Nichols comes from Crowell’s successful government contracting group, one of the most established and well-regarded in the city, and his appointment to co-chairman of Covington’s government contracts group marks one of the rare times the firm has tapped someone from the outside to lead a practice.
Nichols shares the title with longtime Covington partner Alan Pemberton, who’s served as sole chairman of the government contracts group since 2001. In Nichols, Covington has a younger partner (Nichols is 43 and Pemberton is 59) with a strong international practice representing contractors based abroad — an area poised to grow as more countries consider joining a World Trade Organization procurement agreement that would open up the bidding process to foreign-based companies.
“One needs to plan for succession issues,” Pemberton said. “We need to be thinking about the future. One area we want to target is companies that are based abroad and are seeking to enter the U.S. procurement market.”
Procurement budgets grew about 12 percent a year between 2002 and 2008, and started to retract in 2010, according to the Office of Management and Budget. Covington is banking on the idea that as contractors compete more fiercely for contracts and face increasing scrutiny from regulators, their need for lawyers with procurement expertise will grow as well.
“In a tighter environment, you see increased legal activity,” Pemberton said. “Increased competition will drive bid protest work. Greater scrutiny of contractors will drive more disputes under existing contracts and increased white collar and regulatory scrutiny.”
Contractors bring what’s known as protest claims against the government when they want to challenge the award of a contract to another entity. Litigation arising from such claims have been on the rise as companies fight over scare federal dollars.
Covington already represents defense contractors in white-collar investigations, national security, corporate and international trade matters, and having a larger contracting group with more procurement specialists will allow the firm to be more full-service for those existing clients, Pemberton said.
Issues grow in complexity
Nichols said jumping to Covington was a unique opportunity to build something new, since the firm had many of the peripheral practices contractors need, but had yet to focus on government contracting as a core practice.
Pemberton predicts the firm will grow the group both from within and by lateral hiring, and it is looking at candidates from other firms, in-house legal departments and the government.
Government contracting is a mature field that for decades has been dominated by a handful of firms, including Crowell, Venable, Wiley Rein and McKenna Long & Aldridge, which has the oldest and largest practice with about 60 attorneys.
“It’s an interesting time to be getting in, just as we’re talking about downturns in the budget, particularly in defense spending,” said Fred Levy, a 30-year government contracts lawyer at McKenna Long. “That said, there is always federal spending and federal contracting and potentially a lot of business.”
Legal issues for government contractors are much more complicated today than when McKenna Long first began building its group decades ago, Levy said. Law firms getting into the contracting game today need to be prepared to handle a growing spate of compliance and intellectual property issues that arise with companies spar with the government over IP rights to a product they developed with the help of government funding.
“A lot of firms have a misconception about what it takes to start a government contracts practice,” he said. “People think it’s a niche area and you need a few practitioners and you can cover the gamut of federal contracting, but it’s a very diverse and broad practice. Getting a handle on all the issues in government contracting law takes a lot of time.”
One thing any government contracting group needs is a deep bench of lawyers for litigation, Levy said. Bid protests are especially labor-intensive because of the 100-day deadline the Government Accountability Office has to make a decision in those cases, he said.
“I’ve been solicited many times to practice at firms starting up government contracting practices,” he said. I’m not interested in that because I need mass. I need bodies and people to help me that know something about government contracts.”