Each month, Venable's Government Contracts Group publishes a summary of recent legal developments of interest to the government contractor community.
On April 27, 2021, President Biden signed an Executive Order on Increasing the Minimum Wage for Federal Contractors. This long-awaited order increases the minimum wage for certain federal contractors and subcontractors, such as those subject to the Service Contract Labor Standards, to $15.00 per hour, effective January 30, 2022. The order further provides that the minimum wage will increase annually by an amount determined by the Secretary of Labor. To implement the order, the Secretary of Labor is directed to issue regulations by November 24, 2021, followed by implementing regulations by the Federal Acquisition Regulatory Council. Venable discussed the order in greater detail here.
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Through its Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDLs), the Small Business Administration (SBA) has provided approximately $968 billion to small businesses across the country impacted by the COVID-19 pandemic. In hopes of speeding the distribution of funds, the SBA streamlined these programs and limited internal controls, resulting in less oversight and a higher risk of fraud and improper payments. Because of the growing concerns about program integrity, the Government Accountability Office (GAO) added the PPL and EIDL programs to its High-Risk List in March 2021. SBA has begun taking numerous steps to address these deficiencies, including implementing a comprehensive oversight plan for EIDLs, and conducting fraud risk assessments for the PPP and EIDLs. These oversight measures are likely to expand as loan forgiveness applications increase.
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On April 16, 2021, the GAO released a report, "Information Technology and Cybersecurity: Significant Attention Is Needed to Address High-Risk Areas." As the report notes, despite spending over $100 billion annually on IT and cybersecurity, the federal government continues to struggle to effectively manage those resources. Since 2015, the GAO has treated IT acquisition and operations as a high-risk area for the federal government and has recommended approximately 4,700 steps to improve federal management. While hundreds of recommendations have not been implemented, the GAO report highlights the urgency of addressing the following areas:
- Develop and execute a more comprehensive federal strategy for national cybersecurity and global cyberspace.
- Mitigate global supply chain risks.
- Enhance the federal response to cyber incidents.
Contractors working in the federal IT and cybersecurity space should expect to receive greater scrutiny of their proposals for delivering IT solutions.
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On April 21, 2021, the Office of Inspector General (OIG) for the U.S. Department of Defense (DOD) released a report detailing its audit of DOD spending under other transactions (OTs) through consortiums. OTs use a streamlined procurement process that is exempt from many Federal Acquisition Regulation (FAR) requirements. Based on a sample of 13 OT awards valued at $24.6 billion, the report found that DOD contracting personnel did not properly track OTs, award OTs in accordance with applicable rules, or negotiate fees consistently. The report made 13 recommendations on how to improve oversight of OTs, including developing guidance and training on the best practices for OTs. We can expect additional developments relating to OTs as the process continues to receive attention.
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On April 19, 2021, GSA announced that it is proposing to amend the General Services Administration Regulations (GSAR) to modify GSAR 532.905-70 so that it no longer requires contracting officers to obtain approval of legal counsel before processing final payments for construction and building service contracts where, after 60 days, the contracting officer is unable to obtain a release of claims from the contractors. GSA explains in the proposed rule that legal review of such payments is not a statutory requirement, and in fact, the decision to process final payments under construction and building service contracts is a business decision rather than a legal one. Prior to the proposed rule, GSA guidance on final payments for construction and building service contracts in GSAR 532.905-70(c) provided that, "in cases where, after 60 days from the initial attempt, the contracting officer is unable to obtain a release of claims from the contractor, the final payment may be processed with the approval of assigned legal counsel." The legal approval requirement will be removed once the rule becomes effective. Following the enactment of this rule, a contracting officer may instead process a final payment in such a situation after documenting in the contract file (i) that the contracting officer requested a release of claims from the contractor and did not receive a response within 60 calendar days; and (ii) approval to process the final payment from one level above the contracting officer. Comments on the proposed rule are due June 18, 2021.
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On April 9, 2021, the U.S. Department of Labor (DOL), Wage and Hour Division (WHD), published Field Assistance Bulletin (FAB) No. 2021-2 rescinding FAB 2020-2 and updating guidance regarding the practice of seeking liquidated damages in settlements in lieu of litigation. Specifically, FAB 2021-2 returned WHD to the policy of seeking liquidated damages in settlement from employers who are found to owe unpaid wages during DOL's pre-litigation investigations.
FAB 2020-2, published on June 24, 2020 during the Trump administration, established numerous employer-friendly policies, including that DOL would not assess pre-litigation liquidated damages if any of the following circumstances existed:
- there is not clear evidence of bad faith and willfulness;
- the employer's explanation for the violation(s) shows that the violation(s) were the result of a bona fide dispute of unsettled law under the FLSA;
- the employer has no previous history of violations;
- the matter involves individual coverage only;
- the matter involves complex section 13(a)(1) and 13(b)(1) exemptions; or
- the matter involves State and local government agencies or other nonprofits.
FAB 2021-2 returns the WHD to its practices prior to June 23, 2020, where it sought liquidated damages in cases where the employer was not able to offer a good faith defense to the alleged wage and hour violations. While FAB 2021-2 has allowed WHD to regain its discretion in determining when to seek liquidated damages in a settlement, WHD must still gain concurrence from the relevant DOL Regional Solicitor before making a demand for liquidated damages.
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The General Services Administration (GSA) issued a temporary waiver of Multiple Award Schedule (MAS) solicitation requirements in an attempt to aid the federal government's response to the COVID-19 pandemic by increasing opportunities within the acquisition process. GSA issued Acquisition Letter (AL) MV-21-03 and Supplement 1, temporarily waiving the following three (3) MAS solicitation requirements in MAS provision SCP-FSS-001, Instructions Applicable to All Offerors, when a company is proposing products, services, and/or solutions to directly support the Government's COVID-19 efforts:
- The requirement to possess two (2) years of Corporate Experience
- The requirement to submit a Relevant Project Experience for each SIN proposed
- The requirement to submit Annual Financial Statements for the previous two years
The AL does not change any other vendor instructions, technical requirements, or the contracting officer's responsibilities during a procurement, including determining responsibility and ensuring fair and reasonable pricing.
The AL applies to (1) all MAS large categories, subcategories, and SINs under which new offerors are proposing products, services, and/or solutions in direct support of COVID-19 efforts, and (2) existing MAS contractors that are adding service SINs in direct support of COVID-19 efforts. The AL does not apply to offers or modifications that include products, services, and/or solutions that do not directly support COVID-19 efforts, or to the Department of Veteran's Affairs (VA) MAS for medical equipment, supplies, pharmaceuticals, and services.
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On April 22, 2021, the U.S. Department of Justice (DOJ) announced the indictment of six former employees of an Arlington, Virginia government contractor who are alleged to have intentionally recruited unqualified linguists for deployment with U.S. forces in Afghanistan. The former employees received a base salary plus incentive bonuses based on how many recruits advanced through the government's vetting process. The individuals are alleged to have arranged for other individuals to fraudulently impersonate the unqualified linguists during oral proficiency interviews.
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On April 26, 2021, the GAO sustained a pre-award protest challenging the terms of a request for proposals (RFP) issued by the Air Force. The GAO found that the solicitation, which required protégé firms in a joint venture to individually meet the same evaluation or responsibility criteria as other offerors, violated SBA regulation. The decision is a good reminder that mentor-protégé joint ventures should carefully review solicitation requirements for compliance with SBA regulations and consider a pre-award protest if the terms are contrary to regulation.
*A special thank-you to Anna Kaye for her contributions to this article.