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
As the House and Senate Armed Services Committees prepare to mark up the Fiscal Year 2024 National Defense Authorization Act (NDAA), they are very likely to consider a number of China-related measures that have been recommended by the national security community and which could enjoy bipartisan support. These recommendations are generally focused on countering Chinese influence in the United States or increasing the United States’ relative power advantage in the Pacific region.Continue Reading Fiscal Year 2024 National Defense Authorization Act: More China-Related Measures on the Horizon
On May 19, 2023, the National Institutes of Health (“NIH”) issued notice that it would be updating its requirements for consortium/subaward agreements on NIH-funded grants. This update, which will be effective October 1, 2023, will bring NIH’s subaward and consortium requirements in line with the Office of Management and Budget Guidance set forth in Title 2 and push NIH grant recipients and subrecipients towards a higher degree of formality in their agreements. Failure to formalize these relationships may endanger eligibility for NIH funding.Continue Reading Show Me the Documentation: NIH Pushes Grantees to Formalize Subaward / Consortium Agreements
On May 10, 2023, the United States Court of Appeals for the Federal Circuit issued a decision regarding bid protest standing in CACI, Inc.-Federal v. United States et al. In that decision, the court declared previous decisions to no longer be good law and held that the Court of Federal Claims erred in finding the protester to lack standing.Continue Reading Federal Circuit Weighs in on Bid Protest Standing and Departs from Prior Cases
This is the twenty-fourth 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 March 2023. This blog describes key actions taken to implement the Cyber EO, as well as the U.S. National Cybersecurity Strategy, during April 2023.Continue Reading April 2023 Developments Under President Biden’s Cybersecurity Executive Order and National Cybersecurity Strategy
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
The Department of Defense, General Services Administration, and the National Aeronautics and Space Administration have issued a proposed rule that would revise the Federal Acquisition Regulations (“FAR”) to implement section 5(b)(i) of Executive Order (“E.O.”) 14030, Climate-Related Financial Risk, requiring government contractors to publicly disclose greenhouse gas (“GHG”) emissions and climate-related financial risk and also set science-based reduction targets. Non-excepted contractors who do not comply with these rules could be presumed non-responsible and thus ineligible to receive federal awards.
Under the proposed rule, contractors will need to represent whether they are a “major contractor” (over $50M in federal contract obligations in prior Federal fiscal year) or a “significant contractor” (between $7.5M and $50M in federal contract obligations in prior fiscal year). If the contractor meets either of those definitions, they then must complete a GHG analysis and report their findings in SAM.gov. Importantly, the Proposed Rule does not include an exception for commercial items (including COTS items) or services contractors.
The baseline reporting requirement consists of completing the GHG Protocol Corporate Accounting and Reporting Standard, which involves assessing (1) GHG emissions from sources that are owned or controlled by the reporting company (i.e., Scope 1 emissions) and (2) GHG emissions associated with the generation of electricity, heating and cooling, or steam, when these are purchased or acquired for the reporting company’s own consumption, but occur at sources owned or controlled by another entity (i.e., Scope 2 emissions).
Major contractors must also complete an annual disclosure questionnaire through the CDP Climate Change Questionnaire. This annual disclosure requires accounting for emissions that result from the operations of the reporting entity and that occur at sources other than those owned or controlled by the entity (i.e., Scope 3 emissions). Additionally, major contractors would need to develop a science-based target to reduce GHG consistent with the goals of the Paris Agreement. The disclosure and the target must be made publicly available online. Among other limited exceptions, major and significant contractors that are higher educational institutions or nonprofits are not required to complete an annual climate disclosure or set science-based targets. Notably, however, a major contractor considered a small business for the North American Industry Classification System (“NAICS”) code it has identified in its SAM.gov registration as its primary NAICS code would be exempt from the Scope 3 reporting and target requirements, but must still comply with the Scope 1 and 2 reporting requirements.
Failure to conduct the GHG inventory, make the annual climate disclosures, or meet the science-based targets, if required, would result in a presumption of non-responsibility under FAR subpart 9.1. Such contractors would presumptively be ineligible to receive contracts or subcontracts through the federal government unless the contracting officer determines that (1) noncompliance resulted from circumstances properly beyond the prospective contractor’s control; (2) the prospective contractor has provided sufficient documentation that demonstrates substantial efforts to comply; and (3) the prospective contractor has made a public commitment to comply as soon as possible on a publicly accessible website (within one year).
Implementation of Rule
The Acquisition Environmental and Contract Management Team is reviewing over 38,000 public comments on the Proposed Rule and drafting the final rule. A date for release of the final rule has not been made public. One year after the Proposed Rule is finalized, major contractors and significant contractors will be required to complete their GHG inventories and disclose their emissions in SAM.gov. Additionally, major contractors will be required to submit their disclosure questionnaire and science-based targets two years after the rule’s implementation. The Proposed Rule provides waiver authority to an agency in the event of an emergency, for national security reasons, or to allow an additional year for an entity to achieve compliance. Although it is possible that agencies will grant waivers in the event contractors experience difficulty implementing this rule, agencies have less readily granted waivers of FAR compliance requirements in certain situations, particularly where, as here, the waivers are made public.
Changes may certainly be made to the Proposed Rule before it is finalized. However, as it is currently drafted, this Proposed Rule would impose potentially significant new reporting and disclosure standards for many government contractors, resulting in increased compliance burden and cost, including cost to the government under cost-type contracts. For instance, the rule goes further than many companies’ standard climate pledges and even beyond the climate disclosure rules proposed by the Securities and Exchange Commission in March 2022 (as previously discussed here, which would not require companies to develop targets, like the proposed FAR amendments). Additionally, this rule suffers from a familiar frustration with assessing GHG emissions as it lacks clear guidance on the particular methods and factors that should be used by companies in calculating their emissions. This lack of a clear framework is particularly concerning in the context of government contracting, where companies will be expected to certify to the results of their GHG emission assessments. Therefore, as we move toward a final rule, government contractors would be well advised to continue monitoring the progress of this Proposed Rule.
This is the twenty-third 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 February 2023. This blog describes key actions taken to implement the Cyber EO during March 2023.Continue Reading March 2023 Developments Under President Biden’s Cybersecurity Executive Order
Last week, the U.S. Cybersecurity and Infrastructure Security Agency released guidance on Security-by-Design and Security-by-Default principles for technology manufacturers that was jointly developed by the Federal Bureau of Investigation and the National Security Agency, as well as cybersecurity authorities in Australia, Canada, United Kingdom, Germany, Netherlands, and New Zealand. The guidance builds on the White House’s recent roll-out of the U.S. National Cybersecurity Strategy and is in line with efforts to encourage a consistent, international approach to software security that emphasizes the responsibilities of software manufacturers across various jurisdictions. While the guidance primarily focuses on recommendations for technology manufacturers, it also includes recommendations for enterprise customers to “hold their supplying technology manufacturers accountable for the security outcomes of their products.”
A new post on Covington’s Inside Privacy blog discusses the core principles behind the guidance and next steps for key stakeholders.
Today the National Telecommunications and Information Administration (NTIA) released its first notice of funding opportunity for development of next-generation wireless infrastructure under the new Public Wireless Supply Chain Innovation Fund (“Innovation Fund”). According to NTIA’s announcement, this first tranche of funding will include up to $140.5 million in grants, ranging from $250,000 to $50 million, specifically to support expanded testing and evaluation of the performance, security, or interoperability of open, interoperable (“open-RAN”) wireless networks. Companies (both for- and nonprofit), higher education institutions, industry groups, and consortia of multiple organizations are eligible to apply.Continue Reading Commerce Department Issues First Funding Notice for Wireless Innovation Fund