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The Department of Defense (DoD) recently implemented additional procedures for the mitigation of cybersecurity risks in its supply chain. Designed to identify and mitigate cybersecurity and related supply chain risks throughout a program’s lifecycle, DoD Instruction 5000.90, Cybersecurity Acquisition Decision Authorities and Program Managers, requires program managers to:

  • Assess contractors’ cybersecurity posture, including, where applicable, verifying compliance with the DoD’s newly introduced Cybersecurity Maturity Model Certification (CMMC);
  • Consider the extent to which contractors have experienced “significant” incidents resulting in network breaches or data loss;
  • Avoid program requirements that may necessitate the use of contractors or suppliers that are owned or controlled by a foreign adversary government or are subject to the jurisdiction of a foreign adversary government;
  • Manage any supply chain risks associated with foreign ownership, control, or influence (FOCI); and
  • Mitigate supply chain risks using a framework that prescribes escalating risk management actions across four risk tolerance levels.

Alongside the DoD, the General Services Administration (GSA) recently introduced, as part of a draft solicitation for the Polaris small business government-wide IT contract, its own Vendor Risk Assessment Program (VRAP). According to the draft solicitation, the VRAP is designed to identify, assess, and monitor supply chain risks associated with FOCI, cybersecurity, and other factors, such as financial performance.

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On January 13, 2021, the Small Business Administration issued an interim final rule to implement the one-year extension of 8(a) Business Development status provided for in the National Defense Authorization Act for Fiscal Year 2021 and in the Consolidated Appropriations Act, 2021 (which we previously discussed here).

The rule contains crucial information on implementation of the extension, as well as explains how the rule will impact firms in different stages of their 8(a) lifecycles.

For starters, all firms in the 8(a) BD Program as of March 13, 2020 will receive the one-year extension, unless they were terminated, graduated early, or voluntarily withdrew prior to September 9, 2020.  Whether an entity is eligible to take advantage of the extension and how it is able to do so varies as follows:

Eligible for a one-year extension of 8(a) participation? Actions Needed to Be Taken to Benefit from the Extension
8(a) participants in the Program as of January 13, 2021 (that were admitted to the program on or before September 9, 2020) Yes

No.

 

The extension is automatic.

8(a) participants in the BD Program as of March 13, 2020 BUT graduated or otherwise left before January 13, 2021 Yes – for the period of time equal to one year from the date of the original expiration of the concern’s program term.

The extension is not automatic.

Such entities are required (1) to notify SBA of their intent to be readmitted by no later than March 15, 2021; and (2) certify that they continue to meet the applicable eligibility requirements as set forth in 13 C.F.R. §§ 124.101 through 124.111.

8(a) participants in the BD Program as of March 13, 2020 BUT were terminated or early graduated by SBA or elected to voluntarily withdraw or early graduate in lieu of termination No N/A
8(a) participants that graduated or otherwise left the 8(a) BD Program prior to March 13, 2020 No N/A
Participants that were admitted to the 8(a) BD Program after September 9, 2020 No N/A

The rule also clarifies how the extension will affect business activity targets.  Specifically, “any period of extension under the Act will be added to a Participant’s transitional stage of participation in the 8(a) BD program.”  As a reminder, in the transitional stage of the 8(a) Program (years five through nine), firms must generally achieve certain targets of revenue derived from sources other than sole source or competitive 8(a) contracts.  Here, SBA determined that firms receiving the extension (including firms in year nine of their term as of March 13, 2020), should generate 50 percent of their business activity from sources other than sole source or competitive 8(a) contracts.

This interim rule is immediately effective on January 13, 2021.  The deadline for submitting comments is March 15, 2021.

The extension is welcome relief for many firms, and will grant 8(a) participants an additional opportunity to utilize the Program’s significant benefits.

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On January 1, 2021, the National Defense Authorization Act for Fiscal Year 2021 became law after both houses of Congress overrode President Trump’s December 23, 2020 veto of H.R. 6395.  This Act contains numerous provisions that will impose new requirements, expectations, or opportunities for government contractors.  Crowell & Moring’s Government Contracts Group analyzes key provisions for government contractors regarding cybersecurity, government contracts intellectual property, other transactions, national security, small business, and more here.

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In BGT Holdings, Inv. v. United States, No. 1:18-cv-00178-PEC (Fed. Cir. Dec. 23, 2020), the Federal Circuit held that FAR 52.245-1 requires the Government to consider an equitable adjustment when it fails to provide Government-furnished equipment (GFE) required by the contract.  The contract in question required the Government to furnish equipment for the construction and delivery of a gas turbine generator.  After award, the Government stated that it would not provide the contractually-required equipment, unless BGT reduced the contract price.  In response, the contractor purchased the equipment itself, and sought reimbursement under FAR 52.245-1.  FAR 52.245-1 grants the Government the right to change the amount of GFE it provides, but also states that the CO “shall consider” an equitable adjustment under the contract.  The Government did not grant an equitable adjustment, and BGT asserted several theories related to FAR 52.245-1.  The Court of Federal Claims agreed with the Government that BGT’s breach count was insufficiently pled because, under FAR 52.245-1, the contracting officer must only “consider” the equitable adjustment––with any adjustment allowance being discretionary––and thus a decision to deny an adjustment is not a breach.

The Federal Circuit reversed.  First, the Court held that the Government’s interpretation of “shall consider” an equitable adjustment would “produce absurd results” and provide the Government with the “unfettered right to withdraw promised GFE from a contract without consequence.”  The Court remanded for a determination of whether the contractor was “entitled to an equitable adjustment as fair compensation for the [Government’s] failure to deliver those GFE items.”  Second, the Court remanded to the trial court to determine whether the contracting office “ratified” the actions of subordinates who communicated with the contractor about the GFE.  The Court held that the contractor did not “waive” this ratification argument by signing a contract with a Changes clause that admonishes the contractor to only follow the written directions of the contracting officer.  Third, the Court held that the contracting officer can “waive” the Changes clause requirements and thus allow subordinates to give authorized change orders, and the Court remanded on this issue as well.  The Federal Circuit’s decision is an important reminder for contractors that the Government cannot make changes to a contract without ensuring that the contractor is compensated for the impact of those changes.

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On January 6, 2021, the Administrative Conference of U.S. Courts authorized federal district courts to develop policies for accepting “highly sensitive court documents (HSDs),” which would normally be filed electronically under seal, via paper filing. The statement from the Administrative Conference also acknowledged that the recent cybersecurity attack on SolarWinds products compromised the confidentiality of documents filed under seal on the Judiciary’s Case Management/Electronic Case Files system (CM/ECF).

As a result, courts nationwide are issuing notices delineating what constitute HSDs, and how parties must file HSDs, effective immediately. While some courts have yet to issue guidance, a number of other federal courts have issued general orders requiring that HSDs be filed in paper in drop boxes in or outside the courts. Individual courts are left with a split between treating all sealed documents as HSDs, and leaving to the presiding Judge, or if none, the Chief Judge, the determination of whether a document is an HSD. The U.S. District Court for the District of Columbia will take the latter approach and has provided that the HSD determination may consider whether the document contains closely held trade secrets, or confidential government enforcement information.

On a practical level, these orders may require that sealed documents, including bid protests, are filed by the court’s close of business to be considered timely filed, rather than 11:59 p.m., the deadline for electronic filing. The orders also may require more conferences among the parties to reach consensus on what information must be filed under seal, particularly if the presiding Judge or Chief Judge of a District has to decide when the parties fail to agree, as is often the case. We will continue to monitor these developments.

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In this episode, hosts Evan Wolff and Kate Growley talk about what government contractors need to know about the Internet of Things and the recently passed IoT Cybersecurity Improvement Act. Crowell & Moring’s “Byte-Sized Q&A” podcast takes the complex world of government contracts cybersecurity and breaks it down into byte-sized pieces.

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This week’s episode covers important developments concerning the nationwide court order enjoining the Executive Order on Combating Race and Sex Stereotyping, GAO’s annual report regarding protest filings, extension of the reimbursement period for Section 3610 of the CARES Act, and the National Defense Authorization Act for Fiscal Year 2021, and is hosted by partners Peter Eyre and Olivia Lynch. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.

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On January 6, 2021, the DoD issued a class deviation, effective immediately, to implement the nationwide court order enjoining Sections 4 and 5 of Executive Order (EO) 13950, Combating Race and Sex Stereotyping, as well as guidance provided by the Office of Federal Contract Compliance Programs (OFCCP). EO 13950 prohibits federal agencies, contractors, and grant recipients from using workplace diversity and inclusion trainings to “promote race or sex stereotyping or scapegoating,” with Section 4 applying specifically to government contractors.

Under the class deviation, contracting officers are directed to “take all steps necessary to ensure the enjoined Section 4 of EO 13950 and its associated clause 252.222-7999, Combating Race and Sex Stereotyping (DEVIATION 2021-O0001) (NOV 2020), are not implemented or enforced and are inoperable until further notice.” Among other steps, contracting officers are instructed to (i) ensure that any new contracts do not contain the enjoined clause; (ii) modify existing contracts that include the enjoined clause to remove it and replace with the revised clause; (iii) not enforce any clauses contained in government contracts added pursuant to EO 13950; and (iv) not take any adverse action towards contractors or subcontractors on the basis of purported noncompliance with EO 13950, agency action implementing EO 13950, or any contract term inserted pursuant to EO 13950. To the extent contractors or subcontractors are presented with the enjoined clause, the injunction and class deviation provides a basis for refusing to incorporate the clause into any contract.

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On Sunday, President Trump signed a combined COVID-Relief and Omnibus Spending Bill, The Consolidated Appropriations Act of 2021, which funds the Federal Government for FY 2021 and includes a variety of COVID-19-related relief measures.  Among those measures, Section 1002 of the Act extends the reimbursement period for Section 3610 of the CARES Act, which allows federal agencies to use their funds to reimburse contractors for paid leave made to employees who are unable to access the worksites and unable to telework during the pandemic. The initial reimbursement cutoff of September 30, 2020 was previously extended until December 11, 2020, and the Act further extends the period until March 31, 2021, allowing agencies the discretion to continue to provide contractors with relief under Section 3610 of the CARES Act in 2021.

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Crowell & Moring’s “All Things Protest” podcast keeps you up to date on major trends in bid protest litigation, key developments in high-profile cases, and best practices in state and federal procurement. In this episode, hosts Olivia Lynch and Christian Curran are joined by colleague Eric Ransom to discuss issues surrounding emergency sole source procurements, and a recent stay override decision from the Court of Federal Claims concerning a Federal Emergency Management Agency sole source contract for COVID-19 tests.

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