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

On August 25, 2022, the Department of Defense (“DOD”) published — with immediate effect — two new Defense Federal Acquisition Regulation Supplement (“DFARS”) clauses requiring defense prime contractors and subcontractors disclose any work in China on certain DOD contracts.  Under the interim rule, the DOD is prohibited from awarding or extending certain new contracts if a contractor fails to disclose its use of workers in China in performance of a covered DOD contract.  Although there is no prohibition on DOD awarding a covered contract to an entity that makes a disclosure, the Department can rely on a variety of authorities to exclude certain contractors and products that represent supply chain risks, especially if the products or services involve information technology.

Continue Reading New DFARS Clauses Require Defense Contractors to Disclose Work Performed in China

The Eastern District of New York has enjoined a New York contractor’s federal debarment, in a rebuke of agency debarment actions that fail to honor contractors’ procedural rights.  On July 8, 2022, part supplier Precision Metals Corporation (“Precision”) was granted a Temporary Restraining Order (“TRO”) vacating and setting aside a Defense Logistics Agency (“DLA”) debarment and enjoining debarment while court proceedings are pending.  The decision, which emphasizes two procedural violations, serves as a reminder that an agency’s authority to debar contractors is not unlimited, and that it must strictly adhere to the rights granted contractors before taking action.  Each procedural violation, and its practical implications, is discussed below.

Continue Reading Department of Defense Debarment Enjoined Due to Procedural Missteps

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.

Continue Reading DoD Releases Guidance on Inflation and Economic Price Adjustments for Fixed-Price Contracts

This is the eleventh in a series of Covington blogs on implementation of Executive Order 14028, “Improving the Nation’s Cybersecurity,” issued by President Biden on May 12, 2021 (the “Cyber EO”).  The first blog summarized the Cyber EO’s key provisions and timelines, and the second through tenth blogs described the actions taken by various Government agencies to implement the EO from June 2021 through February 2022, respectively.  This blog summarizes key actions taken to implement the Cyber EO during March 2022.  As with steps taken during prior months, the actions described below reflect the implementation of the EO within the Government.  However, these activities portend further actions, potentially in or before June 2022, that are likely to impact government contractors, particularly those who provide software products or services to the Government.
Continue Reading March 2022 Developments Under President Biden’s Cybersecurity Executive Order

Given the growing attention in U.S. military assistance to foreign allies and the applicable ground rules, Covington has prepared a primer to understanding the basics of foreign military sales, foreign military financing, and direct commercial sales.  Covington features a multi-disciplinary team of government contracts, export controls, anticorruption, and corporate attorneys with experience in foreign military

On March 18, 2022, the Department of Defense published a final rule in the Defense Federal Acquisition Regulation Supplement implementing its “enhanced” debriefing process.  That process originated in the National Defense Authorization Act for Fiscal Year 2018 and had previously been implemented via a class deviation.

The DOD enhanced debriefing process — which applies to procurements under FAR Part 15, and to task order competitions under FAR 16.505 — has two hallmarks:

Continue Reading DOD Issues Final DFARS Rule on Enhanced Debriefing Process

On March 8, 2022, the Department of Justice announced the first settlement of a case under the Civil Cyber-Fraud Initiative.  Established in October 2021, the Initiative aims to utilize the government’s authority under the civil False Claims Act to pursue alleged instances of fraud and misrepresentation concerning cyber practices.  (We previously wrote about the Initiative here.)  The Initiative has been a point of emphasis in DOJ speeches and public comments in recent months.  This settlement is a milestone in the rollout of the program and confirmation that DOJ intends to take allegations of cyber fraud seriously.
Continue Reading First Settlement of DOJ Civil Cyber-Fraud Initiative

On the heels of the FTC’s opposition to Lockheed Martin’s acquisition of Aerojet Rocketdyne and Lockheed’s termination of the deal, the Department of Defense (DoD) released a report expressing concerns about the state of competition among its contractors.  Of particular note, the report encourages DoD action to (1) increase oversight of M&A transactions and (2) obtain greater IP rights in matters involving defense industrial base contractors.  Although the report is light on specifics and identifies objectives that are in some tension with each other, the report is a reminder to companies that the U.S. Government, the single largest purchaser in the country, remains focused on enhancing competition. To that end, we anticipate seeing Executive Branch action in the coming months that seeks to further that policy objective.
Continue Reading DoD Signals Increased Scrutiny of Gov Con M&A and Renewed Interest in Background IP Rights

On December 22, 2021, the Defense Security Cooperation Agency (DSCA) announced the Fiscal Year 2021 transaction figures for the Foreign Military Sales (FMS) Program, reporting $34.8 billion in total transaction value.  FMS declined for the second consecutive year, down 31 percent from $50.8 billion dollars in transactions in FY 2020.  The 2021 figure represents the