Executive Developments
On January 20, 2021, Joe Biden was sworn in as the 46th president of the United States. Like many of his predecessors, President Biden wasted no time in issuing a slew of executive orders to institute various policy changes, several of which directly affect government contractors as discussed below.
- As anticipated, on January 20, 2021, President Biden issued Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, to revoke President Trump's September 22, 2020 Executive Order 13950, Combating Race and Sex Stereotyping, and to issue guidance and directives on how "the Federal Government should pursue a comprehensive approach to advancing equity for all, including people of color and others who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality." Though several agencies had already issued class deviations suspending the application and enforcement of Executive Order 13950, as last reported on here, subsection 10(b) of Executive Order 13985 directed the following:
The heads of agencies covered by Executive Order 13950 shall review and identify proposed and existing agency actions related to or arising from Executive Order 13950. The head of each agency shall, within 60 days of the date of this order, consider suspending, revising, or rescinding any such actions, including all agency actions to terminate or restrict contracts or grants pursuant to Executive Order 13950, as appropriate and consistent with applicable law.
Accordingly, and per subsection 10(a), Federal contractors, subcontractors, and grant recipients no longer must comply with the requirements of Executive Order 13950, including the contract clause previously applicable to Federal contractors and subcontractors.
- That same day, President Biden issued Executive Order 13988, Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation, "to prevent and combat discrimination on the basis of gender identity or sexual orientation, and to fully enforce Title VII and other laws that prohibit discrimination on the basis of gender identity or sexual orientation," including overlapping forms of discrimination. Signaling that the Biden Administration seeks to eradicate those same types of discriminatory behavior, but through very different means, section 2 of this executive order calls on the heads of each agency, "as soon as practicable and in consultation with the Attorney General, as appropriate," to take various actions that include "review[ing] all existing orders, regulations, guidance documents, policies, programs, or other agency actions" that either "were promulgated or administered by the agency under Title VII or any other statute or regulation that prohibits discrimination" or are inconsistent with the enumerated policy of the executive order (emphasis added). Subsections 2(b) and 2(c) further direct the agency heads to respectively "consider whether to revise, suspend, or rescind such agency actions, or promulgate new agency actions, as necessary to fully implement statutes that prohibit sex discrimination and the policy in section 1 of this order," and to "consider whether there are additional actions that the agency should take" to ensure compliance with such policy. Notably, subsection 2(c) states that "[i]f an agency takes an action described in this subsection or subsection (b) of this section, it shall seek to ensure that it is accounting for, and taking appropriate steps to combat, overlapping forms of discrimination, such as discrimination on the basis of race or disability," reiterating the Biden Administration's desire to tackle both race- and sex-based discrimination.
- On January 25, 2021, as more fully reported on here, President Biden issued Executive Order 14005, Ensuring the Future Is Made in All of America by All of America's Workers, directing the federal government to, "whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America's workers thrive." Among other changes, this executive order substantively revises existing "Made in America Laws"; creates a Made in America Office within the Office of Management and Budget to be headed by a Made in America Director; centralizes and reconfigures the waiver process; increases domestic participation and oversight in federal contracting; and asks the Federal Acquisitions Regulations (FAR) Council to revise FAR Part 25, pursuant to notice and comment rulemaking.
- On January 26, 2021, President Biden issued Executive Order 14006, Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, to "reduce profit-based incentives to incarcerate by phasing out the Federal Government's reliance on privately operated criminal detention facilities." The impetus for this executive order appears to be twofold—a need to decrease incarceration levels and a response to certain 2016 findings by the U.S. Department of Justice's (DOJ) Office of Inspector General that privately operated prisons do not maintain adequate levels of safety or security. Though this executive order does not directly address what might happen to existing private prison contracts, it indicates that such contracts will not be extended and makes clear that the federal government will no longer issue solicitations for new contracts, where it states the "Attorney General shall not renew Department of Justice contracts with privately operated criminal detention facilities, as consistent with applicable law."
Regulatory Updates
- On January 19, 2021, the FAR Council issued a final rule implementing President Trump's Executive Order 13881 on Maximizing Use of American-Made Goods, Products, and Materials. Notwithstanding the potentially superseding impact of President Biden's January 25, 2021 executive order, discussed above, which speaks to related, prospective changes to the Buy American Act, the final rule became effective on January 21, 2021 and applies to solicitations issued on or after February 22, 2021. The final rule solidifies many changes included in the proposed rule, which is more fully discussed here, and includes, among other changes, an increase to the domestic content requirement for end products and construction materials that "consist wholly or predominantly of" iron or steel, or a combination of both, from 50% to 95%; for all other end products and construction materials, an increase to the domestic content requirement from 50% to "exceeds 55[%] of the cost of all its components"; and an increase in the price preference evaluation factor from 6% to 20% for large businesses, and from 12% to 30% for small businesses. Though the final rule is subject to change, the key changes therefrom are effective for now.
- On January 13, 2020, the Small Business Administration (SBA) issued an interim final rule for the purpose of allowing certain 8(a) Participants to extend their 8(a) Business Development (BD) program term by a period of one year, as authorized in the Consolidated Appropriations Act, 2021, and the National Defense Authorization Act for Fiscal Year 2021. In explaining the nuances and associated requirements of the extension, including with respect to the different stages of a firm's 8(a) life cycles and whether implementation is optional or automatic, the rule provides that the SBA will variously amend 13 C.F.R. Part 124 to, among other changes, "incorporate the optional program term extension for small business concerns participating in the 8(a) BD program on March 13, 2020"; "clarify that any period of extension under the Act will be added to a Participant's transitional stage of participation in the 8(a) BD program"; "clarify the respective terms of the developmental and transitional stages of program participation"; and "clarify how an extension of participation under the Act will impact an 8(a) Participant's requirement to attain the targeted dollar levels of non‑8(a) revenue in its extended program term." Notably, the rule clearly states that this extension authority is not available to the following:
- Business concerns that graduated from or otherwise left the 8(a) BD program prior to March 13, 2020;
- Business concerns that were admitted to the 8(a) BD program after September 9, 2020; and
- Business concerns that were Participants in the 8(a) BD program at any point between March 13, 2020, and September 9, 2020, but were terminated, graduated early, or voluntarily withdrew from the program in lieu of being terminated or graduating early.
The interim final rule became effective on January 13, 2021. Comments are due no later than March 15, 2021.
- On January 12, 2021, the DOJ issued a news release announcing its "first civil settlement to resolve allegations of fraud against the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security (CARES) Act" and for alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). As part of the settlement agreement, both the company, SlideBelts Inc., and its President and CEO, Brigham Taylor, admitted to making false statements to federally insured banks—by claiming that the company was not in bankruptcy when it actually was—for the purpose of influencing both the approval and SBA loan guarantee process, and agreed to pay the United States "a combined $100,000 in damages and penalties to resolve allegations that they committed fraud" as well as the full $350,000 loan amount. Though the facts at hand give rise to a seemingly open-and-shut case, DOJ's intent to pursue recoveries against other individuals and companies for similar and less clear-cut violations remains both clear and imminent.
Legal Developments
- In Amaze Technologies, LLC, the U.S. Government Accountability Office (GAO) denied a protest challenging the Department of the Air Force's award of a task order to Apogee Engineering, LLC (Apogee), for advisory and assistance support services. Among other claims, the protester alleged that the agency's award was improper, as Apogee is a large business, and the fair opportunity proposal request was issued to General Services Administration One Acquisition Solution for Integrated Services (OASIS) small business contract holders. In dismissing this supplemental protest ground, the GAO relied upon the text of 13 C.F.R. § 121.1009(g)(2)(iii) to explain that, "if a timely [Office of Hearings and Appeals (OHA)] appeal is filed, and OHA affirms the size determination finding the awardee ineligible, the agency 'shall either terminate the contract or not exercise the next option.'" Given that the SBA area office's determination that Apogee was no longer a small business occurred after the award and was timely appealed, affirming that Apogee was not an eligible small business, the Air Force consequently "had one of two choices: either terminate the task order issued to Apogee, or continue with performance, but not exercise the next option on the task order." The GAO held that, by not terminating the contract, the Air Force validly chose the second option, allowing Apogee to keep the task order award and causing this protest ground to be dismissed for failure to state a valid legal basis.
- On January 25, 2021, the GAO sustained both protests in Crowley Government Services, Inc.; Petro Star, Inc., in which the protesters challenged the Defense Logistics Agency's evaluation of price proposals and lowest-price technically acceptable (LPTA) contract awards. The solicitation, which included 164 contract line item numbers (CLINs) for the acquisition of various petroleum products and indicated that awards would be made individually on a CLIN‑by‑CLIN basis, required that the agency calculate an evaluated price for offerors pricing fuel using an uncommon escalator. Pursuant to amendment 4, however, the protesters argued that where an offeror based its prices on the government-preferred escalator, the agency should not have calculated an evaluated price, as only the proposed prices that relied on an uncommon escalator were subject to that calculation. In sustaining this protest ground, the GAO found that the agency failed to evaluate prices in accordance with the methodology stated in the solicitation, concluding that the solicitation "did not advise offerors that the agency would use this calculation in those instances where an offeror proposed its prices using the government-preferred escalator." To reach this conclusion, the GAO read the solicitation as a whole and in a manner that gave effect to all of its provisions, ultimately finding that the agency's contrary interpretation was unreasonable.