Congressional, Executive, and Legal Developments for Government Contractors to Consider

4 min

Recent Cases and Administrative Decisions

The GAO has worked on refining its guidance on procedural issues, particularly with regard to jurisdiction, interested-party status, timeliness, intervention, protective order, and other procedural disputes. These decisions come amid a recent focus by Congress on the bid protest process, with an eye toward efficiency in federal procurement. Venable's alert breaks down these cases and explains the key takeaways contractors need to understand the bid protest process.

In MA Cleaning & Landscaping Design, Inc. v. Banneker Ventures, LLC, the District of Maryland held for the prime contractor (Banneker) on a pay-if-paid clause. No. GJH-16-2720, 2019 WL 3766488 (D. Md. Aug. 8, 2019). At issue were some additional costs MA Cleaning incurred while constructing a parking lot for the SSA. Banneker refused to submit these change orders to the GSA, and because of several pay-if-paid clauses in the subcontract, Banneker refused to pay MA Cleaning. MA Cleaning argued that the clauses did not apply because Banneker prevented payment by not submitting the change orders, but the court rejected that argument because of another clause that gave the prime sole discretion to determine whether such claims had merit. In other words, the subcontractor granted exclusive rights to the prime to determine whether any change orders should be submitted to the government and was subject to pay-if-paid clauses. This case serves as a reminder that both prime and subcontractors must ensure their payment and dispute resolution terms are harmonized to appropriately reduce risk and ensure adequate protection.

Regulatory Developments

Effective August 13, 2019, the FAR issued an interim rule, the Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment. This rule defines "covered telecommunications equipment or services" to include equipment produced by Huawei Technologies Company or ZTE Corporation. It affects all solicitations issued after the effective date, as well as any awards on solicitations issued before then. In general, the rule requires a representation that the equipment proposed will not be procured from Huawei or ZTE, and that it is not actually used. Some exceptions and waivers are available, and the DoD will allow some class deviations. Issues surrounding these companies have been in the news much of this year, so this rule should come as no surprise.

The Department of Labor released a notice of proposed rulemaking to expand existing religious exemption laws that apply to religious organizations to federal government contractors. Under the current regime, Civil Rights Act Title VII exemptions apply to religious organizations, but these exemptions are in direct conflict with President Johnson's Executive Order 11246. That order mandates equal employment opportunity in federal government contracting. The rule seeks to clarify and expand the definition of "religious purpose," potentially allowing a far greater number of federal government contractors to qualify for Title VII exceptions. This proposed rule is certainly controversial, and may face substantial challenges if enacted. However, if implemented, it may have substantial effects on the employment practices and policies of many government contractors.

The FAR council is proposing an amendment to the FAR to allow small-business set-asides in overseas contracts. This is intended to align better with the SBA's policies, which allow for set-asides to be performed outside the United States. Under FAR part 19, contracting officers have divergent interpretations of whether set-asides are even allowed in overseas procurements. The new rule would clarify part 19 and expressly allow contracting officers to use set-asides and sole-source procedures in overseas procurements. If adopted, this would undoubtedly increase the number of overall opportunities for small businesses, and has the potential to increase competitiveness in overseas procurements.

The GSA released a fact sheet explaining the imminent demise of the website. That website will be rolled into the revamped website sometime in the first quarter of 2020. This is part of the ongoing upgrades and changes to the various federal government contracting websites with which contractors are familiar. The new website has a training page. Contractors should continue to monitor these changes to avoid any potential disruption as these rollouts continue.

Legislative Developments

Senators Rick Scott (R-FL) and James Lankford (R-OK) proposed the Disaster Contract Transparency Act, S. 2421, with the aim of streamlining post-disaster services and the contracts that provide those services. The bill would require that advance contracts be in place by state and local governments for debris removal and would limit FEMA's reimbursement of those contracts to the lowest rate available out of the federal, state, or local contract. Contractors may also be subject to penalties for not following their advance contracts. The bill also instructs FEMA to develop rules regarding debris removal contracts. This bill, if passed in its current form, may have its desired effect of streamlining the disaster-recovery process, but may also increase the regulatory and compliance hurdles contractors competing for or entering into these types of contracts may face.