC initiatives make use of such hybrids, most notably Enhanced Use Leasing (“EUL”), a program under which federal agencies lease federal property to private parties for development of the land.

In our next post, we will describe the hybrids most relevant to BRAC – EUL programs and the use of governmental lease of real property as a vehicle for new construction. In our third post, we will examine the effect of these hybrids on contractors’ rights upstream to get paid and to enforce such rights, and on contractors’ duties downstream to pay their subcontractors.

- Bob Carney and Lisa Sparks

The Coming Government Insourcing

Thousands of Government Positions Are Expected To Come Here Under BRAC 2005. Contracting Agencies Are Scrambling to Fill Those Positions. Will the Government Be Taking Your Employees as Well?

At a time when many of us in the Washington, D.C./Baltimore metropolitan area are anticipating a flow of local government contracting opportunities occasioned by BRAC gains in the region, the Department of Defense (DoD) has been following an initiative to in-source “inherently governmental” jobs currently being performed by private contractor employees:

http://prhome.defense.gov/docs/DepSecDef%20Memo%20In-sourcing%20Contracted%20Services-Implementation%20Guidance%20(28%20May%2009).pdf

By all accounts, this in-sourcing initiative is a high priority for DoD in 2010.

DoD spends up to 80% of its annual budget on contracting with private companies for supplies and services. Contracts for supplies will not be affected by DoD’s in-sourcing initiative. However, DoD contracting agencies are now in the process of reviewing all current contracted services, intending move those positions that are determined to perform “mission critical” or “inherently governmental” functions out of the private sector.

On a local level, what impact will in-sourcing have on BRAC opportunities in the area? Given the lack of clarity in what positions are likely to be determined to be “inherently governmental” or “mission critical,” the impact is hard to predict.

An “inherently governmental” function is one that, as a matter of law and policy, must be performed by federal government employees and cannot be contracted out because it is intimately related to the public interest. The definition is fairly flexible, but examples of an “inherently governmental” function would be conducting criminal investigations or contractually binding the U.S. government. Administrative and advisory services – those services that primarily support the government’s acquisition process – could easily be considered “inherently governmental” functions.

The further trouble is that the government has yet to clearly define what constitutes a “mission critical” function. “Mission critical” services could be any function that is essential to support the operational activities of the agency. Many of the contracting opportunities brought here by BRAC will be focused on R&D, sophisticated defense engineering, information technology, information and enterprise security and defense communications services, among others. Many of these BRAC contracting opportunities will entail services where the skills and resources necessary to provide them are difficult to acquire and in short supply. Contractors spend large amounts of time and money recruiting to fill these highly skilled positions in order to support government customers. Can they expect to see the government in-sourcing the position – and recruiting the contractor employee as well? Let us know.

- Heather James