The Coalition for Government Procurement and the National Defense Industrial Association filed an amicus brief in the consolidated Supreme Court cases United States ex rel. Schutte v. SuperValu, Inc. and United States ex rel. Proctor v. Safeway, Inc. The brief urges the Court to hold, consistent with the decisions of multiple federal courts of appeals, that a defendant cannot be liable under the False Claims Act (“FCA”) for “knowingly” submitting a “false” claim if (1) it acted in accordance with an objectively reasonable reading of an ambiguous statute, regulation, or contract provision and (2) there was no authoritative guidance warning it away from that interpretation.  The Amici are represented by Covington & Burling LLP. 

In SuperValu and Safeway, the Court is asked to resolve questions over the role that subjective intent plays in evaluating whether a defendant satisfies the FCA’s “knowledge” requirement.  Petitioners argue that a contractor can be liable under the FCA for submitting a claim that is premised on an objectively reasonable interpretation of an ambiguous legal provision if the contractor recognized that the provision could be interpreted a different way.  However, as the amicus brief explains, such a claim cannot be false for alleged noncompliance with the ambiguous legal provision that has not otherwise been clarified by authoritative guidance.  Nor can such a contractor knowingly submit a false claim just because it was aware that the legal obligation may be interpreted differently.

Continue Reading Amici Curiae Submit Brief Urging Supreme Court to Adopt “Objectively Reasonable” FCA Knowledge Standard

On March 21, 2023, the Department of Commerce (“Commerce”) published a Notice of Proposed Rulemaking (the “Commerce Proposed Rule”) to implement certain provisions of the CHIPS and Science Act of 2022 (“CHIPS Act”) that place restrictions on certain activities of businesses receiving federal funding pursuant to the CHIPS Act (“Commerce Guardrails”).  On the same day, the Department of the Treasury (“Treasury”) also published a Notice of Proposed Rulemaking (together with the Commerce Proposed Rule, the “Proposed Rules”) to implement the Advanced Manufacturing Investment Credit (“ITC”), including its own restrictions on certain activities that, in broad strokes, parallel the Commerce Guardrails (together with Commerce Guardrails, “CHIPS Guardrails”) (Covington alert).  

Continue Reading National Security Update – Departments of Commerce and Treasury Release Notice of Proposed Rulemaking Regarding CHIPS “Guardrails”

On January 25, 2023, the Defense Security Cooperation Agency (DSCA) announced the U.S. arms transfer figures for FY 2022, showing that U.S. defense sales to foreign militaries bounced back after two years of decline.  Arms transfers through the Foreign Military Sales (FMS) program increased year-over-year by 49% up to a total of $51.9 billion, and Direct Commercial Sales (DCS) transactions increased by the same percentage up to $153.7 billion. 

These enormous single-year jumps in arms transfers reverse declining sales during the two preceding fiscal years, and arms transfers have now returned to nearly match FY 2019 levels.  Unsurprisingly, Russia’s unprovoked invasion of Ukraine was a major driver, as Ukraine’s FMS transactions increased more than fivefold, and several European countries in close proximity to the conflict significantly increased their FMS purchases:

Continue Reading U.S. Foreign Military Sales Bounce Back

This is the twenty-second 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 January 2023.  This blog describes key actions taken to implement the Cyber EO during February 2023.

Continue Reading February 2023 Developments Under President Biden’s Cybersecurity Executive Order

Contractors often assume that government auditors have special authority to interpret the Cost Accounting Standards.  That assumption is easy to understand — auditors frequently take the position that there is just one “right” way for a company to do its contract cost accounting, based on how other companies do things.  But contractors should know that CAS is flexible and generally gives them options about how to comply, based on the circumstances of their business.  In short, a contractor’s business judgment matters, and contractors can use it to push back on auditors who take an overly rigid view of CAS.

Continue Reading So the Auditor Says You Violated CAS?  Remember, Your Business Judgment Matters When Determining Compliance

The United States National Cybersecurity Strategy, released on March 2, 2023, is poised to place significant responsibility for cybersecurity on federal contractors, technology companies, and critical infrastructure owners and operators.  The Strategy articulates a series of objectives and recommended executive and legislative actions that, if implemented, would increase the cybersecurity responsibilities and requirements of these types of entities.  For example, the Strategy proposes that legislation be developed to establish liability for software vendors that fail to take reasonable precautions to secure their software.  The Strategy also outlines the need to use minimum cybersecurity requirements, as opposed to voluntary measures, in critical sectors to enhance national security and public safety.  A new post on Covington’s Inside Privacy blog discusses the main pillars and objectives of the new National Cybersecurity Strategy. 

In August 2020, the Office of Management and Budget (“OMB”) amended its Guidance for Grants and Agreements set forth under 2 CFR (commonly referred to as the “Uniform Guidance”).  The Covington team wrote about that amendment, and in particular, the implementation of Section 889 requirements, here.  Now, almost three years later, OMB is requesting feedback in anticipation of further amending the Uniform Guidance. 

Continue Reading Opportunity to Comment on OMB Efforts to Amend Compliance Requirements for Grant Agreements

This is the twenty-first 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 December 2022.  This blog describes key actions taken to implement the Cyber EO during January 2023.

Continue Reading January 2023 Developments Under President Biden’s Cybersecurity Executive Order

On February 7, 2023, the House Committee on Armed Services (the “Committee”) held a hearing entitled “The Pressing Threat of the Chinese Community Party to U.S. National Defense.” This hearing marked the Committee’s first in the 118th Congress and it focused on U.S. strategic competition with the Chinese Communist Party (“CCP”) of the People’s Republic of China (“PRC”). This overview is the first in a series of legislative updates we will provide on congressional oversight activities related to China throughout the Congress, including specific activities focused on trade controls, supply chain dependencies, and PRC-sourced telecommunications infrastructure in U.S. networks.

Continue Reading Key Takeaways from the House Armed Services Committee Hearing on the Chinese Communist Party Threat to U.S. National Defense

This is the twentieth 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 blogsummarized 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 November 2022.  This blog describes key actions taken to implement the Cyber EO during December 2022.

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