Subcontractors take contractors to court

As government spending shrinks, smaller subcontractors are trying to protect their share, even filing suit against prime contractors who they feel are wrongly withholding work.

Take Chantilly-based System High, which sued Fairfax-based ManTech International. In a suit filed in the U.S. District Court for the Eastern District of Virginia’s Alexandria division late last month, the company alleged that ManTech threatened to end two subcontracting relationships with it after it refused to allow ManTech on its team to compete for a Defense Advanced Research Projects Agency contract.

A service-disabled, veteran-owned business, System High also said that ManTech tried to entice System High employees to consider working for a replacement subcontractor.

System High, which declined to comment for this story, had sought an injunction against ManTech to stop it from terminating the subcontracts and soliciting System High employees as well as a punitive damages award.

ManTech filed a motion to dismiss, which the court granted late last week.

In a filing, ManTech noted that it has the right to terminate subcontracts and was doing so not in bad faith but because it preferred to work with a company that would be a small business for the foreseeable future. System High may not qualify in the future because of a large contract it won, the filing alleged. ManTech declined to comment further.

Alan Chvotkin, executive vice president and counsel for the Professional Services Council, an industry group, said tensions between prime contractors and subcontractors aren’t unique to tough budget environments, but the current constraints mean companies don’t want to miss out on potential work.

“As budgets get tighter, opportunities are fewer and fewer,” he said. “Companies are watching their business opportunities a lot more carefully because there’s just a lot fewer of them.”

Last year, Bethesda-based Financial Markets International, known as FMI, filed its own suit against McLean-based contracting giant Booz Allen Hamilton, arguing that Booz Allen breached its subcontract with FMI. The two companies teamed on a winning proposal for work in Ukraine under the U.S. Agency for International Development.

FMI, in its court filing, argues that Booz Allen has not allocated to FMI the agreed-upon level of work for the project, even though FMI’s experience in the Ukraine was critical to Booz Allen’s win. Nick W. Kennedy, FMI’s project manager, said the lawsuit was a “last resort” but that the company is optimistic about its chances on the suit.

Booz Allen has filed a motion to stay the case until the subcontract ends in October, contending in a filing this month that it has verified that it is meeting its obligation and adding that FMI cannot argue the company has breached its subcontract given that the program is ongoing.

In a statement, Booz Allen said it is “confident and will vigorously defend our position in this case,” but declined to comment on the specifics because the matter is under litigation.

 
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