Photo of Amy Laderberg O'SullivanPhoto of Zachary Schroeder

In Computer World Services Corporation, GAO sustained a protest challenging the Department of Homeland Security, U.S. Coast Guard’s corrective action taken in response to an earlier sustained protest by CWS. In its original protest, CWS successfully challenged a task order award; in response, the agency informed offerors via e-mail that it intended to remove a limited price realism analysis from its evaluation, and requested that offerors revalidate their price quotes within two days. The agency did not, however, issue a formal solicitation amendment or provide offerors with an opportunity to submit revised quotes.

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In this episode, hosts Mana Lombardo and Jacinta Alves discuss the $175 Billion CARES Act Provider Relief Fund established in response to the COVID-19 Pandemic and FCA risks associated with receipt of those funds. “Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act.

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Photo of Jacinta AlvesPhoto of Lorraine M. CamposPhoto of Brian Tully McLaughlinPhoto of Gail D. ZirkelbachPhoto of Lyndsay GortonPhoto of Stephanie Crawford

On June 17, 2020, the Pandemic Response Accountability Committee (PRAC) issued its first report, “Top Challenges Facing Federal Agencies: COVID-19 Emergency Relief and Response Effort” (the “Report”). PRAC was established by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). It consists of the twenty-one offices of inspectors general (OIGs) that oversee the agencies that received the bulk of the emergency funding, and it sits within the Council of Inspectors General on Integrity and Efficiency (CIGIE). The purpose of PRAC is to lead the efforts of CIGIE to promote transparency and conduct oversight of the funds disbursed under the CARES Act and related legislation, which currently totals $2.4 trillion. This first report provides a summary, by agency, of identified challenges in disbursing the emergency funding, especially the potential for fraud, abuse, and misuse of those funds, which will likely lead to audits, investigations, and qui tam lawsuits under the federal False Claims Act (FCA) in the months and years to come.

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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 Rob Sneckenberg and Christian Curran are joined by guest Liam O’Reilly to discuss the Federal Circuit’s recent Inserso decision and how it may impact the COFC’s waiver analysis for pre-award solicitation challenges.

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Photo of Adelicia R. CliffePhoto of Alan W. H. GourleyPhoto of M.Yuan ZhouPhoto of Stephanie Crawford

Section 889(a)(1)(B) of the FY 2019 NDAA, scheduled to become effective on August 13, 2020, bars the Government from entering into a contract, or extending or renewing a contract, with any entity that uses certain covered telecommunications equipment or services. The prohibition against “use” of covered equipment applies broadly to a contractor’s “use” anywhere within the company (including affiliates), and is not limited to its performance of government contracts. Industry has expressed substantial concerns over the reach of this prohibition and over whether compliance is even possible. On June 10, 2020, as the deadline for implementation looms and FAR Case 19-009 remains pending, Under Secretary of Defense for Acquisition and Sustainment Ellen Lord testified before the House Armed Services Committee, seeking Congress to delay Section 889(a)(1)(B)’s effective date.

Under Secretary Lord expressed concerns with the DoD’s ability to implement the restrictions by the rapidly approaching deadline, and to ensure complete compliance within two years. Given the complexity of the defense supply chain, she suggested that an additional year is needed to prevent the statutory prohibition from creating any potential unintended consequences to the defense industrial base. Industry would also like to see a delay in implementation, as well as a scaling back of the prohibition’s reach.

Photo of Jacinta AlvesPhoto of Lorraine M. CamposPhoto of Brian Tully McLaughlinPhoto of Gail D. ZirkelbachPhoto of Lyndsay GortonPhoto of Stephanie Crawford

On Wednesday, June 17, 2020, the Pandemic Response Accountability Committee (“PRAC”), composed of 21 Offices of Inspector General overseeing agencies that received the most CARES Act funds, released its first report, “Top Challenges Facing Federal Agencies: COVID-19 Emergency Relief and Response Efforts.”  The report was derived from information provided by 37 Offices of Inspector General from across the government.  PRAC is responsible for leading OIG CARES Act funding oversight.  Although the report flags concerns ranging from ballot theft to staffing shortages, the primary challenge identified in the report is the potential for fraud and abuse of Government funding under various programs.  The report emphasizes compliance and oversight concerns unique to the large amount of funding (~$2.4 trillion) appropriated under the CARES Act (and other COVID-19 legislation) in conjunction with the need to distribute these funds quickly in the midst of reduced or altered agency staffing and operations due to COVID-19.  With 37 Inspectors General asserting their commitment to addressing improper payments and fraud, companies should prioritize compliance now and ensure traceability of grant and contract monies associated with COVID-19 to prepare to respond to audits and reduce the risk of an investigation in the coming year.

Further commentary on the concerns regarding fraud and abuse identified in the PRAC report, including related to potential violations of the federal False Claims Act, will be forthcoming.

Photo of Mana Elihu LombardoPhoto of Stephanie MarcantonioPhoto of Amy Laderberg O'SullivanPhoto of Paul J. PollockPhoto of Olivia Lynch

On Wednesday June 17th, SBA and Treasury issued a revised Paycheck Protection Program (PPP) loan forgiveness application implementing the extended 24-week “covered period” and the reduction in payroll cost limitation on forgiveness from 75% to 60% of costs, per the PPP Flexibility Act of 2020 enacted June 5, 2020.  In addition to revising the full forgiveness application (and issuing revised instructions), SBA also published a new “EZ” version of the forgiveness application (and associated instructions) intended for borrowers that meet one of three requirements: 1) are self-employed and have no employees; 2) did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; or 3) experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.  While the “EZ version” of the application requires fewer calculations and less documentation for applicants seeking forgiveness, it still maintains numerous certification requirements and includes additional certifications for the borrower to attest to their eligibility to use the EZ application form. Both applications give borrowers the option of using either the original 8-week covered period (if their loan was made before June 5, 2020) or the extended 24-week covered period.

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Photo of Adelicia R. CliffePhoto of Alan W. H. GourleyPhoto of M.Yuan ZhouPhoto of Stephanie Crawford

Section 889(a)(1)(B) of the FY 2019 NDAA, scheduled to become effective on August 13, 2020, bars the Government from entering into a contract, or extending or renewing a contract, with any entity that uses certain covered telecommunications equipment or services. The prohibition against “use” of covered equipment applies broadly to a contractor’s “use” anywhere within the company (including affiliates), and is not limited to its performance of government contracts. Industry has expressed substantial concerns over the reach of this prohibition and over whether compliance is even possible. On June 10, 2020, as the deadline for implementation looms and FAR Case 19-009 remains pending, Under Secretary of Defense for Acquisition and Sustainment Ellen Lord testified before the House Armed Services Committee, seeking Congress to delay Section 889(a)(1)(B)’s effective date.

Under Secretary Lord expressed concerns with the DoD’s ability to implement the restrictions by the rapidly approaching deadline, and to ensure complete compliance within two years. Given the complexity of the defense supply chain, she suggested that an additional year is needed to prevent the statutory prohibition from creating any potential unintended consequences to the defense industrial base. Industry would also like to see a delay in implementation, as well as a scaling back of the prohibition’s reach.

Photo of Gail D. ZirkelbachPhoto of Alexis DeBernardisPhoto of Eric Ashby

The U.S. Justice Department recently recommended that other countries consider focusing on collusion in government procurement, touting the early success of its interagency strike force. During yesterday’s virtual meeting of the Organization for Economic Cooperation and Development (OECD) Competition Committee, Assistant Attorney General Makan Delrahim introduced the Antitrust Division’s recently formed Procurement Collusion Strike Force (PCSF), citing “significant signs of success on a national level and in the 13 U.S. Attorney Office partner districts.” The interagency task force has reportedly fielded inquiries from over 50 federal, state, and local government agencies and has trained more than 2,000 criminal investigators, data scientists, and procurement officials since its inception in November 2019. The Division announced that several grand jury investigations have been opened across the country as a result of the PCSF’s work, with over a third of the open investigations involving public procurements.

To the 38 member countries of the OECD committee and the EU, Delrahim emphasized the Division’s hope that “the Strike Force can serve as a model for other countries looking for innovative ways to more effectively fight bid rigging and other anticompetitive schemes that impact public procurement, and cheat taxpayers, all over the world.”

Crowell & Moring has established a PCSF Resource Center that is closely monitoring enforcement activity and assisting numerous government contractors with internal investigations and antitrust compliance.

Photo of Mana Elihu LombardoPhoto of Stephanie MarcantonioPhoto of Amy Laderberg O'SullivanPhoto of Paul J. PollockPhoto of Olivia Lynch

On June 11, 2020, the Small Business Administration (SBA) posted a new interim final rule (the IFR) which clarifies certain key changes made to the Paycheck Protection Program (PPP) by the Paycheck Protection Program Flexibility Act of 2020 (Act). We addressed in a previous alert how the Act, signed into law on June 5, 2020, made important changes to many aspects of the PPP, including extending the minimum maturity period, extending the forgiveness period, reducing the payroll cost limitation on forgiveness, adding exemptions to employee rehiring requirements, revising the loan deferral period, and lifting the CARES Act’s prohibition on payroll tax deferral. The IFR largely implements the Act as written with the SBA providing further clarity in the IFR on two key changes.

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