Government Contracts Regulatory Compliance

Through the Infrastructure Investment and Jobs Act (“IIJA”) and the Inflation Reduction Act, the Department of Energy (“DOE”) has awarded billions of dollars to a series of new infrastructure and clean energy programs.  The scope and size of these programs have, in turn, attracted scrutiny from the DOE’s Office of Inspector General (“OIG”), as evidenced most recently by an OIG Special Report (“Report”) detailing what the OIG characterized as “Management Challenges” at DOE.  The Report is notable for several reasons, but most striking is its sharp criticism of DOE’s apparent reluctance to fully accede to the OIG’s request for vast quantities of agency and contractor data in connection with preventative fraud detection efforts.  This blog will cover the key findings of this Report and the most important takeaways for current and prospective DOE implementing partners.Continue Reading Department of Energy Office of Inspector General Management Challenges Report: Key Findings and Insights

The requirement to pay “prevailing wages” to covered workers is a perennial aspect of many types of government contracting, including construction contracts subject to the Davis-Bacon Act (“DBA”) and certain related laws (collectively referred to as the Davis-Bacon and Related Acts or “DBRA”).  In recent years, Congress has also expanded the reach of prevailing wage requirements to new industries: clean energy projects seeking to take advantage of federal tax credits under the Inflation Reduction Act are required to ensure that prevailing wages are paid or may be forced to forfeit valuable credits.  Semiconductor manufacturers — as well as manufacturers of materials and equipment used to make semiconductors — that seek to take advantage of the incentives established by the CHIPS Act are likewise required to follow the prevailing wage requirements of the DBA. 

It was in this context that the Department of Labor (“DOL”) introduced a 222-page final rule, “Updating the Davis-Bacon and Related Acts Regulations,” that substantially rewrote the implementing regulations under the DBRA.  Among other things, the final rule alters how DOL calculates the prevailing wage rates for each locality, and expands the definition of the “site of work” and categories of workers subject to the DBA.  Moreover, the final rule imposes the DBA by operation of law on federal construction contracts that would otherwise be covered, but that nevertheless do not include the requisite FAR clauses and wage determinations used to inform contractors of the DBA’s requirements.  The potential impact of these changes has not gone unnoticed:  last month, two trade associations — the Associated Builders and Contractors of Southeast Texas, Inc. (“ABCSETX”) and the Associated General Contractors of America (“AGC”) — filed separate suits challenging multiple aspects of the final rule, including the changes to prevailing wage calculation methodology and the revised definition of the site of work.  We expand on the final rule’s changes — and on the pending legal challenges — below. Continue Reading Whose Site Is It Anyway: Trade Groups Challenge DOL’s Prevailing Wage Calculation and Expanded Definition of the Site of Work Under the Davis-Bacon Act

On October 5, 2023, the Federal Acquisition Regulatory Council (FAR Council) issued an interim Federal Acquisition Regulation rule (FAR rule) that implements the Federal Acquisition Supply Chain Security Act (FASCSA).  This FAR rule implements the requirements of the Federal Acquisition Supply Chain Security Act of 2018 and the Federal Acquisition Security Council (FASC) final rule for complying with exclusion or removal orders. The FAR rule represents yet another step by the Government to mitigate the security risks that the Government perceives with the use of information technology that may be produced or provided by countries considered to be foreign adversaries.  Like similar supply chain prohibitions, the rule requires contractors to conduct diligence to ensure that articles and sources covered by a FASCA exclusion or removal order are not provided to the Government, to make an affirmative representation to the Government that such articles and sources will not be provided, and to promptly report if any are identified.  The FAR rule will become effective on December 4, 2023, and will apply to new contracts and contracts subject to extension or renewal.  The rule instructs that existing IDIQ contracts should be modified by the Government within six months of December 4, 2023 to apply the requirements to future orders.

Additional information about the rule and its relationship to existing FASCSA regulations is outlined below.Continue Reading FAR Council Issues Interim Rule Outlining Procedures Relating to Excluded Covered Articles and Sources

Although Congress averted a Government shutdown on October 1 by passing a temporary spending bill, we may be headed toward a shutdown next month.  As many Federal Government contractors have experienced during prior Government shutdowns, some portions of the Government — primarily those not funded through annual appropriations bills or that provide “essential services” — may continue to operate (often without pay or access to certain resources), while others shut down immediately, leaving contractors with a customer that often is unable to provide funding, authorize contract actions or respond to inquiries until the Government reopens its doors.  Faced with these challenges, contractors would be well advised to ensure their shutdown plans position them to navigate the potential challenges.  Each agency and contract can offer unique challenges, but we offer a few key considerations below to guide contractors in assessing their approaches to potential shutdowns:Continue Reading Key Steps Contractors Should Consider When Facing a Government Shutdown

Following our recent overview of topics to watch in the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2024, available here, we continue our coverage with a “deep dive” into NDAA provisions related to cybersecurity and software security in each of the Senate and House bills.  For the past three years, the NDAA has dedicated a separate Title to cyber and cybersecurity, reflecting the increased importance of these issues in Department of Defense (“DoD”) operations.  As expected, both the Senate and House versions of the NDAA bill continue this tradition.  Many of the cyberspace related provisions in both chambers’ bills would have direct or indirect impacts on DoD contractors and other members of the Defense Industrial Base (“DIB”).  We summarize below the cyber-related provisions that are most likely to impact the DIB. Continue Reading Key Cyber Security and Software Security Provisions of the House and Senate Versions of the Fiscal Year (FY) 2024 National Defense Authorization Act (NDAA)

Last Friday, September 29, the FAR Council published a proposed rule that would update the Federal Acquisition Regulation (FAR) to implement the Small Business Administration’s (SBA) 2020 changes to rules on when small businesses must recertify their status in connection with orders under multiple-award contracts.

The SBA size and socioeconomic recertification rules are convoluted — especially in situations where a small business becomes a large business by virtue of an M&A transaction and wants to continue bidding on orders under a multiple-award contract.  The proposed changes seek to provide greater clarity in the FAR on the situations in which small businesses must recertify their size status in connection with certain orders and take a much-needed step towards aligning the FAR small business requirements and clauses with SBA’s regulations.  As is true with respect to small business representations more generally, contractors should pay attention to the situation-specific recertification requirements to avoid being inadvertently tripped up.Continue Reading Updates to FAR Small Business Recertification Requirements:  More Clarity, More Complexity

This is the twenty-eighth 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 subsequent blogs described the actions taken by various government agencies to implement the Cyber EO from June 2021 through July 2023.  This blog describes key actions taken to implement the Cyber EO, as well as the U.S. National Cybersecurity Strategy, during August 2023. Continue Reading August 2023 Developments Under President Biden’s Cybersecurity Executive Order and National Cybersecurity Strategy

Domestic sourcing requirements are not new, but the Government is always developing new tools for increasing the sourcing of goods from the U.S. and allied countries.  Both sides of the political aisle have marched to a drumbeat of increased domestic sourcing for the past several years.  Most recently, the Biden Administration implemented Executive Order 14005 to “maximize” the U.S. Government’s purchase of goods and services produced in the United States and Executive Order 14104 to increase domestic manufacturing and commercialization in certain research and development supported by federal funding.  The ongoing bi-partisan support for bolstering domestic sourcing is illustrated no better than through this year’s NDAA, which focuses on expanding the domestic supply chain for materials and supplies critical to the U.S. military, encouraging the purchase of domestic end items, and providing more opportunities for the Department of Defense (“DoD”) to engage with and purchase from domestic businesses.Continue Reading Key Domestic Sourcing Provisions of the House and Senate Versions of the Fiscal Year (FY) 2024 National Defense Authorization Act (NDAA)

In Honeywell International, Inc., the ASBCA declined to dismiss a roughly $151 million claim by DCMA alleging a violation of CAS 410, holding that the government’s allegations were sufficient to state a claim for improper treatment of G&A expenses.  The Board’s decision provides guidance on how to interpret CAS 410 — a topic that is often addressed by auditors, but has rarely been the subject of written opinions by the courts or boards of contract appeals.Continue Reading ASBCA: Government Can Pursue $151 Million Claim Under CAS 410

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.Continue Reading It Makes No Deference: Fed Circuit Confirms Proper Standard of Review in Default Termination Challenges