Sorting through domestic preference requirements applicable to government contracts is no simple task. Different agencies like the DOD, FTA, FAA, FHWA, have their own rules applicable to certain programs. Exceptions from those rules can differ when a small business is making the offer. And the rules are subject to change. With the Court of Appeals for the Federal Circuit’s (“Federal Circuit”) decision in Acetris Health LLC v. United States (Fed. Cir. 2/10/2020), the situation is now a little more complicated. The same product may be “U.S. made” for government contracts purposes but considered foreign origin for customs and international trade purposes which triggers US customs duties and tariffs. Continue Reading Federal Circuit weighs in on Trade Agreements Act compliance and the meaning of “manufacture”
We’ve all heard the expression that those who deal with the Government must turn square corners. This is because the Government has a broad array of tools at its disposal to motivate, coax, and cajole contractors and federal grant recipients to play by the rules. Those tools include harsh measures such as criminal prosecution and civil false claims act enforcement on the one hand and poor CPARS ratings on the other. A seemingly less severe administrative option available to the Government is suspension and debarment. However, any entity that has been suspended or debarred knows that these measures can prove harsh and disruptive. While the numbers of suspensions and debarments have declined from the all-time high in 2011, there is still significant activity. In its FY 2018 report, the Interagency Suspension and Debarment Committee reported 2444 referrals, 480 suspensions, 1542 proposed debarments, and 1334 debarments. The number of referrals for suspension and debarment in FY 2018 is almost exactly the same as the number of GAO bid protests filed that year.
What is Suspension and Debarment?
Like any consumer, the Government has inherent authority to pick with whom it will do business. Not everyone makes the cut. Suspension and debarment are the Government’s tool to avoid entities it views as a high risk for poor performance, fraud, waste, and abuse. Suspension and debarment preclude a business entity or individual from contracting with the Government or from receiving grants, loans, loan guarantees or other forms of assistance from the Government. A suspension is a temporary exclusion when the Government determines immediate action is necessary pending the completion of an investigation or legal proceeding. A debarment is an exclusion for a defined, reasonable period of time—often three years. Continue Reading A primer on Suspension and Debarment
We previously looked at whether the COVID-19 pandemic is an excusable delay that would give contractors relief from delivery deadlines and schedule commitments. But many contractors impacted by Coronavirus may see their costs of performance increase due to agency instructions intended to control the spread of the virus. Today we review potential avenues for recovering those costs.
- The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The first potential avenue for recovering Coronavirus impact costs is the recently passed CARES Act (Pub. L. 116-136). Section 3610 of the CARES Act allows agencies to reimburse contractors for paid or sick leave costs that they incur to pay their employees when a site is impacted by Coronavirus. This reimbursement authority applies where (i) employees or subcontractors are unable to perform work on a federally approved site “due to facility closure or other restrictions;” and (ii) those employees or subcontractors cannot telework because their duties cannot be performed remotely.
But this reimbursement authority is subject to some very specific limitations. First, the CARES Act does not require that agencies reimburse these costs. It just gives agencies discretion to do so and allows them to use any available appropriations. Contractors seeking reimbursement under this avenue will need to affirmatively request reimbursement and provide the agency with compelling reasons to exercise its discretion.
Second, the agency’s reimbursement authority is limited to “the minimum applicable contract billing rates not to exceed an average of 40 hours per week,” and is only for leave that is paid by the contractor to “keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contract personnel.”
Third, any reimbursements received pursuant to § 3610 of the CARES Act must be reduced by the amount of payroll tax credits the contractor is allowed under Division G of the Families First Coronavirus Response Act (Pub. L. 116-127).
On April 9, 2020, the Office of the Under Secretary of Defense for Acquisition and Sustainment issued Implementation Guidance for § 3610 of the CARES Act. The guidance emphasizes the need for documentation to show how leave costs are “identified, segregated, recorded, invoiced, and reimbursed.” It also notes that implementation will vary based on the contract type and suggests creation of a separate line item (or series of line items) to track CARES
§ 3610 costs.
Affirmative action requirements waived for contracts specifically related to COVID-19 relief
As in past times of national emergency, the Office of Federal Contract Compliance Programs has stepped up to exempt certain new federal supply and service contractors and subcontractors from having to comply with most OFCCP requirements over the course of the contract. Announced March 17, OFCCP calls the action the “National Interest Exemption.” Contractors providing supplies and services specifically related to COVID-19 relief must still abide by OFCCP’s non-discrimination and non-retaliation obligations and are subject to OFCCP complaint investigations. The exemption extends to the obligations of all three laws enforced by OFCCP: Executive Order 11246, § 503 of the Rehabilitation Act, and § 4212 of VEVRAA.
Federal agencies and contractors are working hard to address the realities of the COVID-19 pandemic. In some cases, work must stop. In others, the work will increase or change dramatically. While contractors should look to contracting officers for guidance with respect to specific contracts, agency-wide guidance documents are beginning to shed light on the government’s expectations. We will be using this blog entry to collect and share agency guidance on performance of government contracts during the Coronavirus pandemic.
Department of Defense—
- Civilian Personnel Guidance for DoD Components (Mar. 8, 2020). Risk-based measures to minimize risk to civilian personnel and a limited telework policy.
- Guidance for Personnel Traveling During the Novel Coronavirus Outbreak (Mar. 11, 2020). Pre-travel and post-travel health guidance.
- Planning for Potential Novel Coronavirus Contract Impacts (Mar. 10, 2020). Contractors are encouraged to work with government program managers and requirements owners to determine if new measures need to be taken to ensure the welfare and safety of the workforce. Empowers contracting officers as the authority when contract performance is affected by COVID-19.
- The Role of Continuity in the COVID-19 Pandemic Response (Mar. 18, 2020). Reinforces the localized power of the Health Protection Conditions (HPCON) framework and Pandemic Plans that are developed by DoD Components.
- Contract Place of Performance — Public Health Considerations (Mar. 20, 2020). Extends the same telework flexibilities that are available to DoD service members and civilians to contractors, where appropriate.
- Determining and Making Commercial Item Procurements (Mar. 27, 2020). Lists class Commercial Item Determination (CID) to allow Contracting Officers maximum flexibility in awarding critical contracts for supplies and services related to the COVID-19 pandemic in a streamlined manner.
- Undefinitized Contract Actions, Class Deviation 2020-O0012 (Apr 3, 2020). For undefinitized contract actions (UCA), it removes the requirement in DFARS 217.7404-4(a) to limit obligations, if the UCA is related to the national emergency. It also allows the head of the contracting activity to waive the limitations in DFARS 217.7404(a)(1)(i), 217.7404-3(a), and 217.7404-4(a) for a UCA if the head determines the waiver is necessary due to the national emergency for COVID-19.
- Submission of Interim Vouchers under Classified Contracts, Class Deviation 2020-O0011 (Apr. 3, 2020). Directs contractors to submit interim vouchers under classified contracts to the payment office listed in the contract. The vouchers are provisionally approved by the Defense Contract Audit Agency (DCAA).
- Progress Payment Rates, Class Deviation 2020-O0010 (Mar. 20, 2020). Increases progress payment rates at DFARS 232.502-2 for large business concerns to 90% and small business concerns to 95%.
- Progress Payment Rates Implementation Guidance (Apr. 3, 2020). Provides FAQs for Class Deviation 2020-O0010.
Department of the Army—
- Planning for Potential Novel Coronavirus Impacts (Mar. 12, 2020). Encourages increased communication, notes that contracting officers do not bear the responsibility to determine whether the excuse of COVID—19 applies, outlines causes for performance delays that are excusable and FAR provisions that excuse performance delays, and clarifies situations in which compensation is an option.
In response to the growing Coronavirus pandemic, President Trump announced that the federal government will invoke the Defense Production Act to obtain necessary medical equipment and supplies from private industry. In this post we address some of the most frequently-asked questions about the DPA.
What is the Defense Production Act?
Originally conceived during the Korean War, the DPA allows the President to divert goods and supplies from civilian use to promote the national defense. This authority is not limited to sourcing aircraft parts or ammunition, or to supporting active military operations. The text of the Act expressly extends to matters involving “national economic security and national public health or safety.”
The Defense Priorities and Allocations System regulations in 15 C.F.R. Part 700 implement the Defense Production Act. The DPAS regulations provide detail about how the government will issue rated orders and what contractors and commercial suppliers must do to respond.
How does the government prioritize orders for specific supplies?
The government specifies the relative priority for specific supplies by issuing a “rated order,” which may be designated “DX” or “DO.” A DX order has the highest priority. It must be fulfilled before any other DO or unrated order. A DO rated order must be fulfilled before an unrated order. A rated order must be fulfilled first, even if it means the contractor must divert items already in process or ready for delivery under another contract. Continue Reading Contractor FAQs on the Defense Production Act
The spread of COVID-19 (Coronavirus) remains unclear, but its impacts are already being felt. Supply chains are being disrupted and companies are implementing preventative measures to protect their employees. Many businesses have already suspended non-essential travel, encouraged remote working arrangements, and advised employees to follow the Centers for Disease Control risk-reduction strategies. Given these delays and disruptions, it’s logical to wonder: Are delays or impacts related to the Coronavirus an excusable delay?
The answer is yes, if you can prove it. Below we outline the standard contract clauses dealing with delays from epidemics and discuss how courts have interpreted those clauses in the past when contractors claimed their delays should be excused due to an epidemic. Continue Reading Is Coronavirus an excusable delay?
Transportation is central to mail delivery, so it is no surprise that the companies who move the mail dominate the list of the Top 150 U.S. Postal Service Suppliers in Fiscal Year 2019. Seven of the Top 10 companies are involved in transportation. Federal Express tops the list, as it has since 2002, with just over $2 billion in USPS receipts.
All three newcomers to the Top 10 are transportation-related companies, with several more positioned in the Top 20. Transportation spending in 2019 reached an all-time high, totaling $9 billion. While that’s a large figure, it’s only 11 percent of the Postal Service’s operating expenses. More than two-thirds of the Postal Service’s operating expenses are spent on employee compensation and benefits.
Technology companies are also prevalent on the list, with HP Enterprise Services, Accenture Federal Services, Northrop Grumman, and IBM all in the top 25. Good ‘ole paper products are also represented. Victory Packaging, maker of USPS-branded packaging, is ranked seventh.
The Postal Service spent $10.3 billion on its top 150 suppliers in 2019, about five percent more than last year. The Top 10 USPS suppliers accounted for $4.2 billion of that amount.
Unlike other agencies, the Postal Service is exempt from many – but not all – federal procurement laws and regulations. Bedrock rules, such as the Federal Acquisition Regulation (FAR), the Competition in Contracting Act (CICA), and GAO bid protest jurisdiction, do not apply. Instead, the Postal Service has its own 714-page Supplying Principles and Practices manual and a unique procurement environment. The Postal Service is also off-budget, funding its own purchases.
Below are the Top 10 suppliers in FY 2019:
Top 10 USPS Suppliers, FY 2019*
|2019 Rank||Supplier Name||FY19 Totals||Payment Location||2018 Rank|
|1||Federal Express Corporation||$2,050,716,860.98||Pasadena, CA||1|
|2||EnergyUnited Electric Membership Corporation||$419,662,347.85||Statesville, NC||3|
|3||Eagle Express Lines, Inc.||$390,444,985.04||Homewood, IL||2|
|4||Pat Salmon & Sons, Inc.||$341,072,753.43||Little Rock, AR||28|
|5||Postal Fleet Services, Inc.||$248,967,211.46||St. Augustine, FL||12|
|6||United Parcel Service of America, Inc.||$211,210,699.94||Louisville, KY||5|
|7||Victory Packaging||$210,917,649.33||Houston, TX||4|
|8||HP Enterprise Services, LLC||$193,053.629.38||Plano, TX||7|
|9||United Airlines, Inc.||$177,324,474.78||Pasadena, CA||10|
|10||Kalitta Air, LLC||$170,893,464.38||Ypsilanti, MI||21|
*As in past years, not included are purchases made via credit cards (including U.S. Bank and Voyager card fuel purchases). When companies are believed to be affiliated or under common ownership, we have often consolidated their separate entries under the company with the highest individual ranking or best-known name. Our consolidations vary from year to year, and this may affect numerical rankings. City/state designations are derived from USPS’s payment records and may not be the contractor’s primary location.
Happy New Year to mid-size government contractors! SBA’s determination of small business status under receipts-based size standards is transitioning from a three-year to a five-year lookback period starting today. The change is the result of a final rule that SBA issued on December 5, 2019. The rule is intended to allow mid-size businesses to regain or keep their small business status longer. The expectation is that this will increase small business contracting dollars and set-asides. A breakdown of the rule is below.
The Military Housing Privatization Initiative was intended to address the availability and adequacy of housing for military service members and their families. As a result of the MHPI, approximately 99 percent of military family housing in the United States is now operated and maintained by private developers. MHPI developers have recently been the target of litigation seeking to hold them responsible for mold and other environmental contamination. Plaintiffs are not only seeking damages for personal injury. They are seeking class certification. In one case they are seeking injunctive relief that would require changes to how the MHPI project is managed.
In this post, we provide some background on the MHPI program, the environmental contamination litigation filed so far, and some perspective on the legal issues presented in these cases. We explain why MHPI developers have a basis to assert derivative sovereign immunity and why the federal enclave doctrine presents an obstacle to some state law claims. We also point out why plaintiffs may face insurmountable hurdles in achieving certification to proceed in a class action. Continue Reading How MHPI developers can defend against class actions for environmental contamination