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Government Contracts Regulatory and Legislative Update March 2019

Regulations

VA Issues Proposed Rule to Reform Competition Requirements 

On February 1, 2019, the U.S. Department of Veterans Affairs (VA) issued a proposed rule to revise VA Acquisition Regulation (VAAR) Part 806, Competition Requirements. The proposed changes are a continuation of the VA’s phased approach to streamline the VAAR to eliminate duplication with the Federal Acquisition Regulation (FAR); transition internal guidance into the VA Acquisition Manual (VAAM); and incorporate new department-specific policies. Previously, in September 2018, the VA issued several proposed and final rules addressing such topics as Construction and Architect-Engineer Contracts; Contracting by Negotiation and Service Contracting; Contract Cost Principles and Procedures; Protests, Disputes and Appeals; and Subcontracting Policies and Procedures.

In this latest round of proposed revisions, the VA seeks to add the following new sections to VAAR Part 806, Competition Requirements:

  • Section 806.270 (Set-asides for Verified Veteran-owned Small Businesses), which sets forth the VA’s authority to set aside procurements for veteran-owned small businesses (VOSBs) when the VA “Rule of Two” is met. That is, when the contracting officer reasonably expects to receive two or more offers from eligible VOSBs or Service-disabled, veteran-owned small businesses (SDVOSBs), and the award can be made at a fair and reasonable price. This section also provides that the VOSB set-aside requirement applies to all contracts subject to VAAR Part 806. Furthermore, SDVOSB- and VOSB-restricted set-asides involving indefinite-delivery contracts will satisfy competition requirements.

  • Section 806.302-750 (Noncompetitive Procedures for Verified VOSBs), which authorizes contracting officers to enter into contracts non-competitively with SDVOSBs and VOSBs verified under the VA Vets First Verification Program. Specifically, this permits the use of other than full and open competition procedures for contracts at or below the Simplified Acquisition Threshold (SAT).

  • Section 806.302-751 (Authorized or Required by Statute – VA Unique Authorities), which lists those statutes previously contained in Section 806.302-5. This section also provides pertinent VA policy regarding the use of other than full and open competition for the acquisition of prosthetic appliances and services as well as commercial healthcare resources and use of medical equipment or space when acquired from affiliated and unaffiliated institutions.

Comments on the proposed rule are due by April 2, 2019.

GSA Issues Final Rule to Repeal Small Business Mentor-Protégé Program

On February 4, 2019, the General Services Administration (GSA) issued a direct final rule to amend the GSA Acquisition Regulation (GSAR) to remove GSA’s Mentor-Protégé Program and associated clauses that duplicate the Small Business Administration’s government-wide Mentor-Protégé program. This is in response to a 2016 SBA final rule that established the government-wide program for all small business concerns, and that also implemented the National Defense Authorization Act (NDAA) 2013, Section 1641, which prohibited an agency from administering an agency-specific, small business mentor-protégé program without SBA approval. This direct final rule, effective April 3, 2019, removes GSAR Subpart 519.70 and transitions contractors involved in existing mentor-protégé agreements to the SBA government-wide program.

DoD Issues Proposed Rule to Reform Undefinitized Contract Actions

On February 15, 2019, the Department of Defense (DoD) issued a proposed rule to amend the DFARS to implement Sections 811 and 815 from the 2017 and 2018 NDAAs, respectively, that modify requirements for definitizing Undefinitized Contract Actions (UCAs). The proposed modifications impact risk-based profit calculations, definitization timelines, foreign military sales, and unilateral UCA definitizations exceeding $50 million.

UCAs are designed for use when urgent Government interests demand the contractor be given a binding commitment to permit immediate contract performance, despite the inability to negotiate contract terms and conditions in sufficient time. The UCA represents a general framework, rather than a complete contract; the parties agree to definitize the contract within a defined time period, generally no later than 180 days of the UCA award date.

The proposed rule makes the following much needed, but modest amendments to the DFARS:

  • For definitizations delayed beyond 180 days from the date the contractor submits a “qualifying proposal,” profit must be calculated based upon the contractor’s cost risk that existed on the proposal submission date of the proposal submission, rather than the definitization date.

  • Contracting officers must obtain written, higher-level approval to extend UCA definitization more than 90 days beyond the maximum 180-day definitization period.

  • Foreign Military Sale UCAs require definitization within 180 days of the contracting activity approval; the agency head may waive this requirement for certain operations.

  • DoD cannot unilaterally definitize UCAs exceeding $50 million without fulfilling certain new, restrictive requirements, such as obtaining higher-level written approval and allowing statutory deadlines to elapse.

  • “Qualifying proposal” is redefined to align with the statutory requirement that proposals include sufficient information to enable a “meaningful audit” versus a “complete and meaningful audit.”

Comments on the proposed rule are due by April 16, 2019.

DoD Issues Final Rule Requiring Contractor Anti-Terrorism Awareness Training

On February 15, 2019, DoD issued a final rule to require federal contractors who routinely access federally-controlled facilities and military installations to complete Level I anti-terrorism awareness training. This rule creates a new DFARS Subpart 204.72 (Antiterrorism Awareness Training), which prescribes a new DFARS clause 252.204-7004 (Antiterrorism Awareness Training for Contractors), for use in all solicitations and contracts, including those below the simplified acquisition threshold (SAT) and those for commercial item acquisitions. The new training is to be completed within thirty days of requiring access and annually thereafter. The burden on contractor personnel is expected to be minimal, as the training can be web-based and the DoD bears the burden of the training expense. See 84 Fed. Reg. 4362, Feb. 15, 2019.

DoD Issues Final Rule Regarding Amendments Related to General Solicitations

On February 15, 2019, DoD issued a final rule to implement Sections 221 and 861 of the 2018 NDAA which “expand the definition of ‘other competitive procedures’ and extend the term and increase the dollar value under the contract authority for advanced development of initial or additional prototype units.”

Section 221 broadens the application of other competitive procedures by amending 10 U.S.C. § 2302(2)(B) to encompass “science and technology” proposals, rather than simply “basic research” proposals. In addition, Section 221 establishes broad agency announcements (BAAs) as a competitive procedure for the selection of science and technology proposals. Section 861 amends 10 U.S.C. § 2302(e) as it applies to “advanced development of initial or additional prototype units awarded from a competitive selection.” Specifically, this extends the statutory term limits from twelve months to two years, and increases the dollar threshold from $20 million to $100 million.

DoD Issues Final Rule to Encourage Use of Commercial or Non-Government Standards

On February 15, 2019, DoD issued a final rule to implement Section 875(c) of the 2017 NDAA, which requires DFARS revisions “to encourage offerors to propose commercial or non-Government standards and industry-wide practices that meet the intent of military or Government-unique specifications and standards.”

This rule amends DFARS 211.107(b) to require the use of FAR provision 52.211-7 (Alternatives to Government-Unique Standards) in solicitations that include military or Government-unique specifications and standards. Previously, use of this provision was optional in DoD solicitations. Acquisitions valued at or below the SAT are included in this requirement. DoD solicitations for commercial item acquisition, however, are excluded, as such contracts should not include military or Government-unique specifications or standards. Affected contractors who choose to propose alternative standards should remember that the offeror retains responsibility to demonstrate how said alternative standards meet DoD mission requirements.

DoD Issues Final Rule  to DFARS: Extension of Supply Chain Risk Management Authority

On February 15, 2019, DoD issued a final rule to implement Section 881 of the 2019 NDAA, which made the DFARS 239.73 requirements for supply chain risk management permanent by removing the sunset provision of the existing regulation, and instead establishing authority under 10 U.S.C. § 2239a.

The implementation of this DFARS rule, along with a prior DFARS Class Deviation, strongly hints at DoD’s increased efforts to regulate and evaluate supply chain risk management. Contractors face significant responsibility in managing, minimizing, and mitigating any perceived risks, lest contracting officers interpret failure to do so as a negative mark when evaluating contractor past performance.

DoD Issues Final Rule Permitting more than Five Offerors for Phase Two Design-Build Solicitations

On February 15, 2019, DoD issued a final rule to implement Section 823 of the 2018 NDAA, which amends 10 U.S.C. § 2305a to grant the contracting officer discretion to exceed the five-offeror maximum for certain phase two design-build solicitations. For such solicitations issued pursuant to an indefinite-delivery, indefinite-quantity (IDIQ) contract that exceeds $4 million, the contracting officer may select more than five offerors to submit competitive proposals without requiring the head of the contracting activity’s approval. The contracting officer has discretion in the number of offerors selected when the solicitation is for a contract valued at or below $4 million; this is consistent with existing FAR guidelines. A new DFARS section 236.303-1 implements this new authority for contracting officers.

DoD Issues Final Rule to Streamline "Transportation of Supplies by Sea" Clause

On February 15, 2019, DoD issued a final rule to consolidate existing instructions regarding notifications of transportation of supplies by sea into a single DFARS clause, 252.247-7023. 

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About this Author

Jessica Abrahams Government Contracts Lawyer
Partner

Jessica C. Abrahams, chair of the firm’s Government Contracts Team, offers U.S. and international clients comprehensive counsel on issues concerning litigation, compliance, and transactions. Her clients span a variety of industries, from biodefense and health care to information technology, defense products and services, supply chain and infrastructure development. She regularly advises global government contractors, Indian nations, nonprofit organizations and small business owners on contracting best practices and risk mitigation techniques.

A trial lawyer with a...

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John Horan Government Contracts Attorney
Partner

John G. (Jack) Horan represents clients in litigation with the government; internal investigations of contract, regulatory, civil and criminal violations; and compliance with contractual, regulatory, civil and criminal requirements. He is an experienced practitioner in government contracts, litigation, and white collar criminal defense.

Jack has a wealth of litigation experience, including acting as lead counsel in over 30 jury trials and hundreds of criminal, civil, administrative and arbitration hearings, as well as presenting oral arguments on eight appeals before the Federal and District of Columbia Courts of Appeals.

As a criminal defense lawyer, Jack represents companies and employees in closely regulated industries under investigation or indictment for criminal offenses arising from regulatory violations. He has represented clients before federal and state grand juries and in criminal proceedings in federal and state courts. His experience includes defending companies and employees accused of crimes under the False Claims Act, the False Statements Act and the Foreign Corrupt Practices Act, as well as export control, import, bribery, gratuities, conflict of interest and federal election laws.

Jack has litigated contract and fraud cases against the government, prime contractors and subcontractors before the Board of Contract Appeals, the United States Court of Federal Claims, and federal and state courts, as well as in arbitration proceedings. He has represented contractors protesting and defending the award of contracts before the Court of Federal Claims, the Government Accountability Office, federal agencies and state forums, and has also represented clients in suspension and debarment proceedings brought by federal and state agencies.

Jack possesses significant experience in assisting clients with compliance with requirements in solicitations, contracts, regulations, and civil and criminal statutes applicable to government contracts. He has drafted and reviewed corporate compliance programs for government contractors and businesses ranging from Fortune 500 companies to emerging businesses. Jack has also conducted internal investigations of contract compliance, fraud, government security violations, employee kickback schemes, theft of corporate and government property, organizational conflicts of interest, and violations of import and export laws.

Before entering private practice, Jack served as an Assistant U.S. Attorney for the District of Columbia. In this role, he supervised criminal investigations by local and federal law enforcement authorities and represented the United States in jury trials, hearings and appellate arguments in the District of Columbia and federal courts.

Jack serves as an Associate Editor of the American Bar Association’s Public Contract Law Journal and is the author of “Legal Forum,” a monthly column in Contract Management magazine, a publication of the National Contract Management Association (NCMA). Jack also serves as General Counsel and an ex officio board member to NCMA. Jack is also an adjunct professor at the Catholic University of America, where he teaches “Legal Aspects of Government Contracting” in the university’s Federal Acquisition and Contract Management master’s degree program.

202-230-5362
Dana B. Pashkoff, Washington DC, Partner, information technology, telecommunications, homeland security, aerospace/defense industries, government contractors, risk management counseling
Partner

Dana B. Pashkoff provides legal counsel to government contractors in the information technology, telecommunications, homeland security, and aerospace/defense industries. Dana has litigated numerous contract claims and bid protests before federal district courts, the U.S. Court of Federal Claims and the Government Accountability Office. She also provides compliance counseling to government contractors.

Dana has significant experience in risk management counseling, specifically in the area of sales of products and services to the...

202-230-5364
Michelle Francois Government Contracts Attorney
Associate

Michelle Y. Francois assists clients with government contracts matters such as bid protests, claims and procurement research, and federal litigation. Michelle has significant experience representing public and private clients in various stages of litigation. She drafts legal documents, represents clients in court conferences and other administrative proceedings, takes depositions, and represents clients in mediations and settlement negotiations. Michelle has represented municipalities in litigation against public and private entities in §1983, land use, and taxation...

202-230-5394