Government Contracts Regulatory Compliance

As GSA Multiple Award Schedule contractors know all too well, Schedule contracting involves a complex web of customer-tracking, reporting, and price-adjustment requirements.  Those of us who navigate these often byzantine rules understand why many in the industry have called for the adoption of an alternative approach to verifying price reasonableness.

For the last several years, GSA has been piloting just such an alternative:  the Transactional Data Reporting (“TDR”) program, through which the government collects transaction-level data on products and services purchased through the Schedule to make data-driven decisions that save taxpayer dollars.  GSA has been running a TDR pilot program for several years to test the potential for a new regulatory regime, though the program sometimes has been the source of criticism and controversy.  Now that controversy has heightened further:  GSA’s Office of Inspector General published an audit report on June 24, 2021 that is sharply critical of the program, only to see GSA’s Federal Acquisition Service (“FAS”) Commissioner publicly reject the report’s conclusions and defend TDR’s effectiveness.

Time will tell whether the TDR rule becomes the new standard for GSA Schedule contracting.  But the latest round of controversy suggests that the current maze of requirements are not going away any time soon.

Continue Reading The End of CSP and PRC Requirements? — GSA’s TDR Pilot Program Faces Further Internal Criticism

On April 27, 2021, President Biden signed an Executive Order entitled “Increasing the Minimum Wage for Federal Contractors” that will raise the hourly minimum wage for federal contractors to $15.00 effective January 30, 2022.  This Executive Order builds on Executive Order 13658 (“Establishing a Minimum Wage for Contractors”), issued by President Obama in 2014, which first implemented an hourly minimum wage of $10.10 for covered federal contractors.[i]

Continue Reading Government Contractors Should Prepare Now for the $15 Per Hour Minimum Wage

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.

Continue Reading Technically Still Yours: Court Holds that Contractors May Mark Unlimited Rights Data with a Proprietary Legend

On October 21, 2020 the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published a Request for Information (“RFI”) seeking voluntary submissions of workplace diversity and inclusion training information and materials from federal contractors, federal subcontractors, and their employees. The RFI was published pursuant to Executive Order 13950, Combating Race and Sex Stereotyping (“EO”) issued on September 22, 2020, which prohibited certain “divisive concepts” in workplace trainings and instructed OFCCP to solicit information from federal agencies and contractors about the content of their training programs.  The EO also directed OFCCP to establish a hotline to investigate complaints received under the EO, as well as Executive Order 11246. The hotline, and a corresponding email address, were established on September 28, 2020. We provided a full description and explanation of the requirements of the EO here.

Under the new RFI, contractors may submit comments and other information to OFCCP by December 1, 2020, but any submission of information is strictly voluntary.  As discussed below, prior to making any submission, contractors should consider carefully the nuances of the EO and RFI and the potential implications of making a voluntary submission.

Continue Reading Department of Labor Requesting Information on Federal Contractor Workplace Diversity Training

On September 29, 2020, the Department of Defense (DoD) released an interim rule that industry hoped would provide clear guidance with regard to DoD’s implementation of its Cybersecurity Maturity Model Certification (CMMC) framework.  The vast majority of the rule focuses on DoD’s increased requirements for confirming that contractors are currently in compliance with all 110 security controls in National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171 (NIST 800-171).  The interim rule also includes a clause for adding CMMC as a requirement in a DoD contract, but the clause fails to address many of the questions that industry has with regard to implementation of the CMMC program.  The rule becomes effective November 30, 2020.  We have written previously on NIST 800-171 and the CMMC here and here respectively.

DoD has been focused on improving the cyber resiliency and security of the Defense Industrial Base (DIB) sector for over a decade.  The Council of Economic Advisors estimates that malicious cyber activity cost the U.S. economy between $57 billion and $109 billion in 2016.  The interim rule is one of multiple efforts by DoD focused on the broader supply chain security and resiliency of the DIB and builds on existing FAR and DFARS clause cybersecurity requirements.  Increasing security concerns coupled with recent high-profile data breaches have led DoD to move beyond self-certification to auditable verification systems when it comes to protecting sensitive Government information.

Continue Reading Department of Defense’s Interim Rule Imposes New Assessment Requirements But is Short on Detail on Implementation of CMMC

On September 22, 2020, President Trump issued the Executive Order on Combating Race and Sex Stereotyping (“EO”) establishing requirements aimed at “promoting unity in the Federal workforce,” by prohibiting workplace training on “divisive concepts,” including “race or sex stereotyping” and “race or sex scapegoating” as newly-defined in the EO.  The EO is broadly applicable to executive departments and agencies, Uniformed Services, Federal contractors, and Federal grant recipients.  The EO expands on a letter issued in early September by the Director of the Office of Management and Budget (“OMB”) that directed all agencies to begin to identify contracts or other agency spending on trainings that include “critical race theory,” “white privilege,” or “un-American propaganda,” in an effort to ensure “fair and equal treatment of all individuals in the United States.”

Following the EO, on September 28, 2020, OMB issued a Memorandum for the Heads of Executive Departments and Agencies (the “Memo”) with additional guidance aimed at assisting agencies in identifying diversity and inclusion trainings for agency employees that may be subject to the EO.  The Memo suggests that agencies conduct keyword searches of training materials for specific terms, such as “intersectionality,” “systemic racism,” and “unconscious bias.”  Although the Memo primarily explains the terms of the EO, it also provides additional insight concerning the breadth of agency trainings that may ultimately be considered to violate the terms of the EO, which are described below.

Although the EO is likely to be subject to legal challenge (as more fully discussed below), federal contractors, including subcontractors and vendors, could be subject to the compliance requirements outlined below as soon as November 21, 2020.
Continue Reading President Trump Issues Executive Order Prohibiting “Divisive Concepts” in Federal Contractor Trainings

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?

Continue Reading [Updated] If the Acting DHS Secretary Was Unlawfully Selected, What Does that Mean for DHS Procurements?

(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.

Background

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”).[1]  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.[2]

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.[3]  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.[4]  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.[5]

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.[6]

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.

Continue Reading M&A and Section 889: Due Diligence and Integration Considerations

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.[1] 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