Federal government contract domestic preference requirements are set for significant changes. McCarter & English Government Contracts and Global Trade co-leaders Franklin Turner and Alex Major and Senior Associate Cara Wulf provide guidance for federal contractors in a Feature Comment for Thomson Reuters’ The Government Contractor. In the comprehensive article, the authors review the current regulatory
The Beginning of the Biden Administration – What Federal Contractors Need to Know
A new administration has moved into the White House, and, as anticipated, President Biden wasted no time in issuing, in the first few days of his presidency, a raft of Executive Orders (EOs) that appear calculated to set the tone of his administration. Notably, many of these executive actions walk back (or attempt to fully erase) some of the signature policies of the Trump Administration. Some of these presidential actions have immediate implications for government contractors, while others represent broad policy statements that, at least in the short term, will have little impact on contractors’ day-to-day operations – but they merit a close watch, particularly the Executive Order titled “Ensuring the Future Is Made in All of America by All of America’s Workers,” discussed in detail here. Contractors should take note of these early developments, as they are likely to evolve into concrete policies that will create new opportunities – or obstacles – for businesses in the federal marketplace in the months and years to come.
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Big Changes to Buy American—Biden Issues Broad Executive Order on the Future of Domestic Purchasing in Federal Procurement
On January 25, 2021, President Biden issued a sweeping Executive Order titled “Ensuring the Future Is Made in All of America by All of America’s Workers” (Order), which is intended to be the first step toward fulfilling his campaign promise to commit to American businesses by strengthening domestic preference rules in government procurement. The Order states the administration’s policy that the US government should “use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States.” While this is not a novel policy objective—indeed, the Trump administration articulated similar goals—the Order introduces certain dramatic steps in furtherance of that objective that may ultimately have significant implications for contractors.
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FAR Council Issues Final Rule to Implement Trump Executive Order on Significant Buy American Changes
On the eve of the inauguration of President Biden, a lingering Trump-era policy finally made its way into the Federal Acquisition Regulation (FAR). On January 19, 2021, the FAR Council issued a final rule implementing changes first revealed in Executive Order 13881 (the E.O.), Maximizing Use of American-Made Goods, Products, and Materials (84 FR 34257, July 18, 2019). As we discussed in an earlier post on this topic, the E.O. mandated significant modifications to FAR clauses implementing the Buy American statute by (1) substantially increasing domestic content requirements and (2) increasing the price preferences for domestic products. On September 14, 2020, the FAR Council issued a proposed rule designed to implement the requirements of the E.O. (85 FR 56558, Sept. 14, 2020). Our post on that development noted that, while the proposed rule incorporated the overarching objectives of the E.O., it also significantly expanded on the E.O. by reintroducing the domestic content test for commercially available off-the-shelf (COTS) items made wholly or predominantly of iron or steel, or a combination of both (with the exception of fasteners).
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2020 False Claims Act Recoveries Were Down by One-Third in 2020. . . and That’s Bad News for Federal Contractors
On January 14, 2021, the Department of Justice released its updated statistics for False Claims Act (FCA) recoveries in FY 2020. The Civil Division reported that it recovered $2.2 billion in settlements and judgments in the previous fiscal year—down nearly $900 million from FY 2019, and off nearly two-thirds from the government’s high-watermark collections of $6.1 billion in FY 2014. Although $2.2 billion in net FCA recoveries represents DOJ’s lowest FCA haul in a decade, it is still a remarkable figure considering court closures and pandemic-slowed dockets across the country over the past eleven months.
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The FAR Council Issues Proposed Rule to Implement Executive Order on Significant Buy American Changes
Halloween is coming up and, right on cue, the FAR Council has released a proposed rule that has potentially frightening implications for contractors. Last year, on July 15, 2019, the president signed Executive Order 13881 (the E.O.), Maximizing Use of American-Made Goods, Products, and Materials (84 FR 34257, July 18, 2019). As we noted in our previous post on this topic, the E.O. mandated significant changes to Federal Acquisition Regulation (FAR) clauses implementing the Buy American statute by substantially increasing both domestic content requirements and price preferences for domestic products. As we also pointed out, the E.O. contained several ambiguities as to how the desired changes would be implemented. At long last, we have (proposed) answers. On September 14, 2020, the FAR Council issued a proposed rule designed to implement the requirements of the E.O. (85 FR 56558, Sept. 14, 2020). While this proposed rule incorporates the overarching objectives of the E.O., it also adds a fairly unsettling spin in that it expands on the E.O.’s mandate by reintroducing the domestic content test for commercially available off-the-shelf (COTS) items as it pertains to iron and steel products.
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Risks, Reefs, and Wrecks: Charting a Course Through the Perils of Covered Telecommunications Equipment and Services
Like the sailors of old, the government contracting community ventures forth knowing full well that danger lies ahead – although fortunately not in the form of a kraken, leviathan, or other mythical sea monster. Rather, these perils and risks are embedded in sweeping new regulations that, like an unseen reef, will be arriving and taking effect all too quickly. On July 14, 2020, the FAR Council published a long-awaited (or perhaps long-dreaded) Interim Rule implementing Section 889(a)(1)(B) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Section B). Effective August 13, 2020, Section B prohibits executive agencies from “entering into, or extending or renewing, a contract with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.” Unlike its counterpart, Section 889(a)(1)(A) of the NDAA for FY 2019 (Section A), which prohibits agencies from “procuring or obtaining equipment or services that use covered telecommunications equipment or services as a substantial or essential component or critical technology,” the restrictions of Section B go far beyond the immediate contract between the contractor and the government. Instead, Section B directs contractors to discontinue any and all use of covered telecommunications equipment or services. Even accounting for the choppy seas caused by the ongoing pandemic, the exceedingly broad scope of Section B promises sharp, jagged, and uncharted hazards to contractors attempting to implement compliant policies and procedures.
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Proposed Rule Introduces Critical Changes for SBA Contractors
Although many of us have canceled vacations during this (unusual) year, summer is nevertheless upon us. While we wholeheartedly recommend firing up the grill and enjoying the sunshine in the coming months, companies planning to enter into joint venture (JV) agreements to compete for Government contracts should first make sure that they set aside some time to consider the impacts of proposed changes coming to the Federal Acquisition Regulation (FAR). These changes have the potential to create significant opportunities for both veteran Government contractors and new entrants to the federal marketplace who might consider competing for procurements through JV agreements.
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The Evolution of Contract Financing: Resurrecting Performance-Based Payments Under Fixed-Price Contracts
Contracting with the Department of Defense (DoD) can provide healthy opportunities for businesses of all sizes. That said, it is no secret that contractors without the cash resources to finance their performance while awaiting payment from the Government may find themselves swallowed whole by their contractual obligations. Many defense contracts are long-term endeavors; consequently, a contractor’s sustainability and profitability can be impacted by the sapping of available manpower while also requiring significant capital investment to manage material, labor, overhead, and other expenses incurred when performing a contract. In many cases, the upfront financial investment required serves as a barrier to entry into the government marketplace for nontraditional defense contractors. However, the DoD has recently unearthed and reanimated one of the more impressive dinosaurs buried in the Federal Acquisition Regulation. Welcome to the world of performance-based payments (PBPs).
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Commerciality in the Time of Coronavirus—DCMA Issues New Class Commercial Item Determination and Guidance
On March 31, 2020, the Office of the Under Secretary of Defense for Acquisition and Sustainment issued a memorandum attaching a class Commercial Item Determination (CID) promulgated by the Defense Contract Management Agency Commercial Item Group (DCMA CIG) identifying as commercial items specific products and services needed by the Department of Defense (DoD) to address the COVID-19 pandemic (Memorandum). The Memorandum is specifically intended to “allow contracting officers maximum flexibility” in awarding critical contracts for supplies and services needed for the DoD to combat the COVID-19 pandemic. The Memorandum is expected to facilitate the award of “urgent commercial item procurements,” and the class CID is specifically “limited to the information pertaining to the 2020 COVID-19 pandemic.”
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