2012 will see changes regarding U.S. free trade agreements relating to, first, the dollar thresholds at which the various agreements apply to federal purchases and, second, the likely expansion of the scope of the World Trade Organization Government Procurement Agreement ("WTO GPA"). The updated dollar thresholds are important for government contractors because the thresholds determine when a contract is subject to the Buy American Act ("BAA") or the Trade Agreements Act ("TAA"). As to the WTO GPA, its expansion should provide significant increased access to the U.S and many of its trading partners in international procurements, although the hoped for accession of China to the WTO GPA remains stalledContinue 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 repealed an extremely unpopular withholding requirement that has been haunting recipients of federal funds since 2005.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!"
While Vice President Biden was busy touting Summer 2010 as the “Summer of Recovery” and the economic effects of the February 2009 Stimulus Act (a.k.a. the American Recovery and Reinvestment Act, the Recovery Act, ARRA, the Stimulus Act, etc.), the gears of the regulatory process ground steadily onward. Throughout the summer, the White House Office of Management and Budget (“OMB”) issued updated policy guidance implementing the ARRA requirements, and the rule-makers in the FAR Councils remained hard at work updating and (hopefully) finalizing the regulations implementing the finer details of the Recovery Act. Despite the fact that the ARRA funding officially expired on September 30, 2010 (meaning that any unobligated ARRA funds will now revert to the federal treasury to be saved or spent another day), the Government spent its summer fine-tuning the regulations. As the sun begins to set on the Recovery Act, and as the Summer of Recovery fades into the past, we summarize here some of the key features of the final Recovery Act rules promulgated over the last few months.
By David S. Gallacher
On March 25, 2010, the Office of Management and Budget ("OMB") offered three small, yet significant, amendments to the rules implementing the "Buy American" requirement of the American Recovery and Reinvestment Act of 2009 (Section 1605 of the "Recovery Act" or "ARRA"). See 75 Fed. Reg. 14323. The new rules do liberalize the requirement – at least a little bit – allowing increased flexibility in delivering products from Canada and Taiwan under State or local construction projects funded by the Recovery Act. But be aware that these new amendments are prospective – if you already have a contract funded by the Recovery Act, you will more than likely need to modify your contract to take advantage of these new revisions (assuming you are able). If you are pursuing future business opportunities funded by the Recovery Act, then you may be able to take advantage of the new rules. Easy, right? Not exactly. If you have to deal with these issues in real life, your head is probably already spinning. Let's sit down and talk for a minute.
Six Questions To Ask In Figuring Out Whether The Recovery Act Buy American Requirement Applies To You
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.
New 2010 Updates to Buy American and Trade Agreements Dollar Thresholds; Buy American Requirements Remain Elusive and Complicated
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.
If you are a company that has received funds under the American Recovery and Reinvestment Act of 2009 (also known as “ARRA,” “the Recovery Act” or “the Stimulus Act”) and that has a requirement to report the data required under the Act (under FAR 52.204-11 and Section 1512 of the Act), you have until the end of this week (October 10, 2009) to report this data through the new website www.federalreporting.gov.
Stimulus projects are likely to come with a thick string of transparency and accountability requirements, along with potentially severe financial penalties and, in some cases, possible prison time. These conditions may be extended not only to U.S. government contractors, but to companies undertaking federally funded projects for state and local governments.
Companies that plan to accept money from the 2009 American Recovery and Reinvestment Act (ARRA) should consider acting now to prepare for an especially demanding environment. Investing time, effort, and resources today to establish and improve risk management and compliance processes and controls can help companies mitigate potentially catastrophic problems later.
Learn more by reading the complete paper authored by Deloitte Financial Advisory Services partner, Donna Epps, and Sheppard Mullin Government Contracts partner, John Chierichella, available through the following link.
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).
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.
Recovery Act Update -
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.
While the promise of the $787 billion federal stimulus package is no doubt alluring to many companies, receiving Stimulus funds does not come without strings attached, posing risks for the unwary recipient.
New Recovery Act Rules Implement Provisions Relating To Government Audit Access, Whistleblower Protections, And Buy American Requirements; Much Confusion Remains
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:
- Reporting Requirements for Recipients of Recovery Funds (see 74 Federal Register 14639)
- Publicizing Contract Actions (see 74 Federal Register 14636)
- GAO and IG Access to Company Employees (see 74 Federal Register 14646)
- Whistleblower Protections (see 74 Federal Register 14633)
- Buy American Requirements for Construction Materials (see 74 Federal Register 14623)
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.
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).
The $789 billion stimulus bill, H.R. 1, which passed Congress February 13, is expected to have sweeping ramifications for the contracting industry. Four themes throughout the stimulus foreshadow what federal contractors can expect from the Obama Administration: energy efficiency, transparency, competition, and oversight.
Stimulation Has Its Price - The Audit and Oversight Provisions of The 2009 Stimulus Bill Are Unlike Anything Most Funding Recipients Have Ever Seen
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). As widely reported in the media, the Stimulus Bill includes approximately $787 Billion in government spending and tax cuts. With regard to the government spending provisions (Division A of the Act, which appropriates approximately $520 Billion), the U.S. Government (as well as the State and local governments receiving this money) will disburse the funds through a number of different vehicles – namely government contracts, grants, cooperative agreements, and other transactions. The legislation is intended to deal with, on an expedited basis, economic conditions that many Americans have not experienced in their lifetimes and for which they want an accelerated cure. Those familiar with the federal acquisition and grant processes, however, know that immediacy is not built into those processes. Moreover, to the extent that the “need for speed” overtakes process, recipients of the funds will almost assuredly find themselves downrange from one of the most rigorous oversight regimes ever enacted. Companies, and even States and localities – should familiarize themselves with the full terms of the Faustian bargain they will be striking.
Free Trade Agreements, "Made In America," and The 2009 Stimulus Package - Country of Origin Requirements Remain an Elusive Compliance Obligation
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.