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Crowell & Moring has issued its Regulatory Forecast 2018: What Corporate Counsel Need to Know for the Coming Year.

The section focusing on government contracts, Will Purchasing Be Streamlined?” provides an overview of how the procurement process might be made more efficient, and this time, government contractors might be able to weigh in on the changes.

It is clear digital technology is driving the future of business across a wide range of industries while Washington, as well as state and global regulators, is forging the appropriate balance between fostering innovation and protecting consumers. This report is the companion piece to the firm’s 2018 Litigation Forecast, which was published in January and also focused on the opportunities and challenges general counsel face in navigating the Big Data revolution.

Be sure to follow the conversation on Twitter with #RegulatoryForecast.

On February 8, 2017, the Department of Justice Fraud Section posted a new guidance document on its website entitled, “Evaluation of Corporate Compliance Programs”  (“Compliance Guidance”).  This Compliance Guidance, comprised of a number of topics and questions, comes a little over a year after the Fraud Section hired Hui Chen as its resident compliance expert.  Tapping into her experience as both a prosecutor and a compliance professional at several large multinational companies, Ms. Chen has commented that an effective compliance program requires a whole-company commitment, and has emphasized the importance of leadership and key stakeholders in the compliance process.[1]  Her vision is evident in the Fraud Section’s recently released Compliance Guidance, which provides some insights into the mindset of prosecutors tasked with corporate investigations.[2]   The Compliance Guidance itself references two of the ten “Filip Factors,”[3] an enumerated set of factors used by prosecutors in making charging decisions related to corporate entities.  Although the Compliance Guidance cautions that the Fraud Section does not use a “rigid formula” to assess a company’s compliance program, the guidance provides a detailed list of compliance-focused sample topics and questions that the Fraud Section believes are relevant to its analysis.

Continue Reading DOJ Issues New Guidance on the Evaluation of Corporate Compliance Programs

Continuing his trend of fulfilling the promises set forth in his Contract with the American Voter, President Trump, on January 30, 2017, issued an Executive Order mandating the elimination of at least two existing regulations for every new regulation issued.  In particular, the order explains that “whenever an executive department or agency…publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”  In this way, the Administration intends to offset “any new incremental costs associated with new regulations….” Notably, however, the definition of regulation does not include: (1) “regulations issued with respect to a military, national security, or foreign affairs function of the United States”; (2) “regulations related to agency organization, management, or personnel;” or (3) “any other category of regulations exempted by the Director.”

Continue Reading Trump Administration Seeks to Reduce Regulatory Burdens

On Saturday, January 28, President Trump issued an Executive Order setting forth the ethics regulations governing current and future executive agency appointments, which is both more restrictive and less restrictive than the 2009 Obama Executive Order addressing the same issue.  Specifically, and with respect to the former, President Trump’s order bans all executive agency appointees from engaging in “lobbying activities” with respect to the particular agency in which the appointee served for a period of five years after leaving the Administration, and further prohibits such appointees from lobbying on behalf of a foreign government or political party during the remainder of their lifetimes (if such activities would require registration “under the Foreign Agents Registration Act of 1938”).  See §§ 1.1, 1.4.  These two prohibitions were absent from the Obama-era counterpart and mirror two of Trump’s promises outlined in his Contract with the American Voter.

Continue Reading Trump’s Ethics Executive Order More Concerned with Post-Government Employment Activities

On November 18, 2016, the Office of Government Ethics (OGE) issued a final rule revising the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”)  applicable to the solicitation and acceptance of gifts from outside sources. See 5 CFR § 2635. The final rule imposes a duty to decline otherwise permissible gifts when the appearance of impropriety is present, adds new examples of how to apply the rules, codifies previous interpretations of the gift rule, and retains the $20 de minimis exception (despite pushback in comments to the proposed rule to raise the standard commensurate with inflation. ) Although Government employees are the primary subject of the final rule, the changes will have a direct impact on how contractors, referred to as “prohibited sources” can interact with Government officials.   It is important for government contractors to understand that being implicated by a Government official’s violation of these Standards can lead to various consequences, such as facing public embarrassment, a tarnished reputation in the marketplace, suspension and debarment, or penalties for violating the bribery or illegal gratuities statutes.

The rule becomes effective on January 1, 2017. Continue Reading OGE Finalizes Rule Regarding Solicitation and Acceptance of Gifts for Executive Branch Employees

When assessing whether a contractor is eligible for award, contracting officers are required to conduct a meaningful present responsibility determination using the factors contained in FAR 9.1. However, a final rule issued by the FAR Council on September 30, 2016 has inserted a wild card into the process—the agency suspension and debarment official (SDO).

The final rule adopts an interim rule without change, which amends the FAR to establish the following representation and certification requirements:

  • Representation (FAR 52.209-11): Any corporation responding to a federal solicitation must represent whether it: (1) has any unpaid federal tax liability that has been assessed and is not being appealed or paid in a timely manner; or (2) has a felony conviction for a violation under any federal law within the preceding 24 months. There is no de minimus amount for reporting tax delinquencies. Consistent with the Consolidated and Further Continuing Appropriation Acts, an affirmative response to either prong would create an automatic exclusion that precludes the award of federal contracts in a “shoot first, ask questions later” fashion.
  • Certification (FAR 52.209-12): Corporate offerors must certify to tax matters contained in FAR 52.209-12(b) when responding to certain solicitations where the resultant contract (including options) may have a value greater than $5 million. If applicable, contractors must ensure that their certifications are accurate; otherwise additional liability could arise for the submission of false statements.

Continue Reading Tough (Tax) Break: Federal Tax Delinquency and Felony Convictions Could Bar Corporations from Contract Award

Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. This latest edition is hosted by partners David Robbins and Lorraine Campos and includes updates on the Transactional Data Rule Pilot Program, proposed FAR amendments, and bid protests.

Click below to listen via the embedded player or access from one of these links:
Crowell.com | PodBean | SoundCloud | iTunes

https://www.podbean.com/media/player/audio/postId/6495674?url=http%3A%2F%2Fcrowellmoring.podbean.com%2Fe%2Fsep-30-fastest-5-minutes-govt-contracts-podcast-crowell%2F%3Ftoken%3D6896692c4b2d265f0f922e0cb9fbe3e1

Beginning in June 2016, GSA will remove current wage determinations from existing MAS Schedules and require ordering agencies to incorporate determinations at the task order level to ensure that the “most recent” wage determinations are incorporated when an individual task order is placed.  The recently announced change is part of GSA’s plan to “update” the process by which  the Service Contract Act is incorporated into Multiple Award Schedules. 

 

Earlier this week, the Department of Veterans Affairs (“VA”) announced a seismic shift in policy that opens VA Schedule 65 IB to covered drugs that do not comply with the Trade Agreements Act (19 U.S.C. §2501 et seq.) (“TAA”).  While the VA’s prior policy prohibited contractors from offering TAA non-compliant drugs from on  a Federal Supply Schedule (“FSS”) contract, the VA’s new policy requires “that all covered drugs, regardless of county of substantial transformation, be available on a 65 I B FSS contract.”

TAA Overview

Under the TAA, the Buy American Act is waived for end products that are “substantially transformed” in so-called “designated countries”; i.e. those countries with which the U.S. is a party to bilateral and multilateral free trade agreements as well as certain other countries receiving preferential treatment (“Least Developed” and “Caribbean Basin” countries).  At the same time, the TAA prohibits the procurement of end products whose country of origin is a non-designated country (e.g., China, India, Malaysia).  The TAA has a “non-availability” exception where the end products required are not offered, or cannot be fulfilled by U.S. or designated country end products.   However, VA policy prohibited contracting officers from making non-availability determinations for FSS contracts – until now.

New Policy

The shift in policy empowers VA Contracting Officers to make individual non-availability determinations and waive TAA requirements when two hurdles are overcome (i) the offered drugs or similar drugs  are not TAA-compliant and (ii) the drug being offered is a covered drug under the Veterans Healthcare Act.  This policy change allows the VA to make available on 65 IB Schedule contracts those covered drugs formerly excluded due to the TAA non-compliant status.  Given the requirements under the new policy, it appears the VA intends to apply this non-availability exception to all covered drugs from non-designated countries, such as China and India.

Fast-Approaching Deadlines

The VA has set an aggressive timeline for implementing its new policy. The first deadline is this Tuesday– April 26, 2016.  By this date, pharmaceutical manufacturers must submit their Non-Federal Average Manufacturer’s Price (“Non-FAMP”) calculations to the VA’s Office of Pharmacy Benefits Management Services (“PBM”) for TAA non-compliant drugs.

By May 6, 2016, manufacturers currently holding VA FSS contracts must submit a Request for Modification (“RFM”) to add non-TAA compliant products to their existing FSS contracts.   Additionally, these contractors must execute a mass modification, which includes a “Trade Agreements Act Non-Availability Determination Request Letter”.  This letter requires contractors to list all non-TAA compliant covered drugs and verify that their currently marketed National Drug Codes (“NDC”) have no TAA compliant versions, including authorized generics.  The Contracting Officer may then make a non-availability determination based on this statement and its representations in the System for Award Management (“SAM”).

Manufacturers without a VA FSS contract, likely because their only covered drugs are TAA non-compliant, are required to at least enter into Interim Agreement (“IA”) by the May 6, 2016.  The purpose of the IA is to require the manufacturer to make its covered drugs available to the Government while negotiating a VA FSS contract – a process that can take several months.

All TAA non-compliant drugs must be on an existing FSS 65 IB contract or a new IA by June 6, 2016.

Impact on Manufacturers

This change in VA policy should be music to the ears of pharmaceutical companies that manufacture covered drugs in China, India and other non- designated countries.  By adding these products to VA FSS contracts, these manufacturers will have the opportunity for increased sales to various VA hospitals and other Government purchasers.

However, the VA’s ambitious deadlines may prove challenging for some manufacturers.  Manufacturers that are not already calculating Non-FAMP pricing information for TAA non-compliant drugs will need to perform these calculations right away.   Additionally, if a manufacturer prefers to dual-price, a calculation option under 38 U.S.C. 8126 that allows for the Big 4 (VA, Department of Defense, Public Health Service and Coast Guard) to be provided a lower price than other federal purchases under the FSS, it will likely require additional time and effort to negotiate the dual pricing under the FSS.  Because the new guidance provides no information on the impact of failing to make these deadlines, manufacturer should make every effort to meet these deadlines and alert the VA of its compliance efforts if a deadline may be missed.

By notice published in the Federal Register, the U.S. Trade Representative has confirmed that New Zealand has acceded to the WTO Agreement on Government Procurement and thereby, effective August 12, 2015, has become a “designated country” under the Trade Agreements Act.  Accordingly, products and services from New Zealand are now eligible to be procured under all contracts subject to the TAA, including GSA Schedule contracts.