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This week’s episode covers GSA schedule, cybersecurity, and FCA news, and is hosted by partners Peter Eyre and David Robbins. 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. | PodBean | SoundCloud | iTunes 

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This week’s episode covers SEC, ASBCA, GSA, and CFIUS news, and is hosted by partners David Robbins and Peter Eyre. 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. | PodBean | SoundCloud | iTunes 

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On Monday, August 13, 2018, President Trump signed into law the H.R. 5515, the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (FY 2019 NDAA), the earliest an NDAA has been signed in over a decade.  The FY 2019 NDAA includes several provisions relevant to contractors, including replacing the definition of “commercial item” with “commercial product” and “commercial services,” discouraging the use of lowest price technically acceptable contracting, and a clause designed to accelerate payments to small businesses.

Continue Reading FY 2019 NDAA

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The Small Business Administration (SBA) has seemingly slipped a noteworthy change into a technical correction published in the Federal Register on March 26, 2018.  Indeed, this “technical correction” actually appears to be an attempt to overturn the impact of a decision that the Office of Hearing and Appeals (OHA) issued in January 2018 – In The Matter of: Analytic Strategies, Inc., No. VET-268 – which held that under SBA’s recertification rules, a SDVOSB maintains its size and socio-economic status for the life of the multiple-award contract unless a contracting officer requests recertification in connection with a specific task order.

As discussed in more detail below, this change creates a degree of uncertainty with respect to a concern’s ability to receive task/delivery orders on a set-aside basis following a recertification of size or status on a contract.

The Recertification Requirement on Set-Asides

When a contract is awarded on a set-aside basis, the contractor is required to recertify as to its size and/or socioeconomic status within thirty days of contract novation, merger, or acquisition.  In other words, following one of the aforementioned events, the contractor must confirm that it is still small or retains the socioeconomic status it claimed for award, or notify the procuring agency that it is other than small or no longer qualifies for the chosen socioeconomic status.  The recertification requirements are generally similar regardless of the program.  See 13 C.F.R. § 121.404(g) (size recert requirement); 13 C.F.R. § 125.18(e)(1) (Service-Disabled Veteran-Owned Small Business (SDVOSB) recert requirement); 13 C.F.R. § 126.601(h)(1) (Historically Underutilized Business Zones (HUBZones) recert requirement); 13 C.F.R. § 127.503(h)(1) (Women-Owned Small Business (WOSB)/ Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) recert requirement).

The Impact of a Recertification on a Set-Aside Contract

If a contractor has to recertify as to its size or socioeconomic status, it generally has been understood that the following occurred:

  • For contracts awarded on a set-aside basis, the contractor can continue to perform and the agency can exercise options, BUT, from that point forward, the agency cannot count the performance towards the agency’s small business and/or relevant status goals.

For multiple award contracts awarded on a set-aside basis:

  1. The contractor can continue to perform existing orders and the agency can continue to exercise options with respect to those orders, and
  2. The contractor can receive new set-aside orders against the contract so long as the contracting officer does not request a new size or status certification in connection with that specific order.

BUT, again, from that point forward, the agency cannot count performance on already-awarded or newly-awarded contracts towards the agency’s small business and/or relevant status goals.

The old version of the SDVOSB recertification requirement states:

(1) A concern that represents itself and qualifies as an SDVO SBC at the time of initial offer (or other formal response to a solicitation), which includes price, including a Multiple Award Contract, is considered an SDVO SBC throughout the life of that contract. This means that if an SDVO SBC is qualified at the time of initial offer for a Multiple Award Contract, then it will be considered an SDVO SBC for each order issued against the contract, unless a contracting officer requests a new SDVO SBC certification in connection with a specific order. Where a concern later fails to qualify as an SDVO SBC, the procuring agency may exercise options and still count the award as an award to an SDVO SBC. However, the following exceptions apply:

  1. Where an SDVO contract is novated to another business concern, the concern that will continue performance on the contract must certify its status as an SDVO SBC to the procuring agency, or inform the procuring agency that it does not qualify as an SDVO SBC, within 30 days of the novation approval. If the concern is not an SDVO SBC, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its SDVO goals.
  2. Where a concern that is performing an SDVO SBC contract acquires, is acquired by, or merges with another concern and contract novation is not required, the concern must, within 30 days of the transaction becoming final, recertify its SDVO SBC status to the procuring agency, or inform the procuring agency that it no longer qualifies as an SDVO SBC. If the contractor is not an SDVO SBC, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its SDVO goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new status.

13 CFR § 125.18(e)(1).

It should be noted, however, that if, following a recertification as other than small or ineligible for the relevant socioeconomic status, a particular contract requires off-ramping or termination, or renders a holder ineligible to compete on future set aside task orders, those opportunity-specific provisions will apply.

This scheme historically has allowed a degree of certainty as to a potential work stream under a multiple award contract, which impacts valuation of small businesses.

SBA Took the Opposite Position In Analytic

In a recent case regarding a task order competition under a One Acquisition Solution for Integrated Services (OASIS) contract, SBA articulated a different position regarding the impact of a SDVOSB recertification.

Specifically, in April 2014, GSA awarded Analytic Strategies, Inc. (Analytic) an OASIS Small Business (SB) Pool I contract.  As part of its proposal submitted in October 2013, Analytic represented itself as an SDVOSB.

In July 2016, a non-veteran owned concern acquired Analytic.  Analytic updated its registration in the System for Award Management to reflect this change, and notified GSA of the change in its status (i.e., that it no longer qualified as an SDVOSB).  The GSA contracting officer responded that Analytic “will still be considered” an SDVOSB for purposes of OASIS orders.

In June 2017, DHS issued a Request for Quotations, which was set aside for SDVOSBs that were OASIS SB Pool I holders.  This RFQ did not request recertification in connection with the order.  DHS ultimately awarded the order to Analytic.  One of the unsuccessful offerors filed a protest, which apparently raised concerns that Analytic misrepresented its socioeconomic status.  GAO subsequently requested SBA’s opinion on GAO’s jurisdiction over this allegation and SBA, in turn, asked GAO to dismiss the allegation.  Thereafter, SBA initiated its own status protest of Analytic in November 2017, arguing that Analytic was no longer an SDVOSB and, thus, not eligible for orders set aside for SDVOSBs following the recertification: “There is no authority permitting a concern that loses [SDVOSB] status after a merger or acquisition to continue to receive [SDVOSB] set-aside orders.”

The SBA Director of Government Contracting (D/GC) agreed and determined that Analytic was not an eligible SDVOSB for the set-aside task order.

OHA Rejected SBA’s Reading of its Regulation in Lieu of a Plain Reading of the Rule

“Appellant maintains the provisions under § 125.18(e)(1)(i-iii) have the limited effect of preventing the procuring agency from counting options and orders issued to unqualified concerns toward its socioeconomic procurement goals. (Id., at 6.) In Appellant’s view, these are not exceptions to the general rule that a concern retains its SDVO SBC status for the life of the contract. (Id.) These provisions come immediately after another rule related to counting as stated in the regulation (i.e., “Where a concern later fails to qualify as an SDVO SBC, the procuring agency may exercise options and still count the award as an award to an SDVO SBC.”) and, therefore, are exceptions to that rule. (Id.) Appellant stresses, the remedy provided in the three exceptions is that “the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards it SDVO [SBC] goals,” not that the agency can no longer issue orders. (Id., at 7.)”

Analytic appealed to OHA, arguing that the exceptions under § 125.18(e)(1)(i)-(ii) did not impact the general rule that a concern retains its SDVOSB status for the life of the contract.  According to Analytic, the exceptions only applied to the portion of the rule related to an agency’s ability to count spend against its SDVOSB goal since the exceptions immediately follow that rule.  Analytic argued that there was nothing in the text of the rule suggesting that a recertification as result of an acquisition will render a contractor ineligible to compete for new orders.

SBA disagreed with Analytic’s interpretation of the impact of the exceptions.  According to SBA, the exceptions (e.g., the occurrence of a merger or acquisition) not only impacted an agency’s ability to count spend towards its goals, but also were an exception to the general rule that a concern retains its status for the life of the contract.  Under its interpretation, SBA noted that a contracting officer retains discretion to award other task orders to the concern for which it is eligible (i.e., openly competed, small business set asides where the concern recertifies as small) instead of terminating the contract.  In other words, SBA pointed out that a contractor is not necessarily precluded from winning future task orders, but instead, the preclusion is limited to orders for a particular socioeconomic category for which the concern has already recertified as ineligible.

“SBA disputes Appellant and DHS’ construction of the recertification rule following “however,” arguing the proper construction applies the exceptions following “however” to the entire provision, rather than to solely counting toward procurement goals. SBA argues that counting and consideration are linked. If one of the exceptions following “however” applies, a concern is not considered an SDVO SBC at task order award and a procuring agency cannot claim credit for a task order award to the concern. (Id., at 8.)”

SBA also recognized that its interpretation of “however” in the SDVOSB recertification requirement would impact the requirement across the different programs since “the word ‘however’ appears in the same place in all of its recertification rules, including the small business set aside program.”  (Citing 13 C.F.R. §§ 121.404(g), 121.704(b), 126.601(h), 127.503(h).)

On January 29, 2018, OHA vacated the determination that Analytic did not qualify as an SDVOSB.  In doing so, OHA explained that SBA’s recertification rules state that, if a contractor no longer qualifies as small as a result of a merger or acquisition, the agency cannot count any options or orders made pursuant to the contract moving forward.  An agency can, however, still award those options and orders to the contractor as a set-aside because the regulations do not explicitly preclude it from doing so.

According to OHA, the plain language of the regulation dictated this conclusion—the exceptions for novations, mergers, acquisitions only related to the part of the rule discussing an agency’s ability to count spend against its goals and not to the general rule about when size is determined:

The regulation specifically contemplates that this retention of eligibility extends to Multiple Award Contracts, such as the OASIS SB Pool I contract at issue here. The only exception to this general rule occurs if the contracting officer requests recertification in connection with a specific order. See 13 C.F.R. § 125.18(e)(1). This exception is articulated immediately following the regulation’s statement of the general rule, and there are no other exceptions enumerated at this point in the regulation.


The regulation then contains an intervening sentence dictating that when a concern no longer qualifies as an SDVO SBC, a procuring agency may exercise options and still count the award as an award to an SDVO SBC toward meeting the agency’s socioeconomic contracting goals. See id. The regulation plainly contemplates the award of an option or order to a subsequently-unqualified concern, and nonetheless permits the procuring agency to count the option or order toward its socioeconomic goals so long as the concern satisfies the general rule. The regulation then states that “However, the following exceptions apply” and discusses exceptions for novation, merger and negative status determination. See 13 C.F.R. § 125.18(e)(1)(i-iii). For each of these exceptions, the remedy articulated in the regulation is that “the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, toward its SDVO [SBC] goals.” Id.

Thus, OHA found SBA’s interpretation of the recertification rule “flatly contradict[ed] the plain language of § 125.18(e)” as well as “SBA’s application of the similar recertification rule for size status.”  OHA also pointed out that SBA’s intent when promulgating the regulation was “specifically to afford the contracting officer discretion in exercising options and issuing orders to a subsequently-unqualified concern pursuant to an on-going procurement.”  See 78 Fed. Reg. 61114, 61126 (Oct. 2, 2013) (stating “SBA believes that it would be a decision of the contracting agency as to whether and how a business would move to the non-set-aside portion of a multiple award contract if it did not initially submit an offer for the non-set-aside portion”).

SBA’s Revised the Recertification Requirements Seemingly in Response to OHA’s Decision

The SBA’s technical correction requires that the SDVOSB certification (copied in full above) be revised as follows:

Amend § 125.18 by revising the last sentence of paragraph (e)(1) to read as follows:
§ 125.18 What requirements must an SDVO SBC meet to submit an offer on a contract? * * * * *
(e) * * *
(1) * * * However, the following exceptions apply to this paragraph (e)(1):

Less than two months after OHA issued its decision in Analytic, SBA issued the aforementioned “technical correction” to clarify the recertification requirements for each of the socioeconomic programs so that the referenced exceptions would “be applied to the entirety of the preceding paragraph.”  SBA added just four words to each of the recertification requirements, namely that the exception applies to the entirety of the referenced paragraph.

The Impact of the Addition of the Four Words to the Recertification Requirements

The key issue in Analytic was whether the exceptions (regarding novation, acquisition, mergers) applied to both the rule on size/eligibility and on counting in the preceding paragraph or to merely the rule on how the agency can count spend against its goals (which is contained in the sentence immediately preceding the introduction to the exceptions).  In light of the extensive briefing by the parties on how the exceptions should be read and OHA’s rejection of SBA’s reading, it is difficult to read SBA’s “technical corretion” as anything other than a response to OHA clarifying that the exception applies to the entire preceding paragraph as opposed to merely the last sentence (which was OHA’s reading).

Read in this light, should a company recertify as other than small (or that it no longer qualifies for a certain socioeconomic status) following a novation, merger, acquisition or other event, it will be ineligible to compete for orders set-aside under its former size or status.

Questions and Concerns Raised by SBA’s “Technical Correction”

First, SBA’s “technical correction” lacks clarity both as to the reason why SBA issued it and the intended result.  Notwithstanding that it is difficult to read SBA’s revision to the recertification requirements as anything other than a response to OHA (even in light of the lack of any reference to the Analytic case), the revisions are not a model of clarity.  Stated otherwise, SBA could have revised the regulations to expressly prohibit contractors from competing for set-aside task orders for a size or particular socioeconomic category for which the concern has already recertified as ineligible.  Instead, SBA seemingly obscured why it published this “technical correction”—noting only that “[i]t has been brought to SBA’s attention that as drafted, it is not clear which sentence or clause the final sentence is referencing”—as well as its impact.

Second, SBA has not engaged in the expected notice and comment rulemaking.  Indeed, in its decision, OHA twice stressed that it would not allow SBA to revise its regulations by adjudication because such a change to SBA’s regulatory scheme should be subject to “notice and comment rulemaking.”  But, rather than issue a proposed rule for comment, SBA revised the recertification requirements via what it called a “direct final rule,” which would become effective May 25, 2018 assuming SBA received no “significant adverse comment” on or before April 25, 2018.  It would not be surprising to see a challenge to the method by which SBA enacted this change.

Finally, precisely what this “technical correction” means for previously awarded contracts is unclear.  Contractors should expect that recertification provisions, as revised, will apply to new solicitations for contracts issued on or after May 25, 2018.  But, what about task/delivery order solicitations issued after that date under already-awarded multiple award contracts?  SBA states in the rule that the “action does not have retroactive or preemptive effect,” but SBA also deemed this aspect of the rule to be merely a “technical clarification” that aligns the paragraph with SBA’s intent and was “not intended to make any substantive change to the paragraphs.”  This question will linger until we better understand how contracting officers and the SBA will implement the rule come May 25, 2018.

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This week’s episode covers FedRAMP news, DOL news, and GSA schedule news, and is hosted by partner David Robbins and associate Monica Sterling. 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. | PodBean | SoundCloud | iTunes 

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The General Services Administration’s (GSA) System for Award Management (SAM) announced its role in an ongoing Inspector General Investigation into alleged, third party fraudulent activity in SAM.

GSA suspects that the alleged fraudulent activity impacted only a limited number of entities.  GSA has since notified the affected entities, and deactivated their SAM registrations.  GSA also required these entities to validate and confirm their registration and bank account information in SAM before reactivating their SAM registrations.

Continue Reading After Fraudulent Activity in SAM, GSA Implements New Registration Requirements

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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 Peter Eyre and David Robbins and includes updates on NDAA FY 2018 provisions, GAO rulings, and the Semiannual Regulatory Agenda posted by DoD, NASA, and the GSA. | PodBean | SoundCloud | iTunes 

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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, with the latest edition hosted by partners David Robbins and Peter Eyre and including updates on DOJ Fraud Section guidance, GSA OIG’s report on 18F, and an interesting Fourth Circuit decision. Click on one of the options listed below to listen.

Listen: | PodBean | SoundCloud | iTunes

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On August 25, 2016, the Obama Administration published the long-awaited Federal Acquisition Regulation (FAR) final rule and Department of Labor (DOL) final guidance implementing the “Fair Pay and Safe Workplaces” executive order (“Executive Order”) (available here and here). The underlying executive order has been amended (available here) with purportedly technical corrections to conform the final rule and guidance to the Executive Order.

The rule adds subpart 22.20 to the FAR and imposes new obligations on government contractors and subcontractors, including: pay transparency obligations, restrictions on arbitration provisions, and a requirement to report labor “violations.” In response to feedback from interested parties on the proposed rule, the FAR Council and DOL incorporated several notable changes prior into the final rule and guidance. Nevertheless, many are concerned that the rule as written will create significant new burdens – at extraordinary cost – and potentially pave the way for “blacklisting” companies from procuring federal government contracts. Below is an overview of key provisions of the final rule, along with a summary of changes from the proposed rule.

Implementation. The administration extended the compliance timeline, and will implement the rule in phases. Starting on October 25, 2016, the rule will only apply to contracts of at least $50 million. Beginning on April 25, 2017, the rule will apply to contracts of at least $500,000. Subcontractors will not to start reporting violations until October 25, 2017. In addition, the disclosure reporting period will be limited to one year and gradually increase over the next three (3) years, with a full three-year reporting period required beginning on October 25, 2018.

Applicable Labor Laws. Under the reporting requirement, contractors bidding on covered contracts will be required to disclose whether there has been any “administrative merits determination,” “arbitral award or decision,” or “civil judgment” rendered against the contractor for violations of 14 enumerated statutes and executive orders: Fair Labor Standards Act; Occupational Safety and Health Act; National Labor Relations Act; Americans with Disabilities Act; Family and Medical Leave Act; Title VII of the Civil Rights Act; Age Discrimination in Employment Act; Davis-Bacon Act; Service Contract Act; Section 503 of the Rehabilitation Act; Vietnam Era Veterans’ Readjustment Assistance Act; Migrant and Seasonal Agricultural Worker Protection Act; Executive Orders 11246 (Equal Employment Opportunity) & 13658 (Contractor Minimum Wage). In a notable departure from the original executive order, but consistent with the proposed rule, the only “equivalent state laws” covered by the rule are OSHA-approved State Plans. According to the final rule, the administration will identify additional “equivalent state laws” in a future rulemaking. In short, the final rule did not contain any material changes to the proposed rule with regard to the labor laws at issue.

Administrative Merits Determinations, Arbitral Awards or Decisions, and Civil Judgments. These key terms are defined in the Guidance and incorporated into the FAR rule. The Guidance defines “administrative merits determinations” to include, among other things: (1) issuance of a Form WH-56 or a “letter indicating that an investigation disclosed a violation of sections six or seven of the FLSA or a violation of the FMLA, SCA, [or] DBA” issued by the DOL’s Wage and Hour Division; (2) an OSHA citation or notice of imminent danger; (3) a “show cause” notice issued by the Office of Federal Contract Compliance Programs; (4) a complaint issued by any Regional Director of the NLRB; and (5) a letter of determination from the EEOC that reasonable cause exists to believe that an unlawful employment practice has occurred or is occurring. In short, under the definition of “administrative merits determinations” contractors will need to disclose alleged violations that haven’t been fully adjudicated. Thus, a contractor might ultimately prevail on the merits but be forced to report the violation for several years potentially jeopardizing a contract award. These key provisions of the proposed rule, including the requirement to report “administrative merits determinations,” are unchanged in the final rule, notwithstanding significant contractor concern over reporting on alleged violations that have not yet been the subject of a full and fair hearing on the merits.

Pre-Award. FAR 22.2004-2 mandates that Contracting Officers (COs) address labor law compliance when determining contractor and subcontractor responsibility. COs must carefully consider a contractor’s actions (either through a labor compliance agreement or remediation) when making a responsibility determination. Where previous attempts to secure adequate remediation by the contractor are unsuccessful, and it is necessary to protect the Government’s interests, the CO may consider a non-responsibility determination or exclusion action. In addition, under FAR 22.2004-2, COs must consider a prospective contractor’s compliance with labor laws when past performance is an evaluation factor. FAR sections 22.2004-1(c), 22.2004-2(b) and 22.2004-3(b) address the newly established role of the Agency Labor Compliance Advisor (ALCA). Federal agencies are required to designate a senior agency official to serve as an ALCA in order to advise COs when assessing labor law violations, mitigating factors, and remedial measures. According to the rule, the ALCA provides COs with analysis and advice, but the final rule notes that this does not disturb the CO’s independent authority in determining contractor responsibility. Again, these key provisions of the proposed rule and guidance remain unchanged.

Post-Award. Under FAR 22.2004-3, a contractor’s obligation to disclose alleged labor law violations continues after an award is made. Semiannually during the performance of the contract, contractors must update the information provided. If a contractor discloses information regarding labor law violations during contract performance, or similar information is obtained through other sources, the CO, in consultation with the ALCA, considers whether action is necessary. Such action may include requiring the contractor to enter into a labor compliance agreement, declining to exercise an option on a contract, terminating the contract in accordance with relevant FAR provisions, or referring the contractor to the agency suspending and debarring official. It remains to be seen whether COs, who have needed to be reminded to conduct meaningful FAR 9.1 present responsibility determinations in recent years, will have the bandwidth or the capability to conduct this analysis, or whether they will outsource the decisions to the ALCAs or suspending and debarring officials. These provisions of the proposed rule and guidance remain unchanged in the final rule.

Weighing Violations of Labor Laws. The Guidance defines the terms “serious,” “repeated,” “willful,” and “pervasive” and attempts to provide guidelines for COs who are weighing and considering alleged labor law violations. For example, violations of particular gravity (such as terminating employees in retaliation for exercising their rights under the covered labor laws, or violations related to an employee’s death) are given the most weight. The guidance also addresses mitigating factors that COs must consider when weighing violations, including good faith efforts to remedy past violations, internal processes for expeditiously and fairly addressing reports of violations, and/or plans to proactively prevent future violations. The Appendix to the Guidance includes an extensive chart of illustrative examples.

Paycheck Transparency. FAR 22.2005 requires contractors performing work on covered contracts and subcontracts to provide employees covered by the FLSA, the Davis Bacon Act, and the Service Contract Act with information concerning the individual’s pay, hours worked, overtime hours, if applicable, and any additions made to or deductions made from the individual’s pay. The rule also requires contractors to provide to any independent contractors performing work on the contract a document informing them of their status as independent contractors. The paycheck transparency requirements will become effective on January 1, 2017. These provisions of the proposed rule and guidance remain largely unchanged in the final rule.

Dispute Resolution. For contracts over $1 million, FAR 22.2006 requires contractors to agree that the decision to arbitrate claims arising under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contractors after such disputes arise, subject to certain exceptions. This flows down to subcontracts exceeding $1,000,000 other than for the acquisition of commercial items. This provision of the proposed rule and guidance likewise remains largely unchanged and a significant concern for employers who have adopted robust arbitration and claims resolution procedures.

Significant Changes.

  • Subcontractors. Perhaps the most significant change in the final rule is the reporting regime for subcontractors. Under the proposed rule, subcontractors were to report alleged labor law violations to prime contractors. This would have required subcontractors to share such alleged violations with potential competitors for future procurements, and would have increased the administrative burdens placed on prime contractors, who would have had to process and report subcontractor labor compliance data as well as their own. The final rule addresses this concern by requiring subcontractors to report directly to the DOL via a web portal. However, it remains to be seen if DOL will have the bandwidth to review and analyze what could be a large of volume of information, since the rule provides incentives for subcontractors to provide information about mitigating factors and remedial measures.
  • Public Disclosure. In another significant change, the proposed rule did not specify what labor law violation history would be made publicly available, but the final rule compels public disclosure in the Federal Awardee Performance and Integrity Information System (FAPIIS) of some basic information about violations. Contractors will have the option to publicly disclose mitigating factors.
  • Pre-assessment. In a new development, DOL has created a voluntary “pre-assessment” process through which contractors can proactively have their labor compliance history reviewed before a specific acquisition. If there are concerns, this change permits the contractor to attempt to negotiate a labor compliance agreement and start taking steps to mitigate issues before there is a specific acquisition. According to the information presently available (the “pre-assessment” process is unprecedented and was not contemplated in the proposed rule), participating in pre-assessment “will be considered in future acquisitions as a mitigating factor.” This change only amplifies the importance of “labor compliance agreements” – a heretofore undefined term – and likely only heightens contractor concerns over the apparent authority of so-called “Labor Compliance Advisors.”

Potential Legal Challenges and Congressional Action. Based on the scope of the requirements and its impact on the contracting community, the final rule – along with the Executive Order – could be subject to a legal challenge by a combination of affected companies and industry trade groups. Moreover, Congress could impede the rule’s implication. For instance, the House and Senate passed National Defense Authorization Act bills for fiscal year 2017 that would exempt defense contractors from the Executive Order. That provision of the NDAA is subject to removal when Congress reconvenes in September, and the White House has issued statements opposing this provision of the bill.

Next-Steps for Contractors. Given the rapid phase-in of the new rule over the next several months, contractors who are not already preparing for “Day One Compliance” should take steps immediately to do so. Significantly, contractors without a compliance plan in place will be at risk of (i) competitive disadvantage in the procurement process, and worse, (ii) potential suspension and debarment action if the Government determines that their labor compliance history – and failure to “mitigate” or explain that history in context – warrants exclusion from the contracting process.

The final year of the Obama Administration has seen a flurry of activity that will affect the government contracting community.  Appearing on WJLA’s Government Matters program (available here at, Crowell & Moring Chair Angela Styles discussed some of the latest changes that will impact industry including the GSA’s final rule on transactional data reporting; the Office of Federal Procurement Policy’s category management initiatives; and the Fair Pay and Safe Work Places Executive Order.