Contractors often assume that government auditors have special authority to interpret the Cost Accounting Standards. That assumption is easy to understand — auditors frequently take the position that there is just one “right” way for a company to do its contract cost accounting, based on how other companies do things. But contractors should know that CAS is flexible and generally gives them options about how to comply, based on the circumstances of their business. In short, a contractor’s business judgment matters, and contractors can use it to push back on auditors who take an overly rigid view of CAS.
New Contractor Conflict of Interest Rules May Be Coming Soon, with a Special Focus on Consulting and Advisory Contracts
In legislation passed last week, Congress directed the FAR Council to issue new rules for contractor organizational conflicts of interest. The legislation itself did not create any new OCI standards, but provided factors for the council to consider, focusing on conflicts of interest for companies that act as consultants to the government.
It is unclear at this point what the precise nature and extent of the resulting changes to the OCI rules may be. But the new law makes it likely that there will be some fairly significant revisions. Congress set a deadline of Summer 2024 for the new regulations, so the contracting community should be on the lookout for a notice of proposed rulemaking in the coming months, and should not hesitate to submit comments for the government’s consideration.
Congress Offers Greater Hope for Defense Contractors Battling Inflation; Actual Relief Is Still Not Clear
As part of the FY23 National Defense Authorization Act (“NDAA”), Congress has given the Department of Defense authority to pay defense contractors for increased costs due to inflation. Section 822 of the NDAA amends Public Law 85-804 (50 U.S.C. 1431) to allow contractors to apply for adjustments, while also giving the DoD wide discretion to grant or deny requests. President Biden is expected to sign the FY23 NDAA soon, and Section 822 has the potential to be welcome news for contractors who have been battling inflation under multi-year, fixed-price contracts.
As readers of this blog know from prior posts, DoD has issued position papers over the last year that attempt to address inflation with existing legal tools, but as a practical matter, the Department has provided few options for contractors impacted by rising costs. The new NDAA provision could finally provide DoD with the legal support it needs to aid contractors struggling with inflation. However, many questions remain about how this law will work and whether it will actually meet the growing needs of the defense industrial base. In particular, Congress has not yet appropriated money to fund applications for relief, and DoD must prepare guidance for implementing the statute. Both of these things will need to happen before contractors can apply for and potentially receive inflation-based price adjustments under this amended Public Law 85-804 authority.
This post discusses the amendment and analyzes the hurdles that remain between defense contractors and inflationary relief.
DoD Releases Updated Guidance for Firm-Fixed-Price Contractors Grappling with Inflation
With continued inflation putting pressure on the defense supply chain, the Department of Defense (“DoD”) has released guidance encouraging contracting officers to provide mutually agreeable relief to fixed-price contractors facing untenable costs.
DoD’s guidance, dated September 9, 2022 and available at the link here, follows a similar guidance earlier this summer which recommended that contracting officers consider including economic price adjustment clauses in new solicitations. We previously wrote about that guidance here.
DoD Releases Guidance on Inflation and Economic Price Adjustments for Fixed-Price Contracts
In response to industry-wide questions about price adjustments for economic inflation, the Department of Defense (DoD) has released guidance about when and how contracting officers may provide financial relief to contractors working on fixed-price contracts. The guidance generally discourages contracting officers from granting adjustments under the Changes clause due solely to inflation. But it does not completely close the door to adjustments, and it offers modest options for fixed-price contracts that contain an economic price adjustment clause. Moreover, DoD encourages contracting officers to consider inserting economic price adjustment clauses in new solicitations.
This blog post summarizes DoD’s guidance, explains the mechanics of economic price adjustment clauses, and offers views about evaluating other grounds for relief.
FCA Defendants May Be Able to Recover Attorney Fees Under Their Fixed-Price Contracts, At Least For Now
If a contractor is working on a fixed-price contract, can it charge the government for attorney’s fees to defend a False Claim Act (“FCA”) case related to the contract?
In The Tolliver Group, Inc. v. United States (Fed. Cl. Jan. 22, 2020), the Court of Federal Claims (“COFC”) said the answer was “yes,” if the government was liable for an equitable adjustment under the circumstances. The decision was welcomed by contractors facing meritless FCA suits, which are often costly to defend even when the relator plainly does not have a case.
But the Federal Circuit has thrown cold water on Tolliver — at least for now. In a decision last week, the court of appeals vacated Tolliver on jurisdictional grounds, concluding that the legal theory of the COFC’s decision was never presented to the contracting officer for a final decision under the Contract Disputes Act of 1978 (“CDA”), and that the COFC therefore lacked jurisdiction over the contractor’s claim. The Tolliver Group, Inc. v. United States (Fed. Cir. Dec. 13, 2021).
Accepting What You Can’t Change: ASBCA Holds that an Agency Must Accept Non-Conforming Goods After Waiting to Consider a Deviation
The FAR explains that the Government must accept or reject work as “promptly as practicable after delivery.” FAR 52.246-2(j). But what if the contractor knows its work is not compliant, but has asked the agency for a deviation from the contract’s terms? A recent decision from the ASBCA provides guidance on this tough but not uncommon issue.
Continue Reading Accepting What You Can’t Change: ASBCA Holds that an Agency Must Accept Non-Conforming Goods After Waiting to Consider a Deviation
White House Issues Guidance on Limiting Waivers of Domestic Sourcing Laws – What Contractors Need to Know
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.”
President Biden Orders Tightening of Made in America Laws: What Contractors Need to Know
On January 25, 2021, President Biden issued a much-anticipated Executive Order announcing plans to strengthen the U.S. Government’s preference for domestically-sourced goods and services, including a proposal to tighten longstanding exceptions to domestic preference requirements.
Executive Order 14005 on Ensuring the Future Is Made in All of America by All of America’s Workers (“EO”) aims
Technically Still Yours: Court Holds that Contractors May Mark Unlimited Rights Data with a Proprietary Legend
If your company delivers technical data to the Department of Defense, you should take a close look at the Federal Circuit’s decision issued yesterday in The Boeing Co. v. Secretary of the Air Force.
The Court acknowledged that contractors may retain ownership and other interests in unlimited rights data, and it held that they may take steps to put third parties on notice of those rights. In particular, the Court held that, in addition to the standard legends required by the Defense Federal Acquisition Regulation Supplement (“DFARS”), contractors may also include a legend notifying third parties of the contractor’s retained rights.