A.R. Moxon on the Unpopularity of “Socialism”

February 19, 2020

Here is author A.R. Moxon on the unpopularity of “Socialism,” which I have copied and assembled from a Twitter thread and posted here because it actually is a great way to consider public policy and political discourse in today’s media environment:

Maybe what’s finally growing unpopular are the longstanding lies that (1) there exists for our nation no shared life that must be managed; and (2) that government—which is simply the way we choose to manage that shared life—should be seen as our enemy, rather than as just … us.

Maybe more and more Americans are starting to realize that the people whose ideology involves telling us that government is something that is naturally automatically corrupt and failed and ineffective have clear bright incentives to deliberately create a corrupt failed government

Maybe if we start to understand that we have a shared life and government is the way we organize it we’ll start to engage with it to make it better.

And view with suspicion those who talk about drowning it in a bathtub.

There are no Democratic candidates who will not get called “socialist” throughout the general election—including Warren or Sanders, moderate left social democrats in any other political milieu—and none for whom that narrative will not be uncritically repeated 1 million times.

“Socialism” is broadly unpopular for the same reason “liberalism” is; a conservative political/media complex spent five decades attacking them.

Meanwhile socialist policy proposals are broadly popular, and the socialist institutions we have are successful, beloved, and entrenched.

Maybe let’s stop worrying what people will call our politics, given they want to dismantle our shared lives together, by corrupting its organization, and by selling it off to the highest bidders.

Let’s just stand for good things and let the labelers worry about the labels.

Aggressively and purposefully pursuing the reality you want to see in the world has been far more politically successful than worrying about what other people will think or say about it. That’s an observable fact; it’s very strange to me how many people behave otherwise.

And I’d really like to see people who want to see a more just fair and livable world pursue what they want with the same lack of concern to how they’ll be perceived as do those who aggressively pursue the far less merciful, far more draconian, far greedier world they want to see.


Our Institutions Will Not Protest Us

February 13, 2020

Our institutions will not protect us. “We tend to assume that institutions will automatically maintain themselves against even the most direct attacks. This was the very mistake that some German Jews made about Hitler and the Nazis after they had formed a government. On February 2, 1933, for example, a leading newspaper for German Jews published an editorial expressing this mislaid trust:

‘We do not subscribe to the view that Mr. Hitler and his friends, now finally in possession of the power they have so long desired, will implement the proposals circulating in [Nazi newspapers]; they will not suddenly deprive German Jews of their constitutional rights, nor enclose them in ghettos, nor subject them to the jealous and murderous impulses of the mob. They cannot do this that because a number of crucial factors hold powers in check…and they clearly do not want to go down that road. When one acts as a European power, the whole atmosphere tends towards ethical reflection upon one’s better self and away from revisiting one’s earlier oppositional posture.’

“Such was the view of many reasonable people in 1933, just as it is the view of many reasonable people now.”

[Snyder, Timothy. On Tyranny (pp. 23-24). Crown. Kindle Edition.]


Why Did the IRS Give Equifax a $7.25 million contract?

October 10, 2017

Politico  and The Hill on October 5 reported that the IRS had awarded Equifax a sole source $j7.25 million contract “to verify taxpayer identity and to assist in ongoing identity verification and validations needs of the Service.”   Naturally, this raised question from all quarters in the wake of the massive data breach suffered by Equifax.  It may seem odd when the basic principle of federal procurement is “full and open competition” [48 CFR 6.101] for the IRS to give a sole source contract to Equifax when there are obviously other companies that could also perform the service.

To unravel this situation, we must understand the Government Accountability Office (GAO) bid protest process and the laws and regulations involved.   The federal procurement process has a long history of mechanisms to allow disappointed bidders to challenge the government’s procurement actions.  Federal procurement regulations (known as the FAR and found at 48 CFR Chapter 1) provide for what is called an agency level protest (48 CFR 33.103) that requires the agency to consider protests presented to the agency.  A more formal protest option is to file a protest with GAO. [31 US Code 3552]  The other option for protestors is to file an action at the US Court of Federal Claims.  [28 US Code 1491(b)(1)]

If the agency receives notice of the protest from GAO in a short, prescribed time, the agency must direct the awarded contractor to not proceed with the performance of the new contract.  When this stay of performance is in place, it is common practice for the agency to award a “bridge contract” (essentially an extension of the existing contract) to the incumbent contractor, which is often also the protestor.  This is a good way for the losing incumbent contractor to get a few more months of work from the agency.  But it also makes it easier for the agency to deal with a successful protest.

In this case, on July 7, 2017, Equifax Information Services, LLC filed a bid protest with GAO against an award by the IRS to an as yet unidentified contractor. [Solicitation TIRNO-17-Q-00047; File Number: B-414907.1]  Apparently, the protest was filed within the time limit that required suspension of performance of the new contract.  Equifax must have been the incumbent contractor.  So the IRS basically extended Equifax as the contractor during the pending protest.  This was the $7.25 million contract the news reports are referring to.  The IRS justified this sole source award as follows:  “A sole source order is required to cover the timeframe needed to resolve the protest on contract TIRNO-17-Z-00024. This is considered a critical service that cannot lapse.”

The IRS Commissioner claimed that “the only alternative” to doing business with Equifax was “to shut down all online access to taxpayer accounts.”  This got the attention of GAO, which pointed out that the IRS could have proceeded with the newly awarded contract if the Commissioner had determined in writing “that urgent and compelling circumstances which significantly affect interests of the United States will not permit waiting for the decision of the Comptroller General.”  [31 US Code 3553(c)(2)]  While this provision and the GAO statement did nothing to make the IRS look good, this statutory authority was probably not useful in this case.

Switching contractors for any major program usually takes weeks if not months to turn over the program to the new contractor, a process which requires the participation of the prior contractor.  In this case, it is likely that the agency has no certainty that the protest will be rejected which might require redoing the procurement.  Even if the protest is rejected by GAO, Equifax would still have the option of a protest at the US Court of Federal Claims.  Even if the Court of Federal Claims rejected the protest, that could be appealed to the US Court of Appeal for the Federal Circuit and even to the Supreme Court.  This “bridge contract” that was awarded to Equifax was probably for three to six months.  If that contract for that period was worth over $7 million, it should be obvious that Equifax has a financial interest in extending the contract as long as possible.

If Equifax takes that route, at some point after completion of the GAO protest process, IRS would most likely obtain court approval to move forward with the awarded contract even in the midst of appeals.  In any event, it appears that the IRS suffered from a common and long standing federal agency problem, trying to successfully explain a complicated situation to Congress.


Impact of Chinese Ownership of a Major Distributor on Federal Contractors

September 29, 2017

As of December 2016, the IT distributor Ingram Micro is now part of fast-growing $30 billion Chinese conglomerate, HNA Group.  A large number of small businesses doing business with the federal government, especially those participating in one or more GWACs, might be concerned with this change of ownership of a vendor that they may be using.

When we think of foreign vendors, what comes to mind first is the Buy American Act (BAA).  However, the BAA does not address the ownership of companies but the country of origin of the products involved.  Also trade agreements and various bilateral agreements carve out many exceptions to the BAA.  To further compound the complexity, the rules to determine country of origin are themselves extremely complex.  So the fact that Ingram Micro is now owned by a Chinese company does not answer or necessarily raise any concerns about the BAA.  Those concerns have to be addressed on a case by case basis for each product, and more importantly for each end item delivered to the government.

One area where foreign ownership is an issue is review by the Committee on Foreign Investment in the United Stated (CFIUS).  [50 US Code 4565]  CFIUS is an federal inter-agency committee that reviews, for national security concerns, transactions that could result in control of a U.S. business by a foreign entity.  If CFIUS determines that a covered transaction is detrimental to national security, the President can suspend or block the transaction.  Not every foreign acquisition is reviewed by CFIUS.  Of course, if there is no CFIUS review, the government could come along later and undo the transaction.  In this case there was a CFIUS review and the transaction to acquire Ingram Micro was not blocked.

Another area where foreign ownership comes into play is in the performance of government contracts that require access to classified information.  For a defense contractor to have possession of classified information, it must have a “Facility Security Clearance” (FCL).  To obtain the FCL, one of the critical factors (in addition to appropriate physical security and access by cleared personnel) is the potential for “Foreign Ownership, Control or Influence” (FOCI).  Except in rare cases where the foreign ownership involved is from a country with bilateral security agreements, obtaining an FCL when dealing with the FOCI usually means setting up complicated corporate management arrangements that insulate the US-based management from control by the foreign owner.  When the foreign owner is from a country with a history of espionage against the United States, I would think the likelihood of resolving the FOCI and obtaining an FCL is remote or impossible.

So my best guess is that Ingram Micro would be unlikely to get or keep any FCL at this point.  However, that may not be important or relevant since my understanding is that as a distributor, Ingram Micro probably deals exclusively with commercial products and would have no need itself for an FCL.  While the Ingram Micro situation may seem to raise a unique issue with any prime contractors operating under an FCL, in no case should vendor without an FCL or vendor personnel without a personnel security clearance have access to classified information in the prime contractor’s possession.

Bottom line?  Small businesses with federal contracts using Micro Ingram as a supplier should not have an issue with the change of ownership.  Of course, the handling of classified information should be managed properly with this and every other vendor.


Closing Down Guantanamo

February 23, 2016

I have always limited posting here to government contracting issues. I am about to violate that self-imposed limitation, doing it on a subject about which I am definitely not an expert. That is probably dangerous thing to do in the blogosphere, but taking a risk now and then keeps life interesting. These ruminations are prompted by an article in Vox.com about the legality of the Berghdahl prisoner swap, today’s satire from Borowitz, and my pondering whether there was any possible way President Obama could complete his 2008 pledge to shut down Guantanamo. And now, in a spasm of synchronicity, President Obama has launched today another effort to close Guantanamo; however, the President’s proposal would require congressional approval and we know how likely that is to happen in an election year. I’m thinking about a way to close Guantanamo down without congressional approval. So here goes, my flagrantly Machiavellian, blatantly textualist way to get this done. Read the rest of this entry »


Government Oral Assurances

February 6, 2016

In a recent episode of the epic legal soap opera, Suits, an Assistant DA and the show’s protagonist reached an oral agreement that the Assistant DA later reneged on. This reminded me of the general proposition in the world of government contracts that, to coin a phrase, oral agreements are worth the paper they’re written on. A few years back, my opposition in a bid protest ran into this truism. Read the rest of this entry »


Bid Protests for Government Property Sales? Maybe . . . Sort of

January 31, 2016

When a bidder in a government real estate property auction feels in some way the victim of unfair or improper treatment by the government is there a remedy available? And by remedy, I mean some formal process that will subject the government agency’s action to an independent review. If you ask the General Services Administration (the seller of most surplus federal property), they will say there is no remedy.   But in my view, that is not quite the case. Read the rest of this entry »


The Small Entity Compliance Guide; A Sheep in Sheep’s Clothing

September 13, 2015

So I’m rummaging through emails and come across a notice of a FAR update and see something called a “Small Entity Compliance Guide.”  “Great,” I thought, “finally someone is trying to get information to small businesses about what they need to do to comply with the various government contracting regulations that get dumped on them from time to time.”  Then I kept looking and, much to my dismay, what should appear but the Federal Acquisition Circular that has been published yea these many years with a new title.  What a disappointment.  Of course, it is entirely understandable. Congress comes along with the ‘‘Small Business and Work Opportunity Act of 2007’’ (buried in the ‘‘U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007’’), without of course increasing any manpower or funding to do any of this.  So what can one expect of an already overstretched agency but to morph something already being done into something that meets the letter of the congressional mandate without actually doing any additional work (other than pasting a new title on the Federal Register notice).  Still, I was disappointed.  A Small Entity Compliance Guide is a great idea.  I hope one day soon we will see one that actually helps a small business.  Until then we’ll just keep searching the internet.


Doing business with the Government: Step Zero.

August 19, 2015

Your business can’t even bid on a federal government contract without registration with the “System for Award Management.” This registration can be done entirely on-line at sam.gov and anyone could do it (well, with minimal computer skills).
That said, I have been surprised, but probably shouldn’t be, that businesses wanting to get into the federal contracting world choose not to do it themselves. There a lot of companies out there that will sell you help with this registration bundled with a lot of marketing services. I have friends with government contract marketing companies and I know they do good work, but it can get pricey for a start-up.
Having done a number of these in the last few months, I have decided that I and my office manager should offer this service as a standalone product for a fixed price. If you are interested, feel free to contact me at jvanhorne@vanhornelaw.com for pricing and more information on the process.


Governmental Squareness

June 20, 2011

While working on the section on the limited authority of government agents for my soon-to-be published Solo Attorney’s Emergency Guide to Government Contracts, I had reason to wonder about the genesis of the oft quoted phrase “those who contract with the Government must turn square corners.” United States v. Wunderlich, 342 U.S. 98, 101 (1951). My understanding of this phrase relates to the inapplicability of doctrines such as apparent authority to government contracts, although it has also been applied in a compliance context. That said, it turns out that the phrase and variations thereof have quite an interesting history.

The turn of phrase can be attributed to Justice Holmes in Rock Island, Arkansas & Louisiana RR. Co. v. United States, 254 U.S. 141, 143 (1920). In Rock Island, the plaintiff failed to follow the statutory procedures for appealing a tax assessment. Justice Holmes’ opinion states: “Men must turn square corners when they deal with the Government. If [the Government] attaches even purely formal conditions to its consent to be sued those conditions must be complied with.” Obviously, the context is a question of sovereign immunity and the government’s consent to be sued. That is an issue that remains very relevant with respect to remedies such as the Federal Tort Claims Act.

The first use of this maxim in a government contracts case that I could find came in 1925, in David A. Wright v. United States, 60 Ct. Cl. 519 (1925). In that case, the U.S. Court of Claims (predecessor twice removed of today’s U.S. Court of Federal Claims) quoted Justice Holmes’ maxim in concluding that the plaintiff could not recover for a so-called informal agreement, i.e., a contract not in writing. The plaintiff was induced by government agents (military officers) to rehabilitate a manufacturing facility in reliance on the promise of orders for special lathes. The officer with whom plaintiff dealt had no authority to enter into contracts on behalf of the government. Even though there was authority to give relief for the “informal agreements,” the government official did not have authority to enter into any contract. Notwithstanding the officer’s inducement to incur the costs and plaintiff’s reliance on the officer’s statements, the officer was an agent without authority and the government was not liable. This is the application of Holmes’ “square corners” maxim with which I was familiar.

United States v. Bethlehem Steel Corp., 315 U.S. 289, 337 (1942), concerned shipbuilding contracts from World War I. The contractor in this case was in a very strong negotiating position and insisted on a contract that resulted in a 22% profit. The majority upheld the contract. Justice Frankfurter thought the contracts should be reformed to reduce the profit the contractor received. In his dissent, he quoted Justice Holmes’ maxim in arguing that contractors should not take advantage of the government in an emergency situation. Two years later Justice Frankfurter had occasion to argue the maxim’s antithesis in his dissent in United States v. Blair, 321 U.S. 730, 736-738 (1944). The majority held that a construction contractor could not pursue a claim for damages in the Court of Claims because he had failed to follow the prescribed administrative disputes procedures. “If it were shown that the appeal procedure provided in the contract was in fact inadequate for the correction of the alleged unreasonable attitude of the subordinate Government officials, we would have quite a different case. But here we must insist, not that respondent turn square corners, but that he exhaust the ample remedies agreed upon.” Justice Frankfurter, while acknowledging that those dealing with the government must “turn square corners” and that government contract provisions could not be waived or modified even where circumstances rendered their effect harsh, argued that “there is neither law nor policy that requires that courts in construing the terms of a government contract should turn squarer corners than if the same terms were contained in a contract between private parties.”

The risk that dealing with government agents take was perhaps most brutally demonstrated in Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384-388 (1947). Local government agents had approved insurance contract that was not permitted by the regulations. The majority held that government did not have to make good on the insurance contract. “Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. . . . And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority.” The majority opinion went on to say that Justice Holmes’ maxim “does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury.” The dissent by Justice Jackson included a nice turn of phrase on the Holmes maxim: “It is very well to say that those who deal with the Government should turn square corners. But there is no reason why the square corners should constitute a one-way street.”

That brings us to the case that first captured my interest in the Holmes maxim, United States v. Wunderlich, 342 U.S. 98, 101 (1951). This case involved a standard government contract disputes clause which appeal from a contracting officer’s decision could only be appealed to the head of the department. Here the contractor appealed the adverse decision of the agency head to the Court of Claims, which found in the contractor’s favor. In the Supreme Court, the majority basically said the contract prohibited any sort of judicial relief except in the case of the government agency’s engaging in fraud. The reference to the Holmes maxim actually comes in Justice Douglas’ dissent in which he offers the maxim as a concept of government contract law upon which the majority relied sub silentio, ignoring (in Justice Douglas’ mind) the broader implications of the majority position.

This decision, as might be expected, caused an uproar in the business community and Congress enacted the “Wunderlich Act” which authorized judicial review on fact decisions if the decisions were (1) fraudulent, (2) arbitrary, (3) capricious, (4) so grossly erroneous as necessarily to imply bad faith, or (5) not supported by substantial evidence. (41 U.S. Code §§321- 322) The act also prohibited use of a government contract clause making the decision of any administrative official, representative, or board final on a question of law. Although still on the books, the Wunderlich Act has for most government contract purposes been preempted by the Contract Disputes Act. (41 U.S. Code §§601-613)

Justice Black’s dissent in St. Regis Paper Co. v. United States, 368 U.S. 208, 229 (1961), provided another nice turn of phrase based on the Holmes maxim. For purposes of an investigation, FTC had demanded copies of corporate reports submitted to the Census Bureau. The census statute granted the Secretary of Commerce the discretion to furnish to named authorities data taken from information obtained by the Census Bureau on censuses of population, agriculture and housing. The statute also provided that when the Secretary furnishes such data it shall “in no case” be used by the recipient “to the detriment of the persons to whom such information relates.” The majority said that didn’t matter because the information didn’t come from the Secretary but from a direct request from the FTC to the company. In dissent, Justice Black responded: “Our Government should not, by picayunish haggling over the scope of its promise, permit one of its arms to do that which, by any fair construction, the Government has given its word that no arm will do. It is no less good morals and good law that the Government should turn square corners in dealing with the people than that the people should turn square corners in dealing with their Government.”

The Holmes maxim was used to reinforce the principle that unauthorized representations of government agents cannot be relied on in Heckler v. Community Health Services, 467 U.S. 51, 63 (1984). The majority concluded that the government was not estopped from recovering Medicare overpayments even though recipient relied on express authorization of government agent in making expenditures. The majority opinion explained that the Holmes maxim “is consistent with the general rule that those who deal with the Government are expected to know the law and may not rely on the conduct of Government agents contrary to law.”

Perhaps the most recent and notorious invocation of the Holmes maxim was in the Winstar Supreme Court decision. (United States v. Winstar Corp., 518 U.S. 839 (1996)) Because the FSLIC lacked the funds to liquidate all of the failing thrifts during the savings and loan crisis of the 1980’s, the Federal Home Loan Bank Board encouraged healthy thrifts and outside investors to take over ailing thrifts. As inducement, the Bank Board agreed to permit buyers to designate the excess of the purchase price over the fair value of identifiable assets as an intangible asset referred to as supervisory goodwill, and to count this goodwill toward the capital reserve requirements imposed by federal regulations. Congress’s subsequent passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 prohibited thrifts from counting this goodwill in computing the required reserves. A number of thrifts put out of business by the change in the rules sued on the theory that the promise to be able to use goodwill as an asset counting toward the capital reserve requirements was a contractual obligation that was breached by the government. The majority confirmed the judgment of the courts below that the thrifts were entitled to recover against the government for breach of contract.

Between the various opinions in Winstar, almost all of the cases referenced above were invoked. Chief Justice Rehnquist dissenting, invoked the Holmes maxim with this explanation: “The wisdom of this principle arises, not from any ancient privileges of the sovereign, but from the necessity of protecting the federal fisc — and the taxpayers who foot the bills — from possible improvidence on the part of the countless Government officials who must be authorized to enter into contracts for the Government.” In his concurring opinion, Justice Scalia said in response to the government’s argument that the promise to recognize the supervisory goodwill was not “unmistakable:”

It was found below that the Government had plainly made promises to regulate in a certain fashion, into the future; I agree with those findings, and I would conclude, for the reasons set forth above, that the promises were unmistakable. Indeed, it is hard to imagine what additional assurance that the course of regulation would not change could have been demanded — other than, perhaps, the Government’s promise to keep its promise. That is not what the doctrine of unmistakability requires. While it is true enough, as the dissent points out, that one who deals with the Government may need to “turn square corners,” . . . he need not turn them twice.

While it is of literary and historical interest to see how Holmes’ maxim has been invoked over the decades since 1920, it certainly remains a key concept for all dealing with the government. Government agents can only act within the scope of their authority. Commitments made by government agents without authority cannot be relied upon. Government agents’ representations of the law are worth nothing if in error. We all must turn square corners when we deal with the Government.