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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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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 8, 2022, the Department of Defense (“DoD”) issued Class Deviation 2022-O0009 (the “Deviation”) immediately authorizing contracting officers to allow active registration in the System for Award Management (“SAM”) within 30 days of contract award or three days prior to submission of the first invoice (whichever comes first) rather than at the time of award—provided the contractor can prove it has initiated or attempted to start the SAM registration process.  The Deviation is in effect through October 31, 2022 unless rescinded or extended.

The SAM registration process, which changed in April 2022 when GSA switched from the DUNS number to the Unique Entity Identifier (“UEI”), has suffered from significant delays and system errors.  These system challenges continue, and SAM incident tickets continue to take weeks to process in many cases.  With this Deviation, DoD joins a number of other agencies that have already issued guidance for managing SAM delays that may affect contracts or grants.

Continue Reading DoD Issues Deviation for SAM Registration Requirement Due to Ongoing Processing Delays

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On August 31, 2022, the Safer Federal Workforce Task Force announced that the Federal Government “will take no action to implement or enforce Executive Order 14042,” the contractor vaccine mandate, “to ensure compliance with an applicable preliminary nationwide injunction, which may be supplemented, modified, or vacated, depending on the course of ongoing litigation.”

This announcement

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On August 18, 2022, the FAR Council issued a proposed amendment to the FAR implementing Executive Order 14063, Use of Project Labor Agreements for Federal Construction Projects, which requires the use of project labor agreements (PLAs) on any large-scale federal construction projects valued at or above $35 million unless an exception applies.  The Order, and the proposed rule, also give agencies discretion to use PLAs on projects under that $35 million threshold. 

In addition to expanding definitions of “construction,” “labor organization,” and “large-scale construction project” to align with E.O. 14063, the proposed rule would revise FAR 22.503 to reflect the change in policy that mandates agencies to require the use of PLAs when awarding large-scale federal construction contracts—including individual orders under Indefinite Delivery, Indefinite Quantity contracts—unless an exception applies.  The proposed rule would make the PLA requirement a mandatory flow-down.  The proposed rule would also allow agencies to include any additional agency-specific requirements in a PLA through FAR 22.504(b)(6), and would strike the current FAR 22.504(c), which grants agencies discretion to specify PLA terms and conditions. 

Continue Reading FAR Council Proposes New Rule on Project Labor Agreements for Major Construction Projects

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Last week, the United States Congress passed the $280 billion CHIPS and Science Act of 2022 (CHIPS Act)[1] to bolster domestic semiconductor and microchip manufacturing in the United States. The bipartisan legislation will facilitate federal investments in the form of grants, loans, and loan guarantees to eligible entities and create significant business opportunities for companies in the U.S. The legislation also provides funding and new programs to boost advanced workforce training and research and development in a range of scientific and technology areas. The legislation now awaits the signature of President Biden, who hailed its passage as “exactly what we need to be doing to grow our economy right now.”

The legislation seeks to reverse the decades-long decline in U.S. microchip and semiconductor manufacturing and counter the rise of China as a source for technologically advanced manufacturing processes and products. By boosting domestic manufacturing and supply chains, the legislation also aims to relieve the global semiconductor shortage that has plagued manufacturers of a diverse set of products – everything from automobiles to children’s toys – and has contributed to the nation’s supply chain woes for more than two years.

The cornerstone of the legislation is $52 billion that will be allocated to the U.S. Department of Commerce semiconductor initiative to develop and expand domestic manufacturing capacity. Implementation of that program was already underway at the Department of Commerce[2], following Congressional authorization in the Fiscal Year 2021 National Defense Authorization Act (FY21 NDAA), and the legislation passed last week now provides the critical funding needed to commence direct federal incentives for the construction, expansion, or modernization of semiconductor manufacturing facilities.

Continue Reading The CHIPS Are Down and Incentives Flow as Congress Attempts to Vitalize the U.S. Semiconductor Industry

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Major changes to the way small business contractors obtain, and agencies evaluate, past performance references are set to arrive on August 22, 2022. On July 22, 2022, the Small Business Administration (SBA) published a final rule implementing provisions of Section 868 of National Defense Authorization Act for Fiscal Year 2021. The rule provides two new methods for small business contractors to obtain past performance ratings upon which they may then rely when submitting offers on prime contracts with the Federal Government.

First, a small business offeror may rely on the past performance of a joint venture of which it is a member, as long as the small business was involved in performance of the joint venture’s contract(s).  To that end, when submitting a proposal, the small business must: (1) identify the joint venture; (2) specify the joint venture’s contract(s) the small business elects to rely upon; and (3) detail the duties and responsibilities the small business carried out as part of the joint venture. Provided these requirements are met, the procuring agency shall (per 13 C.F.R. § 125.11) consider the past performance of the joint venture when evaluating the past performance of the small business concern.

Continue Reading SBA to Implement New Methods for Evaluating Expanded Sources of Small Business Past Performance

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The General Services Administration (GSA) transition from the Dun & Bradstreet (D&B) Data Universal Number System (DUNS) to the Unique Entity Identifier (UEI), which took effect on April 4, 2022, has faced challenges.  Substantial verification and validation delays continue, agencies have had to issue guidance for the management of SAM delays, and even Congress is showing concerns.  

According to the Federal Service Desk (FSD), GSA requires entities to submit new validation documentation, despite the years of submissions to Dun & Bradstreet, because data rights limitations prevent SAM.gov from using previously validated data.

Continue Reading SAM Transition to UEI Plagued with Registration Processing Delays

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On July 7, 2022, the General Services Administration (“GSA”) published an Advance Notice of Proposed Rulemaking (“ANPR”) seeking public comment on revising GSA policies and procedures to reduce single-use plastics in purchased products and their packing and shipping materials.  GSA is acting in furtherance of the directives set forth in Executive Order 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability (discussed here), which, among other things, directed GSA to use federal procurement policy as a way to support a recycled content market.  Thus, for purchases under the Federal Supply Schedule program, as well as GSA’s construction, concession, and facility maintenance contracts, GSA seeks to reduce reliance on single-use plastics and move toward what the Administration considers to be “environmentally preferable” materials.

Continue Reading GSA Exploring New Regulations to Reduce Single-Use Plastic in Federal Procurement