Earlier this month, the Federal Circuit provided new guidance on the high burden that the government must carry to terminate a contract for default. In Dep’t of Transp. v. Eagle Peak Rock & Paving, Inc., the Federal Circuit held that the validity of a termination decision does not depend exclusively on the contracting officer’s reasoning — rather, the government must produce evidence during litigation to prove the contractor’s default under a de novo standard of review. The Eagle Peak decision illustrates that, absent a threshold showing that the contracting officer’s decision was pretextual, contractors challenging a default decision should focus on developing the “clean slate” record needed to rebut the government’s allegations, rather than disputing the contracting officer’s rationale (or lack thereof) for termination.
Opportunity to Comment on OMB Efforts to Amend Compliance Requirements for Grant Agreements
In August 2020, the Office of Management and Budget (“OMB”) amended its Guidance for Grants and Agreements set forth under 2 CFR (commonly referred to as the “Uniform Guidance”). The Covington team wrote about that amendment, and in particular, the implementation of Section 889 requirements, here. Now, almost three years later, OMB is requesting feedback in anticipation of further amending the Uniform Guidance.
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.
OFCCP Seeks Input On Potential FOIA Disclosure of Contractor Employment Information
Update as of September 15, 2022: OFCCP has extended the deadline by one month for contractors to submit objections to the FOIA request described in this article. The new deadline is October 19, 2022. Additionally, in an effort to clarify which government contractors are covered by this FOIA request, OFCCP has indicated that it will be reaching out to “contractors that OFCCP believes are covered by this FOIA request” using the “email addresses provided as a contact for the EEO-1 report” through OFCCP’s Contractor Portal.
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In response to a broad Freedom of Information Act (“FOIA”) request the Office of Federal Contract Compliance Programs (“OFCCP”) may produce the Employment Information (“EEO-1”) Type 2 filings of up to 15,000 government contractors unless written objections are filed by September 19, 2022. This blog post explains the information that OFCCP has been asked to release and factors that government contractors should consider in deciding whether an objection to the release of this information is appropriate and advisable.
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OFCCP Contractor Portal: It’s Not Too Late
Earlier this year, the Department of Labor’s Office of Federal Contractor Compliance Programs (“OFCCP”) opened the Contractor Portal, a new platform where covered federal contractors and subcontractors must annually certify whether they are meeting their requirement to develop and maintain written Affirmative Action Programs (“AAPs”). As we previewed in June, OFCCP required covered
DOJ Settlement Underscores the Significance of Incorrect Small Business Representations
The Department of Justice (“DOJ”) recently announced a $5.2 million settlement with Numet Machining Techniques, LLC and affiliated entities (collectively, “Numet”) concerning alleged misrepresentations of size and ownership in connection with pursuing U.S. Government contracts. The Numet settlement is an important reminder to the contractor community that representations and certifications—particularly those concerning small business status—should be made with due caution and that the discovery of incorrect representations during M&A due diligence can be a significant finding. In this post, we explore the recent Numet settlement, examine the Small Business Administration (“SBA”) size and affiliation rules, and offer guidance to companies assessing the significance of incorrect representations.
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.
OFCCP’s New Contractor Portal: What Contractors Need to Know
On December 2, 2021, the Department of Labor’s Office of Federal Contractor Compliance Programs (“OFCCP”) announced the creation of a new Contractor Portal. Starting next year, federal prime contractors and subcontractors will be required to register on the portal and submit a formal certification, on an annual basis, as to whether they have developed and maintained an Affirmative Action Program (“AAP”) in accordance with OFCCP requirements. If selected by OFCCP for a compliance review, contractors will use the same portal to upload their AAPs in addition to any other requested information. The Contractor Portal is expected to open for registrations on February 1, 2022, with the certification features available March 31, 2022. By June 30, 2022, all existing contractors and subcontractors must certify compliance with the AAP requirements.
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Recent Federal and State Laws Restrict Use of Employee Non-Competition Agreements by Government Contractors and Other Employers
The employee non-competition agreement landscape continues to evolve rapidly, with several states enacting new limits on the use of non-competition agreements between employers and employees. Once a valuable tool for employers to protect their businesses from unfair competition, loss of customers, or misuse of company confidential information, many states have increasingly limited the enforceability of such agreements.
The federal government is now weighing in on the appropriate use of non-competition agreements between employers and employees. President Biden’s July 9, 2021 Executive Order asks the Federal Trade Commission (“FTC”) to limit such agreements—signaling a potential expansion of federal regulation of agreements between employers and workers. And a pending Senate bill would ban most non-competition agreements. Given these developments, government contractors and other employers should assess whether their use of these agreements with employees is consistent with recent state developments and aligned with the broader trend toward limiting the enforceability of these agreements.