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As signaled as a possibility in its March 9, 2020 guidance in Memorandum M-20-11, the Office of Management and Budget (OMB) issued Memorandum M-20-17 on March 19 to provide short term administrative, financial management and audit relief from the 2 CFR Part 200 Uniform Guidance requirements to a broader scope of recipients of grants and Federal financial assistance that are affected by the COVID-19 crisis.  Importantly, this OMB guidance authorizes awarding agencies to grant the administrative relief exceptions enumerated to the extent the awarding agency deems appropriate to recipients affected by the loss of operational capacity due to COVID-19.  Except as noted below, and until awarding agencies publish additional guidance on their implementation of Memorandum M-20-17, recipients must ask for relief, and the awarding agency then has the discretion to issue an exception to the requirements.

Any exceptions issued pursuant to this guidance are time limited and will be reassessed by June 17, 2010.  Though OMB acknowledges that, at present, many of the operational impacts and cost are unknowable, it is uncertain what OMB guidance will be following reassessment in June 2020.  Therefore, impacted grant recipients should act within the next 90 days to attempt to secure relief.

 

The Differences Between OMB Guidance in M-20-11 and M-20-17

In its most recent guidance in M-20-17, OMB expands the scope of M-20-11 – which was limited to grant recipients performing essential research and services necessary to carry out the COVID-19 emergency response – to provide similar “short term relief” for administrative, financial management and audit requirements under 2 C.F.R. Part 200 to “recipients affected by the loss of operational capacity and increased costs due to the COVID-19 crisis.”  In addition to applying to a broader group of grant recipients, M-20-17 also provides certain additional flexibilities that were not previously included in M-20-11; these include: flexibility with application deadlines, allowability of costs not normally chargeable to awards, extension of currently approved indirect cost rates, extension of closeout, and the ability for awarding agencies to waive certain notification requirements pertaining to COVID-19 related problems on a grant-by-grant basis.

It appears that the allowability of pre-award costs from January 20, 2020 through the Public Health Emergency Period and the twelve-month extension (as opposed to six-month extensions) to complete the Single Audit report, provided in Memorandum M-20-11, continues to be limited to those grantees performing essential research and services necessary to carry out the COVID-19 emergency response.

Notably, as agencies consider this relief, OMB counsels that program managers should consider potential offsets, including a reduction in training and travel.

 

Administrative Relief Exceptions for COVID-19 Crisis

In addition to the existing flexibility that awarding agencies have to grant exceptions on a case-by-case basis pursuant to 2 C.F.R. § 200.102, OMB is providing Federal agencies with the authority to issue broader exceptions to the Uniform Guidance requirements as detailed below.  However, this relief is not automatic, except where noted herein.  Accordingly, recipients and awardees must take affirmative steps to contact funding agencies to request relief absent further guidance from the various Federal awarding agencies.  Awarding agencies are obligated to maintain records on the level of particular exceptions provided to recipients, though recipients are well-advised to maintain records as well even if not specifically required.

As outlined this guidance from OMB, the following exceptions are available.

  1. Flexibility with SAM registration. (2 C.F.R. § 200.205)
  • To expedite the issuance of funding, awarding agencies do not have to require an active System for Award Management (SAM) registration at the time of application.
  • Current registrants in SAM with active registrations expiring before May 16, 2020 will receive a one-time extension of sixty (60) days.
  1. Flexibility with application deadlines. (2 C.F.R. § 200.202)
  • Awarding agencies may ease the deadlines for applications for certain grant announcements, whether solicited or unsolicited. Agencies that choose to relax the deadlines should provide guidance on their websites or provide a point of contract for questions.
  1. Waiver for Notice of Funding Opportunities (NOFOs) Publication. (2 C.F.R. § 200.203)
  • Awarding agencies may publish Notice of Funding Opportunities (NOFOs) with less than thirty (30) days notice without any justification for the shortened timeframe required. Agencies are only required to document and track any NOFOs that are published for less than thirty (30) days.
  1. No-cost extensions on expiring awards. (2 C.F.R. § 200.308)
  • Awarding agencies may automatically extend awards, active as of March 31, 2020 and scheduled to expire before or up to December 31, 2020, at no cost for a period of up to twelve (12) months.
  • Recipients are required to submit project-specific financial and performance reports within ninety (90) days following the end date of the extension. Likewise, awarding agencies are required to examine the need to extend other project reporting as necessary.
  1. Abbreviated non-competitive continuation requests. (2 C.F.R. § 200.308)
  • For projects with planned future support with continuation requests schedule to come in between April 1, 2020 and December 31, 2020, recipients may submit a brief statement to awarding agencies that demonstrates recipients are in a position to: (1) resume or restore project activities, and (2) accept a planned continuation award.
  • Awarding agencies are required to examine the need to extend this approach on subsequent continuation award start dates when recipients have an opportunity to assess their projects.
  • Look for awarding agencies to post specific instructions in this regard on their websites.
  1. Allowability of salaries and other project activities. (2 C.F.R. § 200.403, 2 C.F.R. § 200.404, 2 C.F.R. § 200.405)
  • As it relates to the charging of salaries, benefits, and other necessary costs to Federal ward to resume activities supported by the award, recipients may charge these costs, consistent with recipients’ policy of pay salaries (under unexpected or extraordinary circumstances) from all funding sources and with applicable Federal cost principles and the benefit to the project.
  • Recipients are required to maintain appropriate records and cost documentation as required by 2 C.F.R. § 200.302 to substantial any salaries or costs related to interruption of project operations or services.
  1. Allowability of Costs not Normally Chargeable to Awards. (2 C.F.R. § 200.403, 2 C.F.R. § 200.404, 2 C.F.R. § 200.405)
  • Without regard to the Uniform Guidance “Factors affecting allowability of costs,” “Reasonable costs,” and “Allocable Costs” at 2 C.F.R. § 200.403-405, recipients may charge to the award the full costs related to the cancellation of events, travel, or other activities necessary and reasonable for the performance of the award, or the pausing and restarting of grant funded activities due to COVID-19.
  • Recipients are required to maintain appropriate records and cost documentation as required by 2 C.F.R. § 200.302 to substantial any salaries or costs related to interruption of project operations or services.
  • Awarding agencies are required to advise recipients that recipients should not assume additional funds will be available should the charging of these costs result in a shortage of funds to eventually carry out the event or travel.
  • If appropriate, awarding agencies may provide additional guidance on costs on their websites and/or provide a point of contract for questions.
  1. Prior approval requirement waivers. (2 C.F.R. § 200.407)
  • Awarding agencies may waive any prior approval requirements. Any costs charged to Federal awards must be consistent with Federal cost policy guidelines and the terms of the award, except where specified in M-20-17.
  1. Exemption of certain procurement requirements. (2 C.F.R. § 200.319(b), 2 C.F.R. § 200.321)
  • Awarding agencies may waive procurement requirements with regard to geographical preferences and contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms.
  1. Extension of financial, performance, and other reporting. (2 C.F.R. § 200.327, 2 C.F.R. § 200.328)
  • Recipients may receive extensions for up to three (3) months beyond the normal due date for financial, performance, or other reports. If awarding agencies allow such extensions, recipients may continue to draw on Federal funds.  However, recipients must submit these reports at the end of the extension timeframe.
  • Awarding agencies may waive the requirement for recipients to notify the agency of problems, delays or adverse conditions related to COVID-19.
  1. Extension of currently approved indirect cost rates. (2 C.F.R. § 200.414 (c))
  • Recipients may continue to use their currently approved indirect cost rates (i.e., predetermined, fixed, or provisions rates) to recover their indirect costs on Federal awards.
  • Awarding agencies may approve recipients’ extension requests to use these current rates for one (1) additional year without requiring the submission of an indirect cost proposal. Similarly, awarding agencies may grant extensions for the submission of an indirect cost proposal to finalize the current rates and establish future ones.
  1. Extension of closeout. (2 C.F.R. § 200.343)
  • For the closeout of expired projects, awarding agencies may allow recipients to delay the required submission of any pending financial, performance, or other reports by one (1) year, so long as recipients provide proper notice about the delay.
  1. Extension of Single Audit submission. (2 C.F.R. § 200.512)
  • For recipients and subrecipients who have not filed their single audits as of March 19, 2020 that have fiscal year-ends through June 20, 2020, awarding agencies should allow recipients and subrecipients to delay the completion and submission of the Single Audit reporting package, per Subpart F of 2 C.F.R. § 200.501, to six (6) months beyond the normal due date.
  • Unlike the aforementioned exceptions, no further action by the awarding action is required to enact this extension. Likewise, this extension does not require recipients and subrecipients to seek approval for the extension by the cognizant or oversight agency for audit.
  • Recipients and subrecipients should maintain documentation of the reason for the delayed filing, and would still qualify as a “low-risk auditee” under 2 C.F.R. § 200.520(a).

Crowell & Moring is standing by to assist with any COVID-related questions.  Please contact with any additional questions or concerns related to the OMB guidance or specific agency action.

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On March 20, 2020, the Office of Management and Budget (“OMB”) released guidance to agencies heads on managing federal contract performance issues impacted by COVID-19 [Linked here: M-20-18]. The memo and attached Frequently Asked Questions (“FAQs”) focus on the following main issues:

Telework: agencies are encouraged to maximize telework for contractor employees, wherever possible, to enable continued contract performance consistent with the health and safety of contractor and government personnel.  This includes modifying contracts that do not currently allow for telework.

Mitigating Impact on Contractors: agencies are encouraged to be as “flexible as possible” in responding to the impacts of COVID-19 on contractors.  The OMB specifically suggests that agencies extend performance dates if telework is not available.  Agencies are also encouraged to consider whether it would be beneficial to keep skilled professionals or key personnel “in a mobile ready state” for activities deemed critical to national security or other high priorities, and whether contracts that possess capabilities for impending requirements (e.g., security, logistics) can be “retooled” for pandemic response within the scope of the contract.  Of note, the FAQs note that requests for equitable adjustments (“REAs”) for costs associated with safety measures taken by contractors to protect their employees should be considered on a case-by-case basis.  Agencies are to handle REAs in accordance with existing agency practices, taking into account whether the requested costs would be allowable or reasonable (e.g., did the contractor take actions consistent with CDC guidance; did the contractor reach out to the contracting officer or contracting officer representative to discuss appropriate actions).

Emergency Procurement: agencies are encouraged to leverage special emergency procurement flexibilities authorized in connection with the President’s declaration of a national emergency under the Stafford Act, including the flexibilities identified in FAR 18.202, Defense or recovery from certain events.  The flexibilities include increases in certain thresholds for emergency procurements in support of COVID-19 response efforts:

  • Micro-purchase threshold raised from $10,000 to $20,000 for domestic purchases and to $30,000 for purchases outside the United States;
  • Simplified acquisition threshold raised from $250,000 to $750,000 for domestic purchases and $1.5 million for purchases outside the United States; and
  • Agencies may use simplified acquisition procedures up to $13 million for purchases of commercial item buys.

In addition, because the pandemic is nationwide, acquisitions under the Stafford Act need not create preferences for local firms in areas impacted by the disaster.

SAM Re-registration Extension:  Finally, while the guidance in the memo and FAQs are directed at agencies, the FAQs provide one concrete note of relief for contractors — those with active System of Award Management (“SAM”) registrations that are expiring before May 17, 2020 will be afforded a one-time extension of 60 days.  It is not yet clear how this will be rolled out (e.g., automatically applied or by request), but contractors should be aware this extension as the impact of COVID-19 upends normal administrative functions.

Crowell & Moring is standing by to assist with COVID-related questions.

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Following the March 19, 2020 guidance issued by the Department of Homeland Security’s Cybersecurity and Infrastructure Agency (CISA) on “essential” critical infrastructure workers during COVID-19, the Department of Defense (DoD) issued a memorandum today reiterating that the Defense Industrial Base (DIB) is identified as a critical infrastructure sector by DHS, and that those who work in such sectors are expected to maintain normal work schedules. The DHS guidance identified the DIB essential critical infrastructure workforce as those who provide “essential services to meet national security commitments,” including aerospace; mechanical and software engineers; manufacturing/production workers; IT support; security staff; security personnel; intelligence support; aircraft and weapon systems mechanics and maintainers; suppliers of medical supplies and pharmaceuticals; and critical transportation. The DoD memorandum adds some additional details, stating that DoD contracts and subcontracts that support the development, production, testing, fielding or sustainment of weapons systems/software systems or the manning, training, equipping, deploying, or support military forces, are considered essential critical infrastructure that should maintain normal work schedules.

However, DoD contracts and subcontracts that support tasks such as providing office supplies, recreations support or lawn care are not considered essential. DoD notes that it will continue to assess conditions, and that companies should continue to follow guidance issued by the Centers for Disease Control and Prevention as well as State and local government officials regarding strategies to contain the spread of COVID-19. Crowell & Moring is standing by to assist with COVID-related questions.

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Today, the Cybersecurity and Infrastructure Security Agency (CISA) released guidance to help state and local jurisdictions and the private sector identify and manage their essential workforce while responding to coronavirus (COVID-19). The White House Coronavirus Guidelines direct that Critical Infrastructure Industry, as defined by the Department of Homeland Security, has a special responsibility to maintain normal work schedules.

CISA executes the Secretary of Homeland Security’s delegated responsibilities as assigned under the Homeland Security Act of 2002 to provide strategic guidance, promote a national unity of effort, and coordinate the overall Federal effort to ensure the security and resilience of the Nation’s critical infrastructure. The list of Essential Critical Infrastructure Workers was developed in coordination with Federal agencies and the private sector as a guide to help decision-makers within communities understand how to ensure continuity of essential functions and critical workforce as they consider COVID-related restrictions in certain communities (e.g., shelter-in-place). The list can also inform critical infrastructure community decision-making to determine the sectors, sub sectors, segments, or critical functions that should continue normal operations, appropriately modified to account for Centers for Disease Control (CDC) workforce and customer protection guidance.

There are 16 critical infrastructure sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, and the guidance goes into detail on identifying essential critical workforce for:

  • Healthcare/Public Health
  • Law Enforcement, Public Safety, First Responders
  • Food and Agriculture
  • Energy (Electricity industry, Petroleum workers, and natural and propane gas workers)
  • Water and Wastewater
  • Transportation and Logistics
  • Public Works
  • Communications and Information Technology
  • Other Community-Based Government Operations and Essential Functions
  • Critical Manufacturing
  • Hazardous Materials
  • Financial Services
  • Chemical
  • Defense Industrial Base

CISA cautions this guidance is only advisory, and should not be considered as a Federal directive or standard, explicitly recognizing that State, local, tribal, and territorial governments are ultimately responsible for implementing and executing response activities in their communities, while the U.S Government is in a supporting role.

Crowell is working with many clients to identify options to enable them to continue operations in support of critical infrastructure missions.

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On March 18, 2020, President Trump significantly expanded the authority delegated to the Secretary of Health and Human Services (HHS) in his “Executive Order on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of Covid-19.” The Order is based on a finding that, “to ensure that our healthcare system is able to surge capacity and capability to respond to the spread of COVID-19, it is critical that all health and medical resources needed to respond to the spread of COVID-19 are properly distributed to the Nation’s healthcare system and others that need them most at this time.”

Specifically, the Order delegated to the Secretary the authority to require performance of contracts or orders (other than contracts of employment) over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary or appropriate. The Order also authorized the HHS Secretary to determine the proper nationwide priorities and allocation of all health and medical resources, including controlling the distribution of such materials (including applicable services) in the civilian market, for responding to the spread of COVID-19 within the United States, and may issue such orders and adopt and revise appropriate rules and regulations as may be necessary. This grant of authority to HHS is quite broad and apparently distinct from existing requirements and limitations of the Defense Priority and Allocation System regulations set forth in 15 CFR Part 700. The Order leaves open a number of questions that will need to be addressed by the Secretary, including the impact on existing medical supply contracts and healthcare providers’ and suppliers’ abilities to manage the allocation of healthcare resources to treat their patients.

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The COVID-19 Pandemic continues to cause disruptions across nearly all industrial sectors, including the government contracting industry.  As contractors attempt to respond to challenges in providing support to government customers, meeting contract and staffing requirements, and adhering to contract terms and a flurry of new federal, state and local directives, companies should be aware of how to minimize disruptions, preserve their rights, and avoid bad practices that could increase post-pandemic legal risk.

During this webinar, Crowell & Moring’s government contracts lawyers will address several ways to manage key performance risks, including delays, disruption, changes, and other collateral consequences related to the fallout from the COVID-19 pandemic.

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As part of our continuing commitment to help our clients address the effects of COVID-19, we are providing the initial, anonymized, and aggregated results from our benchmarking questionnaire.  We continue to gather information and update the responses, but given the rapidly changing environment, we wanted you to have this information sooner than later.

Our teams are working around the clock to address these and other impacts.  Please reach out if you need assistance, and above all else, our best wishes for your continued good health.

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On February 7, 2020, the ASBCA sustained the appeal of Command Languages, Inc. d/b/a CLI Solutions (CLI) against the Army over increased costs to translate technical manuals. CLI contracted with the Army to translate advanced level armored vehicle maintenance manuals for use by the Afghanistan Army. The advanced level manuals included tasks from basic level manuals, but CLI only incorporated these tasks by reference – the tasks themselves were not translated. CLI and the Army disagreed over whether contract language stating that the basic manuals were provided to the contractor as government furnished information (GFI) “for reference” permitted CLI to incorporate information from them by reference. The Board found that CLI’s contract interpretation was reasonable, given that CLI notified the Army of its intent to use this reference-only approach and provided sample manuals, and the Army had no objections to this approach prior to performance. The Board pointed out that the contract gave CLI the option to utilize GFI in the “most effective” manner of its choosing when creating the advanced manuals, and there was no contract language prohibiting CLI’s method. The Board also found that the Army did not challenge CLI’s approach until after performance started.

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The Coronavirus Pandemic continues to cause disruptions and highlight vulnerabilities in supply chains across nearly all industrial sectors.  As businesses attempt to respond to challenges in obtaining parts and supplies, meeting contract supply and staffing requirements, and adhering to CDC recommendations, companies should be aware of how to minimize disruptions, preserve their rights, and avoid bad practices that could enhance post-pandemic legal risk.  The declaration of a national emergency, amongst other recent acts, have opened doors for new contracts and contract modifications.  Meanwhile, bad actors should be expected to seek opportunities to take advantage of the telework, general chaos, and component scarcity.

During this webinar, Crowell & Moring’s government contracts, international trade, and privacy and cybersecurity lawyers will address cyber, personnel, performance, and manufacturing risks during this challenging time and practices for defending against these risks.  This analysis will be integrated with a review of equitable adjustments, tort liability immunity, and indemnification protections that may be available for businesses at this time.

Speakers

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We thank our clients for your input on our effort to help contractors benchmark what companies are doing as part of COVID-19 contingency planning. Please use the survey link below to access the brief benchmarking questionnaire. Assuming we have a sufficient number of responses, we will aggregate and share responses (on an anonymous basis).

Access the survey here.

Please contact David Robbins with any questions.