Although it is usually good news for a protester when an agency takes corrective action, the corrective action sometimes fails to adequately address the protest grounds. When this occurs, a protester may wish to file a new protest challenging the agency’s corrective action. The question of when to file a corrective action challenge is often tricky, however — and a misstep can result in dismissal. GAO recently clarified that timing in Computer World Services Corporation.
Contractor Supply Chain Readiness – An Update on Expected Regulatory Changes
In recent years, both Congress and the Executive Branch have made it a key priority to mitigate risks across the industrial and innovation supply chains that provide hardware, software, and services to the U.S. government (“USG”). Five of these initiatives are likely to result in new regulations in 2020, each of which could have a fundamental impact on companies’ ability to sell Information, Communications, Technology and Services (“ICTS”) to the USG. As these requirements begin to take hold, federal contractors should be mindful of potential impacts and the actions that can be taken now to prepare for increased USG scrutiny of their supply chain security.
GSA Awards First Contracts to Develop an Online Shopping Platform, and the White House Seems to Be Paying Attention
On Friday, the General Services Administration (“GSA”) announced that it had awarded three contracts to develop online shopping portals for commercially-available off-the-shelf (“COTS”) items. The awardees are Amazon Business, Fisher Scientific, and Overstock.com.
Federal Circuit Splits on Blue & Gold Question in Inserso
It’s a big deal in the government contracts community whenever the Federal Circuit weighs in on a bid protest. And it is a particularly big deal when the Federal Circuit issues a split opinion in a bid protest. That’s what happened last week in Inserso Corporation v. United States (No. 2019-1933), where the Federal Circuit issued a split opinion denying a protest as waived under Blue & Gold.
With Potential New TINA Audits on the Horizon, the ASBCA Provides a Helpful Primer on Defending Against Defective Pricing Claims
Late last year, a spokesman for the Department of Defense announced without fanfare that the agency would increase audits of certified cost or pricing data under the Truth in Negotiations Act (“TINA”). While the full effect of that enhanced focus on TINA compliance remains to be seen, a recent decision by the Armed Services Board of Contract Appeals (“ASBCA”) provides helpful guidance for navigating upcoming TINA audits and defending against defective pricing claims, particularly in situations involving an on-going program where documents contain both facts and judgmental estimates.
Whose Knowledge Counts? The Expanding Scope of Government Knowledge in FCA Cases
This week marks the four-year anniversary of the Supreme Court’s landmark False Claims Act decision in Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016). In Escobar, the Supreme Court confirmed that the question of government knowledge lies at the heart of FCA liability determinations, but it did not specifically address who counts as “the Government” for purposes of this inquiry. Since Escobar, however, a number of circuits have confirmed that the relevant scope of “government knowledge” includes both the payor agency and other agencies with regulatory oversight and enforcement responsibilities, a recognition that has far-reaching consequences for FCA litigation. To learn more about this emerging trend in the case law and its potentially powerful implications for FCA matters, click here.
Congress Increases Flexibility for Forgiveness under the Paycheck Protection Program, yet Uncertainty about Implementation Remains
The Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law on June 5, revising a number of key requirements for loan forgiveness under the Paycheck Protection Program (“PPP”). The Program has provided support to a number of organizations negatively impacted by COVID-19 in the form of loans that can be forgiven if used for certain eligible expenses.
The Flexibility Act extends the period in which organizations can incur or pay for such expenditures and allows employers to avoid reductions in forgiveness amounts when they are unable to (i) rehire qualified employees or (ii) maintain prior employment levels due to operational changes resulting from the pandemic. The Act also reduces the amount of eligible expenditures that must be spent on payroll costs when seeking forgiveness from 75 to 60 percent.
Yet, as with most aspects of the Program to date, a number of outstanding questions remain regarding how the U.S. Small Business Administration (“SBA”) intends to implement these changes, particularly with respect to potential reductions in forgiveness amounts. The SBA has consistently deviated from the statutory framework that initially established PPP loans, so it would not be surprising if Congress’s revisions to the Program lead to additional unexpected changes at the regulatory level in the coming weeks.
Targeting DoD’s Reliance on Russian Energy
At the end of last month, the Department of Defense (“DoD”) issued a class deviation to implement Section 2821 of the National Defense Authorization Act for Fiscal Year 2020 (“FY20 NDAA”), which seeks to reduce dependence on Russian energy by prohibiting the acquisition of energy sourced from inside Russia for DoD’s main operating bases in Europe. The Section 2821 restriction is an expansion of earlier limits enacted by Congress on the use of Russian energy in DoD’s European operations. Section 2821 is broader in scope than the earlier limits, and while it does contemplate that DoD may waive the prohibition in certain circumstances, the waiver process is demanding. Contractors with a focus on supplying energy to DoD or supporting its missions in Europe should be familiar with the Section 2821 restriction and the new class deviation.
Background
During the past few years, Congress has looked for ways to reduce DoD dependence on Russian energy for national security reasons. Congress enacted Section 2811 of NDAA for Fiscal Year 2019 (“FY19 NDAA”), which prohibited DoD from acquiring any furnished energy for the new Rhine Ordnance Barracks Army Medical Center in Germany, unless the Secretary of Defense certified, among other things, that the Medical Center would minimize the use of fuels sourced from inside Russia. In crafting Section 2811 of FY19 NDAA, Congress sought to protect the U.S. military’s primary casualty hospital in Europe from possible Russian aggression and manipulation. It contemplated that this requirement as to the Rhine Ordnance Barracks could be waived if the Secretary certified to the congressional defense committees that the waiver was “necessary to protect the national security interests of the United States.” Congress repealed and replaced Section 2811 of the FY19 NDAA with a new provision in the FY20 NDAA in order to expand the restrictions and put in place a more demanding waiver that granted Congress additional oversight.
New Class Deviation
Under the recent class deviation, the Secretary of Defense is prohibited from awarding contracts for the acquisition of furnished energy for any covered military installation in Europe that uses energy sourced from Russia, unless a waiver is granted. DFARS 252.225-7970 defines “covered military installation” as a military installation in Europe identified by the DoD as a main operating base. DFARS 252.225-7971 defines “furnished energy” as energy furnished to a covered military installation in any form and for any purpose, including heating, cooling, and electricity. This class deviation, directed by Section 2821 of the FY20 NDAA, applies to all energy supply contracts, subcontracts, and any other contractual instrument and allows for a broad interpretation of “main operating base.” While the new class deviation does not represent a blanket prohibition on all Russian-sourced energy, it sends a strong policy message that DoD’s European operating bases should eliminate any reliance on Russian-sourced energy.
Waiver Provision
The Secretary of Defense may grant a waiver for a specific contract on a case-by-case basis if it is “necessary to ensure an adequate supply of energy” and is balanced against the “potential risk” of reliance on Russian energy. Notably, Section 2821 of the FY20 NDAA includes a notice and wait requirement to provide Congress time to review the sufficiency of a Secretary’s waiver justification. The Secretary must submit a notice of waiver to the congressional defense committees no later than 14 days before the execution of the contract that includes the following elements: (1) the rationale for the waiver; (2) an assessment of how the waiver may impact European energy resilience; and (3) an explanation of DoD mitigation efforts for reduced Russian energy use.
In repealing Section 2811 of the FY19 NDAA and enacting Section 2821 of the FY20 NDAA, Congress has signaled that European energy resilience is an important national security issue. While the waiver provision does provide an avenue for relief where alternative energy sources may be currently unavailable, the requirement to include mitigation measures for reducing reliance on Russian energy with any waiver request highlights Congress’ commitment to eliminating Russian energy use over time.
DoD Releases Draft Section 3610 Reimbursement Guidance
Last week, DoD released a draft of its much-anticipated guidance implementing Section 3610 of the CARES Act, which authorizes the government to reimburse qualifying contractors for the costs of providing certain paid leave to employees as a result of the COVID-19 pandemic. DoD previously published a collection of memoranda, Q&A documents, and a class deviation addressing Section 3610 reimbursement, but the new draft guidance (“Guidance”), which includes a “reimbursement checklist” and accompanying instructions, provides significantly more detail regarding the process for requesting and substantiating claims for reimbursement under the statute.
A number of open questions remain pending the issuance of final guidance, as discussed below, but the contours of DoD’s Section 3610 process are becoming increasingly clear. Contractors interested in pursuing recovery under the statute should start preparing now to satisfy these emerging rules and requirements.
FEMA Continues to Push Defense Production Act Authority On Several Fronts
Two notices recently published in the Federal Register indicate the Federal Emergency Management Agency (“FEMA”) intends to exercise Defense Production Act (“DPA”) authority in novel ways during the current coronavirus pandemic.
On May 12th, FEMA announced that it plans to invoke DPA authority which permits the President to consult with representatives of industry, business, financing, agriculture, labor, and other interests in order to enter into voluntary agreements or plans of action to help provide for the national defense.
The following day, FEMA published the Emergency Management Priorities and Allocations System (“EMPAS”) regulations governing FEMA’s use of DPA priorities and allocations authority — which, as we’ve previously covered on several occasions, permit the executive branch to require private companies to prioritize its orders and allocate resources in the private sector as needed to promote the national defense. FEMA included a new concept of third-party rated orders in its version of DPA regulations. Continue Reading
