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Mr. Kelly brings over thirty years of experience to the firm’s government contracts group. His practice combines both counseling and acting as an advocate on behalf of clients doing business in the government marketplace.  Mr. Kelly has knowledge of the government contracting process both on a federal and state level, and the specific laws, regulations, contract clauses and dispute resolution mechanisms in this specialized area. He provides advice and guidance to clients who are in the government supply chain, either as prime contractors, subcontractors or vendors. He reviews government solicitations with clients, prepares proposals, and negotiates teaming arrangements and subcontracts with other suppliers. He helps clients build and enhance their compliance programs. He assists clients in protecting their intellectual property and proprietary information concerning their businesses when doing business with the government. He advocates for clients who wrongfully were passed over for a contract award. He prepares claims arising under government contracts as a result of change orders, delays, and terminations for default or convenience. Mr. Kelly’s practice extends to a broad spectrum of industries and federal and state authorities for whom they supply research, products and services including, Medicare and Medicaid audit and investigation service providers; commercial software developers who modify their software for military applications; professional services providers for federal and state-sponsored hurricane relief efforts; raw materials and component suppliers to large military prime contractors; and biomedical and pharma research facilities working under SBIRs, CRADAs, and grants for health agencies.

As we reported last month, the Department of Defense (DoD) has been engaging in an unusual rollout of its new cybersecurity certification program by way of  road tours—led by Katie Arrington, the Special Assistant to the Assistant Secretary of Defense for Acquisition and Sustainment for Cyber—that address the tiered, five-level Cybersecurity Maturity Model Certification (CMMC). At bottom, DoD intends for the CMMC to help streamline the acquisition process by providing acquiring agencies and consenting contractors with more exacting cybersecurity requirements for future acquisitions. What’s unique about the CMMC rollout is the lack of written guidance on the program. DoD representatives have orally provided a majority of publicly available information about CMMC only during various webinars and defense-industry events held over the past couple of months. Indeed, a quick Google search for “CMMC” indicates that, at this time, hard facts about the program appear to be limited to FAQs on a DoD website.

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Every government contractor hesitates and ponders whether information confidential and valuable to its business that is disclosed – either voluntarily or by compulsion – in a submission to a U.S. Government agency will be protected from release to a third party pursuant to that dreaded four-letter acronym: F-O-I-A. In a June 24, 2019, landmark decision, the U.S. Supreme Court, in Food Marketing Institute v. Argus Leader Media[1], has spoken for the first time on FOIA exemption covering such information – and the news is good for contractors seeking maximum protection of their valuable confidential IP and business information.

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Here’s another reminder of limitations that exist when there is a third party claim of infringement against a U.S. Government agency. In such a case, the patent owner must sue in the United States Court of Federal Claims and may recover only “reasonable and entire compensation” for the unauthorized use. See 28 U.S.C. Section 1498(a). No injunctive relief is afforded the plaintiff.  Within the context of that proceeding, the Government agency is free to seek a determination that the patent is invalid, and if the claimed invention does not meet one or more of the patentability requirements, the Government agency will have no liability.

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A little-heralded change to the statutory definition of “commercial item” has now made its way to a proposed FAR rule, which will open up regulatory relief to a whole new class of government contractors – companies, both domestic and foreign, that regularly sell products developed at private expense to friendly foreign governments. With the December 12, 2017, passage of Section 847 of the National Defense Authorization Act of 2018, Pub. L. 115-91 (“2018 NDAA”), the statutory set of definitions for the term “commercial items” was amended. See 41 U.S.C. § 103. More specifically, Section 103(8), addressing “nondevelopmental items,” was broadened as follows:

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In the August 2018 publication of Thomson Reuters’ Briefing Papers, McCarter & English Government Contracts and Export Controls Partner Dan Kelly provides a comprehensive review of patent rights under “Other Transaction Agreements” (OTAs) with DoD and NASA. Heavily promoted by Congress, and only partially understood by industry, OTAs are quickly becoming DoD’s and NASA’s contractual vehicle of choice to lure commercial companies to sell the Government their latest and greatest technologies. However, OTAs are not governed by standard government contracts laws and regulations, meaning there are significant changes to the common provisions of ownership and license rights incident to government contracts and grants. The Briefing Paper should be required reading before entities enter into an OTA as a vehicle for developing new technologies for NASA and DoD to ensure their company’s intellectual property efforts are properly protected.

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Buried in a grab bag of seemingly innocuous course-correcting changes to the Bayh-Dole Act regulations (effective May 14 of this year) is the removal by regulators of the sixty-day window between the federal agency’s notice of a contractor/grantee’s failure to give timely notice of inventions in order to secure title and the federal agency’s ability to take title and strip contractors and grantees of what may be their most valuable assets – i.e., their intellectual property. Now the Government is no longer constrained by this time limitation, and it may grab title to inventions conceived or reduced to practice with Government funds at any time should the contractor/grantee fail to follow the rules.

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The House version of the 2018 National Defense Authorization Act (“NDAA”) (passed July 14, 2017) includes key provisions that would radically change the way the Government purchases certain commercial items, and it may result in the extinction of large parts of the Federal Supply Schedules as we know them. Section 801 of the NDAA promotes Government wide use of online commercial marketplaces (“online marketplaces”) such as Amazon, Staples, and Grainger for the acquisition of certain commercial off-the shelf (“COTS”) items, defined as “commercial products” in the proposed legislation. If enacted, the NDAA would be a revolutionary development in the way the Government buys many of its products, allowing agencies to leapfrog over competitive bidding requirements and numerous mandatory clauses now included in Government contracts for commercial items.

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Contractor past performance evaluations are important factors in source selection decisions under Parts 8 and 15 of the Federal Acquisition Regulation (“FAR”), and they can easily make or break a contractor’s federal customer base. Especially vulnerable are contractors competing in Lowest Price Technically Acceptable (“LPTA”) procurements, where a bad past performance rating can make contractors ineligible due to an “unacceptable” technical rating even though they may offer the lowest price. The submission by Government contracting officials of a contractor’s performance evaluation to the Contractor Performance Assessment Reporting System (“CPARS”) is required in most instances; however, the contractor’s remedies for correcting poor performance evaluations due to mistakes and material omissions by the evaluator are limited in both time and scope. And as the DoD’s Inspector General (“IG”) has repeatedly pointed out, most recently in its May 9, 2017 report, Summary of Audits on Assessing Contractor Performance (noting a large percentage of DoD performance assessment reports are late and not prepared correctly and accurately), mistakes often happen. Contractors looking to sustain their business in the federal marketplace need to be properly armed with the weapons available to challenge poor performance evaluations when the agency gets it wrong.

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One common complaint we hear from our subcontractor clients is “HOW CAN WE GET PAID????” Our experience has shown that whether through inadvertence, lack of subcontract management resources – or even as a predatory business strategy – some prime contractors will dance, dither and delay upon receipt of requests for payment by their subs for work performed, services rendered and/or products delivered. This can be particularly onerous for small business subcontractors whose payroll and other obligations depend upon prompt payment by their customers. Subs are put in an untenable position. Should they stop work and risk breach of contract? Should they threaten to sue and risk breaching the relationship? New changes to the FAR now impose mandatory reporting obligations on primes should they fail to make timely and full payments to their small business subs. Chronic and unjustified payments now must go into an agency’s evaluation of the prime’s past performance in bidding contests. Primes are well advised to make sure their supply chain management is in order to minimize the additional obligations and risks confronting them should they fail to meet their obligations to their small business subs.
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On August 8, 2016, the U.S. Office of Management and Budget (“OMB”) promulgated an Open Source Software (“OSS”) policy via the Memorandum for the Heads of Departments and Agencies, M-16-21 (“Memorandum” or “M-16-21”). The high-level purposes of the Memorandum are to promote reuse of federal contractor and employee custom-developed code, and to improve the quality of such software through public participation. To these ends, the Memorandum has two major directives: (1) all custom-developed code must be broadly available for reuse across the federal government subject to limited exceptions (e.g., for national security and defense) and (2) under a three-year pilot program, federal agencies are required to release at least 20% of their custom-developed code to the public as OSS. The intent here is to enable continual quality improvements to the code as a result of broader public community efforts. As discussed below, the requirement to release custom-developed code as OSS may effectively reduce the creator’s ownership rights, and have economic impacts on both the value of ownership and pricing when bidding on government contracts.

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