Weekly Update for Government Contractors and Commercial Businesses – June 29, 2023

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GOVERNMENT CONTRACTS

GAO Sustains Rare Bid Protest Challenging Agency’s Corrective Action, PilieroMazza Blog, Sam Finnerty

In February 2023, the Department of Energy (DOE) agreed to take corrective action following three bid protests filed at the Government Accountability Office (GAO). Thereafter, two of the original protestors, Kupono Government Services, LLC and Akima Systems Engineering, LLC, filed protests challenging the scope of DOE’s corrective action. In Kupono Gov’t Servs., LLC; Akima Sys. Eng’g, LLC, B-421392.9 (June 5, 2023), GAO sustained the protests, finding that DOE neither appropriately explained nor described its reasoning for the corrective action. In this blog, PilieroMazza reviews the facts of the case and offers important takeaways for government contractors who may be looking to file a bid protest in the future. Read more here. 

Homeland Security Acquisition Regulation (HSAR); Safeguarding of Controlled Unclassified Information (CUI), Department of Homeland Security (DHS)

DHS is issuing a final rule to amend the HSAR to modify a subpart, remove an existing clause and reserve the clause number, update an existing clause, and add two new contract clauses to address requirements for the safeguarding of CUI. This final rule implements security and privacy measures to safeguard CUI and facilitate improved incident reporting to DHS. These measures are necessary because of the urgent need to protect CUI and respond appropriately when DHS contractors experience incidents with DHS information. The final rule is available here and will be effective July 21, 2023.

Information Collection Requirements; Defense Federal Acquisition Regulation Supplement (DFARS); Defense Acquisition Regulations System, Department of Defense (DOD)

DOD published 8 Notices in the Federal Register on Friday, June 23. These Notices request information and public comment about proposed changes to the DFARS for the following issues: (1) Publicizing Contract Actions; (2) Organizational Conflicts of Interest in Major Defense Acquisition Programs; (3) Contract Pricing; (4) DFARS Part 225, Foreign Acquisition and Related Clauses; (5) Describing Agency Needs; (6) Administrative Matters; (7) Subcontracting Policies and Procedures; and (8) Contract Financing. Comments are due July 24, 2023. The Notice summaries are below.

(1) Publicizing Contract Actions

DFARS 205.470 prescribes the use of the clause at DFARS 252.205-7000, Provision of Information to Cooperative Agreement Holders, in solicitations and contracts, including solicitations and contracts using Federal Acquisition Regulation (FAR) part 12 procedures for the acquisition of commercial products and commercial services, which are expected to exceed $1.5 million. This clause implements 10 U.S.C. § 4957 by requiring contractors to provide cooperative agreement holders, upon request, with a list of the contractor’s employees or offices responsible for entering into subcontracts under DOD contracts. The Notice is available here.

(2) Organizational Conflicts of Interest in Major Defense Acquisition Programs

The information collection under OMB Control Number 0704-0477 pertains to organizational conflicts of interest in major defense acquisition programs (MDAPs). This collection implements section 207 of the Weapon Systems Acquisition Reform Act of 2009, which requires DOD to tighten requirements for organizational conflicts of interest by contractors in major defense programs. This statutory requirement is implemented in the solicitation provision at DFARS 252.209-7008, Notice of Prohibition Relating to Organizational Conflict of Interest — Major Defense Acquisition Program, which requires offerors to submit a mitigation plan when there is an organizational conflict of interest that can be resolved through mitigation. The Notice is available here.

(3) Contract Pricing

DOD contracting officers use this information to decide if the contractor has an adequate system for generating cost estimates, which forecasts costs based on proper source information available at the time and can monitor the correction of significant deficiencies. The need for information collection decreases as contractor estimating systems improve and gain contracting officer approval. The Notice is available here.

(4) Part 225, Foreign Acquisition and Related Clauses

DOD needs this information to ensure compliance with restrictions on the acquisition of foreign products imposed by statute or policy to protect the defense industrial base; to ensure compliance with U.S. trade agreements and memoranda of understanding that promote reciprocal trade with U.S. allies; and to prepare reports for submission to the Department of Commerce on the Balance of Payments Program. This information collection includes requirements related to foreign acquisition in DFARS part 225, Foreign Acquisition, and the related clauses in DFARS part 252. The Notice is available here.

(5) Describing Agency Needs

DFARS 211.274-6 prescribes the use of the clause at DFARS 252.211-7007, which requires contractors to report data to the DOD Item Unique Identification (IUID) Registry on all serially managed, Government-furnished property (GFP), as well as contractor receipt of non-serially managed items, unless an exception applies. “Serially managed item” means an item designated by DOD to be uniquely tracked, controlled, or managed in maintenance, repair, and/or supply systems by its serial number. The clause provides a list of specific data elements contractors are to report to the IUID registry in the GFP module, as well as procedures for updating the registry. DOD needs this information to strengthen the accountability and end-to-end traceability of GFP within DOD. Through electronic notification of physical receipt, DOD is made aware that GFP has arrived at the contractor’s facility. The DOD logistics community uses the information as a data source of available DOD equipment. In addition, the DOD organization responsible for contract administration uses the data to test the adequacy of the contractor’s property management system. The Notice is available here.

(6) Administrative Matters

DFARS 204.404-70(a) prescribes use of DFARS clause 252.204-7000, Disclosure of Information, in contracts that require the contractor to access or generate unclassified information that may be sensitive and inappropriate for release to the public. The clause requires the contractor to obtain approval of the contracting officer before release of any unclassified contract-related information outside the contractor’s organization unless the information is already in the public domain. In requesting this approval, the contractor must identify the specific information to be released, the medium to be used, and the purpose for the release. Upon receipt of a contractor’s request, the Government reviews the information provided by the contractor to decide if it is sensitive or otherwise inappropriate for release for the stated purpose. The Notice is available here.

(7) Subcontracting Policies and Procedures

Administrative contracting officers use this information in making decisions to approve or disapprove a contractor’s purchase system. The disapproval of a contractor’s purchasing system would cause Government consent to individual subcontracts and prompt a financial withhold or other Government rights and remedies. DFARS 244.305, Granting, Withholding, or Withdrawing Approval, provides policy guidance for administrative contracting officers to determine the acceptability of the contractor’s purchasing system and approve or disapprove the system, at the completion of the in-plant portion of a contractor purchasing system review, and to pursue correction of any deficiencies with the contractor. DFARS clause 252.244-7001, Contractor Purchasing System Administration, requires the contractor to respond within 30 days to a written initial determination from the contracting officer that identifies significant deficiencies in the contractor’s purchasing system. The contracting officer will evaluate the contractor’s response to this initial determination and notify the contractor in writing of any remaining significant deficiencies, the adequacy of any proposed or completed corrective action, and system disapproval if the contracting officer determines that one or more significant deficiencies remain. If the contractor receives the contracting officer’s final determination of significant deficiencies, the contractor has 45 days to either correct the significant deficiencies or submit an acceptable corrective action plan. The Notice is available here.

(8) Contract Financing

The data submitted by contractors enables contracting officers to calculate improved financing opportunities that will provide benefit to both industry (prime contractor and subcontractor level) and the taxpayer. Contracting officers use the information provided by contractors to create a cash-flow model for use in evaluating alternative financing arrangements. The analysis tool calculates improved financing opportunities that will provide benefit to both industry (prime contractor and subcontractor level) and the taxpayer. The Notice is available here.

Reporting and Recordkeeping Requirements Under OMB Review, Small Business Administration (SBA)

The information collected on SBA Form 480; “Size Status Declaration” is a certification of small business size status. This information collection is used to determine whether SBIC financial assistance is provided only to small business concerns as defined in the Small Business Investment Act and SBA size regulations. Without this certification, businesses that exceed SBA’s size standards could benefit from program resources meant for small businesses. The Notice is available here.

Upcoming Government Contracts Presentations

WEBINAR: The Impacts of Foreign Ownership, Control, or Influence on Federal Government Contractors, August 1, 2023, Isaias “Cy” Alba, IV. 

WEBINAR: Unlocking the Secrets of Debriefings, Gov’t Evaluation of Proposals and Protests, September 7, 2023, Peter B. Ford and Meghan F. Leemon. Read more here.

LABOR & EMPLOYMENT

Clocking in with PilieroMazza: Labor and Employment News for Government Contractors: FLSA Exemptions Matter When Bidding for SCA Contracts, PilieroMazza Podcast, Nichole D. Atallah and Sarah L. Nash. Click here to listen to the podcast.

Contractor Pay Is A Government Issue, Government Executive, Stan Soloway

Prevailing wage laws need an overhaul. Earlier this month, the Florida Phoenix reported that a handful of workers at several customer call centers operated by contractors for the Centers for Medicaid and Medicare Services walked off the job to push for higher pay and protest layoffs. Read more here.

The GOP Wants to Bring Back Pay for Performance, but a Leading Expert Says It’ll Never Work, Government Executive, Nathan Base

Past pay-for-performance efforts have done “double duty as a kind of way to diminish the unions, go after the rank and file, and that was clear,” a researcher says. Read more here. 

Odds for a 5.2% Pay Raise for Feds In 2024 Improve with Release of the Senate Defense Policy Bill, Government Executive, Erich Wagner

The Senate version of the annual National Defense Authorization Act includes an average 5.2% pay raise for both military service members and civilian Pentagon employees. Read more here. 

Department of Labor (DOL) Recovers More Than $48K In Back Wages, Damages for 19 Employees Denied Overtime by Palm Coast Construction Contractor

Investigators with the department’s Wage and Hour Division found that a Florida commercial carpentry and millwork contractor paid 19 employees straight-time rates for all hours worked, including overtime hours. By doing so, the employer failed to pay the required time-and-a-half overtime premium for hours over 40 hours in a workweek, a Fair Labor Standards Act violation. Read more here.

Upcoming Labor & Employment Presentations

WEBINAR: FAR Session 14, Parts 22 & 23, July 12, 2023, Nichole D. Atallah. Read more here. 

WEBINAR: Key Employment Issues for the C-Suite: What Affects Your Bottom Line, July 19, 2023, Nichole D. Atallah and Sarah L. Nash. Read more here. 

FALSE CLAIMS ACT / AUDITS & INVESTIGATIONS

The FCA at the Supreme Court, Part 3 of 4: Subjective Intent Controls FCA Liability, PilieroMazza Blog, Matthew E. Feinberg and Annie B. Hudgins

The False Claims Act (FCA) is seeing quite a bit of action at the Supreme Court this term, with multiple cases under consideration. In this third installment in PilieroMazza’s blog series on “The FCA at the Supreme Court,” we examine active cases, comment on recently issued decisions, and discuss ways government contractors can protect themselves against an FCA claim or in FCA litigation. Parts 1 and 2 of the series are available here and here. Read more here. 

Small Business Administration (SBA) Releases Report on Anti-Fraud Control Measures in Pandemic Relief Programs

Eighty-six percent of fraud in small business pandemic relief programs occurred in the first nine months of the pandemic according to findings in new agency report. The report “Protecting the Integrity of the Pandemic Relief Emergency Programs: SBA’s Actions to Prevent, Detect and Address Fraud” highlights the actions the agency deployed to restore fraud measures in pre-existing relief programs, enhance fraud controls in new programs, as well as support cross-agency efforts to bring fraudsters to justice. The report also details the most comprehensive analysis yet estimating the total impact of fraud, across SBA’s four largest pandemic relief programs, including the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan Program (COVID-EIDL). Read more here.

COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape Report

The Small Business Administration (SBA) Office of Inspector General (OIG) conducted this review to provide a comprehensive estimate of the potential fraud in the SBA’s pandemic assistance loan programs. Over the course of the COVID-19 pandemic, SBA disbursed approximately $1.2 trillion of COVID-19 Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) funds. In the rush to swiftly disburse COVID-19 EIDL and PPP funds, SBA calibrated its internal controls. SBA weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs and provide assurance that only eligible entities received funds. However, the allure of “easy money” in this pay and chase environment attracted an overwhelming number of fraudsters to the programs. OIG collaboration with SBA, the U.S. Secret Service, other federal agencies, and financial institutions has resulted in $30 billion in COVID-19 EIDL and PPP funds being seized or returned to SBA.