In order to provide guidance on agency implementation of Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the General Services Administration (GSA) issued its April 21, 2020 Class Deviation CD-2020-12 (Class Deviation) covering contractor paid leave reimbursement authority in response to the COVID-19 pandemic. Effective immediately, the Class Deviation (1) sets forth Section 3610 guidance for GSA Contracting Officers, and (2) creates a new GSA Acquisition Regulation (GSAR) contract clause prescribing controls for contractor reimbursement under Section 3610 (GSAR 552.222-70). Although the Class Deviation does not account for all implementation issues associated with Section 3610, it does establish guidelines for agency implementation of contractor reimbursement under Section 3610. Given the wide variety of contracts GSA administers for the use of other agencies, this is welcome and practical guidance for contractors.
As most readers of this blog are aware, Section 3610 of the CARES Act provides agencies with the discretionary authority to reimburse, at the minimum applicable contract billing rates, contractor paid leave—through September 30, 2020—to keep their employees or subcontractors in a “ready state, including to protect the life and safety of Government and contractor personnel.” This reimbursement authority applies to contractor employees and subcontractors who (1) cannot perform work on a Government-owned, Government-leased, contractor-owned, or contractor-leased facility or site approved by the Federal Government for contract performance due to closures or other restrictions, and (2) are unable to telework or otherwise work remotely because their job duties cannot be performed remotely during the COVID-19 public health emergency. Among other guidance, the Class Deviation provides instructions for GSA Contracting Officers on how to evaluate a contractor’s reimbursement request and a new GSAR clause defining the limitations of Section 3610 authority.
Highlights of the Class Deviation and new GSAR Clause are as follows:
- Regarding applicability, the Class Deviation states that Section 3610 reimbursement may apply to task orders issued under GSA contract vehicles (e.g., FSS, GWACs), but not to indefinite-delivery vehicles at the contract level or to “non-FAR based contracts,” such as leases for real property. Because of the wide variety of programs under the GSA umbrella, the Class Deviation also permits Heads of Services to issue a determination indicating the programs to which Section 3610 is inapplicable.
- The Class Deviation also makes it clear that GSA expects its contractors to make “limited use” of the reimbursement authority; thus, the guidance in the Deviation is primarily for the benefit of contracting officers administering GSA contracting vehicles for use by other agencies. Indeed, the Class Deviation cites guidance from the Office of Management and Budget’s April 17, 2020 Memorandum M-20-22, that agencies “should carefully consider” if reimbursement for paid leave “is in the best interest of the Government.” Specifically, the Class Deviation counsels that reimbursement under Section 3610 should only be contemplated “after other methods to maintain key contractors in a ready state have been considered,” such as contract extensions, the use of progress payments, or the use of accelerated payments to small-business contractors. When these methods are not viable, the Class Deviation lists “various considerations” a GSA Contracting Officer must take into account before issuing a reimbursement under Section 3610, such as determining whether (1) the contractor is eligible for reimbursement of paid leave on a contract-by-contract basis, (2) it is in the agency’s best interest to keep the contractor in a ready state, and (3) the requested reimbursable paid leave under a contract is appropriate. In the event the GSA Contracting Officer determines that contractor reimbursement under Section 3610 is warranted, the Class Deviation includes guidance—albeit limited guidance—for reimbursement based on contract type.
- GSAR 552.222-70 permits contractors to request an equitable adjustment for reimbursable leave (e.g., sick leave or other leave necessary to keep their employees and/or subcontractors in a ready state) under Section 3610 during the period of March 27, 2020 through September 30, 2020. Reimbursements under the clause are limited to “actual reimbursable leave paid by the affected prime contractor, including payments to a subcontractor to cover paid leave for the subcontractor’s employees,” up to 40 hours per week. Contractors should take special note that the starting date for reimbursement under GSA’s Class Deviation differs from the earlier starting date for Section 3610 reimbursement in the recent cost principle proposed by the Department of Defense (DoD). See DoD, Office of the Undersecretary of Defense, Class Deviation – CARES Act Section 3610 Implementation (April 8, 2020) at 3 (“Reimbursement is authorized only . . . [f]or contractor or subcontractor payments made for costs incurred, not otherwise reimbursable, not earlier than January 31, 2020, and not later than September 30, 2020.”) (emphasis added). However, the March 27 cut-off date is consistent with the Office of Management and Budget’s (OMB) guidance. See OMB Memorandum M-20-22 (April 17, 2020) at 4-5. Regardless, the GSA’s decision to establish March 27, 2020 as the starting date for reimbursement doesn’t account for contractor’s incurring costs for paid leave related to the COVID-19 pandemic prior to that date, leaving a bad taste in the mouths of affected contractors.
- The contractor may initiate the request for reimbursement “immediately after making the payment to the contractor’s employee(s), or making the payment to the subcontractor that has already made the payment to the subcontractor’s employee(s).” In addition to submitting a reimbursement request, GSAR 552.222-70 requires the contractor to “provide any documentation requested by the Contracting Officer,” including, at a minimum, (1) the total estimated amount of reimbursable leave and (2) a representation from the contractor that (i) “[t]he reimbursement request for paid leave is only for reimbursable leave for applicable work, at the applicable rate in accordance with clause 552.222-70”; (ii) “[i]f the contractor receives covered credits, the contractor will timely notify the contracting officer of the circumstances of receiving the covered credits (e.g., dates and amounts)”; and (iii) all information submitted is true, accurate, complete, and correct at the time of submission.
- GSAR 552.222-70 reiterates that contractors are not allowed to retain any double reimbursements after the application of covered credits (defined as any credit received under the CARES Act, such as through the Paycheck Protection Program or Division G of the Families First Coronavirus Response Act), and they must notify the GSA Contracting Officer in writing upon receipt of covered credits, in addition to repaying the amount of the additional reimbursement—characterized as an “overpayment” as the term is used in FAR 3.1003(a)(3)—up to the amount of the covered credits.
In general, GSA’s Class Deviation provides welcome guidance to the murky agency implementation of Section 3610. But continuing questions about the application of Section 3610 have made contractor compliance with this section of the CARES Act a moving target. Accordingly, the key takeaway for contractors during the pandemic is that all actions taken in response to the pandemic—be it paid leave, a request for reimbursement, or both—should be carefully and clearly documented, including the justification, timing, and amount of any emergency assistance received, and any communications with agencies or contracting officers regarding similar matters. Most of the class deviations implementing Section 3610 issued so far include the agency’s right to examine and audit all contractor books and records related to reimbursements, and no contractor wants to be without a sufficiently papered file during an agency audit.