Federal Acquisition Regulation

Last month, the Government Accountability Office (GAO) issued a bid protest decision regarding the application of Buy American Act (BAA) requirements to a solicitation for construction.  In this decision, GAO rejected the agency’s determination that an offeror’s bid was nonresponsive because the offeror failed to provide certain required information for the evaluation of a potential BAA exception.  A summary of the decision and our takeaways are below.
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Continue Reading Pragmatism Wins the Day in GAO Buy American Protest

[Updated August 13, 2018]

If an agreement qualifies as a “subcontract” under a government contract, then it may be subject to certain flow-down, compliance, and reporting requirements.  These requirements are intended to protect the government’s interests, and have significant ramifications for contractors, e.g., increasing transaction costs, expanding potential areas of exposure.  These compliance obligations and risks can even deter some companies from performing under government contracts, especially those companies offering commercial items.

Currently, there is no uniform definition of “subcontract” in the applicable procurement regulations or in the procurement chapters under Titles 10 and 41 of the U.S. Code.  Indeed, there are more than twenty varying definitions of “subcontract” in the FAR and DFARS, with many clauses failing to specify which definition applies.  Now Congress is looking to address this lack of uniformity through the FY 2019 National Defense Authorization Act (NDAA).…

Continue Reading Congress Aims to Redefine the “Subcontract”

On January 9, 2018, Department of Defense (“DoD”) issued Class Deviation 2018-O0009, designed to reduce barriers to entry for innovative entities through streamlining the awards process for research and development contracts. This Class Deviation allows for the use of simplified acquisition procedures and excuses certain procurement obligations when DoD awards contracts and subcontracts valued…

Just two days before Donald Trump’s Inauguration, the Federal Acquisition Regulatory Council published a proposed rule to implement Executive Order 13693, Planning for Federal Sustainability in the Next Decade, and certain biobased acquisition provisions of the Agricultural Act of 2014.  The Council characterized the rule as advancing policies put into effect by an interim rule from May 2011, which “established a culture within the Federal acquisition community to. . . foster markets for sustainable technologies and materials, products and services.”  The proposed rule represents a shift in the FAR towards greater alignment with existing government programs that set forth sustainability standards for products and services.
Continue Reading New Policies on Sustainable Acquisition: Among the Last Proposed FAR Rules of the Obama Administration

On November 29, 2016, the Department of Defense, General Services Administration, and the National Aeronautics and Space Administration proposed an amendment to the Federal Acquisition Regulation (“FAR”) aiming to encourage pre-acquisition communications between industry professionals and federal agencies.  This amendment is part of a five-year long effort by the Obama Administration to clarify that communications between potential government contractors and federal agencies are not only allowed, but encouraged. …
Continue Reading New FAR Rule Encourages “Constructive Exchanges” between Federal Agencies and Contractors

Federal contractors who require employees to sign confidentiality agreements—including those selling only commercial products or in small quantities—need to examine their agreements closely. For the last two years, the government has sought to prohibit confidentiality agreements that restrict employees’ ability to report fraud, waste, or abuse to “designated investigative or law enforcement representative[s]” for federal agencies authorized to receive that information.”[1]  Most recently, the Department of Defense issued a new class deviation on November 14, 2016 prohibiting DoD from using funds from recent appropriations to contract with companies using overbroad confidentiality agreements.[2]  While these restrictions may not be new, the deviation’s broad application and significant consequences mean that contractors should give close scrutiny to ensure any agreements with employees comply with the prohibition.
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Continue Reading Confidentiality Agreements Continue To Pose Potential Compliance Trap for Contractors

On January 20, 2016, the FAR Council published a proposed rule calling for changes to FAR Parts 19 and 52 that address payments to small business subcontractors.  The proposed changes, which are intended to implement regulations adopted by the Small Business Administration (SBA) in 2013, will expand the range of small business-related obligations imposed on prime contractors.

The proposed rule stems from the Small Business Jobs Act of 2010, which, as noted in a previous post, called for regulations governing prime contractors’ compliance with their small business subcontracting plans.  Among the Act’s requirements was that prime contractors notify their contracting officer if they pay a “reduced price” or make an “untimely payment” to a small business subcontractor.  Although the SBA adopted regulations implementing this statutory directive in July 2013, the Far Council is taking on the task for the first time.…

Continue Reading FAR Council Adds New Layer to Small Business Subcontracting Rules

Over the past decade, Congress has focused on eliminating excessive “pass-through” charges—charges defined as overhead costs or profits passed to the Government by contractors adding negligible value over work done by lower-tier contractors.  The efforts began with the Post-Katrina Emergency Management Reform Act of 2006, which introduced limitations on tiered subcontracts after allegations that the Government grossly overpaid for goods and services provided largely by lower-tier subcontractors in the reconstruction following Hurricane Katrina.  However, until the passage of the instant rule to be implemented in FAR 15.404-1(h) effective June 8, 2015, such efforts have had little impact on agencies’ procurement processes.  This latest rule has the potential to significantly reduce the appetite for such contracts, and impact proposal and bid protest strategies.
Continue Reading Contracting Officers Must Soon Separately Justify Awards to Offerors Proposing High-Percentage or “Pass-Through” Subcontracting

In a span of two days, two separate agencies took action against contractor policies and agreements that may discourage whistleblowers.  On March 30, 2015, the U.S. Department of State Office of Inspector General (“State OIG”) issued a report contending that certain contractor policies and agreements have a “chilling effect” on whistleblowers.  On April 1, 2015, the Securities and Exchange Commission (“SEC”) imposed a fine of $130,000 on a contractor for requiring confidentiality agreements that allegedly impede individuals from disclosing securities law violations.   Given recent scrutiny, contractors should consider reviewing policies, procedures, forms, agreements, or practices that may impede employees’ ability to report instances of fraud, waste, and abuse.

As we discussed recently, the SEC’s April 1 order was based on a violation of SEC Rule 21F-17, which prohibits “imped[ing] an individual from communicating directly with [the SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . . .”  The contractor that received the fine required employees to sign a confidentiality agreement after discussions in internal investigations.  Specifically, the confidentiality agreement prohibited employees from “discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department.”  The SEC found that this provision, coupled with a statement that such impermissible disclosures may be grounds for termination, violated Rule 21F-17, even though it was not aware of any evidence that the provision had been enforced.

State OIG similarly took issue with certain contractor confidentiality agreements and policies.  State OIG, in analyzing the practices of the 30 largest State Department contractors, faulted 13 contractors for having policies that have “a chilling effect on employees who wish to report fraud, waste, or abuse. . . .”  Specifically, State OIG criticized policies instructing employees to “consult with the Legal Department” or their supervisor before answering government investigators’ questions or handing over documents, or requiring consultants receiving subpoenas or other judicial demands for contractor confidential information to provide “prompt written notice” to the contractor in order to permit the contractor from seeking a protective order.  State OIG also flagged separation and employment agreements that may have the same “chilling effect”—citing agreements prohibiting statements that could be “derogatory or detrimental to the good name or business reputation” of a contractor.…

Continue Reading SEC and State OIG Allege that Contractors’ Policies, Procedures, and Agreements Suppress Whistleblowing

On November 18, the National Institute of Standards and Technology (“NIST”) released Draft Special Publication 800-171 (“SP 800-171”), which includes new recommended security controls for nonfederal organizations such as government contractors, state and local governments, and colleges and universities that “process, store, or transmit” controlled unclassified information (“CUI”) on their own systems.  These draft standards were issued pursuant to Executive Order 13556, Controlled Unclassified Information (“CUI EO”), which called for the establishment of a uniform government approach for managing unclassified information requiring safeguarding or dissemination controls.  The draft standards are based on the security requirements and controls in FIPS Publication 200 and NIST SP 800-53, but were tailored to eliminate requirements that are uniquely federal, related primarily to availability, and/or presumably already routinely satisfied by nonfederal organizations.

To maintain the security of CUI, the CUI EO instructed the National Archives and Records Administration (“NARA”) to collaborate with various agencies to propose CUI classifications and associated markings, and issue any directives necessary to implement the CUI EO.  As noted in SP 800-171, “the CUI program is designed to address several deficiencies in managing and protecting unclassified information to include inconsistent markings, inadequate safeguarding, and needless restrictions, both by standardizing procedures and by providing common definitions” through a federal CUI Registry.  This Registry outlines 22 top-level categories of data, with subcategories covering everything from electronic fund transfers to source selection in the procurement process.  Although the categories of information included in the Registry are unclassified, the government has determined that additional safeguarding – such as storage on a secure server – or limitations on sharing the data should be employed.  To ensure that controls are reasonable and justified , the CUI EO requires each category to be based in statute, regulation, or government-wide policy, and the Registry lists such authorizations.…

Continue Reading NIST Draft Standards Provide Guidance For Protecting CUI on Contractor Systems