In the underlying dispute, a developer, Curtis Park Group, LLC (Curtis), sought to construct a five-building development, four of which were supported by a single concrete slab. Curtis hired MW Residential LLC (MW) as the general contractor and furnished designs. As part of their contract, Curtis would not be required to reimburse MW for the cost of repairs arising out of MW’s negligence or failure to fulfill a contractual obligation. Additionally, Curtis obtained a builder’s risk insurance policy (the Policy) from Allied World Specialty Insurance Company (Allied World) covering “direct physical loss or damage caused by a covered peril to ‘buildings or structures’ while in the course of construction, erection, or fabrication.” Curtis, however, was the only named insured under the Policy, which also stated, “[i]nsurance under this coverage will not directly or indirectly benefit anyone having custody of [the named insured’s] property.”
After discovering excessive deflection, commonly known as sagging, in the slab during construction, Curtis retained a consultant to conduct an investigation, resulting in a determination such defects arose due to MW’s failure to adhere to the design documents provided by Curtis. This determination was not shared with Allied World. MW then undertook the repairs at its own expense. Shortly thereafter, Curtis gave notice to Allied World of a claim for repairing the slab, totaling $2,857,157.78 in “hard costs” for direct repair costs and $986,391.59 in “soft costs” for the associated delay (the Claim). A few months later, Curtis and MW entered into a project close-out agreement containing the following terms: (1) the parties would work together to pursue the Claim; (2) the parties, if successful, would split the recovery under the Claim, with MW receiving just over 60% of the total; and (3) Curtis would not have to reimburse MW for repair costs if the Claim failed.
After Allied World denied coverage, Curtis brought suit for breach of contract, statutory bad faith, and common law bad faith. In both mid- and post-trial instructions, the federal district court instructed the jury that MW’s “payment of [the roughly $2.8 million in hard] costs does not preclude Curtis [] from seeking coverage under the policy for reimbursement of these costs.” The jury decided in favor of Curtis on its breach of contract and statutory bad faith claims. Allied World appealed. The Court of Appeals for the Tenth Circuit reversed, holding that Curtis’s recovery constituted a windfall that was barred under both the Policy and Colorado’s long-standing public policy that prohibits “gambling” on insurance coverage.
The appellate court began with the plain language of the Policy, determining two conditions are required for coverage. First, Curtis must sustain a direct or physical loss to its property. Second, as the named insured, Curtis must be responsible for bearing the costs of such loss to its property. Moreover, after determining that the reasonable expectations doctrine allowed for the introduction of industry custom as an interpretive tool, the court stated the relevant literature unanimously agreed contractors, subcontractors, suppliers, and materialmen should be added as additional insureds under an owner’s builder’s risk policy. Consequently, “a typical buyer of a builder’s risk policy would not expect the losses of contractors and subcontractors to be covered if those parties were not named as insureds in the policy.” Finally, the court stated that any other interpretation would violate Colorado’s public policy against windfalls and wagering on insurance coverage that prevents an insured from betting (in the form of a policy premium) that someone else’s loss will lead to a monetary reward greater than the amount of the premium, which might also lead to reckless or even intentional misconduct.
Due to the above inquiry and interpretation, Curtis was precluded, as a matter of law, from obtaining coverage for the hard costs sustained by MW in repairing the slab. Further, the court remanded the case to the district court for a new trial on the issue of Curtis’s recovery of soft costs, while recognizing two reasons why Curtis was unlikely to be entitled to such costs. First, the Policy included a term that barred coverage if Curtis made a misrepresentation to Allied World surrounding its entitlement to a claim. Second, the Policy included certain limitations restricting coverage for claims that arose due to negligence. Thus, according to the court, coverage for soft costs was unlikely under the Policy because Curtis’s failure to share the results of the investigation concluding that MW’s negligence caused the defects was likely misrepresentation precluding coverage. Likewise, MW’s negligence itself, if proven, may, in fact, be a bar to coverage.
Author’s Comments: This case turned in part on the owner’s unusual decision to obtain builders’ risk coverage that did not cover losses incurred by its contractors, and this alone is a useful reminder of the hazards associated with such limited coverage. More fundamentally, though, the dispute arose from a settlement that was greedy. As the court noted: “[The] Agreement guaranteed that Curtis Park would obtain the completed construction . . . at the price it had originally agreed to pay and then could make a tidy sum off this litigation. That is a no-no.” It then reiterated the fundamental principle underlying its decision: “[I]t is not the purpose of insurance to provide the insured with opportunities for profit.”
Curtis Park Group v. Allied World Specialty Insurance Company, 124 F.4th 826 (10th Cir. 2024).
Failure to Keep Agency Informed of Personnel Changes Sinks Contractor’s Federal Bid Protest
Bid protests serve a critical role on public projects, providing contractors an avenue to maintain the integrity of the procurement process and ensure the subject contract is awarded to the bidder who best meets the relevant criteria. Although the core concept of a bid protest is quite simple (i.e., a contractor seeks to halt or reverse the award of a contract under a bid upon proof the awarding agency did not follow the relevant procurement procedures or criteria), there are many nuances that can preclude a protest on strictly construed procedural grounds before reaching the substance of the underlying challenge. At the federal level, procurement laws are contained in the Code of Federal Regulations (CFR) and bid protests are heard by the US Government Accountability Office’s (GAO) Office of General Counsel. A recent opinion issued by the GAO, Orion Government Services, Inc. (RFP No. W912HY24R0008), serves as an exemplar of how strictly construed standing requirements contained in the CFR can act as a shield against bid protests that otherwise may be valid on the merits.
In late 2023, the US Army Corps of Engineers (USACE) issued a request for proposals (the RFP) for a fixed-price construction services contract for a project at the Port of Houston in the Houston Ship Channel (the Project). The solicitation for the Project employed a best-value trade-off method, which, unlike the classic low-bid method, undertakes a consideration of substantive factors other than the bid amount. This method is generally considered a negotiated procurement, as the contract to be awarded is negotiated upon the substance of the awardee’s proposal. The RFP utilized five factors: (1) construction execution approach, (2) organization/management team (the Management Factor), (3) past performance, (4) small business participation, and (5) price. The Management Factor required bidders to provide detailed resumes for five key personnel positions established by the RFP. Critically, in regard to any key personnel listed in a proposal, the RFP stated the proposer “shall obtain the Contracting Officer’s written consent before making any substitution for these specific individuals designated as key personnel.” Four contractors submitted proposals under the RFP and the contract was ultimately awarded to McCarthy Building Companies, Inc. (McCarthy). After the award was made, however, one of the proposers, Orion Government Services, LLC (Orion), initiated a bid protest, alleging the USACE failed to follow the RFP’s evaluation factors in a manner that undermined the best-value award. McCarthy then intervened, joined by the USACE, arguing Orion lacked standing to challenge the award because it had failed to notify the USACE of key personnel changes after the submission of its proposal.
The Competition in Contracting Act of 1984 restricts bid protests to interested parties, which are defined at 4 C.F.R. § 21.0 as “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or by the failure to award a contract.” In the post-award context, according to the GAO, a protester is an interested party “only where there is a reasonable possibility that the protester would be next in line for award if its protest were sustained.” Further, in negotiated procurements, proposals must meet all material requirements of the solicitation to be considered for the award of contract. If a proposal does not meet all material requirements, an agency may either reject that proposal or open discussions with all offerors to permit revisions to their proposals. Thus, Orion would lack standing to bring its protest if either there was no reasonable possibility it would be next in line for the award after McCarthy or its proposal failed to meet any of the material requirements contained in the RFP and there was no reasonable probability USACE would reopen discussions with all proposers.
The GAO first analyzed whether Orion’s failure to notify the USACE of key personnel changes constituted a failure to meet a material obligation under the RFP. Orion essentially admitted that it had, in fact, failed to notify the agency of key personnel changes and that the submission of key personnel was a material requirement of the solicitation, but put forth two arguments that it remained an interested party. First, it said it did not fail to meet a material obligation because it had actually submitted two individuals for the key personnel position at issue when the RFP only required the submission of one. The GAO, however, strictly construing the RFP’s requirements, disposed of this argument after noting Orion’s proposal specifically stated that the two key personnel members were to have distinct roles on the Project. Thus, the unavailability of one of the individuals in Orion’s proposal constituted a failure to meet a material requirement. Second, Orion argued that even if its proposal was unacceptable, it was still an interested party because the GAO could reopen discussions with all proposers. The GAO disposed of this argument as mere speculation, stating that the USACE had significant discretion to decide whether it wanted to reopen discussions. Further, because McCarthy and one other proposer had submitted acceptable proposals, there was no obligation on the part of USACE to reopen discussions. Therefore, because its proposal was not acceptable and the USACE was not required to reopen discussions, Orion had no reasonable argument it would be next in line for an award if its bid protest was successful on the merits. Accordingly, Orion’s bid protest was dismissed because it was not considered an interested party.
Author’s Comments: Although bid protests are a necessary and useful tool for contractors who have been unfairly denied a fair opportunity to compete for a publicly funded contract, the odds are often stacked against those bringing such challenges. As shown above, courts strictly construe standing requirements in favor of the government, which often precludes a protest before reaching the merits of its substance. This case highlights how the strict interpretation of bid protest standing can limit opportunities for contractors to challenge an award, even if they may have substantive complaints about the process.
Orion Government Services, Inc., B-422978, B-422978.2 (Comp. Gen. Dec. 30, 2024).
The Court of Federal Claims Sided with Contractors on a Challenge to Project Labor Agreement Mandates in Federal Agency Solicitations
The US Court of Federal Claims (COFC) granted a motion for judgment brought by construction company plaintiffs in a consolidated action challenging Executive Order (EO) 14,063 issued by President Biden on February 4, 2022, under which authority federal agencies issued project labor agreement (PLA) requirements for federal construction projects exceeding $35 million. The COFC found that the PLA mandate violated the Competition in Contracting Act (CICA) requirements and directed those federal agencies to explain their plan for moving forward with each solicitation at issue.
CICA was enacted by Congress in 1984 to require federal agencies awarding contracts for services, such as construction contracts, to obtain full and open competition through the use of competitive procedures. By increasing the number of competitors for government contracts, the government would benefit from more competitive pricing. Under CICA, agencies must (1) solicit bids and offers in a manner designed to achieve full and open competition and (2) develop specifications in such a manner as is necessary to obtain full and open competition.
Since the time CICA was enacted, EOs have gone back and forth from banning to encouraging PLAs. In 1992, President George H.W. Bush issued EO 12,818 prohibiting government agencies from requiring PLAs by parties to federal construction projects. In 1993, President Clinton revoked EO 12,818, and later issued a memorandum encouraging agencies to consider PLAs to achieve economy and efficiency in federal construction projects on a project-by-project basis. In 2001, President George W. Bush issued EOs 13,202 and 13,208 prohibiting government-mandated PLAs, although contractors were free to enter into a PLA voluntarily. In 2009, President Obama issued EO 13,502 revoking and replacing President George W. Bush’s EOs and encouraged agencies to consider PLAs for large-scale construction projects to promote economy and efficiency in federal procurement. During his first administration, President Trump did not modify President Obama’s EO 13,502, and the existing policy of encouraging agencies to consider requiring PLAs was maintained.
In 2022, President Biden issued EO 14,063, which, for the first time, mandated agencies to include PLAs with one or more appropriate labor organizations in government construction projects exceeding $35 million. The EO provided that it was issued to avoid labor-related disruptions and to provide structure and stability to large-scale construction projects. The EO further provided that an agency senior official may grant an exception to the PLA requirement under one or more of the following circumstances: (1) requiring a PLA on the project would not advance the government’s interests; (2) based on an inclusive market analysis, requiring a PLA on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition; and (3) requiring a PLA on the project would otherwise be inconsistent with statutes, regulations, EOs, or presidential memoranda. Thereafter, on December 22, 2023, the FAR Council promulgated a final rule implementing EO 14,063, mandating that prospective contractors agree to negotiate or become a party to a PLA with one or more labor organizations.
The contractor plaintiffs each protested solicitations with PLA requirements. Lead plaintiff MVL USA, Inc.’s (MVL) protest arose from a solicitation issued by the U.S. Army Corps of Engineers (USACE) on May 30, 2024, which mandated that only prospective contractors with an acceptable PLA would be considered eligible for award. MVL and the other plaintiffs argued that the PLA requirements in all solicitations violate CICA’s full-and-open competition requirements by disqualifying otherwise-responsible bidders who do not enter into a PLA with a labor union. For example, in the solicitation at issue in the MVL protest, the USACE determined that market research and analysis of the PLA requirement performed under President Obama’s EO 13,502 then, in effect, showed that the PLA mandate would increase costs and not contribute to the economy or efficiency for the project under consideration. In 2023, USACE concluded that a PLA was not recommended. Then, on January 22, 2024, before the solicitation was issued, it was amended to require compliance with the FARs implemented under President Biden’s EO 14,063.
The COFC found that each of the solicitations at issue in the consolidated action incorporates the PLA mandate by referencing the FAR provisions implementing President Biden’s EO 14,063. The COFC addressed whether the solicitations provided for full and open competition as required by CICA. The COFC highlighted that the previous policy set forth in President Obama’s EO was discretionary, encouraging agencies to consider PLA agreements for large-scale construction projects on a case-by-case basis, whereas the policy implemented by President Biden’s EO mandated PLAs as a default requirement subject to certain exceptions under the agency’s determination.
Moreover, the COFC found that USACE’s only justification for including the PLA requirement for the project that was the subject of the MVL protest was the policy determination that was made by President Biden and the new FAR. Thus, the COFC found USACE’s decision to disregard the market survey results and to include a PLA requirement against recommendations runs counter to the evidence before the agency, “makes a PLA effectively mandatory, and is arbitrary and capricious.”
After the COFC determined whether the solicitation provided for full and open competition, it then addressed whether the agency’s approach was otherwise permissible. The COFC found that the PLA mandates have no substantive performance relation to the substance of the solicitations at issue and violate CICA’s requirement that procuring agencies obtain full and open competition. Examples that the COFC provided that the PLA mandate excludes otherwise awardable proposals include (1) the terms of the contract do not change if a PLA is included or excluded, (2) the government recognizes plaintiffs are likely otherwise capable of performing the contracts, (3) the agencies can point only to the PLA mandate to justify including PLAs in the solicitations, (4) the agencies declined to seek an exception even after the agencies commissioned market research recommending against the use of PLAs, and (5) even when the agencies received overwhelming data indicating PLAs would increase price, reduce economy and efficiency, and stifle competition, the agencies declined to pursue an exception.
Author’s Comments: While PLAs may no longer be justified as part of a solicitation on the basis of the EO alone when the solicitation is challenged, the EO remains in effect. Accordingly, the PLA mandate remains in effect for other solicitations that were not directly at issue in the case. Those mandates are binding unless challenged before the deadline for proposal submission. Now, however, the grounds for such a challenge have dramatically broadened. And while PLAs may not be mandatory for every large-scale government project, agencies thus far still have the leeway to evaluate the need for PLAs on a case-by-case basis consistent with existing law.
MVL USA, Inc. v. United States, 174 Fed. Cl. 437 (2025).