Each month, Venable's Government Contracts Group publishes a summary of recent legal developments of interest to the government contractor community.
Presidential Waiver Authorizing DoD Use of the Defense Production Act (DPA) of 1950 to Build the Resiliency of America's Defense Industrial Base and Secure Its Supply Chains
On February 27, 2023, President Biden signed a presidential waiver of statutory requirements authorizing the Department of Defense (DoD) to use the Defense Production Act (DPA) of 1950 to build the resiliency of America's defense industrial base and secure its supply chains. This presidential waiver is tied to President Biden's previous Executive Order 14017 from February 2021. The purpose of this presidential waiver is to ensure a robust, resilient, and sustainable domestic industrial base for national security purposes and to preserve domestic critical infrastructure. President Biden waived the requirements of section 303(a)(1)-(a)(6) of the DPA for "defense organic industrial base supply chains critical to the DoD and critical supply chains for electronics, kinetic capabilities, castings and forgings, minerals and materials, and power and energy storage."
Executive Order on Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government
On February 16, 2023, President Biden issued a new Executive Order on Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, building on his previous Executive Order 13985 from January 2021. In this new executive order, President Biden reiterates that it "continues to be the policy of my Administration to advance an ambitious, whole-of-government approach to racial equity and support for underserved communities and to continuously embed equity into all aspects of Federal decision-making." This executive order extends and strengthens equity-advancing requirements for federal agencies, such as by establishing (1) Agency Equity Teams to "be led by a designated senior official," who will be responsible for delivering equitable outcomes and supporting "continued equity training and leadership development;" and (2) a White House Steering Committee on Equity. It also requires agency heads to submit in September 2023 and annually thereafter an Equity Action Plan to the Steering Committee.
Of particular interest to the Government Contracts community, Section 7 seeks to advance equitable procurement by establishing a government-wide goal to award 15% of federal procurement dollars to small business concerns owned and controlled by socially and economically disadvantaged individuals (SDBs) in fiscal year 2025. Finally, it tasks the Office of Science and Technology Policy (OSTP) National Science and Technology Council Subcommittee on Equitable Data to advance equitable data practices through the creation of an Interagency Working Group on Equitable Data established in Executive Order 13985.
On December 8, 2021, President Biden issued Executive Order 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability. In response to Executive Order 14057, the General Services Administration (GSA) has suggested its intent to propose amendments implementing the executive order by March 2023. According to FMR Case 2023-102-1, the GSA plans to amend part 102-83 of the Federal Management Regulation (FMR) "to promote economy and efficiency in the planning, acquisition, utilization, and management of Federal facilities." Please review Venable's recent publication on this issue for more information.
The Government Accountability Office (GAO) recently released new procedures for filing and handling GAO protests with classified materials. The key takeaway from the new procedures is that parties may not file classified materials on the GAO Electronic Protest Docketing System (EPDS); rather, the protest must be filed with the agency. After filing, the protester must immediately notify the GAO's Procurement Law Control Group of the classified protest filing.
VA Imposes Strict Real-Time Reporting (Within One Hour) of Suspicion of a Security/Privacy Incident and Insertion in Certain Contracts of VA Acquisition Regulation (VAAR) 852.211-76 Liquidated Damages—Reimbursement for Data Breach Costs
The U.S. Department of Veterans Affairs (VA) released a final rule amending the VAAR effective February 24, 2023. The final rule imposes new cybersecurity requirements, for prime contractors and subcontractors, on VA contracts involving sensitive information about "all VA acquisitions, including acquisitions of commercial products or commercial services other than commercially available off-the-shelf items, when a contractor's information system may contain VA information." The rule includes strict real-time reporting obligations that require reporting of "all actual or suspected security/privacy incidents" to the contracting officer and the contracting officer's representative (COR) "within one hour of discovery or suspicion" (emphasis added). That means that if a contractor merely suspects a security incident, they must report it within one hour, even if they have yet to confirm it.
The rule also requires that the clause at VAAR 852.211-76, Liquidated Damages—Reimbursement for Data Breach Costs (Feb 2023), be included in "all solicitations, contracts, or orders," where VA requires access to sensitive personal information for the performance of a Department function, where sensitive personal information "will be created, received, maintained, or transmitted, or will be stored, generated, accessed, or exchanged, or used by a contractor, subcontractor, business associate, or an employee of one of those entities." This clause allows imposition of liquidated damages where "there was a data breach caused by Contractor's or any of its agents' failure to protect or otherwise engaging in conduct to cause a data breach of VA sensitive personal information." The amount of the liquidated damages must be inserted by the contracting officer in the contract.
Furthermore, if the Agency terminates the contract for default as a result of the data breach, VAAR 852.211-76(e) provides that if the government terminates the contract "in whole or in part under clause 52.249–8, Default—Fixed-Price Supply and Service, or any other related FAR or VAAR clause included in the contract," then "the Contractor is liable for excess costs for those supplies and services for repurchase as may be required under the Termination clause."
FAR 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023)
On February 14, 2023, the FAR Council released the final rule revising FAR 52.232-40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023). The final rule becomes effective March 16, 2023, and prohibits contractors from requiring consideration for accelerated payments. This prohibition applies to contracts and subcontracts (1) below the simplified acquisition threshold, and (2) for commercial products and commercial service.
Occupational Safety and Health Administration (OSHA)
The Occupational Safety and Health Administration (OSHA) of the U.S. Department of Labor proposed an interim final rule governing antitrust whistleblower retaliation claims. This rule establishes procedures and time frames for the handling of retaliation complaints under the Criminal Antitrust Anti-Retaliation Act (CAARA). The interim final rule prohibits employers from retaliating against (1) covered individuals who provide information to the federal government, to supervisors, or to employees with the authority to investigate misconduct regarding potential antitrust law violations; and (2) covered individuals who participate in or assist in a federal government investigation or proceedings regarding a violation of antitrust laws. Contractors and subcontractors are among those included under the definition of "covered individuals." The interim rule became effective on February 10, 2023, and comments are due by April 11, 2023.
On February 9, 2023, the Office of Management and Budget (OMB) proposed revisions to the OMB Guidance for Grants and Agreements regarding the Build America, Buy America Act provisions of the Infrastructure Investment and Jobs Act. OMB's proposed revisions would create new regulations at 2 C.F.R. Part 184 and would amend the Uniform Guidance to require compliance with Buy America Preferences under 2 C.F.R. Part 184. Comments are due on March 13, 2023. For further information, please review Venable's recent publication on the OMB's proposed regulations.
On January 31, 2023, the Department of Defense proposed amendments to the Defense Federal Acquisition Regulation Supplement (DFARS) to preserve regulations surrounding commercial solutions openings (CSOs). The amendments authorize the DoD to acquire innovative commercial products and commercial services using general solicitation competitive procedures. Comments are due on April 3, 2023. For further information, please review Venable's recent publication on the DoD's proposed amendments.
In AccelGov, LLC v. United States, COFC No. 22-1433, the government argued that the protester did not have standing to bring one of its claims, an alleged material misrepresentation, and, therefore, the claim should be dismissed. The Court of Federal Claims (COFC) held that in bid protests, courts will evaluate the alleged procurement errors as a whole when determining standing, and, accordingly, the COFC refused to conduct a "bifurcated, piecemeal standing analysis."
In Thalle/Nicholson Joint Venture v. United States, COFC No. 22-755, the COFC held that the protester's proposal was ineligible for award because the protester, a joint venture, was not registered in the System for Award Management (SAM) as required by the Federal Acquisition Regulation (FAR) 52.204-7, which the solicitation incorporated by reference.