Reporting and Disclosure

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On January 3, 2012, the FAR Council issued a final rule to implement a congressional mandate that the public have access to all information (excluding past performance reviews) in the Federal Awardee Performance and Integrity Information System ("FAPIIS"). FAPIIS was created in 2010 as a one-stop shop for contracting officers to review information about contractors’ business ethics, integrity, and performance.

In response to concerns raised about the disclosure of a contractor’s proprietary and confidential information, the final rule added an immediately effective requirement that contractors be given a seven-calendar-day review period to object to the public release of information on the grounds that such information is exempt from disclosure under FOIA. If a contractor objects, the information will be removed by the Government and the issue will be resolved in accordance with agency FOIA procedures. If there is no objection, the entry will be automatically released to the public part of the FAPIIS site within 14 calendar days after the review period began.
 

On October 19, 2011, the Department of Defense (“DoD”) proposed a new rule to amend DFARS § 252.211-7007 to remove the $5000 threshold from reporting requirements for Government-furnished property.  The proposed rule would require contractors to report Government-furnished property to the DoD Item Unique Identification (“IUID”) registry regardless of value.  DoD states that the intent of the rule is to standardize and simplify reporting.  DoD’s goal is to move away from strict reporting by dollar value alone and toward reporting designed to increase traceability.  Non-serially managed material will be required to be reported to the IUID registry in the same unit of pack as acquired (e.g., box, container).

DoD does not intend to incorporate the proposed property management rule into existing contracts.  Therefore, the Government does not believe there will be any need for equitable adjustments in association with the rule.  Because the rule will not apply to existing programs, the rule should not require duplicate records either.  Reporting requirements under the proposed rule will not apply to: (1) contractor-acquired property that has not been delivered to, and accepted by the Government; (2) property under a statutory leasing authority; (3) property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments; (4) intellectual property or software; (5) real property; or (6) material released for work in process.

Some contractors have expressed concern that the rule could be burdensome as hundreds of thousands of new items are subjected to DoD reporting requirements.  If the rule is adopted, contractors will need to ensure that their employees are diligent in accounting for small, every-day items, that previously may have simply been discarded if broken or worn-out.  However, DoD states that it hopes that the rule will simplify overall reporting and result in greater efficiency and considerable cost savings to both government and industry.  A public meeting will be held on November 17, 2011, and comments are due on or before December 19, 2011.

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On April 13, 2011, the Obama administration released a draft executive order called “Disclosure of Political Spending by Government Contractors.” This executive order, if implemented, would instruct the FAR Councils to amend the FAR to require significant disclosures about contractor political contributions to be made as part of any proposal submitted by a firm seeking a federal contract. The disclosures would not only cover the contributions by the company itself, but also the company’s affiliates, the company’s political action committees, and the individual contributions of all officers and directors:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and

(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditures or electioneering communications.

The disclosure obligation would kick in any time the aggregate amount of contributions given to a single source reach $5000 and the information collected would be posted of the Data.gov website so that the public could access the information. 

In the six weeks since this draft executive order was released, there has been significant backlash from industry. A wide array of trade associations and business advocacy groups, including the Professional Services Council, the Aerospace Industries Association, and the U.S. Chamber of Commerce, have chimed in to vigorously oppose the proposed order. At the same time, watchdog groups of applauded the proposed Order as an example of increased transparency in the area of federal contracting. 

While the Obama administration has assured critics that the information collected would not be considered as part of the evaluation of proposals (beyond the threshold issue of whether the certification of full disclosure was completed), questions persist about whether the draft Order would cause exactly the situation it seeks to avoid—injecting politics into the federal contracting system by providing competitive decision-makers with information they would not otherwise have possessed in the regular course of business. Other entities are concerned about the chilling effect this draft Order would have on political contributions by individuals at the company, whose personal political interests may have little or nothing to do with the interests of the employer. 

In the last week, groups of Republicans in both the House and Senate, led by Darrell Issa (R-California) and Susan Collins (R-Maine) respectively, have introduced legislation called the Keeping Politics Out of Federal Contracting Act of 2011, which would effectively preempt the draft Obama Executive Order by prohibiting federal agencies from collecting the political contribution information of contractors and their employees as part of a federal procurement. The statute would also prohibit federal agencies from using political affiliation or contribution information received from any source as a factor in the award of federal contracts. 

We will keep our readers apprised as the situation continues to develop.

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As we blogged previously, as of today – April 15, 2011 – the public has access to all information (excluding past performance reviews) in the Federal Awardee Performance and Integrity Information System (“FAPIIS”). FAPIIS was created in 2010 as a one-stop shop for contracting officers to review information about prospective contractors’ business ethics, integrity, and performance. Click here for the public portal, which is now live and ready for use.

The public will now have access to contractor-provided information about criminal, civil, and administrative proceedings, as well as government-provided information about contract terminations for default or cause and suspension and debarment. With respect to information entered in FAPIIS before April 15, 2011, it will be subject to the Freedom of Information Act process and is unlikely to be available in FAPIIS.

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On January 24, 2011, the FAR Council issued an interim rule to implement a congressional mandate that the public must have access to all information (excluding past performance reviews) in the Federal Awardee Performance and Integrity Information System ("FAPIIS"). FAPIIS was created in 2010 as a one-stop shop for contracting officers to review information about prospective contractors’ business ethics, integrity, and performance. Click here for more information about FAPIIS.

After April 15, 2011, the public will have access to contractor-provided information about criminal, civil, and administrative proceedings, as well as government-provided information about contract terminations for default or cause and suspension and debarment. The new clause states that requests to review the information posted in FAPIIS before April 15, 2011, will be subject to the Freedom of Information Act process.

As to new contracts, contracting officers will be required to insert the new FAR clause in solicitations. As to existing contracts, contracting officers will be required to bilaterally modify existing contracts (including indefinite-delivery indefinite-quantity contracts) that contain the FAR clause 52.209-8.  If the contracting officer is unable to negotiate this modification prior to April 15, 2011, the contracting officer will be required to obtain approval at least one level above the contracting officer to negotiate an alternate resolution.

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On September 20, hundreds of government contractors joined us for a webinar about the new executive compensation and first-tier subcontract award reporting requirements. It was a lively discussion and we explored some of the challenges relating to this new requirement. In case you missed it, the webinar is now available in its entirety by clicking here. Hope you enjoy it.

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On September 14, 2010, OMB issued two regulations implementing the Federal Funding Accountability and Transparency Act of 2006 requirements applicable to recipients of federal financial assistance. The first (pdf.) requires (among other things) that for any new award made after October 1, 2010, applicants and recipients of grants and cooperative agreements must register in the Central Contractor Registration (“CCR”), and the second (pdf.) requires (among other things) that recipients of grants and other forms of federal financial assistance must – subject to a few limitations that generally mirror those in the FAR – provide information about recipient executive compensation, first-tier subawards over $25,000, and subrecipient executive compensation.

It will be particularly interesting to see how State agencies and educational institutions handle these new requirements. According to the Preamble to the second regulation mentioned above, some State agencies have already expressed concern that the increased administration costs would deplete resources available for public purposes and some have suggested that the new requirement is an unfunded mandate. Similarly, some institutions of higher education noted that the limitation in OMB Circular A-21 on recovery of indirect costs could prevent them from recovering increased administration costs from their Federal awards sure to be incurred to comply with these new requirements.

Please join us for a webinar on Monday, September 20 at 2 pm ET for a discussion of the new rules requiring many contractors to report information about executive compensation and awards to subcontractors.

During this webinar, we will cover many topics, including:

  • Which companies must report executive compensation information?
  • How is executive compensation calculated?
  • How do these rules apply to publicly traded companies?
  • How does the CCR form work?
  • How should companies collect information from subcontractors?
  • What companies are considered subcontractors?
  • What if a subcontractor refuses to provide the information or the information is subject to a confidentiality agreement?
  • How do companies input the information in FSRS?
  • What will be done with the information?
  • Who will have access to the information?
  • What risks will companies face, even if they comply with this rule?

 

It should be an interesting discussion, and we hope you can join us.

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We have previously provided information about the interim FAR Rule implementing the Federal Funding Accountability Act of 2006, as amended by the Government Funding Transparency Act of 2008. The Rule, which is already in effect, requires many government contractors to report information about their executives’ compensation, their first-tier subcontractors’ executive compensation, and information about their first-tier subcontract awards. Since the Rule was published on July 8, 2010, government contractors have wrestled with difficult questions of interpretation and implementation issues. 

The comment period closed on September 7, 2010. Comments (pdf.) submitted by the Council of Defense and Space Industry Associations highlight some of the thorniest questions. Issues include:

1) Does the Rule compromise national security because of mandatory disclosure of information about products and services supplied to the US government?

2) Does the Rule cause competitive harm due to disclosure of subcontractor name and pricing information?

3) How should the executive compensation portion of this Rule be applied to publicly traded companies that have hundreds of DUNS numbers and CCR entries?

It will be interesting to see how the FAR Council addresses these – and other – questions that government contractors are raising.

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We have previously provided information about the final FAR Rule implementing the Federal Awardee Performance and Integrity Information System, known as FAPIIS. This Rule, which became effective on April 22, 2010, requires many government contractors to provide certified disclosures pertaining to certain administrative, civil, and criminal proceedings. The Government is collecting this information via a series of questions that are now active in Central Contracting Registration (“CCR”), and contractors are beginning to wrestle with the significant questions.

Below is an example of one of the questions that may be facing contractors (this image comes from p. 18 of the renewal/update screenshots made available by CCR (pdf.)): 

Here are some of the reasons why this inquiry is giving rise to questions:

1) By inserting the first parenthetical – “including parent organization, all branches, and affiliates worldwide” – one could argue that the question now expands the scope of the contractors’ disclosure requirements beyond the language and purpose of the underlying statute and FAR Rule. Moreover, there is another version of this question appearing elsewhere in CCR where the parenthetical reads “represented by the DUNS number on this specific CCR record,” but does not request information regarding branches and affiliates worldwide. (See p. 24 of the new registration screenshots made available by CCR).

2) Whereas the text of the final FAR Rule seeks certified disclosures about certain proceedings “in connection with the award to or performance by the offeror of a Federal contract or grant”, this CCR question also seeks parallel information with respect to State contracts or grants, and uses the phrase “your business or organization”, rather than “offeror”.

3) Whereas the text of the final FAR Rule seeks certified disclosures about certain proceedings “at the Federal or State level”, this CCR question is not limited in that way and may cause confusion about whether certain foreign or local proceedings must be disclosed.

4) The phrase “or other acknowledgment of fault” is vague and seemingly broader than the final FAR Rule.

5) Does this question impermissibly broaden the FAR Rule without giving the opportunity for notice and comment?

There are many other questions and conundrums as well. Please join us for a webinar on Thursday, May 6, from 2:00 pm – 3:30 pm ET, for an in-depth discussion of the final Rule and the issues now facing government contractors.