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On September 8, 2022, the Department of Defense (“DoD”) issued Class Deviation 2022-O0009 (the “Deviation”) immediately authorizing contracting officers to allow active registration in the System for Award Management (“SAM”) within 30 days of contract award or three days prior to submission of the first invoice (whichever comes first) rather than at the time of award—provided the contractor can prove it has initiated or attempted to start the SAM registration process.  The Deviation is in effect through October 31, 2022 unless rescinded or extended.

The SAM registration process, which changed in April 2022 when GSA switched from the DUNS number to the Unique Entity Identifier (“UEI”), has suffered from significant delays and system errors.  These system challenges continue, and SAM incident tickets continue to take weeks to process in many cases.  With this Deviation, DoD joins a number of other agencies that have already issued guidance for managing SAM delays that may affect contracts or grants.

Continue Reading DoD Issues Deviation for SAM Registration Requirement Due to Ongoing Processing Delays
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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.”

Continue Reading DoD Will Consider Contract Adjustments Addressing Inflation
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This special edition of the Fastest 5 Minutes podcast covers recent developments related to domestic preferences including executive orders, final regulations, the Made in America Office, and the Infrastructure Investment and Jobs Act, and is hosted by Peter Eyre, Addie Cliffe, and Allison Skager. 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.

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Last month, in Seife v. U.S. Food and Drug Administration, the U.S. Court of Appeals for the Second Circuit became the first appellate court to address a significant question left unanswered by the Supreme Court’s 2019 decision in Food Marketing Institute v. Argus Leader Media: what impact, if any, did the 2016 FOIA Improvement Act (“FIA”) have on FOIA Exemption 4?  The answer: a submitter of information ostensibly subject to Exemption 4 must demonstrate competitive harm—though not “substantial” harm—resulting from disclosure in order to invoke the exemption.

Argus clarified the applicability of Exemption 4, which protects from disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.”  5 U.S.C. § 552(b)(4).  The Argus Court rejected the longstanding National Parks test, which applied Exemption 4 only where the submitter of such information could demonstrate “substantial competitive harm” resulting from its disclosure.  Instead, the Argus Court held Exemption 4 applied, at the very least, where the submitter of such information kept it confidential and submitted it to the government with an assurance of privacy.  Given the difficulties inherent in establishing “substantial competitive harm,” Argus was welcome news for contractors seeking Exemption 4 protection.  (We have previously written about Argus and the district court decisions that followed.) 

In 2016, Congress enacted the FIA in response to concerns that FOIA’s exemptions were being overused. The FIA amended FOIA to allow for an exemption’s invocation only if “the agency reasonably foresees that disclosure would harm an interest protected by an exemption” or if disclosure is “prohibited by law.”  5 U.S.C. § 552(a)(8)(A).  Since Argus, multiple plaintiffs have argued the FIA effectively codified the National Parks test.  (Argus considered a FOIA dispute that commenced prior to the passage of the FIA; the Court there had no reason to address the question.)

Continue Reading Second Circuit Holds FOIA Exemption 4 Still Requires Showing of “Competitive Harm” Resulting from Disclosure, Though Not a “Substantial” One
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On August 31, 2022, the White House Council on Environmental Quality (“CEQ”) released instructions to federal agencies for implementing Executive Order (“EO”) 14057 Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability.  As we have covered previously, EO 14057 identified ambitious sustainability goals for federal agencies, including:

  • 100 percent carbon-free electricity by 2030;
  • 100 percent zero-emission vehicle fleet by 2035;
  • net-zero emissions building portfolio by 2045;
  • 65 percent reduction in Greenhouse Gas (“GHG”) Scope 1 and 2 emissions from Federal operations; and
  • net-zero emissions from federal procurement, including a “Buy Clean” policy to promote use of construction materials with lower embodied emissions.
Continue Reading Further Federal Action on Government-Wide Sustainability Goals
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This week’s episode covers an interim rule requiring that certain entities disclose their use of workforce and facilities in China, an update on the contractor vaccine mandate, a notice from OFCCP regarding a FOIA request for contractors’ EEO-1 Reports, and an OFCCP Directive intended to clarify its earlier guidance addressing federal contractors’ obligation to evaluate compensation systems as part of their affirmative action programming, and is hosted by Peter Eyre and Yuan Zhou. 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.

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On August 31, 2022, the Safer Federal Workforce Task Force announced that the Federal Government “will take no action to implement or enforce Executive Order 14042,” the contractor vaccine mandate, “to ensure compliance with an applicable preliminary nationwide injunction, which may be supplemented, modified, or vacated, depending on the course of ongoing litigation.”

This announcement follows the decision issued on August 26, 2022 by the Court of Appeals for the Eleventh Circuit to limit the scope of the nationwide injunction issued by the District Court in Georgia v. Biden, S.D. Ga., 1:21-cv-163. 

Specifically, the Eleventh Circuit limited the nationwide injunction to the parties in Georgia, which include seven states and their agencies (Georgia, Alabama, Idaho, Kansas, South Carolina, Utah, and West Virginia), as well as members of the Associated Builders and Contractors.  

In light of this announcement, federal contractors should expect that the FAR clause implementing the requirements of the Executive Order will not be included in future solicitations and contracts, and the Federal Government will not take any action to enforce the clause where it has already been included in contracts or contract-like instruments, absent further written notice from the agency.

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In Tolliver Group, Inc. v. United States (Aug. 17, 2022), the Court of Federal Claims (“COFC”) granted the contractor’s request for summary judgment, awarding $195,890 in legal fees the contractor incurred to successfully defend against a False Claims Act suit brought by a whistleblower.  The court held that the cost principles in Federal Acquisition Regulation (“FAR”) Subpart 31.2 applied to the contractor’s fixed-price task order, and the contractor’s legal fees were allowable and payable under the contract.  This is the second time that the COFC addressed the contractor’s entitlement to legal fees, having previously held that the contractor could recover a portion of them under the Spearin doctrine (which we reported on here).  The Federal Circuit later vacated that award on jurisdictional grounds (reported on here) and remanded the case to the COFC.

Continue Reading When is the Price of a Fixed-Price Contract Not Fixed?
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Responding to significant uproar from the federal contracting community, on August 18, 2022, the Office of Federal Contract Compliance Programs (“OFCCP”) issued a revised version of its Directive 2022-01 – Advancing Pay Equity Through Compensation Analysis, which was originally issued on March 15, 2022.  The Revised Directive is, per the OFCCP, intended to clarify its earlier guidance addressing federal contractors’ regulatory obligation to evaluate “compensation systems” as part of their affirmative action programming, and the documentation the OFCCP expects contractors to provide to the OFCCP regarding their analyses.  Most importantly, the Revised Directive steps back from the position the Agency took in the March 15 Directive with regard to the applicability of the attorney-client privilege to analyses contractors are required to undertake pursuant to the Agency’s regulations.  The Agency had previously taken the position that contractors conduct undefined “pay equity” analyses pursuant to the Agency’s regulatory obligation and, as a result, could not assert attorney-client privilege over such analyses. 

Continue Reading OFCCP Issues Revised Directive Addressing Privilege Concerns, But Significant Concerns Remain
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On August 25, 2022 the Defense Acquisition Regulations System published two new DFARS clauses prohibiting the award of covered Department of Defense (“DoD”) contracts to contractors that leverage resources in China unless those resources are disclosed.  Implementing Section 855 of the FY22 National Defense Authorization Act and effective immediately, the clauses are DFARS 252.225-7057 “Preaward Disclosure of Employment of Individuals Who Work in the People’s Republic of China” and DFARS 252.225-7058 “Postaward Disclosure of Employment of Individuals Who Work in the People’s Republic of China.” These clauses will be incorporated into DoD solicitations and contracts with an estimated value over $5 million unless a senior procurement executive waives the disclosure requirements due to national security interests.  The requirements do not apply to contracts for commercial products and commercial services, including contracts for commercially available off-the-shelf (“COTS”) items, or to contracts at or below the simplified acquisition threshold (currently $250,000).

Continue Reading DoD Rule on Reporting Employees in China Published and In Effect This Week