Congressional, Executive, and Legal Developments for Government Contractors to Consider
On August 25, 2020, the Cybersecurity Maturity Model Certification (CMMC) Accreditation Body (AB), a nonprofit organization charged with accrediting CMMC Third Party Assessment Organizations (C3PAOs) and individual assessors, announced that it had approved 73 provisional assessors for CMMC-AB training. After completing the four-day-long training, the provisional assessors will be able to conduct assessments during the provisional period and provide feedback to the AB, DOD, and participating contractors. As a reminder to DOD contractors, DOD intends to begin applying the CMMC requirement to a limited number of contracts with the expectation that all DOD contracts will be subject to the requirement over the next few years.
On August 17, 2020, the Under Secretary of Defense issued Class Deviation—Section 3610 Reimbursement Requests. This class deviation, applicable to U.S. Department of Defense agencies, provides guidance to contracting officers for reviewing and processing contractor requests for reimbursement under section 3610 of the Coronavirus Aide, Relief and Economic Security (CARES) Act. That section authorizes contracting officers to modify contracts to reimburse contractors for paid leave a contractor has provided to keep its employees or subcontractors in a ready state during the COVID-19 pandemic. The guidance notes that while contracting officers are required to reimburse for paid leave on or after March 27, 2020, it is in their discretion whether to reimburse such costs prior to March 27. Of note, the guidance encourages contractors to inform their contracting officers of an intent to submit a request for reimbursement so that the parties may identify relevant information to be included in the request. The class deviation includes multiple checklists to be used in preparing and reviewing requests. Contractors considering submitting a request for reimbursement should review this class deviation.
Also, on August 17, 2020, the DOD, General Services administration (GSA), and National Aeronautics and Space Administration (NASA) issued a notice and request for comments in the Federal Register inviting interested persons to comment on representations and reporting associated with implementation of Federal Acquisition Regulation (FAR) rule 2019-009, Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment. This rule implements a statutory restriction prohibiting executive agencies from entering into, or extending or renewing, a contract with an entity that uses any equipment, system, or services that uses covered telecommunications equipment or services. Contractors familiar with this prohibition are likely aware of the continued difficulties in understanding the scope and extent of this rule. Interested parties have until October 16, 2020 to submit comments.
On August 3, 2020, the president signed an executive order (EO), Aligning Federal Contracting and Hiring Practices With the Interests of American Workers. The EO directs heads of departments and agencies to review performance of contracts and subcontracts awarded in fiscal years 2018 and 2019 to assess the following: (1) whether contractors and subcontractors used temporary foreign labor for contracts performed in the United States; (2) whether contracts performed in foreign countries services that were previously performed in the United States; (3) any negative impact on contractors' temporary foreign labor hiring practices or offshoring practices; and (4) the employment policies of the agency.
On August 12, 2020, the U.S. Small Business Administration (SBA) released its annual small business scorecard for fiscal year 2019. The SBA announced that the federal government exceeded its small business contracting goal, awarding 26.50% or $132.9 billion to small businesses. Notable highlights from the scorecard include the government meeting its women-owned small business contracting of 5% for the second time in the scorecard's history and exceeding its goal for service disabled veterans for the seventh year in a row. That said, areas for improvement include awarding to HUBZone businesses, as the government failed to meet its 3% goal, awarding only 2.28%.
On August 11, 2020, the U.S. Department of Justice (DOJ) issued a report, Modernizing the Administrative Procedure Act, evaluating developments in the Administrative Procedure Act (APA) over the years and ways to improve on it. Recommendations in the report include extending judicial review to cover putatively non-binding agency guidance, aligning the amount of process and scrutiny a rule must undergo with the rule's importance, requiring agencies to fully disclose data and other information used in rulemakings, and other various reforms. Whether any of the proposed reforms are ultimately codified into law is unclear; however, it does demonstrate a continued interest in reducing regulatory burdens.
On August 17, 2020, the U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) added to a growing circuit split concerning the DOJ's False Claims Act (FCA) dismissal authority. United States ex rel. CIMZNHCA, LLC v. UCB, Inc., No. 19-2273, 2020 WL 4743033 (7th Cir. Aug. 17, 2020). At issue was one of a number of FCA actions filed in federal courts by a whistleblower company alleging unlawful drugmaker kickbacks. DOJ filed a motion to dismiss pursuant to 31 U.S.C. § 3730(c)(2)(A), stating that the suit lacked sufficient merit to justify the cost of investigation and prosecution and was otherwise contrary to the public interest. The lower court adopted the Ninth Circuit's Sequoia Orange test for evaluating dismissal under that standard and held that the government's dismissal was arbitrary and capricious because in part the government's investigation was not minimally adequate to support a meaningful cost-benefit analysis. On appeal, the Seventh Circuit reversed and defined its own standard, which it described as something similar to the D.C. Circuit's "unfettered discretion" to dismiss standard in Swift v. United States. The growing circuit split and the DOJ's renewed interest in exercising its dismissal authority has caught the attention of legislators and practitioners, who are hoping that the Supreme Court will weigh in.
On August 10, 2020, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued an opinion providing additional guidance on the application of the Blue & Gold contract waiver doctrine. Boeing Co. v. United States, No. 19-2148 (Aug. 10, 2020). The Blue & Gold rule requires contractors that had an opportunity to object to the terms of a solicitation containing a patent error to do so prior to the close of bidding process; failure to challenge the term prior to bid submission waives the party's right to raise the objection in a subsequent action. In Boeing, the contractor argued that the government violated the Cost Accounting Standards (CAS) statute by refusing to offset positive cost impacts Boeing made to its cost accounting practices with the savings generated by other changes made by Boeing. The government refused, claiming that it was prohibited from doing so under FAR 30.606. Boeing challenged the government's interpretation before the U.S. Court of Federal Claims; however, the court, siding with the government, found that any conflict between CAS and the FAR was apparent and because Boeing had not raised the issue prior to proposal submission, it had waived its right. On appeal, the Federal Circuit reversed, finding that because of the interplay of the CAS statute and the FAR, Boeing did not waive its claim because it had no judicial "avenue of relief" during the contract formation process. While the decision was a win for Boeing, it underscores the ongoing quagmire litigants run into under the Blue & Gold rule.
On August 4, 2020, the U.S. Government Accountability Office (GAO) denied a protest challenging the Defense Logistics Agency's (DLA) cancellation of a solicitation. W&G Machine Corp., Inc., B-418698.2, B-418698.3, Aug. 4, 2020, 2020 WL 4697988. DLA had issued a request for quotations (RFQ) for rigid connecting links for use in helicopters, a commercial item. The links were designated as a critical safety item, and the RFQ noted that while there was only one prequalified manufacturing source, the agency would consider links manufactured by other sources. One vendor filed a pre-award protest challenging the terms of the solicitation as unduly restrictive. DLA cancelled the solicitation on the grounds that it had failed to follow regulatory requirements in issuing the solicitation as a brand name requirement. The same protester then challenged the cancellation of the RFQ because DLA's reasons for cancelling were belied by the record. GAO noted that protester's arguments contradicted the position it had taken in the pre-award protest and had even noted that DLA should cancel the solicitation based on the defects. In denying the protest, the GAO held that DLA properly canceled the solicitation, as DLA had in effect issued a brand name procurement but failed to prepare a justification and approval. The decision serves as a reminder of the importance of carefully considering your protest grounds and requests for relief.