Last week, DoD released a draft of its much-anticipated guidance implementing Section 3610 of the CARES Act, which authorizes the government to reimburse qualifying contractors for the costs of providing certain paid leave to employees as a result of the COVID-19 pandemic.  DoD previously published a collection of memoranda, Q&A documents, and a class deviation addressing Section 3610 reimbursement, but the new draft guidance (“Guidance”), which includes a “reimbursement checklist” and accompanying instructions, provides significantly more detail regarding the process for requesting and substantiating claims for reimbursement under the statute.

A number of open questions remain pending the issuance of final guidance, as discussed below, but the contours of DoD’s Section 3610 process are becoming increasingly clear.  Contractors interested in pursuing recovery under the statute should start preparing now to satisfy these emerging rules and requirements.


Continue Reading DoD Releases Draft Section 3610 Reimbursement Guidance

Last week, the FAR Council issued a Final Rule, setting forth new FAR provisions that require the reporting of certain counterfeit and suspect counterfeit parts and certain major or critical nonconformances to the Government – Industry Data Exchange Program (“GIDEP”).[1]  This Final Rule comes more than five years after the rule was first proposed in the Federal Register in June 2014.  The FAR Council describes the Final Rule as “significantly de-scoped” from the version proposed in 2014, but it nonetheless constitutes a significant expansion of the existing counterfeit part reporting obligations, which to date have applied only to electronic parts under DOD contracts.

Continue Reading New FAR Rule Expands Counterfeit Reporting Obligations

Organizational conflicts of interest (OCIs) are perpetually thorny issues in federal procurement that contracting officers are required to identify and evaluate “as early in the acquisition process as possible.”[1] Although the Government Accountability Office (GAO) has identified several OCI categories,[2] two recent decisions highlight so-called impaired objectivity OCIs, which arise when a contractor’s ability to provide objective advice or recommendations to the government will be undermined by competing interests. The two decisions serve as an important reminder of what does — and does not — qualify as meaningful consideration by the contracting officer in such situations, and how prospective contractors can assist in identifying and mitigating such OCIs.

Continue Reading A Tale of Two Protests: Recent GAO Decisions Highlight Impaired Objectivity OCIs

[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”

A prime contractor is responsible for managing its subcontractors, but what exactly does that require? In a recent decision, the answer of the Armed Services Board of Contract Appeals was: not nearly as much as DCAA claimed.

In Lockheed Martin Integrated Sys., Inc., ASBCA Nos. 59508, 59509, the Board ruled on a Government claim seeking more than $100 million from LMIS for allegedly breaching an obligation to manage subcontracts. In DCAA’s reading, this obligation was extensive and required a number of concrete actions by the prime contractor.
Continue Reading ASBCA Shoots Down DCAA Overreach on Responsibility to Manage Subcontractors

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

On September 10, 2014, the U.S. Small Business Administration (“SBA”) issued two proposed rules to increase employee-based size standards for manufacturing and various other industries in connection with the agency’s ongoing review of existing size standards.  The SBA has the discretion to establish size standards as a threshold under which firms are eligible to participate in small business programs, including contract set-asides.  The SBA analyzes the characteristics of specific industries, such as average firm size and the small business share of revenue from federal contracts, to determine which size standard is most appropriate for a particular industry.  Based on an application of this analysis to recent data, the SBA is proposing to increase size standards for 239 industries, which would enable approximately 1,630 new firms to participate in small business programs.  In addition, the SBA is proposing to establish a new 1,250 employee size standard, allowing for a more precise classification of larger small businesses, and to remove or modify a number of unique size standards applicable to specific sub-industries.

The proposed rules are the products of a statutory mandate in 2010 requiring the SBA to review all size standards by 2015, after which the SBA must periodically review size standards every five years.  The last comprehensive review of existing employee-based size standards took place in the late 1970s and early 1980s.  Since that time, the vast majority of employee-based size standards have not been subject to review.  As the SBA itself recognizes, existing employee-based size standards are “no longer supportable” when compared to economic realities in a number of industries.


Continue Reading SBA Increases Size Standards for Manufacturing and Various Other Industries