On August 13, 2020, the Office of Management and Budget (OMB) released new revisions to its Guidance for Grants and Agreements set forth under 2 CFR (commonly referred to as the Uniform Guidance). The Uniform Guidance governs the terms of federal funding issued by agencies, including grants, cooperative agreements, federal loans, and non-cash assistance awards.
The Government Accountability Office (“GAO”) released a decision on Friday finding that the Department of Homeland Security (“DHS”) followed the wrong order of succession after Secretary Kirstjen Nielsen resigned in April 2019. As a result, the Acting Secretaries who have served since then were invalidly selected. In particular, GAO has questioned the appointments of Acting Secretary Chad Wolf, former Acting Secretary Kevin McAleenan, and Deputy Secretary Kenneth Cuccinelli.
GAO’s decision tees up a thorny question for DHS contractors: If these officials were invalidly selected, what does it mean for the agency’s policies and procurement decisions made during their tenure?
(This article was originally published in Law360 and has been modified for this blog.)
Companies in a range of industries that contract with the U.S. Government—including aerospace, defense, healthcare, technology, and energy—are actively working to assess whether or not their information technology systems comply with significant new restrictions that will take effect on August 13, 2020. These new restrictions prohibit the use of certain Chinese telecommunications equipment and services, and a failure to comply can have dramatic consequences for these companies. The new restrictions also will have an immediate impact on mergers and acquisitions involving a company that does—or hopes to do—business with the Federal government. In this article, we highlight some key considerations for M&A practitioners relating to these restrictions.
On July 14, 2020, the U.S. Government’s Federal Acquisition Regulatory Council (“FAR Council”) published an interim rule to implement Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (“FY19 NDAA”). When the new rule takes effect on August 13, it will prohibit the Department of Defense and all other executive branch agencies from contracting—or extending or renewing a contract—with an “entity” that “uses” “covered telecommunications equipment or services as a substantial or essential part of any system.” The restrictions cover broad categories of equipment and services produced and provided by certain Chinese companies—namely Huawei, ZTE, Hytera, Hangzhou Hikvision, Dahua, and their affiliates.
The new rule will be applicable to all contracts with the U.S. Government, including those for commercial item services and commercially available-off-the-shelf products. Companies with a single one of these contracts will soon have an ongoing obligation to report any new discovery of its internal “use” of certain covered telecommunications equipment and services to the Government within one business day with a report of how the use will be mitigated ten business days later. Further, although companies can seek to obtain a waiver on a contract-by-contract basis from agencies, these waivers must be granted by the head of the agency, and may only extend until August 13, 2022 at the latest.
The new rule is the second part of a two-stage implementation of Section 889’s restrictions on covered telecommunications equipment and services in Government contracting. It builds on an earlier rule that implemented Section 889(a)(1)(A) of the FY19 NDAA on August 13, 2019 by prohibiting an executive branch agency from acquiring certain covered telecommunications equipment or services that is a substantial or essential part of any system.
The new rule is expansive in scope, and its effects will be felt far beyond the traditional defense industrial base. Thus, mergers and acquisitions practitioners are well advised to become familiar with the rule and consider how it might impact any future transaction where an acquisition target does at least some business with the Government or has aspirations to do so in the future.
On July 2, 2020, the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) promulgated a final rule resolving long-standing uncertainty regarding its enforcement authority over health care providers participating in TRICARE, a federal program that provides health care to service members, veterans, and their families. The rule officially removes OFCCP’s regulatory authority over TRICARE providers by amending the definition of “subcontract” set forth in the governing Department of Labor regulations. Although the amendment carves out TRICARE providers from OFCCP authority by name and leaves the rest of the “subcontractor” definition unchanged, OFCCP expressly raised the possibility that it would issue additional sub-regulatory guidance concerning its jurisdiction over Federal Employees Health Benefit Program (“FEHBP”) and Veterans Administration Health Benefit Program (“VAHBP”) providers.…
Continue Reading OFCCP Promulgates Final Rule Eliminating Its Authority Over TRICARE Providers
On July 10, 2020, the interim rule implementing Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. No. 115-232) was released by the U.S. Government’s Federal Acquisition Regulatory Council. Section 889 prohibits the U.S. Government from buying (as of August 2019)—or contracting with an entity that uses…
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.
Continue Reading Contractor Supply Chain Readiness – An Update on Expected Regulatory Changes
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.
Continue Reading GSA Awards First Contracts to Develop an Online Shopping Platform, and the White House Seems to Be Paying Attention
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.
Continue Reading With Potential New TINA Audits on the Horizon, the ASBCA Provides a Helpful Primer on Defending Against Defective Pricing Claims
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 FEMA Continues to Push Defense Production Act Authority On Several Fronts
Recent legislation significantly expanded many workers’ entitlement to paid sick leave and paid family leave. These new benefits take effect on April 1st. Our employment and benefits experts have described those requirements in a series of posts, including overviews here and here, and New York-specific considerations here. Federal government contractors should pay particular attention to these new benefits and the way they interact with other paid sick leave requirements.…
Continue Reading New Paid Sick Leave Requirements Impact Government Contractors