The novel coronavirus (“COVID-19”) pandemic has given Department of Veterans Affairs (“VA”) contractors several powerful new tools in their toolbelts, and VA contractors should not leave available protections on the table. VA contractors, including those supplying medical devices under the MSPV-NG bridge contract and pharmaceuticals on a VA Federal Supply Schedule (“FSS”), now can negotiate for extraordinary limitations on liability (in addition to some provided by statute), among other opportunities. Particularly for contractors providing goods and services used in the COVID-19 pandemic response, it is crucial to understand both new protections available and other changes to the rules of VA contracting.
Public Law 85-804 Indemnity
Most recently, the President granted the VA authority to extend to vendors the extraordinary indemnity provided by Public Law 85-804, which typically is reserved for nuclear power-related contracts or contracts involving unusually hazardous work. The Memorandum on Authorizing the Exercise of Authority under Public Law 85-804, issued April 10, 2020, allows the VA to indemnify contractors against the following risks of performance, as detailed in FAR 52.250-1:
- Claims (including reasonable expenses of litigation or settlement) by third persons (including employees of the Contractor) for death; personal injury; or loss of, damage to, or loss of use of property;
- Loss of, damage to, or loss of use of Contractor property, excluding loss of profit; and
- Loss of, damage to, or loss of use of Government property, excluding loss of profit.
This means that the Government itself will shield vendors from such claims. To receive indemnity, the FAR clause must be included in the contract, so contractors should make sure to negotiate for its inclusion. The contract must also define the unusually hazardous risk being covered, so contractors should give careful thought to the definition and scope of potential COVID-19-related damages.
PREP Act Immunity
VA vendors may also be protected from liability under the Public Readiness and Emergency Preparedness (“PREP”) Act provisions of the Public Health Service Act. Manufacturers and distributors of drugs, biological products, medical devices, and certain respiratory protection devices are immune from liability for losses like personal injury and death related to administration and use of those products in the COVID-19 emergency response effort.
While PREP Act immunity does not require the inclusion of any FAR or VAAR contract clauses, vendors may want to include some reference to PREP Act immunity or otherwise create a record with the contracting officer if they believe they are covered. The covered countermeasures eligible for protection under COVID-19 PREP Act immunity are changing almost weekly as the country’s emergency response develops. For further information on PREP Act immunity, see our other blog postings here and here.
VA COVID-19 Contracting
Vendors also should be aware of additional flexibilities VA contracting officers now have in awarding COVID-19 related contracts. On March 15, 2020, the VA temporarily increased the micro-purchase threshold to $20,000 and the simplified acquisition threshold to $750,000 through June 30, 2020, under authority granted by the President’s declaration of a national emergency under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5207 (the “Stafford Act”). The Stafford Act declaration also allowed the VA to increase the threshold for simplified procedures for the acquisition of certain commercial items to $13 million. The VA Memorandum setting forth these emergency acquisition flexibilities emphasized they apply only to contracts in support of the COVID-19 emergency response. The Veterans First Contracting Program preferences still apply to all contracting determinations.
Finally, the Stafford Act declaration opened the door to state and local governments to purchase from the VA FSS through the GSA Disaster Recovery Purchasing program. Vendors may participate, or not, regardless of whether they elected to participate at the time they entered the Schedule contract. The VA issued guidance to contractors regarding state and local government purchasing on March 20, 2020.
As you are aware, things are changing quickly and there is no clear-cut authority or bright line rules in this area. This blog does not reflect an unequivocal statement of the law, but instead represents our best interpretation of where things currently stand. This blog does not address the potential impacts of the numerous other local, state, and federal orders that have been issued in response to the COVID-19 pandemic, including, without limitation, potential liability should an employee become ill, requirements regarding family leave, sick pay, and other issues.
*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your Sheppard Mullin attorney contact for additional information.*