A recently proposed rule would update the Federal Acquisition Regulation (“FAR”) to incorporate statutory changes to limitations on subcontracting that have been in effect since 2013. The U.S. Small Business Administration (“SBA”) has long since revised its own regulations to implement these changes, but some contracting officers have been reluctant to follow these changes in the SBA regulations because the FAR contains contradictory provisions.

The proposed rule is a sign of progress. In particular, it should add significant clarity to the current disconnect between the FAR and SBA regulations. However, the proposed rule is not perfect, and a number of recent developments highlight that outstanding questions remain.


Continue Reading Signs of Progress with the Limitations on Subcontracting, but Outstanding Questions Remain

Pursuant to Sections 817 and 881(b) of the FY 2017 National Defense Authorization Act (“NDAA”), the Department of Defense (“DoD”) recently issued a proposed rule to amend certain sourcing restrictions found in DFARS subpart 225.70 and related clauses.  Specifically the proposed rule would amend the DFARS to:

  • extend the Berry Amendment’s domestic sourcing restrictions to the acquisition of certain athletic footwear for members of the Armed Forces, when the procurement is valued at or below the simplified acquisition threshold [Section 817], and
  • recognize that Australia and the United Kingdom of Great Britain and Northern Ireland (the “UK”) are now members of the National Technology Industrial Base (“NTIB”), thereby permitting the United States to acquire certain items (that are subject to the sourcing restrictions in 10 U.S.C. 2534) if they are manufactured in the UK, Australia, Canada or the United States [Section 881(b)].

We provide our takeaways below.
Continue Reading Takeaways from DoD’s Proposed Changes to Certain Sourcing Restrictions

[This article was originally published in Law360 and has been modified for the blog.]

Over the summer, pursuant to Section 874 of the FY 2017 National Defense Authorization Act (“NDAA”)[1], the Department of Defense (“DoD”) issued a proposed rule[2] to exclude the application of certain laws and regulations to the acquisition of commercial items, including commercially available off-the-shelf (“COTS”) items.  Among other things, the proposed rule identifies certain DFARS and FAR clauses that should be excluded from commercial item contracts and subcontracts, and sets forth a narrower definition of “subcontract” that would carve out a category of lower-tier commercial item agreements from the reach of certain flow-down requirements.  A summary of the proposed rule and our key observations/takeaways are below.
Continue Reading Takeaways From DoD’s Proposed Changes to Commercial Item Contracting

[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 October 21, 2016, the Department of Defense (DoD) issued its long-awaited Final Rule—effective immediately—imposing safeguarding and cyber incident reporting obligations on defense contractors whose information systems process, store, or transmit covered defense information (CDI). The Final Rule has been years in the making and is the culmination of an initial rule issued in November 2013, two interim rules published in August 2015 and December 2015, and years of comments and experience by DoD and its contractors.  The new Rule materially alters the predecessor rule in a number of respects and clarifies several important issues relating to contracting for cloud computing services.

Continue Reading Cybersecurity Update: DoD Releases Long-Awaited Final Rule

Last week, the Federal Acquisition Regulation (“FAR”) Council issued a Final Rule to implement regulations adopted by the Small Business Administration in 2013.  The Final Rule significantly amends FAR Parts 19 and 52 by imposing additional small business-related obligations on prime contractors and clarifying the consequences of failing to satisfy those obligations.  The Final Rule largely tracks the proposed rule, which we previously discussed.  It will be effective November 1, 2016.
Continue Reading Changes to Small Business Subcontracting On the Horizon

Recently, the General Services Administration (“GSA”) issued a proposed rule to codify a class deviation regarding GSA’s approach to common Commercial Supplier Agreement (“CSA”) and End User License Agreement (“EULA”) terms.  We have previously addressed the class deviation here and in an article for the Coalition for Government Procurement available here.  While the Proposed Rule apparently is intended to assuage contractor concerns about the class deviation, it falls short of this goal, so contractors must remain vigilant if and when the Proposed Rule is finalized and GSA begins to attempt to implement it through contract modifications.  Comments on the Proposed Rule are due by August 1, 2016.

Continue Reading GSA Doubles Down on CSA/EULA Deviation

On Monday, April 18th, the Health Resources and Services Administration (“HRSA”) and the Department of Health and Human Services (“HHS”) reopened the comment period for their proposed rule “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation” (“Proposed Rule”).  Originally issued on June 17, 2015, the Proposed Rule sought to implement the civil monetary penalty (“CMP”) and ceiling price calculation provisions created by the 2010 amendment to Sec. 340B of the Public Health Service Act (“PHSA”) (for additional information on the Proposed Rule, please see our October 2015 webinar materials on the subject).  Comments were due August 17, 2015 and stakeholders vigorously commented on HRSA’s proposed penny policy for the ceiling price calculation, the lack of clarity regarding the new drug estimate calculation, and the liability standard for CMPs.

Continue Reading HRSA Seeks a Second Round of Comments on 340B Penny Pricing, New Drug Estimates, and Civil Monetary Penalties

On December 30th, the Department of Defense (DoD) issued a Second Interim Rule amending its “Network Penetration Reporting and Contracting for Cloud Services” Interim Rule and giving  contractors until December 31, 2017 to implement the NIST SP 800-171 security controls required by DFARS 252.204-7012.  As noted in a previous post, DoD has already issued a class deviation giving covered contractors up to nine (9) months (from the date of contract award or modification incorporating the new clause(s)) to satisfy the requirement for “multifactor authentication for local and network access” found in Section 3.5.3 of NIST SP 800-171.  This current revision appears responsive to significant concerns raised by Industry about compliance with the remaining safeguarding requirements imposed overnight on contractors on August 26, 2015.

The Second Interim Rule imposes the following changes:
Continue Reading Time Is On My Side: DoD Hears Industry Concerns – Additional Time Provided to Implement Security Controls Under New Cyber Rule

On June 17, 2015, the Health Resources and Services Administration (HRSA) published a proposed rule to clarify how manufacturers should calculate the ceiling price for covered outpatient drugs under the 340B program, and to provide for civil monetary penalties (CMPs) on manufacturers that “knowingly and intentionally” overcharge 340B covered entities.[1]  The ceiling price provisions are not expected to significantly change manufacturers’ current practices; however, the possibility of CMPs is a new aspect of the 340B program.  Although HRSA speculates that the use of CMPs will “probably be rare,” the proposed rule does not provide significant guidance regarding what constitutes a knowing and intentional violation.  The rule would also subject manufacturers to liability for failure to ensure that covered entities receive 340B pricing from wholesalers or other distributors, raising questions about manufacturers’ obligations to oversee these entities.
Continue Reading HRSA Proposes Calculation of 340B Ceiling Prices, Implementation of Manufacturer Civil Monetary Penalties