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).
Treasury and IRS Release Proposed Guidance on Domestic Content Requirement for Clean Energy Bonus Credit
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
Proposed Rule Requires Certain Contractors to Provide Export Authorizations to DCMA
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.
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Spy Games: Biden Administration Issues Executive Order Restricting Federal Use of Commercial Spyware
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.
CHIPS in for the Children: First Round of CHIPS Act Funding Conditioned on Provision of High-Quality, Affordable, and Reliable Child Care
On Tuesday, the Department of Commerce (Commerce) issued the First Notice Of Funding Opportunity (First NOFO) under the CHIPS and Science Act of 2022 (CHIPS Act), P.L. 117-167. As we have covered, the CHIPS Act provides for federal funding and assistance for the U.S. semiconductor industry, including building and operating new semiconductor factories, and
Buy America, by Americans—Office of Management and Budget Solicits Industry Input on Harmonizing Domestic Preference Regimes
As previewed in President Biden’s State of the Union Address, the Office of Management and Budget (OMB) issued a proposed rule and notification of proposed guidance on February 9, 2023 to improve uniformity and consistency in the implementation of Build America, Buy America (BABA) requirements applicable to federally funded infrastructure projects pursuant to the Infrastructure Investment and Jobs Act (IIJA).
This proposed rulemaking builds on preliminary guidance OMB issued on April 18, 2022, shortly before the BABA requirements became effective in May 2022. While the preliminary guidance focused heavily on agency waivers (both in terms of process and criteria), the proposed rule describes how the requirements related to manufactured products, iron and steel, and construction material will be interpreted.
Fastest 5 Minutes: Special Edition – Infrastructure and Inflation Reduction Act in 2023
This special edition of the Fastest 5 Minutes podcast covers recent developments related to the Infrastructure Bill and Inflation Reduction Act, and key areas to watch in 2023. The podcast features a cross practice team of Crowell partners, so we offer perspectives from tax, energy, labor and employment, government contracts, ESG, environmental, and government affairs.
FY 2023 National Defense Authorization Act: Key Provisions Government Contractors Should Know
The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023, signed into law on December 23, 2022, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that provide new opportunities for contractors to recover inflation-related costs, authorize new programs for small businesses, impose new clauses or reporting requirements on government contractors, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2023 NDAA also includes the Advancing American AI Act, the Intelligence Authorization Act for FY 2023, and the Water Resources Development Act of 2022, all of which include provisions relevant for government contractors.
FCA Settlement Offers Reminder of the Importance of TAA and PRC Compliance
The Department of Justice has announced a $14 million False Claims Act (FCA) settlement with Coloplast, a medical product manufacturer, after Coloplast self-disclosed violations of the Trade Agreements Act (TAA) and Price Reduction Clause (PRC) while under contract with the Department of Veterans Affairs (VA). The TAA requires contractors to furnish end products that are U.S.-made or “substantially transformed” in designated countries. Coloplast disclosed that it misapplied the substantial-transformation standard, causing Coloplast to report incorrect countries of origin for products and to improperly retain certain products on contract after manufacturing moved to non-designated countries. Coloplast also disclosed that it overbilled the Government by failing to provide the VA with discounts pursuant to the terms of the PRC, which normally requires tracking discounts offered to designated commercial customers and offering corresponding downward price adjustments to VA customers.
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Department of Defense Establishes Office of Strategic Capital to Enhance Investment in National Security Critical Technology
On December 1, 2022, Department of Defense (DoD) Secretary Lloyd J. Austin III announced the establishment of the DoD Office of Strategic Capital (OSC). The mission statement of the OSC is to build an “enduring technical advantage” for the United States by helping partner contractors with private investment to develop national security critical technologies, including those related to advanced materials, next-generation biotechnology, and quantum science. OSC will coordinate with existing organizations such as the Defense Advanced Research Projects Agency (DARPA) and the Defense Innovation Unit (DIU), which promotes acceleration of the military use of commercial technologies.
The OSC intends to offer what it characterizes as “patient” extended-term capital to help contractors obtain financing between the early laboratory-testing and prototyping phases and the full-scale development of products that can be used by the DoD warfighter. In addition to traditional vehicles like contracts and grants, this investment will likely take the form of loans and loan guarantees.