Defense Alliance Interview with Richard Busch of Lindquist & Vennum

The Legal Side of Doing Business with the Government

While some of the largest defense companies and government contractors are headquartered in Minnesota or have divisions located in the state, the majority of existing defense contracting and research and development opportunities remain untapped by Minnesota businesses. Slowly, the doors are opening, particularly in the area of defense contract work. Minnesota businesses, as well as the state legislature, are realizing the vast potential that awaits in the government marketplace. In that regard, the Defense Alliance of Minnesota has been the primary force in advancing the technical, manufacturing, research and development capabilities of Minnesota companies in the Federal Government marketplace.

Richard F. Busch II, attorney with Lindquist & Vennum in Minneapolis, has played an important role in advancing the Defense Alliance of Minnesota’s mission of raising awareness about the state’s potential for attracting government business. The 28 year veteran, former legal advisor to the director of contracts at the National Security Agency, and former general counsel for a Fortune 50 defense contractor knows the ins and outs of government contracts and is sharing his knowledge with small and mid-sized companies across the state.

We recently sat down with Busch to ask him some basic questions about getting started in the government marketplace.

Q: If a business entity was considering entering the government marketplace and you could give them just one piece of advice, what would it be?

A: Do it right! The concept is simple, but the execution is more complex because the government marketplace is a much different forum than the commercial market. A company must recognize, understand and prepare for the differences. It is crucial to have experienced, qualified professionals advising you about the unique requirements involved when dealing with the government—contract administrators, accountants, quality and marketing experts, and legal professionals. It’s not necessary to hire people experienced in these areas, but a company should have such advisors available as needed. In addition, look to organizations like the Defense Alliance of Minnesota, the Small Business Administration and the Department of Defense’s Procurement Technical Assistance Centers for help and guidance on the proper proactive approach to government contracting.

Q: Once a company wins a government contract or is awarded an order, what focus should they have in completing their obligation?

A: It’s important to remember that a company’s “past performance” is not just a concept, but rather an important element of success. While there is no such thing as a perfect contract, careful administration, timely performance, quality work and accurate accounting are essential to securing an outstanding performance evaluation. The manner in which a company performs and how its contracts are administered is a primary factor the government considers when and if a problem arises. Exercising sound business judgment, even on those occasions when the company must seek an equitable adjustment or relief from the contracting officer, is important in avoiding and/or resolving disputes over the performance of the contract. Remember, the government has responsibilities under the contract as well and must be held accountable.

Q: Is it important to understand the commercial-item procurement initiative when dealing with the government?
A: Federal Acquisition Regulation Part 12 provides guidelines for the purchase of “commercial” supplies and services. Briefly, the regulation states a preference for the acquisition of commercial items and that commercial items shall be acquired to meet the needs of the agency whenever they are available. In addition, the regulation requires prime contractors and subcontractors at all tiers to incorporate, to the maximum extent practicable, commercial items as components of items supplied to the government agency. This initiative is very important for any business participating or in or considering entering the government marketplace. Having a product or service designated as “commercial” affects intellectual property rights, accounting audits, quality programs, socioeconomic requirements and the imposition of most of the normally required terms and conditions.

Q: Is the government interested in research and development projects?

A: Yes. The government recognizes the enormous amount of technical talent that currently exists in the commercial sector. In fact, the Defense Alliance of Minnesota recently sponsored a seminar on the topic of the urgent need for technical expertise on the battlefield. According to the speakers, Dr. Alok Das (Chief Scientist – Space, Air Force Research Laboratories) and William Brower (Deputy Project Manager, PEO Soldier Program), there are urgent needs for small and medium contractors to provide advanced, unique technologies to the government in record time. The government has adopted new programs and regulations that make it advantageous for commercial companies to commit to research and development in technologies that are specifically important to the government.

Q: Obviously contract terms and conditions are important, but how closely should contracts be reviewed?

A: As with all legal documents, it is important to understand the terms you are committing to and your responsibilities under the contract. In addition, over-incorporation of clauses only creates opportunity for increased spending and a forum for failure. In one situation our client, a small subcontractor on a major program, was given flow-down terms and conditions from the large prime contractor. We were requested to review these flow-down clauses and comment on the applicability of the requirements. Although the subcontractor was on the prime’s proposal team, the prime flowed down more than 115 contract provisions. Upon review, we found only six clauses that were mandatory (there are only six mandatory commercial item procurement clauses) and 14 clauses that would be acceptable if appropriately modified to support the prime contractors responsibilities to the government. The rest of the clauses did not apply or were just not appropriate. Always review the clauses and negotiate the final contract as much as possible. Balance your review by recognizing acceptable risks and keeping in mind your goals in acquiring and performing the contract.

Q: Your example included mention of the subcontractor–prime contractor relationship. What are some important considerations when establishing those relationships?

A: A company’s approach to entering the realm of government contracts should include various relationships with prime contractors. Those contractual relationships could include not only the traditional subcontract, but also teaming arrangements, joint ventures and mentor-protégé programs. Be thorough and proactive in the development of such relationships. Ensure that there is an understanding in terms of the focus and goals to be achieved and the responsibilities assigned to each party. Understand billing, risk allocation, intellectual property issues, marketing, and quality issues between the contract parties. Most important, clearly identify the roles and goals of the parties. Finally, watch those terms and conditions.

Q: How should the contractor handle a dispute with the government over contract performance?

A: There are different approaches to resolving disputes with the government over a contract award or performance. In my opinion, it is most important not to be arbitrary and to understand that there is a certain cost to performing any business obligation. Management must balance the rights supplied under the contract with the importance of the company’s relationship with its customer. Generally, my experience has been that the government understands that parties to a contract may have a dispute—there is no perfect contract. While there are no guarantees, most government officials understand that it is “just business” as long as the issues are presented in a business-like approach. A professional approach goes a long way toward resolving issues and maintaining a high past performance rating.

Whatever the level of the dispute, the contractor must ensure that the claim is drafted well and fully supported. While there are times that demand a more formal resolution technique, I am a firm believer in trying to resolve issues through unassisted negotiation or formal mediation. There are a number of government directives that encourage alternative dispute resolutions between parties; take advantage of those directives as much as possible (it’s just good customer relations).w would you characterize the progress of Minnesota companies in tapping the government marketplace?

A: I think that Minnesota companies are lucky to be in the middle of this much opportunity. What the Defense Alliance of Minnesota is doing is creating new avenues and networks that just don’t exist in other states. The alliance has been successful in rallying local politicians, convincing them of the economic benefits of helping companies infiltrate that marketplace. Additionally, the alliance helps support the government contractor community through expert advice and guidance. Lindquist & Vennum is honored to assist such a professional organization and its members. We intend to support our client’s success in their dealings in the government marketplace. The key factor is to “Do it Right!”

Contact:
Richard F. Busch, II
Lindquist & Vennum PLLP
612-371-3981
rbusch@lindquist.com
www.lindquist.com

The Defense Alliance is an independent organization whose mission is to network and expand Minnesota ’s defense and homeland security industries, to create and retain high quality jobs, and to further promote the state’s important contributions to our men and women of the armed forces. Information on ongoing issues and future events can be found at the Alliance website, www.defensealliance.com.