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On June 2, 2023, the FAR Council issued an Interim Rule with immediate effect that prohibits the presence or use of the TikTok app on “information technology” (IT) equipment used by government contractors and contractor personnel in the performance of a contract. The interim rule mirrors the Office of Management and Budget’s guidance, which directed federal agencies to remove TikTok and successor apps made by Chinese company ByteDance Limited from federal devices (to implement the No TikTok on Government Devices Act). Continue Reading Save the Last (Byte) Dance: New Interim Rule Bars TikTok and Successor ByteDance Apps

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On May 12, 2023, the Department of Treasury and the Internal Revenue Service (IRS) released Notice 2023-38 (Notice), stating that they intend to propose regulations to address the requirements taxpayers must satisfy when claiming domestic content bonus credit amounts provided by the Inflation Reduction Act under Internal Revenue Code (IRC) Sections 45, 45Y, 48, and…

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Concerns about the federal debt limit have simmered since the Government reached the limit in January, but things are coming to a boil with the Treasury Department’s confirming that, as early as June 1, “extraordinary measures” may be insufficient to prevent the U.S. from defaulting on its obligations. A default would be unprecedented, creating uncertainty about how the Administration will proceed. It is important, therefore, that contractors understand the circumstances and be prepared to respond effectively to a range of scenarios.

What is the Federal Debt Limit?

The federal debt limit is the maximum amount of money that Congress, by statute, permits the Treasury to borrow.  When Treasury reached this borrowing limit in January 2023, it began taking “extraordinary measures” to keep paying the federal government’s bills, but those extraordinary measures can only temporarily stave off default.  Once the federal government’s cash on hand is no longer sufficient to pay its bills despite those extraordinary measures, the U.S. could begin defaulting on its payment obligations.  Continue Reading Debt Limit Default

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On May 11, 2023, the Supreme Court issued two opinions limiting the reach of the federal fraud statutes and eliminating often-used theories from the government’s arsenal.

In Ciminelli v. US, 598 U. S. __ (2023), the Supreme Court decided that the “right to control” theory—long used by prosecutors in the Second Circuit—can no longer be used to support wire fraud convictions.  The Court overturned the conviction of Louis Ciminelli, a participant in a scheme to rig bids for New York state-funded projects, known as the “Buffalo Billion” initiative. As part of the scheme, requests for proposals were strategically drafted to give preferential treatment to Ciminelli’s company. At trial, the government argued that Ciminelli and his co-defendants were guilty of wire fraud under the right-to-control theory because they deprived the entity responsible for awarding the state-funded projects of certain information necessary to make an informed decision about the bid awards. The Second Circuit affirmed the conviction and the government’s use of the right-to-control theory.

Writing on behalf of a unanimous court, Justice Clarence Thomas held that the wire fraud statue only reaches traditional property interests and the right to valuable economic information needed to make discretionary economic decisions—known as the “right to control”—is not a traditional property interest. The right-to-control theory, therefore, “cannot form the basis for a conviction under the federal fraud statutes.” Continue Reading In Control: Supreme Court Reigns-In Second Circuit Fraud Theories

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On May 1, 2023, the Biden Administration announced its plan to issue an Executive Order in the coming days to rescind the existing executive order that imposes COVID vaccine requirements and safety protocols on federal contractors.  Specifically, Executive Order 14042 on Ensuring Adequate COVID Safety Protocols for Federal Contractors will be rescinded effective May 12…

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This week’s episode covers GSA’s Acquisition Guidance for Procuring 5G Technology, implementation of OMB’s memo focusing on “No TikTok on Government Devices,” and an ASBCA matter involving intracompany lease payments, 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…

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On March 22, 2023, the Department of Defense (DoD) issued a proposed rule that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to require certain contractors to provide export authorizations to the Defense Authorization Management Agency (DCMA).

DCMA performs quality assurance reviews for manufacturing operations to ensure contractors have the appropriate systems in place to meet quality and functionality standards along with contractual requirements regarding testing and validation.  In some cases, DCMA will engage a foreign auditor to perform the quality assurance review.  However, to do so DCMA needs insight into applicable export authorizations to see if engaging the foreign auditor is permissible.      

The proposed rule would require contractors to provide export authorizations to DCMA when the contract requires (i) government quality assurance surveillance oversight and (ii) performance in or delivery to a government quality assurance country (Australia, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Israel, Italy, Republic of Korea, Netherlands, Norway, Poland, Romania, Slovakia, Spain, Sweden, Turkey, and the United Kingdom).  Export authorizations include export licenses, exemptions, exceptions, and other approvals.  The contractor must also provide the contact information for an empowered official or export point of contact.   Continue Reading Proposed Rule Requires Certain Contractors to Provide Export Authorizations to DCMA

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Overview

On March 27, 2023, President Biden signed the Executive Order on Prohibition on Use by the United States Government of Commercial Spyware that Poses Risks to National Security (EO), restricting federal agencies’ use of commercial spyware.  The Biden Administration cited targeted attacks utilizing commercial spyware on U.S. officials and human rights abuses abroad as motivations for these restrictions.

Usage Restrictions

The EO is not a blanket ban on commercial spyware.[1]  Instead, it bars federal government agencies from using commercial spyware tools if they pose significant counterintelligence or security risks to the U.S. government, or significant risks of improper use by a foreign government or foreign person, including to target Americans or enable human rights abuses.  Indirect use of such spyware (e.g. through a contractor or other third party) is also prohibited.  The EO establishes risk factors indicative of prohibited commercial spyware, including:

  • Past use of the spyware by a foreign entity against U.S. government personnel or devices;
  • Past use of the spyware by a foreign entity against U.S. persons;
  • The spyware was or is furnished by an entity that maintains, transfers, or uses data obtained from the commercial spyware without authorization from the licensed end-user or the U.S. government, or has disclosed or intends to disclose non-public information about the U.S. government or its activities without authorization from the U.S. government;
  • The spyware was or is furnished by an entity under the direct or effective control of a foreign government or foreign person engaged in intelligence activities directed against the United States;
  • A foreign actor uses the commercial spyware to limit freedoms of expression, peaceful assembly or association; or to enable other forms of human rights abuses or suppression of civil liberties; or
  • The spyware is furnished to governments that have engaged in gross violations of human rights, whether such violations were aided by the spyware or not.

Continue Reading Spy Games: Biden Administration Issues Executive Order Restricting Federal Use of Commercial Spyware

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On March 9, 2023, President Biden released his fiscal year (FY) 2024 budget request outlining the administration’s priorities, including a nearly 10 percent increase in discretionary spending over the current enacted funding levels. The President’s budget requests a total of $6.9 trillion federal spending for FY 2024. Of this amount, $4.2 trillion would be in mandatory spending and $1.9 trillion would be in discretionary spending. Defense spending would receive an approximately 3 percent increase from FY 2023 for a total of $885 billion in discretionary spending, while non-defense spending would receive a nearly 4 percent increase from FY 2023 levels for a total of $1.02 trillion in FY 2024. The President’s budget request proposes a 7 percent increase over current non-defense spending level and tax increases among other proposed revenue raisers designed to lower the national deficit by $3 trillion over the next 10 years. 

The President’s budget request is the first step in the annual appropriations process. As the U.S. Congress holds the power of the purse, the next step is for Congress to pass a budget resolution, which provides a blueprint for all budget-related legislation, including the topline numbers governing discretionary spending for the upcoming fiscal year. The Appropriations Committees in the House and Senate will spend the next couple of months holding hearings on the budget request in preparation of their work on appropriations bills for government departments and agencies. The current divided government – with Democrats controlling the White House and the Senate, but with Republicans in the majority in the House of Representatives – and escalating partisan rhetoric on the debt ceiling raises questions about whether the political parties can navigate their way to an agreement before the current funding law expires on September 30. One thing is clear, the President’s budget priorities stand in stark contrast with the emerging House Republican agenda, and the final FY 2024 appropriations law will vary significantly from President Biden’s request.

The following summary, based on a review of the budget request and accompanying Fact Sheet and Analytical Perspectives, provides highlights from each section of the President’s budget proposal. Please reach out to the Crowell Government Affairs Group for more detail in any given area. Continue Reading President Biden Outlines White House Priorities in FY 2024 Budget Request

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On March 8, 2023, the Biden Administration announced a further opportunity for companies to take advantage of significant federal funding intended to promote clean manufacturing and reduce greenhouse gas emissions in federal procurement.  In line with the Biden Administration’s push to implement a clean energy economy (as we have previously covered, for example, here and …