Photo of Peter J. EyrePhoto of Steve McBradyPhoto of Nicole Owren-WiestPhoto of J. Chris HailePhoto of Brian Tully McLaughlinPhoto of Skye MathiesonPhoto of Charles BaekPhoto of John NakonecznyPhoto of Michelle Coleman

On December 9, 2020, the Department of Defense Office of Inspector General (DoD OIG) released its Audit of Department of Defense Implementation of Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act.  The audit assesses the DoD’s issuance of relief under Section 3610, which authorizes certain agencies to reimburse contractors for any paid leave, including sick leave, they provide to keep their employees or subcontractor employees in a ready state when doing so is in the best interest of the Government.  In order to qualify, contractors must not have been able to work due to closures or other restrictions, and must have job duties that cannot be performed remotely.

The audit identified 135 contracts for which a total of $68.3 million in leave costs had already been reimbursed, as of September 30, 2020, as well as an additional 157 contracts for which the contracting officers were planning to use Section 3610.  The majority of contracts under which Section 3610 reimbursements were issued were for contractor employees working at Government-owned facilities.  Where relief was denied, the DOD OIG determined that this was because (1) the contractor did not need to be in a ready state; (2) the subject employee for whom reimbursement was sought had violated DoD travel restrictions; (3) the contractor provided insufficient documentation; or (4) the contracting officer determined that there was insufficient funding available.

Generally, DoD’s use of Section 3610 authority has been limited, with DoD assisting only 96 contractors and subcontractors out of at least 781 that met the standards for relief.  The audit attributed this to (1) flexible and creative solutions on the part of contracting officers; (2) the defense industrial base being declared critical infrastructure; and (3) the lack of Congressional appropriations for Section 3610.  For example, one contracting officer administering a contract with more than 1,000 full-time equivalent employees authorized all the contractor employees to telework or gave them alternate work assignments rather than causing them to be laid off.  With respect to the defense industrial base being deemed critical infrastructure, certain companies were able to re-open and adapted to the pandemic conditions by rearranging their assembly lines and instituting social-distancing practices.  Finally, many contractors have not yet sought relief because they are waiting to see whether Congress will appropriate money for Section 3610—despite the fact that contracting officers are issuing reimbursements, nonetheless.  In fact, the audit noted that a number of contracting officers had resolved funding issues by transferring funds from other contract line items or by using funds that had already been earmarked for labor costs.

The audit sampled 37 contracts to review in greater detail, seeking to determine whether the respective contracting officers had complied with Office of Management and Budget and DoD guidance when approving Section 3610 relief—finding only one instance for which reimbursement should not have been granted.  Other irregularities included the reimbursement of more than 40 hours per week for an employee or allowing profit, but all such issues were in the process of being corrected.

One significant issue that the audit identified was the contracting officers’ reliance on contractors to self-certify that they were not using the same costs claimed under Section 3610 to seek relief under another source of funding, such as the Paycheck Protection Program (PPP), tax credits, or unemployment compensation programs.  Although contractors may seek relief under the PPP and Section 3610, contractors are prohibited from seeking relief for the same costs under both programs.  DoD contracting personnel stated that they were unsure of how to verify whether such double-dipping was occurring.  Nonetheless, the DoD OIG coordinated with the U.S. Small Business Administration to identify any instances in which a contractor who received Section 3610 relief had also received a PPP loan.  The report did not state that any violations had been identified, but it did note that several contractors had failed to disclose their receipt of PPP loans and that the DoD OIG had notified the respective contracting officers, DCMA, and DCAA.

The audit highlights the fact that many of the DoD’s affected contractors and subcontractors have not sought reimbursement under Section 3610.  Moreover, those who have applied, or intend to apply, should be mindful of providing adequate disclosures of any other sources of relief, such as the Paycheck Protection Program, tax credits, or unemployment programs, particularly because federal agencies may continue to coordinate their efforts in order to combat fraud and waste.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Peter J. Eyre Peter J. Eyre

Peter J. Eyre is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He is also a member of the firm’s Management Board. Peter was named to BTI Consulting Group’s list of “Client Service All-Stars” in 2016, 2017, and 2019 and…

Peter J. Eyre is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He is also a member of the firm’s Management Board. Peter was named to BTI Consulting Group’s list of “Client Service All-Stars” in 2016, 2017, and 2019 and has been named an Acritas Star, Acritas Stars Independently Rated Lawyers (2016, 2017, 2019). He is nationally ranked by Chambers USA in Government Contracts since 2014, and by Super Lawyers since 2017.

Photo of Steve McBrady Steve McBrady

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S.…

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S., Europe, Asia, and the Middle East.

In recent years, Steve has received the National Law Journal’s “Winning Litigator” award as a lawyer who has “tackled some of the most widely watched cases of the year,” as well as the “D.C. Trailblazer” award, recognizing lawyers who have “made significant marks on the practice.” In 2018, he was named “Government Contracts MVP” by Law360.

Photo of Nicole Owren-Wiest Nicole Owren-Wiest

Nicole Owren-Wiest is a partner and member of the Steering Committee of Crowell & Moring’s Government Contracts Group in the firm’s Washington, D.C. office. Nicole is nationally ranked by Chambers USA in Government Contracts and a recognized leader in two of the most…

Nicole Owren-Wiest is a partner and member of the Steering Committee of Crowell & Moring’s Government Contracts Group in the firm’s Washington, D.C. office. Nicole is nationally ranked by Chambers USA in Government Contracts and a recognized leader in two of the most complex areas in government contracting: accounting, cost, and pricing, and intellectual property/data rights. With over 20 years’ experience, Nicole has a broad counseling and dispute-resolution practice and leads the Group’s cost accounting practice, which focuses on helping clients navigate the government’s complex cost and pricing rules, including the FAR Part 31 cost principles, the Cost Accounting Standards (CAS), and Truth in Negotiations Act/Truthful Cost or Pricing Data (defective pricing).

Photo of J. Chris Haile J. Chris Haile

J. Chris Haile is a partner at Crowell & Moring with extensive experience in government procurement law. Mr. Haile litigates disputes and counsels clients in a broad range of government contract matters, with particular emphasis on the resolution of contract disputes. For example…

J. Chris Haile is a partner at Crowell & Moring with extensive experience in government procurement law. Mr. Haile litigates disputes and counsels clients in a broad range of government contract matters, with particular emphasis on the resolution of contract disputes. For example, Mr. Haile has represented clients in matters involving the government’s breach of contract, claims for contract changes, termination for default, termination for convenience, Truth in Negotiations Act (TINA) compliance and defective pricing, commercial-item procurement, contract negotiations, and bid protests. He also represents clients in other related matters, such as investigations and audits by government agencies or inspectors general (IGs), False Claims Act / qui tam relator suits, and disclosures to the U.S. Government.

Photo of Brian Tully McLaughlin Brian Tully McLaughlin

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a…

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a variety of complex claims, disputes, and recovery matters. Tully’s False Claims Act experience spans procurement fraud, healthcare fraud, defense industry fraud, and more. He conducts internal investigations and represents clients in government investigations who are facing fraud or False Claims Act allegations. Tully has successfully litigated False Claims Act cases through trial and appeal, both those brought by whistleblowers / qui tam relators and the Department of Justice alike. He also focuses on affirmative claims recovery matters, analyzing potential claims and changes, counseling clients, and representing government contractors, including subcontractors, in claims and disputes proceedings before administrative boards of contract appeals and the Court of Federal Claims, as well as in international arbitration. His claims recovery experience includes unprecedented damages and fee awards. Tully has appeared and tried cases before judges and juries in federal district courts, state courts, and administrative boards of contract appeals, and he has argued successful appeals before the D.C. Circuit, the Federal Circuit, and the Fourth and Seventh Circuits.

Photo of Skye Mathieson Skye Mathieson

Skye Mathieson is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability…

Skye Mathieson is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability issues, defective pricing, fiscal law questions, prime-sub disputes, bid protests, internal investigations, and responding to DCAA audits. Prior to joining Crowell & Moring, Skye spent several years as a trial attorney at the procurement litigation division of the Air Force Headquarters for Legal Operations, where he pioneered the seminal “Laguna Defense” that is now widely raised and litigated at the Boards of Contract Appeals.

Photo of Charles Baek Charles Baek

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation…

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation before the Armed Services Board of Contract Appeals (ASBCA), federal regulatory and ethics compliance and due diligence, bid protests before the Government Accountability Office (GAO), and False Claims Act (FCA) investigations. His practice also includes state contracting due diligence and litigation before the Court of Federal Claims.

Photo of John Nakoneczny John Nakoneczny

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the…

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the Civilian Board of Contract Appeals, where he supported its judges in resolving and mediating appeals under the Contract Disputes Act. John earned his J.D. from The George Washington University Law School, where he was the president of the Government Contracts Student Association and on the Federal Circuit Bar Journal. While in law school, John served as a legal intern at the U.S. General Services Administration and the Fraud Section of the U.S. Department of Justice, Criminal Division. Upon graduation, John was awarded the President’s Volunteer Service Award.

Photo of Michelle Coleman Michelle Coleman

Michelle D. Coleman is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. Michelle advises clients from diverse industries in connection with contract disputes and other government contract matters, including Contract Disputes Act (CDA) claims and requests for…

Michelle D. Coleman is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. Michelle advises clients from diverse industries in connection with contract disputes and other government contract matters, including Contract Disputes Act (CDA) claims and requests for equitable adjustments, fiscal law questions, prime-sub disputes, and bid protests.