On May 12, 2021, the Biden Administration issued an Executive Order on Improving the Nation’s Cybersecurity (the “EO”). The EO sets out a list of deliverables due from a number of governmental entities in June 2021 and successive months. Our overall summary of the EO and its deliverables can be found here, and our discussion of the EO deliverables that were due in June 2021 can be found here. This blog addresses the EO deliverables in July 2021. Continue Reading July 2021 Developments Under the Executive Order on Improving the Nation’s Cybersecurity
Government contractors should take note of the Fifth Circuit’s June 30, 2021 decision in Taylor Energy Co. v. Luttrell, which reaffirmed that contractors can enjoy a broad immunity from third-party liabilities—known as “derivative sovereign immunity,” or “Yearsley immunity.” Yearsley immunity emanates from Yearsley v. W.A. Ross Const. Co., an 80-year-old Supreme Court decision, which established that a contractor is immune when (i) it performed acts pursuant to a valid authorization of Congress and (ii) the contractor did not exceed the scope of that authority.
In Taylor Energy, the court dismissed claims arising out of an oil spill containment project in the Gulf of Mexico. The basic claim in the suit was that the contractor failed to effectively remediate and contain the oil. The Fifth Circuit found that the government: (i) provided direction to the contractor through the statement of work, in the form of “goals” and specific contract deliverables and deadlines; and (ii) periodically met with the contractor and reviewed and approved the work during performance. Based on these core facts, the court held the contractor was immune. The court held that it was irrelevant that the statement of work was “barebones,” and that the contractor—rather than the government—designed certain elements of the remediation effort. Following the Fourth Circuit’s 2018 decision in Cunningham v. GDIT, the Taylor Energy decision is another appellate court victory for contractors in the wake of the Supreme Court reaffirming Yearsley’s core principles in Campbell-Ewald Co. v. Gomez.
Last month, the Biden administration released its report on the results of its 100-day review of U.S. supply chains for critical products: “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth” (the “Report”). Alongside the Report’s slate of policy recommendations, the Biden administration also announced immediate actions to strengthen supply chains and stimulate domestic competitiveness.
The Report is the result of President Biden’s February 24 “Executive Order on America’s Supply Chains” (the “Order”), which directed federal departments and agencies to conduct a review of supply chain risks in four critical product areas, including pharmaceuticals and active pharmaceutical ingredients (“APIs”). The Report and its recommendations further the Biden administration’s broader goal of rebuilding the U.S. industrial base, reducing reliance on foreign competitors, and bolstering national and economic security.
The U.S. Department of Health and Human Services (“HHS”) led the review of the supply chain for pharmaceuticals and APIs, which focused primarily on drugs, in particular small-molecule drugs and therapeutic biological products. The Report makes a number of recommendations discussed herein that have the potential to impact pharmaceutical companies’ business plans and generate significant opportunities, though many such recommendations are long-term and will require dedicated funding so the actual impact of the Report’s suggestions remains to be seen. Continue Reading Biden Administration 100-Day Supply Chain Assessment: Insights for Pharmaceutical Manufacturers
As GSA Multiple Award Schedule contractors know all too well, Schedule contracting involves a complex web of customer-tracking, reporting, and price-adjustment requirements. Those of us who navigate these often byzantine rules understand why many in the industry have called for the adoption of an alternative approach to verifying price reasonableness.
For the last several years, GSA has been piloting just such an alternative: the Transactional Data Reporting (“TDR”) program, through which the government collects transaction-level data on products and services purchased through the Schedule to make data-driven decisions that save taxpayer dollars. GSA has been running a TDR pilot program for several years to test the potential for a new regulatory regime, though the program sometimes has been the source of criticism and controversy. Now that controversy has heightened further: GSA’s Office of Inspector General published an audit report on June 24, 2021 that is sharply critical of the program, only to see GSA’s Federal Acquisition Service (“FAS”) Commissioner publicly reject the report’s conclusions and defend TDR’s effectiveness.
Time will tell whether the TDR rule becomes the new standard for GSA Schedule contracting. But the latest round of controversy suggests that the current maze of requirements are not going away any time soon.
On May 12, 2021 the Biden Administration issued an “Executive Order on Improving the Nation’s Cybersecurity” (EO). Among other things, the EO sets out a list of deliverables from a variety of government entities. A number of these deliverables were due in June, including a definition of “critical software,” the minimum requirements for a software bill of materials, and certain internal actions imposed on various federal agencies.
On June 11, 2021, the White House released new guidance on its plans to limit waivers of domestic sourcing laws, bolstering its January 2021 Executive Order on “Ensuring the Future is Made in All of America by All of America’s Workers.” The guidance, entitled “Increasing Opportunities for Domestic Sourcing and Reducing the Need for Waivers from Made in America Laws,” provides insight on how the Biden Administration intends to enforce domestic sourcing laws such as the Buy American Act (“BAA”) over the coming years.
We have previously written about the January 2021 Executive Order here. Among other things the Executive Order established a federal Made in America Office (“MIAO”) to review agency decisions to waive laws such as the BAA from procurements, grants, and other government contracting activities. It also directed the Office of Management and Budget to establish reporting and oversight procedures to promote enforcement of the Made in America Laws. The guidance fulfills that requirement.
Among other things, the guidance:
- Requires each agency to designate a Senior Accountable Official, an official responsible for coordinating with the Made in America Director to implement the waiver review process,
- Establishes the procedures for review of waiver requests by the Made in America Office (“MIAO”),
- Implements the Executive Order’s requirement that acquiring activities prepare agency reports on compliance with Made in America Laws, and
- Explains the process to develop the public database of all proposed waivers by early fiscal year 2022.
Importantly, the guidance creates an “initial phase” of implementation for the Executive Order, indicating that future phases will follow. In this “initial phase,” the Biden Administration will focus on (1) Jones Act waivers and (2) non-availability procurement waivers pursuant to the BAA proposed by the 24 agencies subject to the Chief Financial Officers (“CFO”) Act. During the first quarter of fiscal year 2022, the MIAO will phase in reviews of waivers proposed by non-CFO Act agencies and other types of waiver requests.
In a blog post announcing the guidance, the new Director of the Made in America Office, Celeste Drake, stated that the guidance is intended “to improve practices and processes to ensure that Made in America laws are not a mere compliance exercise,” as well as “reinforc[e] the actions announced in the 100-Day Supply Chain Review.”
Made in America Executive Order
President Biden’s January 25, 2021, Executive Order aims to “maximize” the U.S. Government’s purchasing of goods and services produced in the United States. The Executive Order established the MIAO to oversee and administer domestic preference requirements in federal procurements. The Executive Order generally requires agencies to obtain approval from the Made in America Director prior to granting a waiver of Made in America Laws. The term “Made in America Laws” is broadly defined in the Executive Order as covering all statutes, regulations, rules, and Executive Orders that refer to “Buy America,” “Buy American,” or include other domestic preference requirements.
The Executive Order also required the Made in America Director, within 45 days after appointment, to publish a list of the information and justification required to support a proposed waiver and a timeframe under which the Made in America Direction will notify the agency of the results of the review. Celeste Drake, a trade policy expert and former labor union official, was selected by President Biden as the Made in America Director on April 27, 2021. To the extent permitted by law and consistent with national security, the results of the waiver review will be made available on a public website.
Key Provisions of the Initial Guidance
The initial guidance details a phased approach to implementing the Executive Order starting summer 2021. Specifically, the guidance falls into four categories: (1) appointment of Senior Accountable Officials at each agency; (2) procedures for review and approval of waivers; (3) additional requirements for the initial and bi-annual agency reports on use of Made in America Laws; and (4) steps for development of the public website listing all proposed waivers and whether the waivers have been granted.
Senior Accountable Officials
The initial guidance requires agencies designate a Senior Accountable Official (“SAO”) for domestic sourcing by June 30, 2021, and send the name of the SAO to the MIAO. The SAO must be “sufficiently senior” so as to direct the agency’s activities regarding relevant Made in America Laws such as identifying opportunities to increase the agency’s reliance on domestic products and services by scouting suppliers, participating in inter-agency product level reviews, managing a waiver reduction strategy, and meeting regularly with the Made in America Director to discuss progress on implementing the waiver reduction strategy. The SAO is also responsible for ensuring that the agency complies with the below procedures for submitting waiver requests to the MIAO.
Review and Approval of Agency Waiver Requests
The guidance broadly defines the term “waiver” to include all “exceptions and waivers under applicable Made in America Laws,” including automatically-effective legal waivers. Indeed, the guidance lists various FAR provisions among the “waivers and exceptions,” including those implementing the Trade Agreements Act and the commercial information technology exception, which occur by operation of law. It remains to be seen how the Biden Administration will enforce its waiver review procedures for these kinds of exceptions, but the current “initial phase” does not require agencies to address them.
To sufficiently assess why the agency requires the waiver, the initial guidance details the required information that must be included by the agency. If a covered agency seeks a waiver on the grounds of non-availability it must submit the following information:
(1) identify the agency, contracting activity, and program office;
(2) provide a description of the end item or construction material being acquired including discussing the impact to the mission if not acquired, country(ies) of origin and U.S. content, the estimated value of the procurement, and, if pre-award, whether the supplier of the item(s) is a small or disadvantaged business;
(3) describe the market research activities used to identify domestically manufactured items satisfying the agency’s requirements;
(4) describe whether competition is anticipated or the procurement was conducted using competitive procedures;
(5) identify whether the solicitation will or did include a price preference for domestic end products and construction materials;
(6) explain, if pre-award, a U.S.-made end product would be rejected for reasons other than price; and
(7) identify the approving authority for non-availability determinations over $25,000.
CFO Act agencies requesting Jones Act waivers must provide a description of the transportation required, explain why the agency cannot acquire transportation on a Jones Act qualified vessel, justify why it is in the interest of national defense to waive the requirement, and provide any additional clarifying information.
The MIAO plans to complete review of the majority of waivers within 3 to 7 business days and not more than 15 days from submission.
Agency Reports on Use of Made in America Laws
Under Section 11 of the Executive Order, each agency must report on its use of Made in America Laws by July 24, 2021. The initial guidance provides a list of sections that must be included in the report. First, the report will identify all types of waivers of Made in America Laws that are relevant to the agency and the agency’s plan to manage waivers. This section includes a discussion of the agency’s process for maximizing use of domestic sources, explanation of the agency’s waiver review procedures, profile of waivers granted in fiscal year 2020, and summary of the types of products and/or construction materials for which non-availability waivers are used most frequently. Second, the report must describe the agency’s ongoing use of and justification for any longstanding or nationwide waivers. Third, the report will include the agency’s recommendations for maximizing the use of domestic goods, products, and services. Last, the report will detail the status and outcome of the agency’s review of actions inconsistent with the Executive Order including whether any agency actions will be suspended, revised or rescinded or if new actions are proposed.
In addition to the initial reports, Section 12 of the Executive Order requires each agency to file bi-annual reports on the agency’s ongoing implementation of and compliance with Made in America Laws. The initial guidance includes similar content requirements for these bi-annual reports.
Development of the Public Website
Under Section 6 of the Executive Order, the Administrator of General Services is required to develop a public website to report information on all proposed waivers and whether those waivers have been granted. The MIAO is responsible for reporting all proposed waivers after 5 days of receipt to GSA to post on the public website. The initial guidance explains that the website “will be designed to help manufacturers, resellers, and other interested parties, including potential domestic manufacturers who are not currently selling to Federal agencies, easily identify opportunities to do business in the Federal marketplace.”
As previously discussed, the new MIAO waiver procedures are intended to reduce agencies use of waivers of Made in America Laws by increasing scrutiny of such waiver requests. In addition to the increased scrutiny by the MIAO, proposed waivers and the results of the MIAO review will be published on a public website. The public database of waiver determinations has the potential to provide useful precedents for contractors that are considering whether to seek a waiver from an agency. However, given the added scrutiny of waiver decisions and public reporting, contractors should carefully consider the information provided to the agency in connection with the review process that could become public.
On May 12, the Biden Administration issued an “Executive Order on Improving the Nation’s Cybersecurity.” The Order seeks to strengthen the federal government’s ability to respond to and prevent cybersecurity threats, including by modernizing federal networks, enhancing the federal government’s software supply chain security, implementing enhanced cybersecurity practices and procedures in the federal government, and creating government-wide plans for incident response. The Order covers a wide array of issues and processes, setting numerous deadlines for recommendations and actions by federal agencies, and focusing on enhancing the protection of federal networks in partnership with the service providers on which federal agencies rely. Private sector entities, including federal contractors and service providers, will have opportunities to provide input to some of these actions.
In particular, and among other things, the Order:
- seeks to remove obstacles to sharing threat information between the private sector and federal agencies;
- mandates that software purchased by the federal government meet new cybersecurity standards;
- discusses securing cloud-based systems, including information technology (IT) systems that process data, and operational technology (OT) systems that run vital machinery and infrastructure;
- seeks to impose new cyber incident[i] reporting requirements on certain IT and OT providers and software product and service vendors and establishes a Cyber Safety Review Board to review and assess such cyber incidents and other cyber incidents, and;
- addresses the creation of pilot programs related to consumer labeling in connection with the cybersecurity capabilities of Internet of Things (IoT) devices.
The Order contains eight substantive sections, which are listed here, and discussed in more detail below:
- Section 2 – Removing Barriers to Sharing Threat Information
- Section 3 – Modernizing Federal Government Cybersecurity
- Section 4 – Enhancing Software Supply Chain Security
- Section 5 – Establishing a Cyber Safety Review Board
- Section 6 – Standardizing the Federal Government’s Playbook for Responding to Cybersecurity Vulnerabilities and Incidents
- Section 7 – Improving Detection of Cybersecurity Vulnerabilities and Incidents on Federal Government Networks
- Section 8 – Improving the Federal Government’s Investigative and Remediation Capabilities
- Section 9 – National Security Systems
The summaries below discuss highlights from these sections, and the full text of the Order can be found here.
On April 27, 2021, President Biden signed an Executive Order entitled “Increasing the Minimum Wage for Federal Contractors” that will raise the hourly minimum wage for federal contractors to $15.00 effective January 30, 2022. This Executive Order builds on Executive Order 13658 (“Establishing a Minimum Wage for Contractors”), issued by President Obama in 2014, which first implemented an hourly minimum wage of $10.10 for covered federal contractors.[i]
The American Rescue Plan, signed into law last month, includes $1.9 trillion in economic stimulus, healthcare, and related funding. And just last week the Biden administration released an infrastructure proposal, the American Jobs Plan, that includes $2.3 trillion in transportation, connectivity, power, and other critical infrastructure investments.
Contractors are right to view these plans as massive opportunities — but should be cognizant of the regulatory strings that often attach to government spending. In general, these can include Federal Acquisition Regulation (FAR) and agency-specific FAR supplements for federal procurements, as well as the nonprocurement uniform requirements (2 C.F.R. Part 200) and related agency-specific regulations that attach to Federal grant funds even when disbursed by state or local entities.
Now, some Congressional members are seeking to add new restrictions that would significantly overhaul the existing domestic preference regime for Federal procurements — mere weeks after the promulgation of new Buy American regulations and the release of a new Executive Order to further tighten the application of these rules.
When the United States government decides to intervene in False Claims Act litigation after initially declining intervention, it is not “déjà vu all over again.” Instead, as one court has recognized, the “government is getting on a moving train,” and it can only be permitted to “intervene at a later date” if it can show “good cause” for doing so. See 31 U.S.C. § 3730(c)(3).
On February 24, 2021, a Tennessee federal district court offered a pointed reminder of this principle when it denied a government motion to intervene in a qui tam suit after DOJ originally had declined to intervene six months earlier. See U.S. ex rel. Odom v. Southeast Eye Specialists, No. 3:17-cv-00689 (M.D. Tenn. Feb. 24, 2021). In so ruling, the court vacated a magistrate judge’s Report & Recommendation (“R&R”), which found that DOJ had established “good cause” for intervention. Although motions to intervene pursuant to Section 3730(c) are often granted, the recent order issued in U.S. ex rel. Odom v. Southeast Eye Specialists illustrates that the “good cause” showing is not a hollow requirement and that it can serve as a meaningful constraint on belated attempts by DOJ to intervene to pursue a case after initially declining to do so.