Third Time Around: Inconsistencies Persist with Final DFARS Commercial Items Rule

On January 31, 2018, the Department of Defense (“DoD” or the “Department”) published a final rule regarding commercial item purchasing requirements.  Among other key amendments, the final rule modifies the Defense Federal Acquisition Regulation Supplement (“DFARS”) by:  (i) formalizing a presumption of commerciality for items that DoD previously treated as commercial; (ii) providing commercial item treatment to goods and services offered by nontraditional defense contractors; and (iii) prioritizing the types of information that the contracting officer (“CO”) can consider when determining price reasonableness in the absence of adequate competition.

The final rule adopts much of DoD’s August 2016 proposed rule, which itself was a revised version of a retracted August 2015 proposed version.  We discussed the August 2016 proposed rule on this subject (and linked to an article regarding the August 2015 version) in a prior post.  Despite receiving repeated input from industry and Congress, DoD’s final rule still provides little concrete guidance, and although these changes were made with the stated purpose of promoting consistency across purchasing components, it appears likely that inconsistencies will persist.  In particular, the final rule continues to leave the door open for individual contracting officers to make potentially burdensome requests for information to support the proposed pricing of commercial items. Continue Reading

Incoming! Issuance of 1,000 Notifications Portends Ramp-Up of OFCCP Enforcement Activity

On February 1, the Office of Federal Contract Compliance Programs (OFCCP) issued 1,000 corporate scheduling announcement letters (CSALs) to federal contractors, a move that suggests a renewed emphasis on the agency’s enforcement of anti-discrimination and affirmative action employment laws. CSALs are informal notices that precede the official initiation of an OFCCP compliance evaluation, but the issuance of these letters serves as both a sign of OFCCP’s enforcement posture under the Trump administration and a call to action for the contractor establishments that receive these notifications. Continue Reading

Will President Trump’s Infrastructure Plan Address OMB Scoring?

During his first State of the Union address on January 30, 2018, President Trump informed the country that “it is time to rebuild our crumbling infrastructure.”  He called on Congress to “produce a bill that generates at least $1.5 trillion for the new infrastructure investment we need.”  And, the President suggested that “every Federal dollar should be leveraged by partnering with State and local governments and, where appropriate, tapping into private sector investment — to permanently fix the infrastructure deficit.”

The President’s full infrastructure plan has yet to be unveiled, but a leaked summary of the plan from January 22 suggests that the plan will heavily depend upon encouraging “state, local and private investment” by providing incentives in the forms of grants.  Fixing federal infrastructure may be made difficult, however, due to the budgetary scoring rules implemented by the Office of Management & Budget (“OMB”). Continue Reading

DoD Implements Streamlining Awards for Innovative Technology Projects

On January 9, 2018, Department of Defense (“DoD”) issued Class Deviation 2018-O0009, designed to reduce barriers to entry for innovative entities through streamlining the awards process for research and development contracts. This Class Deviation allows for the use of simplified acquisition procedures and excuses certain procurement obligations when DoD awards contracts and subcontracts valued at less than $7.5 million to “nontraditional defense contractors”[1] or small businesses. The Class Deviation implements Section 873 of the National Defense Authorization Act (“NDAA”) for FY 2016, Pub. L. 114-92, as amended by Section 896 of the NDAA for FY 2017 (Pub. L. 114-328).

The Class Deviation, titled “Pilot Program for Streamlining Awards for Innovative Technology,” expands exceptions to certified cost or pricing data requirements under FAR 15.403-1(b) to include contracts or subcontracts valued at less than $7.5 million awarded to small businesses or nontraditional defense contractors.[2] The exceptions apply to awards pursuant to (1) a broad agency announcement for the acquisition of basic or applied research (see FAR 35.016(b)(2)); (2) the Small Business Innovation Research (“SBIR”) Program; and (3) the Small Business Technology Transfer (“SBTT”) Program. Nontraditional defense contractors and small businesses awarded contracts or subcontracts valued at less than $7.5 million pursuant to a broad agency announcement under FAR 35.106 or the SBIR Program are also exempted from requirements for audits and records examination under FAR 52.215-2. The exceptions expire on October 1, 2020.

The Pilot Program, housed within DoD’s Defense Pricing/Defense Procurement and Acquisition Policy (“DP/DPAP”), will soon be caught up in a restructuring at DoD. DP/DPAP is within the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (“USD(AT&L)”), which faces imminent reorganization mandated by section 910 of the 2017 National Defense Authorization Act.

The Streamlining Awards for Innovative Technology Pilot Program is another attempt by DoD and Congress to attract private-sector innovation to bring the latest technologies to the warfighter. The Department has also experimented with the Defense Innovation Unit Experimental (“DIUx”), created under the Obama Administration to reduce barriers to entry by awarding contracts on an accelerated timeline. The Section 809 Panel is also examining barriers to entry, particularly for nontraditional contractors with new technologies of interest to DoD.  The Pilot Program is intended to work alongside the DIUx initiative to provide forward momentum for DoD in opening the door for nontraditional contractors through streamlined procurement procedures. This Class Deviation could be a small step in opening that door but time will tell whether there are enough cutting-edge high tech companies who can and will take advantage.

Editor’s Note: Covington is Outside General Counsel to the 809 Panel.

[1] A nontraditional defense contractor is an entity that is “not currently performing and has not performed any contract or subcontract for DoD that is subject to full coverage under the cost accounting standards prescribed pursuant to 41 U.S.C. 1502 and the regulations implementing such section, for at least a one-year period preceding the solicitation of sources by DoD for the procurement.”

[2] Unless an exemption exists, certified cost or pricing data currently is required for contract actions in excess of $750,000. See FAR 15.403-4(a)(1).

Changes Coming to the FAR: Government Proposes New Rules on Data Breaches, Cost Evaluation of IDIQ Proposals, and Overseas Small Business Contracting

Federal contractors may be subject to a slate of new regulations in 2018, including rules that increase cyber reporting burdens, expand small business competition, and change the procedures for competitively awarding IDIQ contracts.

Among the proposed rules, announced in the Semiannual Regulatory Agenda of the FAR Council and the General Services Administration (“GSA”), are changes that would affect nearly every segment of the government contracts industry.  Although some of the rules may simplify the burdens on contractors, most come with enhanced compliance obligations, particularly with respect to data security and cyber incidents.

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Recent Support of Countermeasure Development Poised to Continue in Reauthorization of PAHPA

The U.S. Government has recently taken a number of steps to reinvigorate its support of medical countermeasure development. In particular, by pursuing new methods of contracting, updating regulatory frameworks, and establishing additional incentives for capital investment, the U.S. Government has confirmed that countermeasure development remains a critical component of public health preparedness.

Now, over the past two weeks, a two-part congressional hearing has suggested that recent efforts may soon be accompanied by key legislative changes, including much needed funding authorizations and incentives. As a result, the upcoming reauthorization of the Pandemic and All-Hazards Preparedness Act (“PAHPA”), and its prior reauthorization, may present a critical opportunity to continue to improve public-private relationships in countermeasure development.

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FDA Commitment to MCM Development Reflected in New Draft Guidance on Medical Countermeasure Priority Review Vouchers

On January 19, 2018, FDA announced the availability of a new draft guidance, titled “Material Threat Medical Countermeasure Priority Review Vouchers.” FDA’s publication of the draft guidance, which was issued by FDA’s Office of Counterterrorism and Emerging Threats (OCET) without a statutory mandate – reflects the commitment of FDA leadership to the development and approval of medical countermeasures (MCMs). In a question and answer format, FDA provides details about the Agency’s interpretation and implementation of the MCM priority review voucher (PRV) program, which was established in December 2016 by the 21st Century Cures Act (Section 565A of the Federal Food Drug, and Cosmetic Act (FD&C Act)). That provision, intended to incentivize the development of MCMs, requires FDA to award a PRV to the sponsor of a successful marketing application that meets certain statutory criteria.

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DARPA Targets Animal-Based Viral Threats in Solicitation for PREEMPT Program

On January 19, the Defense Advanced Research Projects Agency (“DARPA”) issued a new solicitation in the form of a broad agency announcement for the Preventing Emerging Pathogenic Threats—or “PREEMPT”—program. The program will be managed by the DARPA Biological Technologies Office, which generally supports activities that integrate biology, engineering, computer science, physical sciences, and mathematics.

The goal of the program is to support research and development relating to new tools, models, and technologies that are focused on preventing the transition of viral threats from animals to humans. In contrast to recent biodefense efforts that have largely been initiated in response to significant human outbreaks, such as in connection with Ebola, influenza, and Zika, the program targets animal-based viruses that have yet to become an active threat to humans. In addition, consistent with DARPA’s mission, the program targets animal-based viruses that have a potential to impact deployed U.S. military forces, particularly with respect to remote geographic areas associated with prevalent endemic and emerging diseases.

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Beware of Employment Law Issues Amidst a Potential Government Shutdown

As Congress scrambles in a last ditch attempt to pass a funding proposal to keep the government operating, government contractors face the various employment law implications of potential furloughs caused by a government shutdown. Of particular concern to private employers is how to furlough employees who are exempt from overtime payments under the Fair Labor Standards Act without placing their exempt status at risk. Contractors must also be aware of obligations under the WARN Act and the rights of former or returning military service members under the Uniformed Services Employment and Re-employment Rights Act.

Click here to read our recent client alert on these issues.

Key Takeaways from Bipartisan Bill to “Strengthen Buy American Requirements”

Following recent efforts by Democrats to push for “Buy American” action, on January 9, 2018, Senator Chris Murphy (D-CT) proudly announced via Twitter that there now is “bipartisan support for strengthening our Buy American laws” and that he is “excited to have the Trump admin[istration] and partners like [Senators Rob Portman (R-OH), Lindsey Graham (R-SC) and Sherrod Brown (D-OH)] working together to get this done.” That same day, these senators reached across the aisle to sponsor the BuyAmerican.gov Act of 2018 (S.2284) to “strengthen Buy American requirements.”

This proposed legislation may be the most significant “Buy American” development since President Donald J. Trump issued his “Buy American” Executive Order (E.O. 13788, April 2017), which set forth a policy and action plan to “maximize . . . the use of goods, products and materials produced in the United States” through federal procurements and federal financial assistance awards to “support the American manufacturing and defense industrial bases” (and which we analyzed in a prior blog post).

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