Compliance

Breaking into federal government contracting can be daunting. There are ever-changing compliance obligations to consider and complex bidding and proposal submission requirements to navigate. An entire industry of sales consultants, proposal writers, and lobbyists promising to help tap into the $600 Billion plus federal marketplace are only a Google search away. Engaging the services from one of these firms is generally allowed, but there are restrictions. This post deals with one of those restrictions—the Covenant Against Contingent Fees (FAR 52.203-5) which restricts how government contractors pay third-party sales agents.

It has been two months since President Biden issued his Buy American Executive Order on January 25, 2021. But it would seem we still have more questions than answers: What specific actions will agencies take to promote the Order’s policy? What will the Made in America Office look like? Where can I find more information about proposed waivers? While the answers to these questions are probably still months away, it is important for contractors to understand the possible implications now and plan accordingly.

Have you received a Section 889 letter yet? If not, you may soon. The letters ask whether you provide or use “covered telecommunications equipment or services.” They are part of the implementation of Section 889 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (the 2019 NDAA), which has two phases. The first phase started in August 2019 but has a limited scope. The second phase—which started in August 2020—is much broader and raises a lot more questions. This article answers some of those questions and provides some tips on how to comply.

Keep in mind that Section 889 is still being implemented. Much of this analysis is based on interim rulemakings at 85 F.R. 42665 and 85 F.R. 53126. Final rules may change based on public comments.

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.

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—

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.

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.

As if over-reaching under the False Claims Act wasn’t bad enough, government contractors will now be subject to a new area of investigation. On November 5, 2019, the U.S. Department of Justice announced its new Procurement Collusion Strike Force, focusing on ferreting out antitrust violations in the government contracts arena.

The PCSF will focus on deterring, detecting, investigating, and prosecuting antitrust crimes under government contracts. These areas include bid-rigging conspiracies and related fraudulent schemes that undermine competition in government procurement. The new strike force is composed of 13 U.S. Attorneys’ Offices, and investigators from the FBI, Office of Inspector General offices of the Department of Defense OIG, the U.S. Postal Service, and other federal agencies.

Buoyed by a guilty plea by five South Korean oil companies, which netted $156 million in criminal fines and $205 million in separate civil settlements, the DOJ Antitrust Division believes this is just the tip of the iceberg. Indeed, in a speech to the American Bar Association, Deputy Assistant Attorney General Richard A. Powers cited a study that eliminating bid rigging could reduce procurement costs by 20% or more. Government contractors, most of whom likely have a profit rate of 10% or less, will find that figure hard to believe.

The problem that government contractors will face is this:  If DOJ believes procurement costs are being inflated by 20% due to bid rigging, once DOJ starts looking for it, DOJ will find it, whether it exists or not. And DOJ is looking for criminal antitrust violations, with penalties that include up to 10 years imprisonment, steep fines, and double damages. Corporations can be fined up to $100 million.

On July 15, 2019, President Trump signed Executive Order 13881 addressing domestic preferences in government procurement. Unlike Executive Order 13788 (April 18, 2017) and Executive Order 13858 (Jan. 31, 2019), which had no substantive effect on existing domestic preference statutes and regulations, this one does.

EO 13881 calls for the FAR Council to make two significant changes to FAR clauses implementing the Buy American Act. The first increases the domestic content requirements for items to comply with the Buy American Act. The second increases the price preference for domestic products.

Under the Christian Doctrine, prime contractors face the risk of having a court or a board of contract appeals read a clause into their contracts, even if it was omitted from the contract that they signed. In this entry we discuss whether the Christian Doctrine applies to subcontractors.

The Christian Doctrine is almost certainly inapplicable to subcontractors. For the reasons why, consider the decision in Energy Labs, Inc. v. Edwards Engineering, Inc., (N.D. Ill. June 2, 2015). A subcontractor contracted to manufacture and deliver HVAC systems for the Chicago Transit Authority. In its own contract, the prime contractor certified that the HVAC system would comply with the Buy America Act. But the prime contractor failed to flow the requirement down to the HVAC manufacturer, which planned to manufacture the units in Mexico. After learning that the plan to manufacture the units in Mexico would not meet the Buy America requirement, the prime contractor canceled the order and purchased the units from another manufacturer.

The original manufacturer sued for breach of contract. In its motion to dismiss, the prime contractor made two arguments. The subcontract was “illegal” because it omitted the Buy America requirement. Or it was legal only because the Christian Doctrine meant that the Buy America requirement was read into the subcontract by operation of law. The court rejected both arguments. There was nothing “illegal” about the prime’s failure to include a Buy America requirement in the subcontract. And there was no basis to read the requirement into the subcontract through the Christian Doctrine. “The Christian doctrine . . . was intended to apply to contracts between the federal government and government contractors, not to subcontracts.”

This result is consistent with our experience.