On December 19, 2022, DoD issued a DFARS proposed rule that seeks to (1) implement the data-rights portions of the May 2, 2019 Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive (SBIR/STTR Policy Directive), and (2) impose significant changes to technical data and computer software marking requirements. The SBIR/STTR portion of the proposed rule follows DoD’s advance notice of proposed rulemaking issued on August 31, 2020 (see 85 FR 53758) and incorporates the eight written public comments that DoD received. The proposed changes to marking requirements go beyond the SBIR/STTR Policy Directive and respond to the Federal Circuit’s decision in The Boeing Co. v. Secretary of the Air Force, 983 F.3d 1321 (Fed. Cir. 2020).
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.
Congress Passes Last Minute Three-Year SBIR/STTR Reauthorization Including New National Security-Related Restrictions and Requirements
On September 30, 2022, President Biden signed the SBIR and STTR Extension Act of 2022 (the Act), reauthorizing the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and six pilot programs for three years, until September 30, 2025. The Act includes new due diligence and reporting requirements, award restrictions, and clawback provisions related to national security risks—particularly regarding firms with ties to China, Russia, North Korea, and Iran—and increased minimum performance standards for multiple SBIR/STTR award winners. The passage and signing of the Act averted a potential lapse of these programs, which were set to expire the day of the reauthorization.
DoD Will Consider Contract Adjustments Addressing Inflation
On Friday September 9, 2022, the Principal Director for DoD Defense Pricing and Contracting (DPC) issued a Memorandum titled “Managing the Effects of Inflation with Existing Contracts.” The Memorandum provides guidance to Contracting Officers about the range of approaches available to address the effects of inflation on the Defense Industrial Base. Of note, it highlights two paths contractors may pursue to recover for inflation under fixed-price contracts.
First, the Memorandum notes that the ability to recognize cost increases is largely dependent on contract type, asserting that “[c]ontractors performing under firm-fixed-price contracts that were priced and negotiated before the onset of the current economic conditions generally bear the risk of cost increases.” This is similar to guidance DPC issued in May encouraging Contracting Officers to consider including economic price adjustment (EPA) clauses in new contracts but expressing skepticism about contractors’ ability to recover for inflation under existing fixed-price contracts. However, the new Memorandum allows that “there may be circumstances where an accommodation [such as schedule relief or amended contract requirements] can be reached by mutual agreement of the contracting parties, perhaps to address acute impacts on small business and other suppliers.”
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President Biden Employs Defense Production Act and Tariff Act in Domestic Clean Energy Manufacturing Push
On June 6, 2022, President Biden issued a White House Fact Sheet (“Fact Sheet”) outlining President Biden’s “Bold Executive Action to Spur Domestic Clean Energy Manufacturing” along with five related Defense Production Act (“DPA”) Presidential Determinations[1] (“Presidential Determinations”) and a Declaration of Emergency and Authorization for Temporary Extensions of Time and Duty-Free Importation of Solar Cells and Module from Southeast Asia (the “Declaration”). The Fact Sheet states the President is (1) authorizing use of the DPA to accelerate domestic production of clean energy technologies; (2) encouraging domestic solar manufacturing capacity through the use of master supply agreements with enhanced domestic preferences; and (3) creating a two-year trade regulation bridge as domestic manufacturing for solar products scales up. The White House stated that these actions are being taken to lower energy costs, reduce risks to the power grid, and mitigate climate change. The Department of Energy (“DOE”) also released a statement on June 6 about the DPA Presidential Determinations which describes DOE’s concerns with regard to each material or technology for which a determination was issued. The statements made by the White House and DOE also make clear that these actions to employ the DPA are part of the Administration’s broader “all of government” approach to addressing Environmental Justice, with the intention to “strongly encourage projects with environmental justice outcomes that empower the clean energy transition in low income communities historically overburdened by legacy pollution.”
Awarded a Prior DoD FAR Part 12 Contract? You May Now Have a CID for the Previously Acquired Products/Services!
On April 28, 2022, the DoD issued a final rule that, effective immediately, requires the government to treat a contract previously awarded using FAR part 12 procedures as a prior commercial item determination (“CID”) for the acquired product or service, unless the head of contracting activity determines that the prior use of FAR part 12
President Issues DPA Determination to Promote Domestic Supply of Strategic and Critical Materials for Large-Capacity Batteries
In an effort to boost the domestic mining industry for critical minerals, on March 31, 2022, President Biden issued Presidential Determination 2022-11, the Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended (“Presidential Determination”). The Presidential Determination states that sustainable and responsible domestic mining, beneficiation, and
NIST Publishes an Initial Draft AI Risk Management Framework and Guidance to Address Bias in AI
On March 17, 2022, the National Institute of Standards and Technology (“NIST”) published an initial draft of its Artificial Intelligence (AI) Risk Management Framework (“AI RMF”) to promote the development and use of responsible AI technologies and systems. When final, the three-part AI RMF is intended for voluntary use and to improve the ability to
National Defense Authorization Act for Fiscal Year 2022: Acquisition Policy Changes of Which Government Contractors Should Be Aware
During December 2021, the House and Senate reached agreement on a compromise National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022. On December 23, 2021, Congress presented S. 1605 to President Biden, which he signed on December 27, 2021.
The FY2022 NDAA contains numerous provisions relating to acquisition policy—which provide new opportunities for government contractors, will result in the imposition of new clauses or reporting requirements on government contractors, require government reporting to Congress on acquisition authorities and programs, alter processes and/or procedures to which government contractors are subject, etc. Crowell & Moring’s Government Contracts Group discusses the most consequential changes in the FY2022 NDAA for government contractors below.
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DIU Issues Step-by-Step Guidelines for Defense Stakeholders to Responsibly Use AI
On November 15, 2021, the Defense Innovation Unit (DIU) released its Responsible Artificial Intelligence (AI) Guidelines (“RAI Guidelines”) to help contractors and federal officials gauge whether AI technology and programs align with the Department of Defense’s (DoD) Ethical Principles for AI (as we previously reported on here). Specifically, the RAI Guidelines provide a process