Commerce Department Proposes Rule Impacting Information and Communications Technology Supply Chains

On November 27, 2019, the Department of Commerce issued a proposed rule to implement the May 15, 2019 Executive Order entitled “Securing the Information and Communications Technology and Services Supply Chain.”  Once finalized and effective, the regulations will govern the process and procedures that the Secretary of Commerce will use to determine whether certain transactions involving information and communications technology or services (“ICTS”) should be prohibited or otherwise restricted.  As currently drafted, the proposed rule goes further than many other legal authorities, in that it allows the government to prohibit or otherwise restrict a broad range of wholly commercial transactions that the Secretary determines present national security risks.

Details on key aspects of the proposed rule are in a Client Alert that we published on November 27, available here.  The public comment period remains open until December 27.  Given the breadth of the proposed rule and the significant number of open questions, thoughtful comments will be critically important in scoping a final rule. Continue Reading

New FAR Rule Expands Counterfeit Reporting Obligations

Last week, the FAR Council issued a Final Rule, setting forth new FAR provisions that require the reporting of certain counterfeit and suspect counterfeit parts and certain major or critical nonconformances to the Government – Industry Data Exchange Program (“GIDEP”).[1]  This Final Rule comes more than five years after the rule was first proposed in the Federal Register in June 2014.  The FAR Council describes the Final Rule as “significantly de-scoped” from the version proposed in 2014, but it nonetheless constitutes a significant expansion of the existing counterfeit part reporting obligations, which to date have applied only to electronic parts under DOD contracts.

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OFCCP Proposes Rule Removing TRICARE Health Care Providers from Its Regulatory Authority

On November 6, 2019, the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) issued a Notice of Proposed Rulemaking (“NPRM”) aimed at resolving what OFCCP describes as a “decade of confusion.”[1] At issue is a long-standing question concerning the scope of OFCCP’s enforcement authority over health care providers participating in TRICARE, a federal health care program covering millions of military personnel, veterans, and their families. In particular, the NPRM requests comments on proposed regulations that would amend OFCCP’s definition of “subcontractor” and thereby remove TRICARE providers–and potentially other categories of providers–from OFCCP’s regulatory authority entirely. The deadline for filing comments is December 6, 2019.

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What Is Lowest Priced Technically Acceptable? GAO Clarifies Reach of New LPTA Restrictions

As previously discussed on this blog, the National Defense Authorization Act for Fiscal Year 2017 and the NDAA for Fiscal Year 2018 imposed new limitations on when the Department of Defense can use Lowest Price Technically Acceptable source selection methods.  Just last month, the Department of Defense issued a final rule amending the Defense Federal Acquisition Regulation Supplement to implement those provisions.  Now, in Inserso Corp., B-417791, B-417791.3, Nov. 4, 2019, GAO has weighed in on what counts as LPTA for purposes of those restrictions.  This decision may indicate a potentially significant limitation on the reach of the NDAA provisions, new DFARS rule, and proposed FAR rule.

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DoD Releases Version 0.6 of its Cybersecurity Maturity Model Certification

On November 7, the Office of the Assistant Secretary of Defense for Acquisition released Version 0.6 of its draft Cybersecurity Maturity Model Certification (CMMC) for public comment. The CMMC was created in response to growing concerns by Congress and within DoD over the increased presence of cyber threats and intrusions aimed at the Defense Industrial Base (DIB) and its supply chains.

The model updates Version 0.4, which DoD released on September 4, 2019, and which we wrote about here. The CMMC establishes the framework necessary for contractors to obtain one of five certification levels necessary to perform work on certain DoD contracts, including those that require the handling of Controlled Unclassified Information. Whereas Version 0.4 merely listed the capabilities, controls, and processes that were expected to apply to each certification level, this version provides some additional discussion and clarification to assist contractors with meeting Level 1 certifications.

DoD has not explicitly asked for comment on this version of the CMMC, and has stated that the updated model is being released “so that the public can review the draft model and begin to prepare for the eventual CMMC roll out.” For this reason, although additional changes are to be expected to the model, contractors should review the general requirements closely to ensure that they are positioned to continue bidding on DoD contracts once DoD begins including a requirement to obtain a specific certification level in Requests for Proposal in Fall 2020. Continue Reading

Not So Fast Guy: Recent GAO Decision Provides Rule For When Agency Deadlines Are Unreasonably Short

Tight deadlines are a fact of life in the world of government contracting.  Indeed, it is not unusual for the government to expect a contractor to provide large amounts of information in just a few short days.  And the draconian penalty for missing such a deadline is usually the rejection of a proposal.

But can an agency’s deadline be unreasonably short?  Yes.  In MCR Federal, LLC, GAO determined that the agency’s deadline for submitting its final proposal revision (“FPR”) was so short that it deprived the protester of a fair opportunity to improve its proposal.

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The More Things Change, the More They Stay the Same: GAO’s FY 2019 Protest Statistics

GAO released its Fiscal Year 2019 protest statistics yesterday, and there are both noticeable changes and relative constants:

  • Protest filings are down by 16%, which means about 400 fewer protests than FY18.  The reason why is anyone’s guess, but it’s likely related in large part to GAO’s new Electronic Protest Docketing System — and associated $350 filing fee.  Prior to EPDS, anyone could submit a protest simply by emailing a protest letter to GAO.  Now, a protester must file electronically through a formal docketing system — and pay $350 to get on file.
  • The number of merits decisions is about the same as FY18.  There were only 35 fewer merits decisions in FY19 compared to FY18, lending further support to the theory that the 400 protest-filing decrease is related to EPDS and the filing fee — and that most of those 400 never would have reached a merits decision.
  • The sustain rate is about the same as FY18.  The sustain rate in FY19 is 13%, compared to 15% in FY18.  But more importantly . . .
  • The effectiveness rate is exactly the same as FY18.  The effectiveness rate in FY19 and FY18 was the same — 44%.  The effectiveness rate measures the percentage of all protests filed in which the protester obtains relief “either as a result of voluntary agency corrective action or [GAO] sustaining the protest.”
  • The number of hearings significantly increased from FY18.  There were only 5 hearings in FY18 (i.e., in 0.51% of cases), compared to 21 hearings in FY19 (i.e., in 2% of cases).

Suspension & Debarment Update: Five Takeaways from the ISDC’s Annual Report

The government has released its long-awaited annual report on federal suspension and debarment activities, and the data reflect a number of trends and developments that should be of keen interest to federal contractors and grantees.  The report, which is published by the Interagency Suspension and Debarment Committee (“ISDC”), shows that suspension and debarment remain potent tools that are used frequently across the executive branch, even if the total number of exclusion actions dipped slightly from the previous year.  But more importantly, the report also demonstrates that federal agencies are adopting increasingly sophisticated approaches to managing suspension and debarment actions, a trend that presents both opportunities and potential pitfalls for the contracting community.  Below we highlight the five biggest takeaways from this year’s ISDC report.

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DOJ Issues New Guidance for Treatment of Confidential Information Under Recent Supreme Court FOIA Decision

Last month, the Department of Justice Office of Information Policy issued new guidance on the definition of confidential information under Exemption 4 of the Freedom of Information Act. This new guidance addresses the meaning of “confidential” in light of the Supreme Court’s decision in Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356 (2019). While not determinative, this DOJ Guidance offers contractors critical insight into how agencies will respond in the first instance to FOIA requests for information that may be subject to Exemption 4. This exemption protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” 5 U.S.C. § 552(b)(4).

As covered in this space earlier this year, in Food Marketing Institute, the Supreme Court jettisoned 40 years of established FOIA case law on how agencies defined confidential under Exemption 4. It rejected the well-established “competitive harm” test from National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974) based on the lack of support in the statutory language. In its place, it adopted a “plain language” interpretation of confidential, finding two potential definitions: (1) information “customarily kept private, or at least closely held,” by the submitting party; and (2) information disclosed when the receiving party provides “some assurance that it will remain secret.” The Supreme Court held that the first condition was mandatory but expressly left open whether confidential information could lose that status if provided to the government “without assurances that the government will keep it private.” As a result, contractors and agencies alike were left without clear guidance as to whether, or when, a government “assurance” may be required. Continue Reading

A New Normal for Foreign Military Sales? Total Sales for FY 2019 Nearly Matches FY 2018

On October 15, 2019, the Defense Security Cooperation Agency (DSCA) announced that foreign arm sales for Fiscal Year (FY) 2019 totaled $55.4 billion.

This amount nearly matches the total from FY 2018 of $55.7 billion, continuing the significant increase in foreign arm sales under the Trump Administration and potentially signaling that the enormous 33 percent jump in sales from FY 2017 to FY 2018 may have established a new normal for U.S. arms exports.

Every October, DSCA announces the total sales arms sales of the U.S.  These totals include government-to-government sales under the Foreign Military Sales program as well as sales funded through the Foreign Military Financing program and other security cooperation and assistance agreements with partner nations.  These totals do not include direct sales from U.S. companies to foreign militaries that do not rely on U.S. government assistance.

The total foreign arms sales for the past six years are:

The large spike in sales in FY 2015 was attributed in large part to ramping up efforts to combat ISIS.  That isolated spike aside, the increase in arm sales in the past four years has been dramatic, with the increase in sales attributable primarily to increased foreign government spending (as opposed to U.S. assistance funding).

DSCA prefers to rely on three-year rolling averages, as annual sales figures can be skewed by specific geo-political events (such as the fight against ISIS in FY 2015) or a few high-value transactions (such as the sale of F-15s to Qatar and F/A-18s to Kuwait during FY 2012).  With two consecutive years of sales around $55 billion, we may now be seeing a new normal for foreign arms sales.  Of course, many factors could impact foreign arms sales moving forward, including fluctuations in energy prices and increased scrutiny by Congress, but it appears for now that robust U.S. arms exports will continue.

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