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On May 12, 2023, the Department of Treasury issued long-awaited guidance addressing the so-called domestic content “bonus credit” available under the Inflation Reduction Act of 2022 (“IRA”).  As we have discussed elsewhere in detail, the IRA incorporates extensions of the existing clean energy tax credits under IRC section 45 and section 48 and establishes new “technology neutral” versions of these credits (pursuant to sections 45Y and 48E) that will become available starting in 2025.  At the same time, the IRA also establishes a new 10% domestic content bonus credit that may be claimed in combination with these tax credits provided that the taxpayer: (1) uses U.S.-made iron and steel during construction of the energy-generation facility; and (2) ensures that the cost of any domestic manufactured products that are components of the facility meets a specified domestic content threshold.

The IRA statutory provision left open several key questions regarding how these domestic content requirements would work in practice (including, for example, how the threshold percentage would be calculated).  Last Friday, Treasury issued long-awaited guidance (Notice 2023-38 or the “Notice”) that, among other things, addresses: (1) the contours of the “iron and steel” requirement; and (2) the method by which the adjusted percentage is to be calculated.  While the guidance is consistent with traditional Buy America principles in certain respects, it also introduces both new concepts and new terminology — particularly with regards to the domestic content percentage calculation — which we discuss in detail below. …

Continue Reading Treasury Releases Long-Awaited Guidance for Domestic Content Bonus Credit Under Inflation Reduction Act

On December 23, 2022, President Biden signed the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 into law.  The Act contains two significant prohibitions regarding the procurement and use of semiconductor products and services from specific Chinese companies and other foreign countries of concern that will come into effect in December 2027. …

Continue Reading NDAA Prohibits Government Purchase and Use of Certain Semiconductors

President Biden recently signed bipartisan legislation reinforcing anti-human trafficking prohibitions. The End Human Trafficking in Government Contracts Act of 2022 builds on the existing anti-human trafficking framework at Federal Acquisition Regulation (“FAR”) § 52.222-50 (Combatting Trafficking in Persons) by requiring agencies to refer contractor reports of potential human trafficking activity directly to an agency suspension and debarment official (“SDO”).  Prior to this legislation, contractors have been required to notify their contracting officer and the agency inspector general upon receiving “[a]ny credible information” that a human trafficking violation had occurred.  See FAR § 52.222-50(d)(1).  Now agencies will be required to refer these reports to their SDOs, creating additional risk for contractors that disclose potential violations. …

Continue Reading New Law Increases Government Scrutiny of Contractor Compliance with Anti-Trafficking Provisions

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

On July 28, 2022, the United States Department of Transportation (“DOT”) published a Request for Information (“RFI”) on the implementation of the Infrastructure Investment and Jobs Act’s Build America, Buy America Act (“BABA”).  As discussed in our previous post, BABA expanded Buy America preferences to cover all infrastructure projects and sets new domestic content standards for federal financial assistance programs.  The RFI focuses specifically on implementing these domestic content standards for construction materials, which were not subject to the Buy America regime prior to BABA.  Given the wide range of products that might conceivably constitute a “construction material,” industry participants would be wise to closely monitor both the RFI and DOT’s implementation progress and to take steps to ensure that policymakers understand their views on the subject.…

Continue Reading DOT Seeks Additional Stakeholder Input on Build America, Buy America Implementation

This is the tenth 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, third, fourth, fifth, sixth, seventh, eighth, and ninth blogs described the actions taken by various Government agencies to implement the EO from June 2021 through January 2022, respectively.

This blog summarizes key actions taken to implement the Cyber EO during February 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 in March 2022 that are likely to impact government contractors, particularly those who provide software products or services to government agencies.…

Continue Reading February 2022 Developments Under President Biden’s Cybersecurity Executive Order

Addressing climate change has been a priority for President Biden since his first day in office.  On December 8, 2021, President Biden continued that focus by issuing Executive Order (EO) 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, which includes a number of requirements directed at introducing sustainability to federal acquisitions.

This most recent EO announces an administration policy to achieve net-zero emissions from federal procurement by 2050 and comes on the heels of the public comment period extension to January 13, 2022 in response to EO 14030, Climate-Related Financial Risk.  Although the administration will likely be rolling out additional sustainability requirements in the coming months, contractors currently have an opportunity to help shape an initial requirement that may end up effectively establishing an environmental, social, and governance or “ESG” reporting requirement. …
Continue Reading Contractors Have an Opportunity to Help Shape ESG Requirements

On May 12, 2021, the Biden Administration issued an Executive Order on Improving the Nation’s Cybersecurity (the “EO”).  The EO sets out a list of deliverables due from a number of governmental entities in June 2021 and successive months.  Our overall summary of the EO and its deliverables can be found here, and our discussion of the EO deliverables that were due in June 2021 can be found here.  This blog addresses the EO deliverables in July 2021.
Continue Reading July 2021 Developments Under the Executive Order on Improving the Nation’s Cybersecurity

Last month, the Biden administration released its report on the results of its 100-day review of U.S. supply chains for critical products:  “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth” (the “Report”).  Alongside the Report’s slate of policy recommendations, the Biden administration also announced immediate actions to strengthen supply chains and stimulate domestic competitiveness.

The Report is the result of President Biden’s February 24 “Executive Order on America’s Supply Chains” (the “Order”), which directed federal departments and agencies to conduct a review of supply chain risks in four critical product areas,[1] including pharmaceuticals and active pharmaceutical ingredients (“APIs”).  The Report and its recommendations further the Biden administration’s broader goal of rebuilding the U.S. industrial base, reducing reliance on foreign competitors, and bolstering national and economic security.

The U.S. Department of Health and Human Services (“HHS”) led the review of the supply chain for pharmaceuticals and APIs, which focused primarily on drugs, in particular small-molecule drugs and therapeutic biological products.  The Report makes a number of recommendations discussed herein that have the potential to impact pharmaceutical companies’ business plans and generate significant opportunities, though many such recommendations are long-term and will require dedicated funding so the actual impact of the Report’s suggestions remains to be seen.
Continue Reading Biden Administration 100-Day Supply Chain Assessment: Insights for Pharmaceutical Manufacturers

On May 12, 2021 the Biden Administration issued an “Executive Order on Improving the Nation’s Cybersecurity” (EO).  Among other things, the EO sets out a list of deliverables from a variety of government entities.  A number of these deliverables were due in June, including a definition of “critical software,” the minimum requirements for a software bill of materials, and certain internal actions imposed on various federal agencies.
Continue Reading June 2021 Developments Under the Executive Order on Improving the Nation’s Cybersecurity