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After a recent Court of Federal Claims (“COFC”) decision limited the circumstances under which a departure of key personnel may doom an offeror’s proposal, an even more recent GAO decision might have swung the pendulum right back. In Sehlke Consulting, LLC, GAO sustained a protest because the agency failed to penalize the awardee when a proposed key person employed under the incumbent contract provided notice that he planned to resign. Even though the key person was still employed on the date of award, GAO held that the agency’s failure to consider his “prospective unavailability” for the follow-on contract undermined the contract award.

The following dates were relevant:

  • Performance of the follow-on contract was scheduled to begin February 1, 2022.
  • On January 11, 2022, one of the awardee’s proposed key personnel (who was then an employee of a subcontractor on the incumbent contract) announced that he planned to resign effective January 28, 2022. The awardee timely notified the Contracting Officer’s Technical Representative (“COTR”) for the incumbent contract.
  • On January 25, 2022, the agency completed its evaluations and awarded the contract.
  • On January 28, 2022—after award but before performance was to begin—the key person’s resignation became effective.
Continue Reading GAO Finds Key Person “Unavailable” Despite Still Being Employed on Date of Award
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This week’s episode covers a new SBA final rule about calculation of employee-based size standards, a False Claims Act settlement involving small business status, DOD’s guidance about impact of inflation on contractors, and the White House’s use of the Defense Production Act to accelerate domestic production of clean energy technologies, 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.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts

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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.”

Continue Reading President Biden Employs Defense Production Act and Tariff Act in Domestic Clean Energy Manufacturing Push
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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 procedures was improper or is no longer appropriate. The final rule implements section 848 of the NDAA for 2018, and applies to DoD contracts regardless of dollar value. Note, however, that prior FAR Part 12 purchases made pursuant to 41 U.S.C. 1903 (for supplies or services to be used to facilitate defense against or recovery from cyber, nuclear, biological, chemical, or radiological attack) or 10 U.S.C. 2380a (for supplies or services from nontraditional defense contractors) may not serve as a prior commercial item determination unless the products or services purchased in that prior acquisition otherwise received a CID.

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Crowell & Moring’s “All Things Protest” podcast keeps you up to date on major trends in bid protest litigation, key developments in high-profile cases, and best practices in state and federal procurement. In this episode, Crowell attorneys Christian Curran and Zachary Schroeder discuss a recent GAO case (K&K Industries, Inc., B-420422; B-420422.2, March 7, 2022) that highlights timeliness traps with enhanced debriefings.

Listen: Crowell.com | PodBean | SoundCloud | Apple Podcasts

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As Russia’s assault on Ukraine continues, countries around the world are taking action.  Relevant to U.S. Government contractors, on April 22, the Defense Logistics Agency (“DLA”) issued a Request for Information (“RFI”) seeking information on companies’ abilities to deliver military and commercial assistance to Ukraine.  The RFI states that “the Biden Administration is working around the clock to fulfill Ukraine’s priority security assistance requests,” and explains that “Russia’s unprovoked invasion has highlighted the importance of dialogue between industry and commercial partners and the Department of Defense.”  To that end, the RFI seeks to fulfill three strategic objectives:

  • Delivering critical commercial and military capabilities to Ukraine;
  • Enhancing the preparedness of our own forces; and
  • Supporting our allies and partners in bolstering their defense capabilities.

Of particular interest to DOD are options that would accelerate production and build more capacity across the industrial base for weapons and equipment that can be rapidly exported, deployed with minimal training, and that are proven effective in the battlefield.  Specifically, the RFI seeks information from industry on weapons systems or other commercial capabilities related to air defense, anti-armor, anti-personnel, coastal defense, counter battery, unmanned aerial systems, and communications (e.g., secure radios, satellite internet).  Among other things, the RFI asks respondents to “describe the weapon, product, or system you believe could assist the Ukrainian military” and state what delivery timeframe they could meet.

Responses are due by Noon Eastern on May 6, 2022, and should be submitted in accordance with the instructions outlined in the RFI.

As the war in Ukraine continues, Government contractors should be alert for this and similar opportunities to bolster the United States’ defenses and assist Ukraine.  The FY2022 omnibus appropriations bill – signed into law in March 15 – includes a $13.6 billion Ukraine aid package, $6.5 billion of which was earmarked for military support for Eastern European countries, including $3.5 billion in additional weapons for Ukraine.  In addition, on April 21, President Biden announced that the U.S. will provide another $800 million in assistance to Ukraine, which will include heavy artillery, ammunition, and tactical drones.

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As Congress considers legislation prohibiting government contractors from doing business in Russia, over 20 states have already acted. In this alert, we highlight: (i) how different states are defining Russian business operations, and the corresponding risks to differently situated government contractors; and (ii) unique aspects of certain state actions that contractors need to be aware of as they develop their compliance strategy.

Which Government Contractors are Affected by Which State Actions?

States have taken a wide variety of approaches to determining which contractors and actions to cover with their Russia-related prohibitions. For example:

  • Several states, including Ohio and Virginia, are limiting their actions to Russian institutions and/or companies, but have not defined such terms.
  • On the other hand, New Jersey and North Carolina are targeting entities that are headquartered or have their principal place of business in Russia, as well as such entities’ subsidiaries (with New Jersey also targeting entities in Belarus). See also proposed Louisiana legislation requiring any public entity to reject the lowest procurement bid if that bidder is “domiciled in Russia.”
  • New York is taking yet a third—and much broader—approach and is targeting entities that conduct business operations in Russia, which includes entities: (i) conducting any commercial activity in Russia; (ii) transacting business with the Russian Government; or (iii) transacting business with commercial entities headquartered or with their principal place of business in Russia. See also proposed Alabama legislation encouraging the state “to disfavor Russian products and any economic activity that would benefit Ukraine, to the utmost extent possible.”
  • Finally, certain states have not yet determined the precise scope of their restrictions. For example, Missouri currently has two competing bills: its Senate has proposed legislation that targets “companies that have active business operations in strategic industries with the Russian Federation”; whereas its House has proposed legislation that would cover “Russia, Russian entities, or any other country adversely occupying or attacking a North Atlantic Treaty Organization (NATO) member, Ukraine, Finland, Sweden, or Georgia; unless the transaction is authorized under Ukraine General License Number 18 issued on February 21, 2022, by the U.S. Department of Treasury’s Office of Foreign Assets Control.”

Government contractors—especially those doing business in multiple states—must carefully consider this evolving patchwork of prohibitions and restrictions as part of their overall compliance strategy.

What are the States Prohibiting, and How?

In addition to determining whether a given state’s proposed or enacted restrictions apply, government contractors must also closely scrutinize the nature of the prohibitions or restrictions at issue. As we discussed previously, most states are considering or have enacted prohibitions on future contracts with affected companies, and/or would require termination of existing contracts with such companies. However, certain states have passed or are contemplating actions with unique—and potentially extreme—consequences.

Most notably, New Jersey has already enacted legislation that requires a contractor to certify it is not on the Department of Treasury’s list of entities engaged in prohibited activities in Russia or Belarus before a contract is awarded, renewed, amended, or extended. For false certifications, the legislation requires: (1) a civil penalty in an amount that “is equal to the greater of $1,000,000 or twice the amount of the [contract] bid”; (2) “termination of an existing contract [or bid] . . . by the issuing agency”; and (3) exclusion from public contracting with the State for 3 years (and with reinstatement only allowed so long as the entity has ceased its engagement in prohibited activities in Russia or Belarus). These penalties significantly exceed the penalties under New Jersey’s state False Claims Act, and pose significant risk to any contractors that do business in the State. Indeed, they could have far reaching effects even beyond New Jersey, as many other states look to whether a company is banned from contacting in any jurisdiction.

Crowell is continuing to monitor these state actions and will highlight significant developments in future alerts. Government contractors should closely follow these issues and update their compliance practices accordingly.

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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 value-added processing of strategic and critical materials for the production of large-capacity batteries, including lithium, nickel, cobalt, graphite, and manganese, are essential to national defense.  The Presidential Determination will allow the Department of Defense (“DoD”) to pursue various investment, purchase commitment, and purchase vehicles to support strategic and critical material mining and production in the United States pursuant to Title III of the Defense Production Act (“DPA”).

Defense Production Act Title III

The DPA Title III, Section 303 authorities are intended to provide the President broad latitude in supporting critical domestic industrial base capabilities.  While other parts of the DPA concern loans, prioritization orders, and allocation orders, Title III is focused on alternative domestic investment options.  It is concerned with the expansion of productive capacity and supply in the United States rather than prioritized procurement or allocation.  Under Title III generally,[1] the Government may:

  • make provision for purchases of or commitments to purchase an industrial resource or critical technology item for Government use or resale;
  • make provision for the development of production capabilities, the increased use of emerging technologies in security program applications, and the rapid transition of emerging technologies;
  • make subsidy payments for raw or nonprocessed materials from high-cost sources under certain conditions;
  • encourage the exploration, development, and mining of strategic and critical materials;
  • make provision for the development of substitutes for strategic and critical materials, components, technology, and other resources to aid national defense;
  • procure and install additional equipment, facilities, processes, or improvements to plants, factories, and other industrial facilities owned by the federal government;
  • procure and install Government-owned equipment in privately-owned plants, factories, and other industrial facilities;
  • provide for the modification or expansion of privately-owned facilities, including the modification or improvement of production processes;
  • permit agencies engaged in procurement for national defense to restrict solicitations to reliable and/or domestics sources; to stockpile critical components; and to develop substitutes for critical components or technology.

Title III, Section 303 requires certain determinations to be made by the President before the authorities therein become available.[2]

Effect of Presidential Determination 2022-11

Pursuant to the Presidential Determination, the DoD is to exercise DPA Title III, Section 303 authorities, including purchases, purchase commitments, equipment transfer, and facility modification, among other things, to encourage private industry to meet this government need for domestic production of critical materials.  This authority is to be exercised in consultation with the Departments of Interior, Agriculture, and Energy, and other agencies as deemed appropriate.[3]  DoD is required to support feasibility studies for the strategic and critical material projects undertaken, which are to address mature mining, beneficiation, and value-added processing projects; by-product and co-product production at existing mining, mine waste reclamation, and other industrial facilities; and mining, beneficiation, and value-added processing modernization to increase productivity, environmental sustainability, and workforce safety.[4]

Key Takeaways

This action follows a June 2021 report on defense critical supply chain vulnerabilities conducted by DoD and the Departments of Commerce, Energy, and Health and Human Services pursuant to Executive Order 14017, which recommended the Government use the DPA to boost domestic mineral production.  The Department of Energy’s June 2021 National Blueprint for Lithium Batteries has called for the United States and its partners to establish a secure supply chain for lithium and other electric vehicle battery components by 2030.  And the Presidential Determination comes on the heels of the Administration’s Infrastructure Investment and Jobs Act that also included significant measures such as grants, loan guarantees, and streamlined regulations to address domestic critical minerals supply chain vulnerabilities.  The development of domestic supply chains for critical minerals, which are key components in renewable energy applications and electric vehicle batteries, is essential for the Biden administration to meet its goal of having the U.S. government transition to a zero-emission vehicle fleet by 2035 and net-zero emissions economywide by 2050.

You can access Crowell & Moring’s primer webinar here discussing the DPA.  Additionally, you can find Crowell & Moring’s summaries of the DPA here and Defense Priorities and Allocations System (DPAS) here.

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As we covered in a prior alert, the recently introduced Federal Contracting for Peace and Security Act (H.R. 7185) could have a profound impact on government contractors. The Act would require termination of existing contracts and prohibit awards, extensions, and renewals of prime contracts and subcontracts with companies doing business in the Russian Federation during its ongoing war of aggression against Ukraine.

The Act is progressing through Congress. Specifically, an amended version of the Act was reviewed and approved by voice vote during a Wednesday meeting of the House Oversight and Reform Committee.

The amendment includes significant updates from the original legislation, e.g.:

  • Whereas the original bill defined the “covered period” of aggression as retroactively beginning on February 21, 2022, the amendment defines it as 60 days after enactment, and requires an agency to provide advance written notice to a company at least 15 days before terminating its contracts under the Act.
  • The amendment contemplates potential “good faith extensions” for contractors that (1) pursue all reasonable steps to comply with the Act; and (2) provide a reasonable, written plan to achieve compliance. Subsequent extensions may also be granted where a contractor continues to pursue reasonable steps to cease operations in the Russian Federation and demonstrates progress with its compliance plan.
  • While the original bill would have affected a prime contract that included a subcontract at any tier to procure any product or service from a company conducting business in the Russian Federation, the amendment would apply only to prime contracts and “major subcontracts” for certain prohibited items. To that end, the amendment calls on the Office of Management and Budget to promulgate regulations including:

-“[a] list of equipment, facilities, personnel, products, services, or other items or activities, the engagement with which would be considered business operations, subject to” the Act’s prohibitions;
-“[a] requirement for a contractor or offeror to represent whether such contractor or offeror uses any of the items on the list” just described;
-“[a] definition of the characteristics of any major subcontract that qualifies as a covered contract under this Act”; and
-“[a] description of the process for determining a good faith extension.”

While these revisions may lessen the Act’s impact on certain contractors, the Act still holds the potential to upend federal procurement. Moreover, it must be considered in tandem with the numerous State actions that are moving at an even more breakneck pace. Crowell is continuing to monitor these developments, and will be highlighting particularly significant State actions in the coming days.

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On March 30, 2022, the General Services Administration (“GSA”) announced the first-ever national standards for “clean” concrete and asphalt that apply to all new GSA-funded projects using more than 10 cubic yards of concrete or asphalt. Acting in furtherance of the directives set forth in Executive Order 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, together with the GSA’s February 2022 requests for information (discussed here and here, respectively), GSA issued standards for “low embodied carbon” concrete and “environmentally preferable” asphalt that will be required “for all GSA projects, both capital and small, regardless of funding source: paving upgrades, modernizations, new construction, customer-funded projects through BA80 Reimbursable Work Authorizations, privately-financed projects such as Energy Savings Performance Contracts, and all Bipartisan Infrastructure Law projects.” Specifically:

  • For concrete, contractors will need to provide a product specific cradle-to-gate third-party verified environmental product declaration (“EPD”) verifying the amount of embodied carbon involved in the product’s extraction, transportation, and manufacture. The standard identifies specific limits for allowable embodied carbon based on concrete mix type and strength, which represent a 20% reduction from industry recommended limits.
  • For asphalt, contractors will need to provide a product specific cradle-to-gate third-party verified EPD affirming the use of at least two environmentally preferable techniques (based on a menu of approved practices specified by GSA) in the processing and installation of asphalt.

Under both standards, a waiver can be sought in limited circumstances where the only available contractor within the maximum transport range is a small business which has yet to invest in EPDs, or where the “clean” materials specified by GSA are otherwise unavailable. In the event that a waiver is granted, contractors will still need to provide GSA a global warming potential (“GWP”) estimate for the product.

This action by GSA is among the first set of enforceable standards to emerge from the Biden Administration’s “all of government” approach to addressing climate change, and, more specifically, its stated intention of leveraging the procurement function in pursuit of its climate change policy objectives. While much of the recent attention has been focused on higher profile efforts like the Securities and Exchange Commission’s newly unveiled proposed rule regarding mandatory climate-related disclosures (discussed here) for publicly traded companies, as well as potential FAR and DFARS amendments that may require similar and wide-ranging climate disclosure requirements for government contractors (discussed here and here, respectively), these new GSA standards establish a model that may be replicated by a wide range of federal agencies in their procurement activities. More immediately, they are a potential game-changer for federal contractors in the construction arena, as the GSA is poised to oversee $3.4 billion in Infrastructure Investment and Jobs Act (“IIJA”) funding for building and modernizing land ports of entry on the country’s northern and southern borders. With GSA recently announcing the allocation of hundreds of millions of dollars in IIJA funding for new port of entry projects in Alaska, Arizona, Washington, Minnesota, and Vermont, in addition to all other projects on the 370 million rentable square feet that GSA oversees for the federal government, contractors should be prepared to encounter these (and similar) new standards.

What remains relatively unclear about the new GSA standards is:

  • Will they only appear as requirements included in the statement of work or contract clauses or will they be used as evaluation criteria?
  • If the later, will they be implemented as pass/fail criteria thereby excluding contractors whose products’ embodied carbon is above the prescribed target number, or will they be included as an evaluation criterion for which contractors are scored based on their proposed product but otherwise remain eligible for award based on the remaining solicitation evaluation criteria?
  • Will GSA go even further to set-aside certain projects for contractors that meet preferred embodied carbon concrete or environmental preferable asphalt target goals?

Finally, additional questions remain as to how implementation of these new standards might impact small businesses that have yet to invest in calculating these environmental metrics. This is especially important considering that the White House has also made increasing small disadvantaged businesses participation a priority (as discussed here), and GSA recently announced its attention to increase small business disadvantaged participation in federal contracting to 21% for FY2022.

Contractors should follow the implementation of these new GSA standards closely, as they represent merely one small component of the White House’s whole-of-government approach towards carbon reduction, and other agencies should be expected to draw upon this GSA model in other contexts as well.