GOVERNMENT CONTRACTING IN THE NEW ADMINISTRATION. April 2, 2009

Transcription

1 GOVERNMENT CONTRACTING IN THE NEW ADMINISTRATION April 2, 2009

2 Our Panelists Richard P. Rector Partner Chair, Government Contracts Practice Seamus Curley Associate Carl L. Vacketta Partner C. Christopher Parlin Of Counsel Fernand Lavallee Partner

3 CONTRACTING OPPORTUNITIES AND CHALLENGES CREATED BY: America Recovery and Reinvestment Act of 2009 ( ARRA ), Pub.L , 123 Stat. 115 (2/17/09) Economic Stimulus Package President Obama s Memorandum To Agency/Department Heads on Government Contracting (3/4/09) President Obama s Memorandum on Ensuring Responsible Spending of Recovery Act Funds 2/25/09) President Obama s Executive Orders Concerning Labor Issues (Jan/Feb 2009) 3

4 ARRA Economic Stimulus Package What is Available? Unprecedented Amounts of Funding Massive Contracting Opportunities When? Goal: Use 50% of Funds on Projects Started Within 120 Days of Enactment (Sec. 1602) Preference for Projects Started and Completed Expeditiously 4

5 ARRA Economic Stimulus Package Where Can The Stimulus Money Be Spent? Federal Agencies State and Local Entities Other? How Can The Money Be Provided? Federal Procurement Contracts Financial Assistance: Grants & Cooperative Agreements Direct to States/Local Entities 5

6 American Recovery and Reinvestment Act of

7 Economic Stimulus Plan American Recovery and Reinvestment Act of 2009 (ARRA) Total of $787 billion 65% spending provisions, 35% tax benefits Major components include: Infrastructure ($120b) Highway construction, public transit, state water projects, federal buildings, broadband deployment Energy ($43b spending, $22b tax incentives) Renewable energy research & development, smart grid development, solar and wind farms, advanced battery manufacturing 7

8 Health Information Technology ($19b) Provides Medicare/Medicaid incentives for certain physicians and hospitals that meaningfully use qualified electronic health records, extensive privacy provisions Tax Relief for Businesses Deferral of the cancellation of debt income (CODI), extension of use of net operating losses (NOLs), reducing the recognition period for built-in gains tax Tax Relief for Individuals Incentives for new car buyers and first-time homeowners, Alternative Minimum Tax patch Broadband Initiative Provides for the deployment of broadband technologies. For detailed descriptions regarding stimulus bill see: 8

9 Federal, State, and Local Contracting Issues & Strategies Stimulus money will be used on both federal and state/local government projects Contracting landscape for contractors is shaped by two key boundaries: 1. Legislation requires competitive procedures be used to maximum extent practicable... opportunities for sole-source contracts at either the federal or state/local levels will be limited 2. Legislation places a premium on rapid implementation... federal and state/local agencies likely will use existing contracts (e.g., GWACs, GSA Schedule, IDIQs), to the maximum extent practicable, to avoid the lag time involved in soliciting and awarding new contracts 9

10 Federal, State, and Local Contracting Issues & Strategies Pursue prime contracts at the federal and state/local level by: identifying projects that will be openly competed assessing whether there is an existing, preferred contract vehicle (or contractor) for such projects considering whether teaming relationships would be prudent based on preferences of the agency or jurisdiction bidding on appropriately competitive projects 10

11 Federal, State, and Local Contracting Issues & Strategies Pursue subcontracts at the federal level by teaming with existing federal contractors who hold GWAC, GSA Schedule, and large IDIQ contracts Typically, new team members and subcontractors can be added to existing contracts in fairly short order For large contractors, teaming with small-business or mid-size contractors may be most fruitful, because these companies may not have the size or capacity to take on certain projects For small and small disadvantaged businesses, focusing on large contractors may be best, as these contractors may need to meet requirements for small-business and small-disadvantaged-business subcontracting 11

12 ARRA Key Legal Issues Heightened Reporting Requirements Increased Oversight/Investigatory Authority ( Recovery Accountability & Transparency Board ) New Interim FAR Rules (Applies to Federal Acquisitions) Buy American Compliance 12

13 Federal Contracting To Maximum Extent Possible Contracts Shall Be Fixed Price, Using Competitive Procedures (Sec. 1554) FAR Implementation (3/31/09): Interim Rules Re: (1) Buy American, (2) Whistleblower Protection, (3) Publicizing Contract Actions, (4) Reporting, and (5) GAO/IG Access Agency Supplements Some Agencies (DOE, Army, Forest Service) have Issued New Ts & Cs 13

14 Federal Contracts What Are The New ARRA Requirements? 1. Reporting Requirements (Sec. 1512) Contractor Must Report Details on Use of Funds. New FAR Subpart 4.15 ( Reporting Requirements ): Information on (1) Amount of Invoices, (2) Supplies Delivered/Services Performed, (3) Program/Project Title and Purpose (4) Completion Status, (5) Number of Jobs Created and Retained, and (6) Names and Compensation of Top 5 Paid Contractor Officers (if (a) 80%+ of Revenues Come from Federal Contracts/Subcontracts and Grants/Subgrants and (b) $25M in Gross Annual Federal Revenues. New FAR Clause Applies to All Solicitations and Contracts. Quarterly Report, Due within 10 Days of End of Reporting Period. Contractor Reports Will Be Made Available To Public. 14

15 Federal Contracts What Are The New ARRA Requirements? 2. New GAO/IG Audit Access Rules Allows Agency IG Reviews of Concerns Raised by Public (Sec. 1514) Allows GAO/IG: (a) Reviews of Any Contractor/Subcontractor Records Regarding Transactions Using ARRA Funds and (b) Interviews of Contractor Officers/Employees Concerning Such Transactions (Sec. 902/1515) Allows GAO Only to Interview Subcontractor Employees (Sec. 902) Provides for New Alternate FAR Clauses to Cover These Access/Audit Rights 15

16 Federal Contracts What Are The New ARRA Requirements? 3. Other New Contract Requirements/Actions Whistleblower Protection New FAR Sec /FAR Clause ( ) Publicizing Contract Actions New Posting Requirements for C.O.s Using ARRA Funds Buy American for Construction Material 16

17 State and Local Contracting Where Are New Rules to be Implemented? OMB Circular/Guidance? Unique Terms & Conditions Of The Procurement Contract/Grant (Recipient/Subrecipient Agreement) Are The Requirements Different From Federal Contracting? Yes, but scope of difference is to be determined by OMB guidance Expect certain key elements (e.g., reporting, oversight) to be very similar President s Memorandum on implementing ARRA (2/25/09) makes clear that spending by States will be scrutinized for imprudent projects 17

18 Buy American Restrictions (Sec. 1605) Funds may not be used for: A [1] project for the construction, alteration, maintenance, or repair of a public building or public work [2] unless all of the iron, steel, and manufactured goods used in the project [3] are produced in the United States. This restriction can be waived in three situations: Inconsistency with public interest rarely invoked Goods are not produced in U.S. in sufficient and reasonably available quantities and satisfactory quality U.S. goods would increase project cost by more than 25% Additionally, the provision must be applied in manner consistent with U.S. international obligations. 18

19 Buy American Restrictions U.S. international obligations preclude application of the Buy American provision with respect to procurements of iron, steel and manufactured goods from: Signatories to the WTO Agreement on Government Procurement (GPA); Signatories to NAFTA and other free trade agreements (FTAs); and Least-developed countries. By listed federal, state or other government entities engaged in scheduled procurements. US procuring entities listed in the GPA and FTAs include most federal non-military procurements, some agencies in 37 states and a few government-owned entities. Scope of coverage varies depending on the entity. 19

20 Buy American Restrictions Where the value of the procurement meets relevant GPA or FTA thresholds. However, if the procurement involves federal funds for a mass transit or highway project, Buy America provision applies in all instances. 20

21 Buy American Restriction Implemented in FAR Through Interim Rule (3/31/09): Comments due on or before 6/1/09. Interim Rule only applies to Federal procurements. OMB guidance will be forthcoming regarding procurements funded with Federal financial assistance (e.g., Federal grants). Issue: Such guidance should clarify how Sec applies if at all to State and sub-state procurements. Interim Rule amends FAR Part 25, Foreign Acquisition, and sets forth 2 new provisions and 2 new FAR clauses to be included in Solicitations. 21

22 Covered Contracts For new contracts: No monetary threshold. Sec applies (one FAR clause will be included in the Solicitation), provided ARRA funds are used. For existing contracts: C.O. to modify on a bilateral basis for future orders using ARRA funds. Contractor refusal to accept applicable clause will render it ineligible to receive ARRA funds. Issue: FAR 1.108(d)(3) contemplates consideration for contract modifications. ( Contracting officers may, at their discretion, include [FAR]... changes in any existing contract with appropriate consideration. ) What will be the measure of appropriate consideration? Issue: Under Changes clause, C.O. can issue unilateral change within scope (e.g., change in specifications). Contractor must accept such change, but is entitled to price adjustment. If a C.O. issues a unilateral change, does the contractor have a meaningful right to refuse Sec.1605 obligations? 22

23 Key Definitions Existing FAR definition of public building or work is incorporated by reference. FAR : public building or work means building or work, the construction, prosecution, completion, or repair of which... is carried on directly by authority of, or with funds of, a Federal agency to serve the interest of the general public regardless of whether title thereof is in a Federal agency. Potentially limits Sec application to traditional heavy-type construction work. Interim Rule narrows Sec s manufactured good term to mean manufactured construction material. Term is not clearly defined. Arguably, it means construction material that has been: (1) processed into a specific form and shape; or (2) combined with other raw material to create a material that has different properties than the properties of the individual raw materials. 23

24 Key Definitions Construction material is any article, material, or supply brought to the construction site by the Contractor or subcontractor for incorporation into the building or work. However, [m]aterials purchased directly by the Government are supplies, not construction material. Issue: Can a C.O. limit Sec applicability by the manner in which the contract line item numbers (CLINs) are designated in the Solicitation? 24

25 New FAR Clauses and Provisions Pre-award: Contractor may request determination Sec does not apply or exception applies. Post-award: Contractor may request determination Sec does not apply or that exception applies. Absent a justification for failing to make a pre-award request (or if the need for such request was reasonably foreseeable), C.O. may disregard post-award request for a determination. If the unreasonable cost exception is invoked post-award and C.O. permits use of foreign construction material, C.O. must reduce contract price to reflect decreased cost of such foreign materials. 25

26 Under New FAR Clauses and Provisions In the Interim Rule, Sec s foreign sourcing prohibition is applied to unmanufactured construction material in addition to manufactured construction material. Issue: Sec references manufactured goods, which the Interim Rule narrows to mean manufactured construction material. Sec does not reference unmanufactured goods. Thus, arguably, the extension to unmanufactured construction material goes too far. Sec s prohibition regarding steel or iron does not apply to steel or iron used as components or subcomponents of other manufactured construction material. For such items, the place of manufacture test controls. Interim Rule permits offerors to furnish alternate offers, where one will include only compliant construction material and the other will include non-compliant construction material. If C.O. does not determine that an exception applies, the non-compliant offers will be rejected as non-responsive or permitted to be revised (to become compliant) during FAR Part 15 discussions. 26

27 New FAR Clauses Under $ million, FAR (3/09) applies. Only domestic construction material may be purchased, unless an exception applies. To qualify as domestic, manufacture of the construction material must have occurred in the U.S. An analysis of the country of origin of components/subcomponents is not required. (This is a deviation from the country of origin test applied under the Buy American Act of 1933.) 27

28 New FAR Clauses At or above $7.443 million, the question is whether the procuring agency is subject to a treaty covering procurements. If yes, FAR (3/09) applies. Only domestic construction material or signatory nation construction material (termed Recovery Act designated country construction material ) may be purchased, unless an exception applies. Same place of manufacture test determines whether construction material is domestic. For products of signatory nations, the test is whether the material underwent substantial transformation in that country. 28

29 Consequences of Non-Compliance With Sec. 1605/ Contract Clause C.O. will give contractor notice of apparent use of unauthorized foreign construction material and request a response, including proposed corrective action. If use of prohibited material is confirmed, C.O. can: (1) process a determination that Sec does not apply, if appropriate; (2) require removal of such material; or (3) make written determination that removal would be impracticable, cause undue delay, or otherwise detrimental to the interests of the Government.... A finding under (3) does not constitute a finding that Sec is inapplicable, nor does it limit the agency s ability to pursue other remedies, including a contract price reduction. Potential default termination. Potential referral to Suspension and Debarment Official. If fraud suspected, C.O. must refer to the agency criminal investigatory unit. 29

30 The Presidential Memorandum on Government Contracting Issued 3/4/09, to heads of executive departments and agencies (not an Executive Order); Sets forth broad policy statements; Establishes a timetable for review of federal contracting procedures and issuance of tough new guidelines; President views the procurement system as broken. 30

31 Policy Objectives For Federal Procurements 1. Preference for firm-fixed-price contracts; 2. Prohibition against noncompetitive contracts (unless use can be fully justified and performance monitored); 3. Limit use of cost-reimbursement contracts (unless an agency cannot sufficiently allow for a fixed-price contract); 4. Increase in the Government s ability to manage the contracting process from start to finish; and 5. Ensure inherently governmental functions are performed by Government employees, and is not outsourced. 31

32 Timetable 7/1/09 OMB to develop and issue guidance on identifying and reviewing contracts that are wasteful, inefficient, or not otherwise likely to meet Agency needs. Guidance to also address appropriate corrective action. OMB to collaborate with heads of other executive agencies to develop guidance. 32

33 Timetable 9/30/09 OMB and executive agencies to issue guidance to: (i) Maximize competition and establish appropriate use and oversight of noncompetitive procurements; (ii) Govern use and oversight of all contract types; (iii) Assist agencies in assessing capacity and ability of federal acquisition workforce to develop, manage and oversee acquisitions; (iv) Clarify outsourcing services rules. 33

34 What to Expect Command emphasis on excellence in acquisition; Increased training of acquisition workforce; Form of guidance: changes to FAR and Agency Supplements? Executive Orders? Guides, directives, orders, etc.? Heightened compliance environment Combined with recent sea change in contractor compliance requirements Emphasis on contractor responsibility and ethical conduct; and Increased oversight/enforcement activity. 34

35 Presidential Memorandum on Responsible Spending of Recovery Act Funds, 3/20/09 Requires transparent, merit-based decisions for grants and other forms of federal financial assistance Selection criteria shall be designed to support projects and applicants that have a demonstrated or potential ability to satisfy goals of the Recovery Act Directs agencies and recipients to avoid funding imprudent projects Specifically includes casinos, aquariums, zoos, golf courses, swimming pools Also includes any project that is imprudent or does not further the job creation, economic recovery, and other purposes of the Act 35

36 Presidential Memorandum on Responsible Spending of Recovery Act Funds, 3/20/09 Establishes strict rules on lobbyist communications Oral communications with registered lobbyists are not permitted concerning particular projects, applications, or applicants for funding When scheduling meetings, and at the beginning of any oral communications, Government official must ask if anyone participating in the communication is a registered lobbyist If so, the lobbyist may not attend or participate in the telephonic or in-person contact, but may submit a communication in writing Oral communications with registered lobbyist are permitted, however, concerning general Recovery Act policy issues But such communications must be immediately documented in writing and posted publicly within 3 business days on the agency s Recovery website Written communications from registered lobbyists concerning particular projects are permissible at any time But must be posted publicly within 3 business days on the agency s Recovery website 36

37 Executive Orders on Labor Matters Executive Order 13495, Jan. 30, 2009 Requires a successor services contractor (and its subcontractors) to offer employment to certain of the predecessor contractor s employees Applies to service employees (non-managerial and nonsupervisory employees) who would otherwise be terminated as a result of the new contract Doesn t apply to contracts under the Simplified Acquisition Threshold or to certain other protected classes of contracts and subcontracts Successor contractor must provide covered employees a right of first refusal in positions for which they are qualified Not required to offer job if employee has failed to perform suitably Effective upon issuance of regulations July 2009? 37

38 Executive Orders on Labor Matters Executive Order 13496, Jan. 30, 2009 Contractors and subcontractors must post a notice advising workers of their rights under federal labor laws, such as the right to unionize and bargain collectively, in all places where notices are customarily posted both physically and electronically Revokes existing rule (EO 13201) that required contractors to post notice advising employees of their right not to join a union Flowdown to subcontractors exemptions investigations of compliance remedies Content and form of notice to be prescribed by DoL in regulations Effective upon issuance of regulations by DoL May 2009? 38

39 Executive Orders on Labor Matters Executive Order 13494, Feb. 4, 2009 Costs of influencing employees exercise of their rights to organize and bargain collectively either supporting or opposing are unallowable. Only applies to contracts to which the cost principles apply (e.g., not commercial-item contracts) Does not affect costs incurred in generally maintaining satisfactory relations with employees (e.g., labor/management committees, employee publications) Effective upon issuance of regulations July 2009? 39

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