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We are a subcontractor for several DoD contracts related to a specific program.  For each subcontract over the past eight years, we have asserted the same data rights to certain technical data.  Our first assertion was made and provided to the Prime in July 2012.  In August 2015, we received notification of a Government Challenge pursuant to 252.227-7037.  In November 2019, we received notification of Final Determination in which the Government took the position of Unlimited Rights. In accordance with 252.227-7013, there are no authorized marking legends for Unlimited Rights.

 

Without going too far into the weeds, has anyone successfully petitioned the Government to ignore the prior legends as permitted in 252.227-7013 and 252.227-7037? My understanding of these DFARS is the Government may ignore or, at the Contractor's expense, correct or strike a marking (7013) or may cancel or ignore the restrictive markings (7037). There is a choice how to handle the unjustified markings.  There are 1000+ drawings which included restrictive legends consistent with the data rights we asserted. The burden of removing the legends is labor intensive and an expensive endeavor; I also don't see the contractor updating the drawings to remove the legend as a remedy provided under the DFARS.   

 

Personal disclaimer, I have been with this company >1 year. The history related to the Challenge and the decision not to appeal the determination had been lost with personnel changeover. I appreciate any feedback.

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Does your company agree with the government's final determination? If no, you need an attorney. If yes, and you want to understand the company's rights with respect to existing drawings, then you need an attorney.

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2 hours ago, Megan G said:

In November 2019, we received notification of Final Determination in which the Government took the position of Unlimited Rights. In accordance with 252.227-7013, there are no authorized marking legends for Unlimited Rights.

 

Without going too far into the weeds, has anyone successfully petitioned the Government to ignore the prior legends as permitted in 252.227-7013 and 252.227-7037?

It seems unlikely that, for as many deliverables are you seem to be talking about here, the Government would be prepared to put in place what it needed to in order to systematically but properly "ignore" the markings on these specific affected deliverables.  DFARS 227.7103-12(b), discussing unjustified markings, includes no discussion about how, exactly, the Government would go about "ignoring" the unjustified markings.  Hopefully no one in the Government wants to set up a process where the risk of inadvertently releasing data in a way that exceeds the Government's license is high.  Improper disclosure can violate 18 USC 1905, a criminal statute.

I trust we are talking about paragraph (h)(1) of the "Rights in Technical Data--Noncommercial Items" clause at DFARS 252.227-7013.  It provides:

Quote

Unjustified technical data markings. The rights and obligations of the parties regarding the validation of restrictive markings on technical data furnished or to be furnished under this contract are contained in the Validation of Restrictive Markings on Technical Data clause of this contract. Notwithstanding any provision of this contract concerning inspection and acceptance, the Government may ignore or, at the Contractor's expense, correct or strike a marking if, in accordance with the procedures in the Validation of Restrictive Markings on Technical Data clause of this contract, a restrictive marking is determined to be unjustified.

(emphasis added).  I don't recall this language being the subject of recent changes, so it is likely the same language in all affected contracts.   

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@here_2_help thanks for your review and feedback. The question is less about the impact the Unlimited Rights determination has on the  asserted data rights, and more on our obligation as a subcontractor to provide drawing updates.  Based on the date the notice of final determination was provided, we are outside the window (90 days) to provide notice of an intent to appeal.  

With respect to the drawing updates, @Jacques I am looking at the language at paragraph (h)(1) of the "Rights in Technical Data--Noncommercial Items" clause at DFARS 252.227-7013. With the current drawing approval process, updates to the drawing will take us close to a year to complete and hundreds of resource hours.  My reading of 252.227-7013(h)(1) is that the Government can either ignore, or at our expense they (the Government) may correct or strike the restrictive markings.   A request that the Contractor modify the drawings as a result of the Challenge is not explicitly provided as a remedy. Might a request that the Contractor modify the deliverables entitle the Contractor to equitable adjustments?

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It seems doubtful to me that the Government would anticipate a request for equitable adjustment simply because the Government complied with DFARS 227.7103-12(b)(2)(ii).  Whatever you decide to do, promptly inform the Government before incurring any costs that you believe are its responsibility to pay.

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I'm curious about the phrase, "Notwithstanding any provision of this contract concerning inspection and acceptance" in paragraph (h)(1) or the "Rights in Technical Data--Noncommercial Items" clause at DFARS 252.227-7013.  Does this function as an exception to the finality of acceptance?  If the validation is resolved in a way that favors the Government, does that mean the Government can revisit its acceptance of those data deliverables as it relates to the unjustified marking?  Does this language have the effect of reviving the direction to contracting officers at DFARS 227.7103-14(b)(3)?  It provides:

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(3)  Do not accept technical data that do not conform to the contractual requirements in all respects.  Except for nonconforming restrictive markings (see paragraph (b)(4) of this subsection), correction or replacement of nonconforming data, or an equitable reduction in contract price when correction or replacement of the nonconforming data is not practicable or is not in the Government's interests, shall be accomplished in accordance with—

(i)  The provisions of a contract clause providing for inspection and acceptance of deliverables and remedies for nonconforming deliverables; or

(ii)  The procedures at FAR 46.407(c) through (g), if the contract does not contain an inspection clause providing remedies for nonconforming deliverables.

Am I wrong in reading DFARS 227.7103-14(b)(4) as only applying to nonconforming markings, and not applying to unjustified markings?  Can the Government reject a deliverable for having an unjustified marking (after the validation process is complete)?

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5 hours ago, Megan G said:

In November 2019, we received notification of Final Determination in which the Government took the position of Unlimited Rights.

You said you were with a subcontractor.  As such, the government is not in privity of contract with you.  Your contract is with the prime.  What do(es) your subcontract(s) say about what data rights you are conveying and to whom?

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13 minutes ago, Jacques said:

I'm curious about the phrase, "Notwithstanding any provision of this contract concerning inspection and acceptance" in paragraph (h)(1) or the "Rights in Technical Data--Noncommercial Items" clause at DFARS 252.227-7013.  Does this function as an exception to the finality of acceptance?  If the validation is resolved in a way that favors the Government, does that mean the Government can revisit its acceptance of those data deliverables as it relates to the unjustified marking?  Does this language have the effect of reviving the direction to contracting officers at DFARS 227.7103-14(b)(3)?  It provides:

 

First, thank you for the reference to DFARS 227.7103-12(b)(2)(ii).  With respect to 252.227-7013(h)(1), I had thought to mention earlier the deliverables with the restrictive markings had been accepted by the Prime, and presumably the Government. As I read the language above, this would permit the Government to revisit acceptance, but, at least in my situation, it wouldn't direct the CO to DFARS 227.7103-14(b)(3).  If the marks were nonconforming 227.7103-14(b)(3) may apply. Although the final determination notice didn't specify, it's my assumption that in a Government Challenge, if the Government is successful in its challenge the restrictive legends are an Unjustified Markings rather than Nonconforming.  

I'm also struggling with the timeline of related events. First assertion 2012 - Notice of Challenge 2015 - Final Determination 2019. During this seven year period hundreds of drawings containing the markings were provided and accepted. If this Challenge had resolved in 2015 there may be only a few hundred of updates needed instead of the 1000+ we're currently looking at.  I'm unfortunately any related background knowledge left the company a couple years ago without leaving a document trail on this matter.  

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5 minutes ago, Retreadfed said:

You said you were with a subcontractor.  As such, the government is not in privity of contract with you.  Your contract is with the prime.  What do(es) your subcontract(s) say about what data rights you are conveying and to whom?

Perhaps the parties are relying on paragraph (k) of the "Validation of Restrictive Markings on Technical Data" clause at DFARS 252.227-7037.  It provides:

Quote

 (k)  Privity of contract.  The Contractor or subcontractor agrees that the Contracting Officer may transact matters under this clause directly with subcontractors at any tier that assert restrictive markings.  However, this clause neither creates nor implies privity of contract between the Government and subcontractors.

 

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Thanks, Jacques.  However, we don't know if "matters under this clause" are consistent with what the subcontractor was required to do by the subcontract.  In other words, would the government be attempting to hold the subcontractor to something that it was not required to do by its subcontract?

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5 hours ago, Megan G said:

Without going too far into the weeds, has anyone successfully petitioned the Government to ignore the prior legends as permitted in 252.227-7013 and 252.227-7037? My understanding of these DFARS is the Government may ignore or, at the Contractor's expense, correct or strike a marking (7013) or may cancel or ignore the restrictive markings (7037). There is a choice how to handle the unjustified markings.  There are 1000+ drawings which included restrictive legends consistent with the data rights we asserted. The burden of removing the legends is labor intensive and an expensive endeavor; I also don't see the contractor updating the drawings to remove the legend as a remedy provided under the DFARS.   

Is the Government requesting that your company correct the markings?

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2 minutes ago, Retreadfed said:

Thanks, Jacques.  However, we don't know if "matters under this clause" are consistent with what the subcontractor was required to do by the subcontract.  In other words, would the government be attempting to hold the subcontractor to something that it was not required to do by its subcontract?

I appreciate the Government's step of allowing for the correction of the deliverables is probably outside of the four corners of 252.227-7037, so I see the value of your question, even though I probably get there differently.  I think Government contracting officers assume every day that clauses required to be flowed down have been.

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28 minutes ago, Megan G said:

I'm also struggling with the timeline of related events. First assertion 2012 - Notice of Challenge 2015 - Final Determination 2019. During this seven year period hundreds of drawings containing the markings were provided and accepted. If this Challenge had resolved in 2015 there may be only a few hundred of updates needed instead of the 1000+ we're currently looking at.  I'm unfortunately any related background knowledge left the company a couple years ago without leaving a document trail on this matter.  

While the date of the notice of the challenge is obviously very relevant, the date of the first assertion isn't.  It is the date of final payment or final delivery of any technical data under the contract that starts the clock, and the date of the challenge the stops it.  See paragraph (i) of the clause at DFARS 252.227-7037.

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8 minutes ago, Retreadfed said:

You said you were with a subcontractor.  As such, the government is not in privity of contract with you.  Your contract is with the prime.  What do(es) your subcontract(s) say about what data rights you are conveying and to whom?

 

2 minutes ago, Jacques said:

Perhaps the parties are relying on paragraph (k) of the "Validation of Restrictive Markings on Technical Data" clause at DFARS 252.227-7037.  It provides:

 

Both are correct, however @Retreadfed brings the task at hand back into focus.  Our Data Assertions were provided in accordance with 252.227-7017 and included as an Exhibit in our subcontract(s). The communication of Final Determination was from the Prime, and the Prime made the request that we update the deliverables to remove the restrictive legends.

The contracts further provide that all data which we asserted to be proprietary and that is necessary for the performance shall be protected in accordance with 252.227-7013.  The relative flowdown clauses are prefaced with the language: except that in those clauses conferring patent and data rights to the Government, the term "Government" or "Contracting Officer" retains its literal meaning and is not to be construed as "Buyer". 

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39 minutes ago, Megan G said:

except that in those clauses conferring patent and data rights to the Government, the term "Government" or "Contracting Officer" retains its literal meaning and is not to be construed as "Buyer".

That looks like a portion of the preface. Is there more preceding it? Specifically, how "Contractor" should be construed?

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7 hours ago, Megan G said:

Without going too far into the weeds, has anyone successfully petitioned the Government to ignore the prior legends as permitted in 252.227-7013 and 252.227-7037?

I have no experience along the lines you are looking for. Gratuitously, it seems to me that such a petition would have less success if the Government ordered the Contractor to remove the restricted marking, and the Contractor, in turn, ordered your company, the subcontractor, to do so. I assume your contract type is Firm Fixed Price, which would mean that there might be serious financial loss in this removal endeavor. If this loss might bankrupt your company and/or cause it to exit the business, I think a better case could be made in a petition if you could come up with a firm amount that wouldn't bankrupt or exit your company and propose that the Government perform the needed removal which your company will pay.  

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17 hours ago, Don Mansfield said:

That looks like a portion of the preface. Is there more preceding it? Specifically, how "Contractor" should be construed?

Correct, the rest of this section is (what I consider) standard Prime - Subcontractor flowdown: The clauses set forth below, and in effect on the date of the Order, are incorporated herein by this reference and made a part of the Order. In all such clauses, the term "Contractor" shall mean "Seller," the term "Contract" shall mean the "Order," and the term "Government Contracting Officer" (or equivalent phrases), shall mean "Buyer" as applicable; except that in those clauses conferring patent and data rights to the Government, the term "Government" or "Contracting Officer" retains its literal meaning and is not to be construed as "Buyer."  The relevant data flowdowns are 252.227-7013; 252.227-7030; 252.227-7037; and 252.246-7001.

@Neil Roberts Yes, we are working within a FFP contract and the anticipated losses are significant.  The sheer number of updates needed is one thing, but it's the current change order process which takes an hour/drawing update.  We will explore an exemption to this process (unlikely) or, as you suggest, setting a price which we will pay for the Government to complete the updates.

22 hours ago, Jacques said:

It seems unlikely that, for as many deliverables are you seem to be talking about here, the Government would be prepared to put in place what it needed to in order to systematically but properly "ignore" the markings on these specific affected deliverables.  DFARS 227.7103-12(b), discussing unjustified markings, includes no discussion about how, exactly, the Government would go about "ignoring" the unjustified markings.

Admittedly, I am not familiar with the Government's document/deliverable control practices. The Final Determination granted Unlimited Rights to each component which rights had been asserted; simply put, all restrictive markings on all deliverables provided could/should be ignored. Without formal procedure, I would think an attestation which identifies all affected Deliverables and directs the Government to ignore the Restrictive Marking pursuant to 252.227-7013 and 252.227-7037 could suffice -- I acknowledge this is a rather simple (and hopeful) fix.

 

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11 hours ago, Megan G said:

 

I would think an attestation which identifies all affected Deliverables and directs the Government to ignore the Restrictive Marking pursuant to 252.227-7013 and 252.227-7037 could suffice -- I acknowledge this is a rather simple (and hopeful) fix.

I envision that component drawing references in a Government end item might have widespread distribution by the government, prime contractors and others for repairs and use of the end item. With all those actors, merely providing an attestation to the government seems to me unable to accomplish the result. Don't know what the end items are in your case. But, I envisioned how an attestation would work or not if the end item was a military airplane.

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