Look Before You Leap – Pitfalls and Trip Wires Inherent in Government Contracting

Accepting money from the Government, whether through a contract, grant, or other transaction, does not come for free. In the commercial world, companies typically engage in a cost/benefit analysis when they make major decisions, such as whether to enter a new line of business, extend their product line, open new facilities, or expand globally. To make these decisions, the company tries to understand not simply the available business opportunities, but also the obligations that are imposed and the risks that are inherent. This is equally, if not more, true when a commercial company decides to sell anything to the U.S. Government – whether as a prime contractor or subcontractor. The Federal Government is an extremely large consumer of goods and services, and so it is a marketplace that is hard to ignore. But, seller beware – because with the opportunities arising from this marketplace come obligations with which your company may not be able to comply. Moreover, while compliance may cost you more than you anticipate, noncompliance could destroy your business. So make sure that you look before you leap into the federal marketplace. Continue Reading

Trade Agreements Act Updates for 2016 – New Year, Lower Thresholds

Every two years, the U.S. Trade Representative updates the dollar values at which certain international trade agreements apply to certain types of U.S. government contracts. This means that certain contracts over the dollar thresholds are subject to the trade agreements, in other words, foreign-made products are placed on equal footing with U.S.-made goods. On the other hand, contracts beneath the dollar thresholds remain subject to certain “Buy American” provisions, preferring U.S.-made goods over foreign-made alternatives. Because most of you reading this post probably sell the Government products and components sourced from the global marketplace (where “Made in China” and “Made in Taiwan” may seem much more common than “Made in America”), you might want to know where these thresholds will sit until 2018. And since the U.S. Trade Representative took the unusual step of reducing these thresholds for 2016, this may be one of those rare occasions where a change in the regulations actually works to your advantage. Continue Reading

Human Trafficking Is Forbidden by Government Contracts. But What Is “Human Trafficking”?

FAR 52.222-50 prohibits “human trafficking.” To quote the current GEICO TV commercials, “Everybody knows that.” But do you know exactly what the FAR prohibits? The answer includes some obvious pernicious acts, but it also covers some related activities that might not necessarily jump immediately to mind. Remember, these prohibitions apply to all contractors – large and small, commercial and non-commercial, whether the contract was awarded via sealed bidding or negotiation – and to their employees and agents, and they must be flowed down to subcontractors. Moreover, there is an obligation to conduct “due diligence” and certify to subcontractor compliance with the prohibitions if the subcontract exceeds $500,000 and any portion is for non-COTS supplies acquired or for services performed outside the United States. Continue Reading

HHS Recognizes Changing Environment of Research

The Department of Health and Human Services (HHS) and other Federal Departments and Agencies closed the comment period for the Federal Policy for the Protection of Human Subjects notice of proposed rulemaking (NPRM) on January 6, 2016 after extending the initial period due to robust response. The proposed rulemaking is the most sweeping since 1991 when HHS codified The Common Rule, 45 C. F. R. part 46, and recognizes the changed research environment with many multisite studies and the expansion of research with more data accessible through technology. The NPRM seeks to further the principles of autonomy and beneficence by protecting privacy and improving the consent process in the new world of research while creating avenues to lessen the administrative burden and to promote research.   Continue Reading

What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers

Volume 1 – The Structure of the Deal and Government Consent

With today’s posting, we begin a ten-part series on unique issues that arise in connection with the acquisition or disposition of a company that performs government contracts or subcontracts. These issues obviously come into play when the target company fits the bill as an established “government contractor,” replete with all of the infrastructure, systems, and processes that one normally associates with that term.  They also come into play, however, in connection with companies that sell standard commercial items to the Government under the auspices of the General Services Administration’s schedule contracts and companies that operate at all tiers within the Government’s supply chain.  They apply whether such companies are selling specialized products manufactured  to Government specifications or commercial items adopted or adapted for use, ultimately, by the Government. Continue Reading

Department of Defense Provides Government Contractors a Grace Period for Compliance with Key Cybersecurity Requirements

In response to industry concerns and comments, on December 30, 2015, the Department of Defense issued a new interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) cybersecurity rules promulgated in August.  Specifically focusing on provision 252.204–7008, Compliance with Safeguarding Covered Defense Information Controls, and DFARS 252.204–7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, under this second interim rule contractors have until December 31, 2017 to implement the security control requirements specified by National Institute of Standards and Technology Special Publication 800-171 (SP 800-171).  As the prior interim rule had no grace period for implementing the new cybersecurity controls, this a fortunate change for DoD contractors.  This welcome extension, however, is not without conditions.  Contractors, in line with the notification outlined in DoD’s class deviation addressing “multifactor authentication for local and network access,” now have 30 days to inform the DoD Chief Information Officer (CIO) if any of the SP 800–171 security requirements are not implemented at the time of contract award.  Absent that notice, DoD will presume contractors are meeting all of the NIST-established controls.  As the new interim rule describes, this 30-day period will allow DoD the opportunity to monitor progress across its government contractors to identify and address any problems with the implementation of the NIST security controls. Continue Reading

Ninth Circuit Severely Limits “Rogue Employee” Exception for Corporations in Securities Fraud Cases

In an issue of first impression, the Ninth Circuit Court of Appeals recently held that a rogue corporate officer’s fraudulent intent can be imputed to a corporation even where the defrauding officer acted against the corporation’s interest, known as the “adverse interest exception.” In re ChinaCast Educ. Corp. Sec. Litig., — F.3d  –, 2015 WL 6405680, at *5 (9th Cir. Oct. 23, 2015).  In so holding, the Ninth Circuit created “an exception to the exception” – when an innocent third party relies on a defrauding officer’s apparent authority, the officer’s fraud can be imputed to the corporation even if that fraud was adverse to the corporation’s interest. Continue Reading

It’s (Not) Academic: Cybersecurity Is a Must for Universities and Academic Medical Centers

Cutting-edge research institutions need cutting-edge cybersecurity to protect their IP and critical personal and financial data.  Universities hold vast repositories of valuable information, including student healthcare information, patient information from academic medical centers, and financial and personal data from applicants, donors, students, faculty, and staff. So it’s no surprise hackers have been targeting universities lately—in fact, at least eight American universities have announced cyber intrusions over the past two years. Continue Reading

Contractors Beware: An Overly Broad Confidentiality Agreement Could Cost You!

On October 29, 2015, DOD renewed the DFARS deviation implemented in February, which prohibits contracting with entities that require employees or subcontractors to sign internal confidentiality agreements or statements that prohibit, or otherwise restrict, such employee or subcontractor from lawfully reporting waste, fraud, or abuse.  Defense contractors should review their policies to ensure they meet the requirements of these new clauses. Continue Reading

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