1. There is no single “Buy American” requirement – there are numerous statutes with differing requirements. Make sure you know which one applies.
2. Whether you are a prime or a subcontractor, certify only to the specific “Buy American” requirements in the RFP; do not make a broader certification than is required.
Continue Reading...2012 saw several updates with regard to free trade agreements (“FTAs”) between the U.S. and its international trading allies. The most notable of these was the U.S.-Korea FTA (“KORUS”), but several other changes were made to the U.S. procurement regulations implementing other free trade agreements. Regrettably, negotiations with China remain stalled with no firm promises on the horizon. Following is a summary of some of the key changes over the last year.
Continue Reading...In December 2011 the World Trade Organization reached an agreement in principle to implement “historic revisions” to the World Trade Organization Government Procurement Agreement (WTO GPA), a trade agreement covering the public procurement markets in more than 40 WTO member states (including the United States). On March 30, 2012, the WTO GPA formally adopted these revisions. While the updates have been formally agreed upon, it may take months until two-thirds of the signatory countries ratify the agreement and make the changes official. Nevertheless, the international community appears to be moving forward with plans to implement, pending ratification.
Continue Reading...By David Gallacher and John Bonn
On January 2, 2011, the President signed the James Zadroga 9/11 Health and Compensation Act of 2010, Pub. L. No. 111-347, which set up a relief fund for victims, first responders, and construction workers who were injured in the September 11 terrorist attacks in New York City. To pay the estimated $4.3 billion price tag for the Act, Section 301 of the Act imposed on any foreign person a tax equal to 2% of federal procurement payment received by that foreign person. See 26 U.S.C. § 5000C. In addition, any person who makes or otherwise is a withholding agent with respect to such a payment is required to withhold the 2% tax from the federal procurement payment and remit the tax withheld to the Internal Revenue Service (“IRS”) under tax laws and regulations applicable to withholding of United States taxes from payments made to foreign persons. Although the tax has been in place for more than 14 months and the IRS has issued a revised Form 1042 with revised instructions to implement withholding and reporting obligations, the Government is only now turning to the details of how this tax will be accounted for in connection with the procurement process. And – as is often the case – there is quite a lot of devil in those details.
Continue Reading...By: David S. Gallacher
Just in time for the end-of-year push to fund the Government and to "create more jobs," members of Congress and President Obama had a rare moment of consensus when they unanimously(!) repealed an extremely unpopular withholding requirement that has been haunting recipients of federal funds since 2005. The "3% Withholding Repeal and Job Creation Act" was signed into law on November 21, 2011 (Pub. L. No. 112-56, Title I), eliminating a requirement to withhold 3% on most payments to contractors and grant recipients. While there are many in Government and industry alike who are ecstatic at the passage of the Act, the Ghost of Christmas Future warns that this specter of "withholding" may not have yet fled the scene. Like poor, chained Jacob Marley from Dickens' A Christmas Carol, industry may yet find itself captive, bound, and double-ironed by future Congressional plots to confiscate funds from government contractors. Miserly grasping for every penny, one can almost hear the federal Government grumbling, "Bah! Humbug!"
By Alexander W. Major
After a decade of increasing appetite for defense dollars, the Pentagon appears to have stepped on a scale and decided to make some changes. Following-on from the Department of Defense’s June 2010 announcement regarding changing its procurement business models, Defense Secretary Robert Gates and Under Secretary of Defense for Acquisition, Technology and Logistics, Ashton Carter, recently unveiled their proposed procurement changes intended to redirect $100 billion over the next five years. Like the lifestyle changes made by contestants on television’s “The Biggest Loser,” the proposed measures, referred to collectively as a “wide ranging Efficiencies Initiative,” are an attempt to demonstrate to Congress that the Department can trim the fat, tighten the belt and use its hefty $700 billion annual budget in a healthier way.
By W. Bruce Shirk and Jessica M. Madon
On March 31, 2010, the Office of Federal Procurement Policy (“OFPP”) issued a proposed rule implementing the Federal Activities Inventory Reform Act of 1998 (“FAIR Act”), 31 U.S.C. § 501. See 75 Fed. Reg. 16188. The essential purpose of the FAIR Act is to “provide a process for identifying the functions of the Federal Government that are not inherently governmental functions” and to that end requires all government agencies to conduct inventories of their activities to determine whether they are commercial or “inherently governmental.” The FAIR Act defines “inherently governmental function” as “a function that is so intimately related to the public interest as to require performance by Federal Government employees.” The proposed policy is intended to implement this broad definition by promulgating a meaningful definition of work which is “inherently governmental” and a policy outlining when work must be reserved for federal employees, i.e., when the functions in question are “inherently governmental.”
By Marko W. Kipa
On March 19, 2009, the FAR Councils issued a final rule providing for enhanced competition for task and delivery order contracts. See 75 Fed. Reg. 13416 (Mar. 19, 2009). The final rule was the culmination of a rulemaking process that surfaced in Section 843 of the National Defense Authorization Act of 2008, Pub. L. No. 110-181 (the "Act"), which went into effect on May 27, 2008. Subsequently, on September 17, 2008, the FAR Councils issued an interim rule with request for comments. See 73 Fed. Reg. 54008 (Sept. 17, 2008). The interim rule essentially mirrored Section 843 of the Act. Comments on the interim rule were submitted by industry and government representatives on November 17, 2008.
The Obama Administration is now planning yet another spending plan, this time in the form of a policy that actively encourages federal contractors either to increase the pay and benefits extended to their workforces, or to face an evaluative disadvantage in competing for federal contracts. This so-called "High Road Procurement Policy" includes an evaluative reward for "potential Federal contractors that pay wages or provide benefits above those required by our laws," including the Service Contract, the Davis-Bacon, the Walsh-Healey, and the Fair Labor Standards Acts.
Nearly one year ago on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5), more commonly known as the Stimulus Act, the Recovery Act, or ARRA. One of the key features of the Act included a "Buy American" requirement, requiring domestically manufactured "iron, steel, or manufactured goods" to be used in Recovery Act funded projects (located at Section 1605 of the Act). This requirement has proven to be a collossal headache for vendors supporting Recovery Act projects and has also proven to be immensely complicated for the good men and women in Government (including those at the State and local levels), who are faced with the task of figuring out how, where, and when the Recovery Act Buy American requirement applies.
Effective January 1, 2010, the U.S. Trade Representative (USTR), Ronald Kirk, published new dollar thresholds determining the applicability of the Buy American Act (BAA), the Trade Agreements Act (TAA), and (potentially) other "Buy American" preferences to the United States' various international free trade agreements. See 74 Federal Register 68907 (December 29, 2009). The changes to the dollar thresholds are effective through the end of 2011, so it is doubtful that we will see any additional escalation until 2012.
In early July, we discussed that fact that Taiwan would soon be an approved country of origin for purposes of the Trade Agreements Act. This was, in our view, good news and a welcome development.
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As part of the much ballyhooed Stimulus Act signed into law on February 17, 2009 (discussed in detail here), Congressman Lawrence “Larry” Kissell (D-NC) introduced an amendment titled, “the Berry Amendment Extension Act,” which placed domestic source restrictions on the purchase of certain fabric and textile products by the U.S. Department of Homeland Security (“DHS”). See Pub. L. No. 111-5, § 604 (codified at 6 U.S.C. § 453b).
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Even experienced contractors can find themselves in unfamiliar waters when delving for the first time in the world of government contracts. In many cases, the first step for a commercial company may be acting as a subcontractor (the "Subcontractor") for another company (the "Prime") that is contracting directly with the Government. Even though the Subcontractor's contract is with the Prime and not the Government, certain federal regulations and policies may still apply and place obligations on the Subcontractor. For various reasons, including promoting federal policy and protecting itself contractually, the Government may require that certain clauses included in its contract with the Prime also be included in the subcontract between the Prime and Subcontractor. Similarly, the Prime, for reasons of consistency, to ensure that the Subcontractor's performance will allow the Prime to meet its own contractual requirements, or to protect itself, may include provisions from the prime contract in the subcontract. Such clauses are colloquially known as "flowdown" clauses.
The Administration has conceded that the American Recovery and Reinvestment Act (“ARRA”) has not worked as planned. With unemployment numbers continuing to climb, the Administration now acknowledges it “misread the economy.” But from the beginning not everyone believed ARRA would achieve the desired stimulative effect. After all, $787 billion cannot be disbursed without some complication.
"Made In Taiwan" Will Soon Be TAA Compliant
China Continues to Dawdle
Costa Rica, Peru, and Oman also Recognized
On June 16, 2009, Taiwan (aka Chinese Taipei) took the penultimate step in acceding to the World Trade Organization's Government Procurement Agreement (WTO GPA), which will eventually grant Taiwan "free trade partner" status under the Federal Acquisition Regulation (FAR) and allow companies selling to the U.S. Government to deliver products that are manufactured in Taiwan. The accession process is expected to be complete by July 15, 2009. After that date, and once the FAR is updated accordingly, "Made in Taiwan" will finally be an approved country of origin for products and services delivered to the U.S. Government.
U.S. Stimulus: "Buy American"
PRC Stimulus: "Buy Chinese"
Canada and WTO: "Not Pleased"
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5), known popularly by a variety of names, including “ARRA,” the “Recovery Act,” and the “Stimulus Act.” We have previously discussed many of the provisions relating to the Recovery Act at some length, especially the implementing regulations that were recently published this spring.
In McDonnell Douglas Corp. v. United States, Civil Action No. 2007-5111-5113 (Fed. Cir. June 2, 2009), the Federal Circuit, after more than a decade of A-12 litigation, upheld a termination for default, finding that the Government was justifiably insecure about the contract's timely completion. The Court's opinion articulates the sustainable rationale for a default termination when there is no firm contract end date or set delivery schedule.
The influential inside-the-Beltway newspaper and website Politico "reports" in its May 26th edition that, as the Administration is "following through" on its campaign pledge to cut wasteful Pentagon spending, it is finding that "the price is high." Politico, May 26, 2009 at 14. Well, OK, as a well worn bumper sticker says “Choices have consequences,” and the choice to cancel a contract is no exception to that rule. But the story's headline and subheadline presage Politico’s insidious and inaccurate message:
On March 31, 2009, the FAR Councils issued several new interim rules (effective March 31, 2009) implementing the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) (also known as ARRA, The Recovery Act, or the Stimulus Act). See Federal Acquisition Circular (FAC) 2005-32, published at 74 Federal Register 14621-14652. The FAC issued new interim rules on a number of areas required under the Stimulus Act, including:
This blog focuses on the final three sets of rules – those relating to Auditor access; Whistleblower protections; and Buy American requirements. The first set of rules is discussed separately here.
Federal contractors that perform work funded, in whole or in part, by the American Recovery and Reinvestment Act of 2009 must report on certain aspects of that work under an interim rule issued by the FAR Councils on March 31, 2009. As currently written, the interim rule provides that recipients of Recovery Act funds must report information including, but not limited to—
a) The dollar amount of contractor invoices;
b) The supplies delivered and services performed;
c) An assessment of the completion status of the work;
d) An estimate of the number of jobs created and the number of jobs retained as a result of the Recovery Act funds;
e) Names and total compensation of each of the five most highly compensated officers for the calendar year in which the contract is awarded if in its preceding fiscal year the contractor received 80 percent or more of its annual gross revenues and $25 million or more in annual gross revenue from federal funds, and such information is not publicly available through SEC filings; and
f) Information on first-tier subcontractors, including the same executive compensation information required from prime contractors.
With its mission to discuss and recommend changes to the MAS program, including price reductions provisions, most favored customer status, and practices in commercial pricing, the Multiple Award Schedule (“MAS”) Advisory Panel has voted on several recommendations to present to the Administrator of GSA. The Panel has been meeting since April last year, and currently is preparing its final recommendations. This Blog obtained a copy of the recommendations already adopted by the Panel.
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 ("the Act" or "the Stimulus Bill") (P.L. 111-5) (H.R. 1). We already have discussed some of the provisions of this Act here and here, focusing on the implications of the various audit and Buy American provisions (including those in Section 1605 of the Act).
On January 15, 2009, the Government issued a final rule adjusting the dollar thresholds at which the Trade Agreements Act ("TAA") applies to U.S. Government procurements. See 74 Federal Register 2745. The changes were originally enacted as an interim rule in February 2008 (see 73 Federal Register 10962 and 73 Federal Register 16747; see also 72 Federal Register 71166; 72 Federal Register 73904), raising the threshold to account for inflation from $193,000 to $194,000 for most procurements involving countries that have agreed to the World Trade Organization Agreement on Government Procurement ("WTO GPA"). For other Free Trade Agreements ("FTAs") with countries such as Australia, Mexico, and Singapore, the threshold is raised from $64,786 to $67,826. Details on the application of the TAA and the revised thresholds are outlined in FAR Subpart 25.4.
On January 15, 2009, the FAR Councils issued the final rule implementing the provision of the Trafficking Victims Protection Reauthorization Act of 2005 ("TVPA") 22 U.S.C. § 7104(g). The final rule is implemented by FAR 52.222-50 entitled “Combatting Trafficking in Persons.”
On January 15, 2009, the FAR Councils issued the final rule on the purchase of commercial-off-the-shelf ("COTS") products, adding a new section to the FAR to be effective on February 17, 2009. See 74 Federal Register 2713.
Continue Reading...On Thursday, January, 22, 2009, Sheppard Mullin co-sponsored a Bisnow event that discussed opportunities for government contractors, particularly those in the Federal IT industry, under the new Administration. Panelists included several government and industry leaders, including: DoD Deputy CIO David Wennergren, Karen Evans (former Administrator of the Office of e-Government and Information Technology at OMB), Navy CIO Robert Carey, ATS Corporation CEO Dr. Edward Bersoff, and SRA International CEO Dr. Stanton Sloane.
Continue Reading...Introduction
By John W. Chierichella (B.A., Cornell University, 1969)
From time to time in this blog, we have reported on developments relating to federal restrictions on the direct or indirect acquisition of offshore resources, with the ever evolving restrictions on the acquisition of specialty metals being a particular bête noire of our contributors. This month we are pleased to provide a guest contribution on a related topic -- state prohibitions and/or restrictions on offshore procurement. It is one thing for the federal government to impose limits on foreign commerce. It is altogether different -- and a question of Constitutional dimension -- for states to do so. This month's contribution, provided to us by Michael A. Zuckerman with the permission of The Cornell Law Review, examines this question in detail. Our thanks to both for their willingness to provide their analysis of this issue to our subscribers. To read Mr. Zuckerman's Note, entitled "The Offshoring of American Government," click here.
On September 17, 2008, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued interim rules providing for enhanced competition for task and delivery order contracts. The interim rules essentially mirrored Section 843 of the National Defense Authorization Act of 2008 (the Act), which went into effect on May 27, 2008, and revised three provisions of the Federal Acquisition Regulation (FAR 16.503 – 16.505) to incorporate the Act’s enhanced competition requirements. See 73 Fed. Reg. 54008 (Sept. 17, 2008). As was discussed in an earlier blog article with respect to the interim rules when they were initially proposed, the rules targeted three primary areas:
Continue Reading...With the enactment of the Federal Acquisition Streamlining Act (FASA) in 1994, Multiple Award task and delivery order contracts were given a significant boost. As part of that legislation came an almost ironclad bar to bid protests against the award of individual task or delivery orders. Disappointed offerors were prohibited from protesting the award of task or delivery orders except if such orders increased the scope, period, or maximum value of the underlying contract. Several exceptions subsequently were carved-out from the general prohibition, including protests of “down-selections” as well as task and delivery orders awarded under the GSA FSS program. Otherwise, however, disappointed offerors could either air their grievances with the agency ombudsman (an individual who possesses no binding authority) or could take the road seldom traveled and file a CDA claim with the contracting officer alleging a breach of the "fair opportunity to compete" required by FASA, implementing regulations, and contract clauses. Only recently was there any indication that damages could be awarded under the latter approach and, as expected, the standard for recovery is a difficult one for any contractor to meet. The circumscribed recourse available to disappointed task or delivery order offerors did not occur by happenstance – it was the result of deliberate efforts by reformers to streamline the acquisition process and to avoid the delays and increased costs they attributed to the numerous, routine and purportedly needless protests encumbering the procurement system.
Effective July 21, 2008, the U.S. Department of Defense ("DOD") issued an interim rule with a request for comments that creates a contractual obligation for all DOD contractors to comply with U.S. export control laws. See 73 Federal Register 42274. While, technically, the interim rule does not impose any new requirement on U.S. businesses, because all are already required to comply with U.S. export requirements, the interim rule does impose additional risks and liabilities on defense contractors because a violation of U.S. export laws could now also result in a breach of contract. Given the fact that many companies do not fully understand the scope or intricacies of U.S. export laws, inadvertent export violations are a common occurrence. Accordingly, this new rule could easily increase contractual (and related) risks for DOD contractors.
Continue Reading...On April 23, 2008, the U.S. House of Representatives passed H.R. 3033, "Contractors and Federal Spending Accountability Act," agreeing by voice vote that GSA would maintain a centralized database of government contractors. The GSA database would collect information on contract defaults, suspensions, and debarments, as well as "any civil or criminal proceeding, or any administrative proceeding" for which a contractor paid at least $5,000 in restitution, that has been "concluded" by the federal or state governments. If a contractor committed in a three-year period more than one offense for which it could be debarred, the contracting officer must affirmatively demonstrate the contractor's responsibility prior to award.
Continue Reading...The United States Court of Federal Claims recently decided a case that addresses a contractor's remedy in the event of a government breach of contract and provides a useful reminder regarding managing expectations in the negotiation of contract prices with the government. Praecomm, Inc. v. United States, 78 Fed. Cl. 5 (Aug. 9, 2007).
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