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 Terrorism and Taxes – Proposed FAR Rule Imposes 2% Tax on Foreign Offers to Fund 9/11 Relief Fund

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 repealed an extremely unpopular withholding requirement that has been haunting recipients of federal funds since 2005.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!"Continue Reading “Bah! Humbug!” – 3% Withholding and the Ghost of Christmas Future

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.
Continue Reading Can DoD Be “The Biggest Loser”? Gates Unveils DoD’s New Fiscal Diet Plan

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.” 
 Continue Reading Federal “In-Sourcing”: New Rules For Inherently Governmental Functions

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.
 Continue Reading Final Rule Issued on Enhanced Competition for Task and Delivery Order Contracts

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.
Continue Reading Administration Actively Solicits Higher Costs From Bidders – Is Its “High Road Procurement Policy” Headed Off a Cliff?

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. 
 Continue Reading Six Questions To Ask In Figuring Out Whether The Recovery Act Buy American Requirement Applies To You

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. 
 Continue Reading New 2010 Updates to Buy American and Trade Agreements Dollar Thresholds; Buy American Requirements Remain Elusive and Complicated

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.

Continue Reading The Moment of Truth Has Arrived — “Made In Taiwan” Now Qualifies Under the TAA

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).

Continue Reading DHS Publishes New Rules Expanding Berry Amendment to Most DHS Procurements