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On September 30, 2022, President Biden signed the SBIR and STTR Extension Act of 2022 (the Act), reauthorizing the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and six pilot programs for three years, until September 30, 2025.  The Act includes new due diligence and reporting requirements, award restrictions, and clawback provisions related to national security risks—particularly regarding firms with ties to China, Russia, North Korea, and Iran—and increased minimum performance standards for multiple SBIR/STTR award winners.  The passage and signing of the Act averted a potential lapse of these programs, which were set to expire the day of the reauthorization.

Continue Reading Congress Passes Last Minute Three-Year SBIR/STTR Reauthorization Including New National Security-Related Restrictions and Requirements
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This week’s episode covers a new executive order sharpening the current U.S. foreign investment screening process, important updates to DOJ’s criminal enforcement policy, and new software supply chain security requirements from OMB, and is hosted by Peter Eyre and Yuan Zhou. 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.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts

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In Doubleshot, Inc., ASBCA No. 61691 (July 19, 2022), the Armed Services Board of Contract Appeals (“ASBCA”) granted the contractor’s motion for partial summary judgment, denying the Government’s claim for unallowable costs to the extent that it was based on missing or unsigned employee time cards.  The ASBCA held that the contractor was not required to maintain time card records to support the allowability of labor charges beyond the retention period specified in the contractor’s cost-plus-fixed-fee contracts (including applicable time extensions). 

The contracts incorporated both the Audit and Records – Negotiation clause (FAR 52.215-2) and the Allowable Cost and Payment clause (FAR 52.216-7), which grant the Government the right to examine the contractor’s records reflecting all claimed costs and reduce payments for amounts that are unallowable.  Following the contractor’s delayed submission of two final indirect cost rate proposals, the Defense Contract Audit Agency (“DCAA”) did not begin auditing the proposals until eight months after the contractual obligation to maintain records had expired.  DCAA then questioned the contractor’s labor costs for which there was no time card support, even though the contractor was able to demonstrate that it paid its employees.  The Government’s claim and the contractor’s appeal followed. 

Continue Reading Too Late: Government’s Failure to Timely Audit Did Not Extend the Contractor’s Document Retention Obligations
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On September 23, 2022, the FAR Council issued a number of final rules amending the Federal Acquisition Regulation (FAR) to reflect changes previously implemented by the Small Business Administration (SBA) to its regulations on women-owned small businesses and HUBZones, as well as to clarify policy on joint ventures in small business contracting. 

The final rule on HUBZones (87 FR 58232) aligns the FAR’s definition of a HUBZone in provisions and clauses such as FAR 2.101, 52.212-3, 52.219-1, 52.219-8 and 52.219-9 to refer to the requirements described in 13 C.F.R. § 126.200 and SBA’s designation of a HUBZone small business concern in the Dynamic Small Business Search (DSBS). This is in line with the SBA’s recent revisions to the HUBZone regulations via which SBA annually certifies HUBZone entities in order to allow such entities to remain eligible for HUBZone contracts for the entire year rather than such entities being required to represent their status for each offer. Higher-tier contractors are required to confirm that a subcontractor representing itself as a HUBZone small business concern is certified by SBA as a HUBZone small business concern by accessing SAM or by accessing DSBS. The rule also allows contracting officers to award HUBZone set-aside and sole-source contracts at or below the simplified acquisition threshold. 

Continue Reading FAR Updated to Reflect Revised SBA Regulations
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This week’s episode covers a DOD class deviation providing flexibility around SAM registration timing, GSA and DOD memos regarding inflation and price adjustments, and a Second Circuit decision relating to Exemption 4 of the Freedom of Information Act, and is hosted by Peter Eyre and Yuan Zhou. 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.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts

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On September 15, 2022, the Biden Administration issued a new executive order (“EO”) and accompanying fact sheet, designed to sharpen the current U.S. foreign investment screening process as administered by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”). [1] This EO is the first to specifically identify certain additional national security factors for CFIUS to consider when evaluating transactions involving foreign investors. 

While the EO does not expand the jurisdiction of CFIUS or establish new requirements, the EO formally directs CFIUS to focus on transactions that could give foreign parties access to U.S. technologies, data, or critical supply chains that the Biden Administration has identified as important for maintaining U.S. economic and technological edge. The EO does not mention any specific country, but underscores the threat posed by inbound investments “involving foreign adversaries or other countries of special concern,” which may appear to be only economic transactions for commercial purposes but could “actually present an unacceptable risk to United States national security due to the legal environment, intentions, or capabilities of the foreign person, including foreign governments involved in the transaction.” [2]

Continue Reading Biden Administration Announces Presidential Directive on Sharpening Foreign Investment Screening by CFIUS
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On September 12, 2022, the Department of Justice (DOJ) announced the first-ever settlement with a Paycheck Protection Program (PPP) lender.  The lender, Prosperity Bank, agreed to pay $18,673.50 to resolve allegations it improperly processed a PPP loan on behalf of an ineligible applicant.  The announcement coincides with DOJ’s creation of three COVID-19 fraud “Strike Force” teams designed to enhanced DOJ’s efforts to combat and prevent COVID-19 related fraud.

Pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act, lenders who originated PPP loans were entitled to receive a fixed fee from the Small Business Administration (SBA) ranging from 1% to 5% of the loan amount.  Prosperity Bank, a regional bank with branches throughout Texas and Oklahoma, was one of those lenders.

Continue Reading DOJ Announces First-Ever False Claims Act Settlement with PPP Lender and Creation of COVID-19 Fraud Strike Force Teams
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As outlined in our prior client alert, the Office of Federal Contract Compliance Programs (the “OFCCP”) published a Notice in the Federal Register to federal contractors of a Freedom of Information Act (“FOIA”) request for disclosure of Type 2 Consolidated EEO-1 Report data submitted by all federal contractors and first-tier subcontractors from 2016 until 2020.  The OFCCP informed covered contractors that these reports would be produced to the FOIA requester unless the contractor submitted an objection to the disclosure by September 19, 2022.  With that deadline fast approaching, many contractors have been rushing to examine their EEO-1 reports to assess whether they should submit an objection, have raised questions with the OFCCP to better understand whether their EEO-1 reports are covered by the FOIA request, and have raised the prospect of an extension of the September 19 deadline.  As a result, OFCCP has just announced that (1) the Agency is extending the deadline for objections to October 19, 2022, and (2) that the Agency will be emailing all contractors that OFCCP believes are covered by this FOIA request, “using the email address provided by contractors that have registered in OFCCP’s Contractor Portal and the email addresses provided as a contact for the EEO-1 report.”   

This additional time and communication is welcome news for the contracting community.  Crowell & Moring LLP is available to assist federal contractors with questions regarding submission of objections prior to the new October 19, 2022 deadline. 

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Yesterday, the Office of Management and Budget (OMB) released Memorandum M-22-18, implementing software supply chain security requirements that will have a significant impact on software companies and vendors in accordance with Executive Order 14028, Improving the Nation’s Cybersecurity.  The Memorandum requires all federal agencies and their software suppliers to comply with the NIST Secure Software Development Framework (SSDF), NIST SP 800-­218, and the NIST Software Supply Chain Security Guidance whenever third-party software is used on government information systems or otherwise affects government information.  The term “software” includes firmware, operating systems, applications, and application services (e.g., cloud-based software), as well as products containing software.  It is critical to note that these requirements will apply whenever there is a major version update or new software that the government will be using. 

Continue Reading Going Hard on Software: OMB Unveils Mandatory Software Supply Chain Security Compliance Requirements
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Not to be outdone by the Department of Defense’s commitment to consider inflation relief, on September 12, 2022, the General Services Administration (“GSA”) Federal Acquisition Service published a Supplement to Acquisition Letter MV-22-02, extending and enhancing policies to provide inflation relief to GSA Schedule contractors.  As we previously explained, the original Acquisition Letter relaxed certain limitations on Schedule contractors’ ability to obtain Economic Price Adjustments (EPAs).  Specifically, it suspended limits on the frequency, size, and total number of EPAs a contractor could obtain during each contract term, while also lowering the approval threshold required for GSA to issue an EPA.  The relief provided by the original Acquisition Letter was set to expire on September 30, 2022, but is now extended through at least March 31, 2023. 

Furthermore, to streamline and expedite the issuance of EPAs, contracting officers will be authorized to directly issue EPAs—without needing to obtain additional approvals—for as long as the Supplement remains in effect.  The Supplement nevertheless reminds contracting officers that EPAs must otherwise be consistent with the terms of the underlying contract.

As was the case under the original Acquisition Letter, the policies described in the Supplement apply only to Schedule contracts administered by GSA, and they are discretionary for Schedules administered by the Department of Veterans Affairs.  Schedule contractors facing inflationary pressures should therefore review their contracts to confirm the availability of these relaxed EPA procedures.