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Yesterday, President Biden issued a Fact Sheet entitled Biden Administration Efforts to Address Bottlenecks at Ports of Los Angeles and Long Beach, Moving Goods from Ship to Shelf to help address the “delays and congestion” across the transportation supply chain. As has been widely reported in recent weeks and months, the global supply chain has been hard hit by large increases in e-commerce and delays and shutdowns implemented to curb the spread of COVID-19. Yesterday’s release confirms public and private commitments to move goods more quickly and to secure the resiliency of American and global supply chains. To do so, the Biden Administration is focusing on the Ports of Los Angeles and Long Beach, which act as the ports of entry to the United States for 40% of containers received. The President, together with leadership from these ports, are undertaking a series of public and private commitments as noted below.

On the public side, the Biden Administration has taken numerous steps in the past several months to secure the supply chain and ensure that goods are delivered. In June, the White House launched the Supply Chain Disruptions Task Force, and, in August, announced John Porcari as the White House Envoy to the Task Force. Last week, the White House issued a release summarizing additional actions taken by the U.S. Departments of Agriculture and Commerce to address increased grocery store prices and the global semiconductor chip shortage respectively. Yesterday’s Fact Sheet also promises to continue to work with industry shareholders to move the American supply chain toward 24/7 operations. For its part, the Port of Los Angeles will expand its hours of operation to 24/7 with new off-peak night and weekend shifts.

On the private side, the union that provides labor for the Port of Los Angeles, and large retailers and delivery companies have agreed to maximize night and weekend hours to ease some of the backlog. For example, the International Longshore and Warehouse Union has announced that its members are willing to work those additional shifts at the Port of Los Angeles. In addition, large retailers have committed to increasing the use of night-time and weekend hours, and large delivery companies will increase the volume of containers that they move from the Ports of Los Angeles and Long Beach. Ultimately, the commitments announced yesterday are expected to move 3,500 additional containers per week at night through the end of 2021.

The Fact Sheet demonstrates the attention the Biden Administration is giving to supply chain issues and their resolution. Crowell & Moring LLP will continue to track these developments.

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In a recent alert, we highlighted VS2 v. U.S., in which the Court of Federal Claims refused to expand the Federal Circuit’s Blue & Gold waiver doctrine and required the Army to consider performance risk in a cost realism evaluation. In a new “Feature Comment” published in The Government Contractor, we take a deeper dive into the Court’s disagreement with GAO and what it means for contractors and agencies going forward. Of particular note, contractors considering capping costs in their proposals should carefully consider when and how agencies may evaluate performance risk; and both protesters and intervenors must stay vigilant and diligently pursue potential protest grounds

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Executive Order 14042, issued on September 9, 2021, requires that certain federal contractors and subcontractors mandate vaccinations against COVID-19 for covered employees in addition to requiring compliance by covered employees and visitors with other COVID-19 safety protocols.

However, E.O. 14042 leaves several questions unanswered, including how agencies should implement the order and, in some cases, what types of contracts are covered.  Government agencies have begun to issue guidance in the form of class deviations, the substance of which we are providing as a side-by-side comparison.

Crowell & Moring LLP is tracking this emerging guidance, and is pleased to present this table, current as of the date on the table.

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Following President Biden’s announcement of Executive Order 14042 (“EO”) on September 9, 2021, several agencies have issued guidance on the EO’s applicability to the contractor community, which we reported on here.  Further to GSA’s September 30, 2021 Class Deviation CD-2021-13, on October 6, 2021, GSA reiterated that a mass modification program for all GSA Schedule Contracts would begin on or around October 8, 2021, and no later than October 15, 2021.

This mass modification applies to GSA Schedule Contracts, regardless of whether they are for products, services, or both.  The Class Deviation notes that the Safer Federal Workforce Task Force’s guidance “strongly encourages agencies to incorporate the clause into contracts that are solely for products” and explains:

It is not administratively feasible to distinguish FSS contracts that are solely for products from FSS contracts that are primarily for products but also include ancillary-type services (e.g., installation, maintenance, training, ancillary services acquired via the Order-Level Materials SIN, etc.). Requiring the clause in all FSS contracts will simplify compliance tracking, vendor communication, and customer messaging efforts.

To that end, the GSA announcement states that:

The requirements in the Executive Order (EO) are being implemented across all government contracts via a Federal Acquisition Regulation (FAR) deviation. The clause in the FAR deviation will be incorporated into GSA contracts via a bilateral modification.

Notably, GSA contractors are required to accept the bilateral modifications with FAR 52.223-99 included.

We are continuing to monitor developments in this area.  Our team is available to help companies navigate the many issues raised by the EO.

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Congress has not passed crucial funding bills for the start of FY 2022 and, on September 28, 2021, Treasury Secretary Yellen informed Congress that Treasury now estimates that the Federal government will reach the debt ceiling by October 18.  As a result, we again face the prospect of a government shutdown for lack of funding.  While Congress may yet take action, agencies across the government are likely to begin taking steps to prepare for a shutdown, and contractors should do so as well.

Although the issues that contractors would face under a government shutdown may vary with the circumstances of individual contracts, there are a number of common considerations. Based on our experience under prior Federal government shutdowns, these include:

  • Where Is the Money? For incrementally funded contracts, a “shutdown” situation is likely similar to those experienced at the end of any fiscal year when there is a “gap” between appropriations. Contractors will need to consider the implications of the various standard clauses (Limitation of Costs, Limitation of Funds, Limitation of Government Obligations) that may affect the government’s obligation to pay costs in excess of the amounts already obligated to their contracts. Of particular concern will be the standard provisions in those clauses that may limit the government’s liability for termination costs in the event that the contracts are eventually terminated without new funding. Contractors will need to decide whether to continue to perform or to take the actions authorized when funding is insufficient to pay for anticipated costs. But for contracts that are fully funded or that have incremental funding sufficient to cover all anticipated costs, including termination costs, a shutdown would not normally create new funding risks.

Continue Reading Potential Federal Government Shutdown: Crowell & Moring Identifies and Answers Common Questions

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Crowell & Moring’s “Byte-Sized Q&A” podcast takes the complex world of government contracts cybersecurity and breaks it down into byte-sized pieces. In this final episode of a three-part series, host Kate Growley digests the current state of DFARS clause 252.204-7021 and what contractors should know about the Cybersecurity Maturity Model Certification (or CMMC).

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

 

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This afternoon, the Safer Federal Workforce Task Force issued its Guidance regarding COVID-19 Workplace Safety: Guidance for Federal Contractors and Subcontractors (at all tiers), pursuant to President Biden’s September 9, 2020 Executive Order.  The 14-page Guidance addresses the following topics:

  • Vaccination requirement.  The Guidance mandates vaccinations, with exceptions only for those employees legally entitled to accommodations.  It does not offer a testing alternative.  Covered contractor employees must be fully vaccinated by December 8, 2021.
  • Other COVID safety requirements.  The Guidance also provides masking requirements for vaccinated and unvaccinated individuals in certain circumstances and requires contractors to designate a person or persons to coordinate COVID-19 safety efforts at covered contractor workplaces.
  • Proof of Vaccination.  Covered contractors must ensure employees are vaccinated by checking authorized vaccination records.  Attestations of vaccination are not acceptable substitutes.
  • Covered contracts. The Guidance confirms that all contracts and contract-like instruments for services (including contracts subject to the Service Contract Act and concession contracts exempted from the Service Contract Act), construction (including contracts covered by the Davis Bacon Act), leasehold interest in real property, and contracts in connection with Federal property or land and related to offering services for Federal employees, their dependents, or the general public are covered.  In addition to Executive Order 14042’s exclusion of subcontracts for products, the Guidance appears to also exempt contracts for products.  The requirements must be flowed down to all lower-tier subcontractors, to the point at which subcontract requirements are solely for the provision of products.
  • Workplace location.  The Guidance defines “workplace location” as a location where covered contract employees work, including both the contractor’s workplace (including outdoor workplaces) and the Federal workplace.  The Guidance further makes clear that the mandate applies to all workers at a covered workplace, regardless of whether those employees work on or in connection with the contract, unless the contractor can affirmatively determine that no covered contractor employees will come in any contact with non-covered employees anywhere on the premises, including in restrooms, meeting rooms, stairways, parking garages, etc.
  • Remote workers.  As to remote workers, the Guidance provides that even individuals working on a covered contract from their residence must comply with the vaccination requirements.  However, private residences are not covered contractor workplaces, so individuals need not comply with other requirements, such as masking and physical distancing.
  • Work “on or in connection with.”  The Guidance clarifies that work “on or in connection with” encompasses all duties necessary to the performance of the covered contract.  This includes work by employees who are not directly engaged in performing the specific work called for by the covered contract, such as human resources, billing, and legal review, perform work in connection with a Federal Government contract.
  • Non-covered contracts.   The Guidance also strongly encourages federal agencies to apply the vaccine mandate to non-covered contracts.  It is therefore possible that contractors that do not have covered contracts will likely see contract clauses imposing similar vaccine mandates.

Our team will cover all of these issues in detail in our webinar on Monday September 27 at 1:30 EDT.

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On September 9, 2021, President Biden announced a six-pronged plan to combat COVID-19, which Crowell previously discussed here.  One prong of the plan is to protect the economy, an aspect of which is the streamlining of the existing Paycheck Protection Program (“PPP”) loan forgiveness process.

Under the PPP, loans to small businesses can be forgiven if the business demonstrates that it used the loan funds to keep its employees on payroll.  In order to receive forgiveness, all borrowers previously had to complete the loan forgiveness application and submit it to their PPP lender.  Per the new streamlined process, for loans of $150,000 or less, SBA will send a pre-completed application form to the borrower, who will then review, sign, and send the form back to SBA.  SBA then works directly with the lender to complete the forgiveness process.

SBA has already started utilizing this new process as of August 4, 2021.  Lenders are required to opt-in to the program through https://directforgiveness.sba.gov, with over 600 banks already opting into direct forgiveness.  SBA estimates that 6.5 million small businesses would be eligible for the streamlined process.  SBA says that more than 820,000 small businesses have already applied for forgiveness using the new process, with borrowers spending an average of 6 minutes on the application and 60% of applicants completing the process on their mobile phone.

Crowell will continue to monitor, and provide updates, regarding the use of this streamlined process.

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The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a final rule, effective September 10, 2021, that updates the Federal Acquisition Regulation to conform to two changes regarding small business subcontracting, namely by providing examples of what does—and what does not—constitute good faith efforts to comply with a small business subcontracting plan, as well as when indirect costs must be used in commercial subcontracting plans.

The NDAA at issue:  Section 1821 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 (section 1821(c) of Pub. L. 114–328; 15 U.S.C. 637) requires the Small Business Administration (SBA) to amend its regulations to provide examples of activities that would be considered a failure to make a good faith effort to comply with a small business subcontracting plan.

SBA Implementation:  SBA issued a final rule at 84 FR 65647, dated November 29, 2019, to implement section 1821 of the NDAA for FY 2017.  SBA added a non-exclusive list of examples of what could and could not be considered good faith efforts to comply with a small business subcontracting plan at 13 C.F.R. § 125.3(d)(3).

Proposed Rulemaking:  DoD, GSA, and NASA published a proposed rule on June 3, 2020, at 85 FR 34155, to implement section 1821 of the FY 2017 NDAA.

Key Change of the Rule:

As noted above, SBA updated 13 C.F.R. § 125.3(d)(3) in 2019 to provide contracting officers guidance on evaluating whether a prime contractor made a good faith effort to comply with its small business subcontracting plan.  The final rule updates FAR 19.705-7, Compliance with the subcontracting plan, to provide similar examples of activities that contracting officers may consider when evaluating whether the prime contractor made a good faith effort to comply with its small business subcontracting plan.  Per commentary in the rule, this change provides contracting officers with consistent and uniform examples to identify and hold large prime contractors accountable for failing to make a good faith effort to comply with their subcontracting plans.

Similar to the SBA final rule, FAR 19.705-7(d) now discusses the corrective actions available to contracting officers when a contractor fails to make a good faith effort to comply with the subcontracting plan and that, in this context, “a failure to make a good faith effort to comply with a subcontracting plan is a material breach, sufficient for the assessment of liquidated damages, and also for other remedies the Government may have.”  The final rule also updates FAR 19.705-6 to address the contracting officer’s responsibilities vis-à-vis a small business subcontracting plan, including initiating action to assess liquidated damages in accordance with FAR 19.705-7.

Commentary in the final rule makes clear that it does not implicate when a small business subcontracting plan is required—merely what activities would be considered a failure to make a good faith effort to comply with such a plan. That means that the rule does not change (1) whether a small business subcontracting plan is required in the acquisition of commercial items, including commercially available off-the-shelf items, nor (2) does it expand the applicability of the small business subcontracting plan requirement to contracts at or below the simplified acquisition threshold. Continue Reading Assessing Good Faith Efforts to Comply with a Small Business Subcontracting Plan

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The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a final rule, effective September 10, 2021, that finally updates the methodology to calculate compliance with the limitations on subcontracting.

The NDAA:  Section 1651 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 (15 U.S.C. 657s) revised and standardized the limitations on subcontracting, including the nonmanufacturer rule, that apply to small business concerns.

Implementation in SBA’s Regulations:  The Small Business Administration (SBA) implemented section 1651 of the FY 2013 NDAA in a final rule published at 81 FR 34243 on May 31, 2016, which became effective on June 30, 2016.

Proposed Rulemaking to Update the FAR:  DoD, GSA, and NASA published a proposed rule at 83 FR 62540 on December 4, 2018, to implement regulatory changes made by the SBA.

Key Set of Changes Made to the FAR:

The final rule updates the methodology for complying with the limitations on subcontracting.  FAR 19.505 and FAR clause 52.219-14 provide that a small business concern subject to the limitations on subcontracting will pay no more than a certain percentage of the amount paid by the Government for contract performance to subcontractors that are not similarly situated entities.  As with 13 C.F.R. § 125.6, the relevant thresholds are set as follows:

  • For a contract assigned a services NAICS code, the small business concern must not pay more than 50% of the amount paid by the Government for contract performance to non-similarly situated subcontractors;
  • For a contract assigned a NAICS code for supplies or products (other than a procurement from a nonmanufacturer), the small business concern must not pay more than 50% of the amount paid by the Government for contract performance, excluding the cost of materials, to non-similarly situated subcontractors;
  • For a contract assigned a general construction NAICS code, the small business concern must not pay more than 85% of the of the amount paid by the Government for contract performance, excluding the cost of materials, to non-similarly situated subcontractors; and
  • For a contract assigned a special trade contracting NAICS code, the small business concern must not pay more than 75% of the amount paid by the Government for contract performance, excluding the cost of materials, to non-similarly situated subcontractors.

Continue Reading FAR Conformed to the “New” Limitations on Subcontracting Methodology at 13 C.F.R. § 125.6