Regulatory & Statutory Developments

When Abraham Lincoln signed the False Claims Act (FCA) into law in 1863, it was a legislative reaction to a series of sensational congressional investigations into war profiteers’ sale of phony provisions and useless equipment to the U.S. government during the Civil War. Contractors who agreed to provide 100-pound bags of flour filled many of the bags with sand. Munitions suppliers demanded full payment (at exorbitant, wartime prices) for rusted, nonfunctioning weapons gleaned from scrap heaps. It was not a leap to find claims that sand was flour, or that a rusted flintlock was an Army rifle, were objectively false; these were not just breaches of contract, but out-and-out frauds. Congress stepped in to stop this “plundering of the public treasury,” and the FCA imposed penalties on those who sought to defraud the U.S. government and its taxpayers.
Continue Reading Honest Abe Would Demand “Objective Falsity” for FCA Liability. Will the Supreme Court?

Undoubtedly a great film for its day, the 1982 classic Poltergeist might not have aged as well as the filmmakers had hoped. But the vivid imagery, jump scares and creepy marketing the PG-rated “family” movie employed remain burned into the minds of many. For those unfamiliar with the Spielberg classic, a “poltergeist” is largely understood…

On September 22, 2020, President Trump issued an Executive Order on Combating Race and Sex Stereotyping (the Order). The Order is directed squarely at federal contractors and subcontractors, and states that its purpose is to “promote economy and efficiency in Federal contracting, . . . unity in the Federal workforce, and . . . combat[] offensive and anti-American race and sex stereotyping and scapegoating.” The Order is effective immediately but is applicable to contracts issued after November 22, 2020 (60 days after the Order).
Continue Reading UPDATE: New Executive Order and Accompanying OFCCP FAQs Demand Federal Contractors and Grantees Scrutinize All Diversity Workforce Training

On September 22, 2020, President Trump issued an Executive Order on Combating Race and Sex Stereotyping. The Order is directed squarely at federal contractors and subcontractors and states that its purpose is to “promote economy and efficiency in Federal contracting, . . . unity in the Federal workforce, and . . . combat[] offensive and anti-American race and sex stereotyping and scapegoating.” The Order is effective immediately but is applicable to contracts issued after November 22, 2020 (60 days after the order).
Continue Reading New Executive Order Demands Federal Contractors and Grantees Scrutinize All Diversity Workforce Training

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.
Continue Reading The FAR Council Issues Proposed Rule to Implement Executive Order on Significant Buy American Changes

Like the hits produced by DJ Khaled, the FAR Council offers “another one.” As covered extensively in this blog, federal contractors have been—or should have been (you have been working toward compliance, haven’t you?)—spending the closing days of summer ensuring compliance with the July 14, 2020 Interim Rule implementing Section 889(a)(1)(B) (“Section B”) of the National Defense Authorization Act for fiscal year 2019.  Section B prohibits the government from entering into a contract with an entity 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, and requires, among other affirmative obligations, for contractors to represent—after conducting a “reasonable inquiry”—that they do/do not use covered telecommunications equipment or services in their respective business operations. In light of the Interim Rule’s broad scope and mandatory accounting of a contractor’s operations, Section B’s compliance mandate presents another significant regulatory burden for contractors to shoulder. But contractors should fear not, because the FAR Council has heard their plaintive wails and responded on August 27, 2020, with a Second Interim Rule implementing new requirements for Section B compliance.Continue Reading The FAR Council’s Second Interim Rule Implementing NDAA Section 889(a)(1)(B): And the Hits Keep Coming!

When last we left the Federal Government, agency buyers were staring down the Interim Rule prohibiting them from contracting with entities that use “covered telecommunications equipment” under Section 889(a)(1)(B) (“Section B”) of the National Defense Authorization Act for Fiscal Year 2019 after August 13, 2020. But then August 13 came and went. Did federal agencies do all they needed to follow the requirement? Did modifications go out to industry yet? Were amendments made? Was FAR 52.204-24 (2019) appropriately corrected to FAR 52.204-24 (2020)? What of 52.204-25 or 52.204-26? Can federal agencies act in time?Continue Reading The Perils of Section 889 Part B Execution: The DoD Waiver

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.
Continue Reading Risks, Reefs, and Wrecks: Charting a Course Through the Perils of Covered Telecommunications Equipment and Services

When entering a casino, professional gamblers understand that “the house doesn’t beat the player. It just gives him the opportunity to beat himself.” This axiom is precisely why in the long run casinos make money, while gamblers see their bank accounts dwindle. The same holds true in the corporate world with respect to the creation, implementation, and maintenance of compliance programs. A company gambling on its compliance obligations does so at its own peril and must understand exactly what the “House” expects. If it doesn’t, then that company may join the unfortunate few that roll the dice or spin the wheel and come up with snake eyes or double zeros. That risk is multiplied if the company betting on sufficient compliance is receiving federal dollars, where failure can lead to catastrophic civil and criminal liability. Fortunately, the United States Department of Justice (“DOJ”) has published its version of “House Rules” that it is supposed to consult when examining whether to investigate, prosecute, or settle criminal charges against a company. In this respect, DOJ prosecutors are tasked with looking at specific factors outlined in the “Principles of Federal Prosecution of Business Organizations” (“Principles”) section of the Justice Manual. Among other factors, these Principles instruct DOJ prosecutors to consider “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision.” In furtherance of this mandate, the DOJ’s Criminal Division issued revised guidance on June 1, 2020, regarding the specific factors DOJ prosecutors should consider in making that evaluation. This updated version of the DOJ’s “Evaluation of Corporate Compliance Programs” (Guidance) clarifies and modifies certain areas of the version last updated in April 2019. Among other noteworthy revisions, the Guidance underscores the need for companies to ensure their corporate compliance program is:
Continue Reading Gambling on Compliance? DOJ Updates the House Rules on Corporate Compliance Program Expectations

Recently, the Defense Pricing and Contracting (“DPC”) unit under the Secretary of Defense issued draft implementation guidance for Department of Defense (“DoD”) contracting officers tasked with assessing contractor requests for reimbursement in accordance with Section 3610 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and applying the recent cost principle implemented by DFARS Class Deviation 2020-O0013—topics covered in depth by this blog. This draft guidance was first alluded to in the May 1, 2020, memorandum from Kim Herrington, the DPC Acting Director, to address “the reimbursement process from requesting the contracting officer’s determination of an ‘affected contractor’ to providing a checklist to guide collection[ ] and evaluation of costs from the [contractor] seeking reimbursement [under Section 3610].” Composed of general reimbursement implementation guidance along with two attachments—a checklist for review of a contractor’s reimbursement request and instructions for using the checklist—the DPC’s draft is, to date, the most comprehensive guidance addressing contractor requests for reimbursement under Section 3610 since the DFARS Class Deviation 2020-O0013 issued on April 8. The final guidance is expected to be released shortly.
Continue Reading DoD Issues Draft Guidance for Contractor Reimbursement Under Section 3610 of the CARES Act