The month of July saw a number of legal developments that may affect government contractors, ranging from a new executive order to legislative updates, and a few noteworthy decisions. This article provides a brief review of those developments.
Legislative Developments
- H.R. 2810 passed in the House on July 14, 2017. The Bill, introduced on June 7, 2017 as the National Defense Authorization Act for Fiscal Year 2018, authorizes appropriations for military activities of the Department of Defense and for military construction for fiscal year 2018. The National Defense Authorization Act for fiscal year 2018 authorizes $613.8 billion in base funding, which includes a $28.5 billion spending increase above President Trump's essential readiness recovery budget. The Bill has been passed to the Senate for consideration and is currently awaiting a decision on a July 25, 2017 motion to proceed to consideration.
- On July 20, 2017, the House passed H. R. 2825, the U.S. Department of Homeland Security Authorization Act of 2017. The Bill was introduced on June 16, 2017 to amend the Homeland Security Act of 2002 to make certain changes to the laws administered by the Secretary of Homeland Security. According to the U.S. Department of Homeland Security (DHS), the Bill purports to: "(1) authorize Congress's Article I authority to write laws and give direction to the Department; (2) create efficiencies by eliminating, consolidating and streamlining programs and offices; (3) protect taxpayer dollars and hold DHS more accountable; (4) support America's front-line defenders and first responders; [and] (5) improve America's safety and security." The Bill was passed to the Senate for consideration on July 20, 2017.
- House Representatives Jack Bergman (Oversight and Investigations Chairman and Michigan Republican), Annie Kuster (Ranking Member and New Hampshire Democrat), and Bruce Poliquin (Maine Republican) introduced bipartisan legislation to "improve the hiring, training, and efficiency of acquisition of personnel and organizations of the Department of Veteran Affairs." H.R. 3053 was introduced on July 10, 2017. On July 19, it was ordered to be reported by voice vote.
- On July 12, 2017, the House introduced H.R. 3243. This bill amends title 40 of the United States Code to "eliminate the sunset of certain provisions relating to the information technology[,]" and amends the National Defense Authorization Act for fiscal year 2015 to "extend the sunset relating to the Federal Data Center Consolidation Initiative."
Executive Branch Activity
- On July 21, 2017, the President issued an Executive Order titled "Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States." The Order launched "the first whole of government assessment of the defense industrial base," with the stated intent of ensuring international security and prosperity and closing the increasing capability gaps that the defense industrial base faces according to the Peter Navarrao, White House trade policy director. The Pentagon, along with the Departments of Labor, Commerce, Energy, and Homeland Security, and the National Security Council will conduct the review, which will be completed 270 days after the date of the Order.
Regulations
- The Chair of the Civilian Agency Acquisition Council (CAAC) issued a letter on July 5, 2017 implementing 41 U.S.C. 4712, clarifying the use of certain whistleblower protection clauses and making permanent the 4-year whistleblower protection pilot program. The letter directs agencies "to continue to use the pilot program coverage until the FAR is revised under FAR case 2017-005, Whistleblower Protection for Contractor Employees[,]" which revises the FAR and makes the 4-year pilot program a permanent regulatory requirement.
- The National Aeronautics and Space Administration (NASA) issued a final rule on July 25, 2017 amending the NASA FAR Supplement (NFS) "to add policy on the use of additional contract periods of performance or 'award terms' as a contract incentive." The Rule "provides a non-monetary incentive for contractors whose performance is excellent . . . to be used where a longer term relationship between the Government and a contractor would provide benefits to both parties." Ample benefits result from award term incentives, including increased award desirability, motivating high performance levels, and reduced administrative costs. The rule will be effective on August 24, 2017; we will monitor whether other federal agencies adopt similar regulations.
Notable Decisions
- Earlier this month, a federal district court judge tossed out the 15-year debarment of a contractor by the Defense Logistics Agency (DLA). In International Exports Inc. et al. v. Mattis et al. (Case No. 1:14-cv-02064), Judge Walton of the U.S. District Court for the District of Columbia found that DLA had insufficient evidence to support the lengthy debarment, which had been purportedly based on a "aggravating circumstance," and was therefore unreasonable. Per the Federal Acquisition Regulation (FAR), a debarment "should not exceed 3 years," FAR 9.406-4(a)(1); however, a lengthier debarment could have been warranted had DLA made and documented specific findings of fact relating to the "aggravating circumstances." DLA did not, and Judge Walton found that "[t]he debarring official's failure to make specific findings of fact as required by FAR 9.406-3(d)(2)(i) on the issue of 'aggravating circumstances' warrants a remand of this case to the Agency for further proceedings." Many in the government contracting community view this decision as a welcome judicial reprieve, confirming the need for formal findings of fact as a condition for prolonged debarments.
- On Thursday, July 13, 2017, the U.S. Department of Justice sentenced a former contractor employee to just over one year in federal prison and levied $50,000 in fines for engaging in wire fraud while working as a contractor for the National Nuclear Security Administration (NNSA) under the U.S. Department of Energy. In December 2016, the employee pleaded guilty to multiple counts of wire fraud, admitting that he had submitted purchase orders for over 125 pieces of unnecessary equipment without the knowledge of his employer or NNSA, and then sold the items on eBay. The cost to his employer and ultimately NNSA was $50,480, which the employee must reimburse.