In accordance with Section 889(a)(1)(A) of the 2019 National Defense Authorization Act (Pub. L. No. 115-232) (the “2019 NDAA”), which required imposition of broad restrictions on procurements involving certain Chinese telecommunications hardware manufacturers such as Huawei Technologies Co. and ZTE Corp within one year, the FAR Council has released an interim rule implementing these restrictions. On August 13, the FAR Council released Federal Acquisition Circular 2019-05 (84 Fed. Reg. 40,216), creating a new FAR Subpart 4.21, as well as two new contract clauses, FAR 52.204-24 and 52.204-25, all of which are effective August 13, 2019. These restrictions apply not only to prime contractors, but also to all subcontractors and throughout the supply chain. Government contractors need to know that these new requirements are effective immediately and that opportunities for waivers are very limited.
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FAR
“Internet of Things” Guidance to be Added to Cybersecurity Requirements for Agencies and Federal Contractors
In 2019, cybersecurity has become top-of-mind for most federal government contractors and agencies that share sensitive information. In addition to updated Department of Defense guidance and procedures for evaluating contractors’ compliance with cybersecurity requirements, as well as an increase in Department of Defense cybersecurity audits, the Federal Acquisition Regulation (FAR) council also has promised a new FAR clause that will require compliance with NIST SP 800-171 security controls for civilian agency contractors that receive or create Controlled Unclassified Information (CUI).
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The List of Forbidden Products Grows: The NDAA’s Prohibitions on Use of Certain Chinese-Made Equipment
The 2019 National Defense Authorization Act (“NDAA”) imposes new restrictions on procurements for telecommunications equipment or services based on ties to certain Chinese entities, thereby growing the list of forbidden products for contractors. Specifically, Section 889 prohibits executive-branch agencies from initiating procurements or entering into contracts for certain telecommunications equipment or services from companies associated with, owned, or controlled by the People’s Republic of China, that are to be used “as a substantial or essential component of any system, or as critical technology as part of any system.”
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Agencies Publish Strict New Labor Reporting Guidelines for Government Contractors
On August 25, 2016, the United States Department of Labor (“DOL”) and Federal Acquisition Regulatory (“FAR”) Councils published “Guidance for Executive Order 13673, ‘Fair Pay and Safe Workplaces’” (“final rule”). See 81 Fed. Reg. 58562. Also referred to as the “blacklisting” rule, it imposes strict disclosure guidelines and requires that both prospective and existing contractors – as well as subcontractors – disclose violations of federal labor laws that resulted in administrative merits determinations, civil judgments, or arbitral awards or decisions. The final rule also requires that contractors and subcontractors disclose specific information to workers each pay period regarding their wages and also prohibits contractors from requiring that their workers sign arbitration agreements that encompass Title VII violations and claims of sexual assault or harassment.
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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers
Volume V—The Land Mines Strewn Throughout the Data Room
M&A transactions, like most transactions in life, involve a cost/benefit analysis. Some cost/benefit analyses are relatively easy to perform. For example, if I buy an energy efficient appliance, I can calculate the likely savings in energy costs over the useful life of the appliance (the benefit) and compare it with the acquisition cost of the appliance (the cost). M&A transactions, of course, involve far more complex cost/benefit analyses. But the key to any such analysis is the ability to identify and quantify the costs and benefits with some measure of confidence. Every line of business has its own quirks and idiosyncrasies, and they need to be understood when evaluating the acquisition of a company that operates in that line. More than most, the business of government contracting is replete with such quirks and idiosyncrasies, and they can have a dramatic effect on the “cost” side of the cost/benefit analysis.Continue Reading What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers
It’s Arrived! FAR Final Rule Addressing “Basic Safeguarding of Contractor Information Systems”
After nearly four years of planning and comments, DoD, GSA, and NASA issued a final rule today amending the Federal Acquisition Regulations (“FAR”) with a new Subpart 4-19 and a new contract clause 52.204-21 addressing the basic safeguarding of contractor information systems. Applicable to all acquisitions, including commercial items other than commercial off-the-shelf items (“COTS”), the Final Rule applies to any contractor information system that may contain “Federal contract information,” meaning “information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government.” See FAR 4.1901. The term expressly excludes information provided by the Government to the public (e.g., on public-facing web sites) or simple transactional information, “such as that necessary to process payments.”
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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers
Volume IV – Key Issues in Government Contracts Due Diligence
This posting is the fourth in our ten-part series on unique issues that arise in connection with mergers and acquisitions involving government contractors and subcontractors. Parts 1 through 3 focused on the structure of the transaction and the implications of that structure on the transfer of pending contracts and proposals. This posting, Part 4, introduces some of the most important issues that potential buyers should consider and address during the due diligence and negotiation process. The posting is not intended to be a detailed “due diligence checklist,” but rather a high level overview of certain key factors that are likely to impact the “go/no go” decision and the buyer’s valuation of the target company.
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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers
Volume III—What Happens to Pending Proposals?
Thus far in this ten-part series, we have discussed whether and how existing contracts with the Government can be transferred to the buyer or surviving entity when an acquisition, merger, or consolidation occurs. Today, we leave the world of existing contracts and turn to bids and proposals that are pending when the deal closes. What happens to those as-yet-unaccepted offers? Is there anything you can do to enhance the likelihood that the Government will be willing to accept such offers notwithstanding the organizational change? And, if you are in second place when the award is made to a “reorganized” offeror, are there possible protest grounds lurking in the deal that you could assert to obtain the award?
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What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers
Volume II – Obtaining Consent to Assign a Government Contract
This posting is the second in a ten-part series on unique issues that arise in the acquisition and disposition of a company that performs government contracts or subcontracts. Part 1 focused on the types of deal structures that are subject to the anti-assignment statutes, and therefore require Government consent. We explained that consent is not required for stock purchases, is required for asset sales, and may be required for other types of transactions, including mergers. This posting, Part 2, addresses the consent process, including the who, what, when, and how of obtaining a novation agreement. It also includes practical tips, based on our experience, for navigating the novation process efficiently and successfully.
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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.
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