UPDATE: GAO Jurisdiction over Task Order Protests Valued at More Than $10 Million Restored

On December 14, 2016, President Obama signed H.R. 5995 into law, removing the sunset provision from 41 U.S.C. § 4106 for jurisdiction over task order protests valued at more than $10 million.  The GAO Civilian Task and Delivery Order Protest Authority Act of 2016 establishes permanent jurisdiction at the Government Accountability Office over protests of civilian task and delivery orders over $10 million under multiple-award IDIQ contracts.

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Embraer’s FCPA Deferred Prosecution Agreement and $205 Million Payment Demonstrate Need for Adequate Internal Controls

Brazilian aircraft manufacturer Embraer SA (“Embraer”) will pay the United States government $205 million to settle allegations that the company violated the Foreign Corrupt Practices Act (“FCPA”) by paying millions in bribes and falsifying accounting records.  The United States government asserted that Embraer bribed government officials within the Dominican Republic, Saudi Arabia, and Mozambique with millions of dollars to win government aircraft contracts. The government also alleged Embraer paid millions in falsely recorded payments in India through a fraudulent agency agreement.

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GAO Loses Jurisdiction Over Task Order Protests Valued at More Than $10 Million

Government contractors hoping to challenge a civilian agency’s award of a task or delivery order may be out of luck, at least temporarily. Prior to September 30, 2016, the Government Accountability Office (“GAO”) had exclusive jurisdiction over protests of civilian task and delivery orders valued at more than $10 million under multiple-award IDIQ contracts. The National Defense Authorization Act (“NDAA”) for Fiscal Year 2008 amended the Federal Acquisition Streamlining Act (“FASA”) to grant GAO this jurisdiction, Pub. L. No. 110-181, 122 Stat. 3, 237 (2008); the NDAA for Fiscal Year 2012 then established a sunset date for this jurisdiction of September 30, 2016, 41 U.S.C. § 4106(f). Any such protests filed after September 30, 2016, are now outside GAO’s jurisdiction, regardless of when the underlying contract was awarded. 41 U.S.C. § 4106(f). However, contractors retain the right to protest military task and delivery orders valued over $10 million, 10 U.S.C. § 2304c(e), as well as civilian or military task and delivery orders which they allege increased the scope, period, or maximum value of the underlying contract, id. and 41 U.S.C. § 4106(f). The Court of Federal Claims’ jurisdiction, which is limited to civilian or military task order protests that allege increased scope, period, or maximum value of the underlying contract, is unaffected by the NDAA sunset provision. 10 U.S.C. § 2304c(e); 41 U.S.C. § 4106(f).

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Watching the Detectives: The SEC Launches a Dedicated FINRA Oversight Unit

The SEC has launched a dedicated team to oversee FINRA, according to remarks by Marc Wyatt, Director of the SEC’s Office of Compliance Inspections and Examinations (“OCIE”). Congress has vested the SEC with the power to supervise FINRA, including the authority to inspect and examine. The new unit, named FINRA and Securities Industry Oversight (“FISIO”), is headed by Kevin Goodman, head of the SEC’s broker-dealer exam program. On Oct. 17, 2016, Wyatt spoke at the National Society of Compliance Professionals 2016 National Conference in Washington, D.C., where he made the announcement. According to Wyatt, the new FISIO team includes “roughly 40 people” throughout the country, and consolidates the SEC’s oversight of FINRA “into a single group.” The FISIO team will oversee FINRA to ensure “that it’s fulfilling its mandate in terms of evaluating its member broker-dealers.” On a separate panel at the event, Goodman noted that before FISIO, the SEC examined FINRA through “programmatic” exams focused on a particular FINRA operation (e.g., exams, enforcement, dispute resolution programs) and “oversight” exams that assessed “the quality of the individual examinations” that FINRA conducts on broker-dealers. According to Goodman, FISIO will “combin[e] those two functions into one,” which he described as “not only powerful but efficient as well.” Continue Reading

Department of Labor Issues Final Rule Implementing Executive Order Requiring Paid Sick Leave for Employees of Federal Contractors

On September 29, 2016, the Department of Labor (“DOL”) issued regulations (the “final rule”) implementing Executive Order 13706, which requires federal contractors to provide paid sick leave to their employees. According to the DOL, federal contractors employ 1.15 million individuals—594,000 of whom do not receive paid sick leave. Thus, for contractors who do not currently provide paid sick leave to their employees, the final rule imposes significant administrative and financial burdens. Given the nuanced requirements of the final rule, however, even contractors who currently provide some form of paid sick leave to employees may find compliance with the final rule burdensome. Contractors should act now to either develop paid sick leave policies or determine what changes need to be made to their current paid leave policies to ensure they are in compliance with the final rule once it becomes effective.

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

Volume X – Accounting for the Cost of Business Combinations Under Government Contracts

Mergers and acquisitions create additional costs and complex accounting issues for government contractors.  There are fees for accounting, legal, and business consultants.  There may be restructuring costs associated with combining business operations.  Segments may be closed and retirement plans may be terminated.  Golden handcuffs and golden parachutes are also common.  Assets may be revalued, goodwill may be created, and there may be changes in cost accounting practices.

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New York State Department of Financial Services Proposes Cybersecurity Regulations for Financial Services Companies

If the New York State Department of Financial Services (“DFS”) has its way, come January 1, 2017, financial services companies that require a form of authorization to operate under the banking, insurance, or financial services laws (“Covered Entities”) will be required to comply with a new set of comprehensive cybersecurity regulations aimed at safeguarding information systems and nonpublic information.

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Cross Your Heart and Hope to Die – New DFARS Clauses Target Counterfeit Electronic Parts

On August 2, 2016, the Department of Defense (“DOD”) rolled out new requirements for defense contractors that provide electronic parts and assemblies containing electronic parts. The new rules impose significant risks on DOD contractors.  One clause mandates a specific purchasing hierarchy, with requirements to purchase from the original manufacturer or authorized suppliers thereof when available.  When an original source is not available, contractors are now required essentially to “vouch” for their suppliers, assuming all the risks if a vendor delivers a counterfeit or suspect counterfeit part. Simultaneously, DOD issued a second clause, which requires certain covered contractors in the DOD supply chain to establish and maintain an acceptable electronic part detection and avoidance system. Failure to implement an effective plan may disqualify a vendor from providing products to the DOD. These new rules come very close to imposing a near “strict liability” standard on DOD contractors, asking them to essentially guarantee the supply chain.  Cross your heart and hope to die.

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Insider Threat Programs – A New Challenge for Cleared Contractors

On May 18, 2016, the Department of Defense issued Conforming Change 2 of the “National Industrial Security Operating Manual” (“NISPOM”).   NISPOM Change 2 requires all U.S. government contractors who require access to U.S. classified information to implement an Insider Threat Program (“ITP”) that will gather, integrate and report relevant information related to potential or actual insider threats among cleared employees by November 30, 2016. Insider threats – a growing phenomenon – arise when employees or contractors exploit legitimate access to an organization’s data for unauthorized or malicious purposes. Much of the impetus for the new rule appears to be a valid concern about large-scale thefts of classified data, as exemplified by Edward Snowden’s release of a vast trove of sensitive documents stolen from the U.S. National Security Agency.

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