On December 28, 2020, the FAA issued a new rule, published in the Federal Register on January 15, 2021, which will impose a requirement (subject to two exceptions described below) for every unmanned aircraft weighing over 0.55 pounds and operated in U.S. navigable airspace to incorporate a remote identification capability so that it can be tracked in U.S. air traffic.  The new rule takes effect 60 days after publication in the Federal Register, but operators of unmanned aircraft have 30 months to bring their operations into compliance with the new rule.  Manufacturers of unmanned aircraft have 18 months to incorporate such systems into the unmanned aircraft they manufacture.
Continue Reading New Rules Governing Remote Identification of Unmanned Aircraft

According to a recent decision in United States ex rel. Scollick v. Narula, Case No. 14-cv-1339 (D.D.C. Nov. 6, 2020), the fraudulent inducement theory of False Claims Act (“FCA”) liability does not require plaintiffs to satisfy the “demanding” materiality standard set forth in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  Though that may sound like good news for plaintiffs, it is not.  The fraudulent inducement theory holds that fraud in a contractor’s proposal can taint every claim for payment it submits under the resulting contract, making them all “false claims” under the FCA.  This bears hefty consequences if proven: the defendant could be liable for civil penalties on every single claim for payment submitted over the life of the contract, in addition to treble damages the government may have suffered as a result of the fraud.  Perhaps in recognition of these severe consequences, the U.S. District Court for District of Columbia held that a plaintiff must plead and prove an even higher standard than Escobar materiality to establish fraudulent inducement liability—actual causation.  Rather than alleging that misrepresentation by the defendant merely was material to the government’s decision to award the contract to defendant, the Scollick decision concludes that “a misrepresentation in the defendant’s bid must have caused the government to award the defendant the contract.”  If the FCA materiality standard is “demanding,” then the actual causation standard is formidable.
Continue Reading “Would You Rather…” – Escobar’s Demanding Materiality Standard or Actual Causation?

On January 19, 2021, the Federal Acquisition Regulatory Council published the final rule amending the Federal Acquisition Regulation (“FAR”) in accordance with President Trump’s Executive Order 13881, “Maximizing Use of American-Made Goods, Products, and Materials.” As we discussed in our prior blog articles here (discussing the September 2020 proposed rule) and here (discussing the July 15, 2019 order), the Executive Order required significant changes to the regulations implementing the Buy American Act, 41 U.S.C. §§ 8301-8305 (“BAA”). The final rule varies very little from the September 14, 2020 proposed rule (discussed in greater detail here). Accordingly, the final rule amends applicable FAR clauses with three key impacts:
Continue Reading “Buy (More) American” – Final Rule Implements Changes to the Buy American Act Regulations

Legislation directing the National Institute of Standards and technology (“NIST”) to create standards and guidelines for securing Internet of Things (“IoT”) devices used by Federal agencies and their contractors recently passed the Senate and is heading to the President’s desk. We have been following this legislation closely for the past two years, here and here.  The bill passed in the Senate without amendment by unanimous consent.
Continue Reading IoT Legislation Passes Congress

A Securities and Exchange Commission (“SEC”) plan to create a registration exemption for certain finders has generated a mixed response.  The nearly 90 comments received by the SEC by the November 12, 2020 close of the comment period reflect a clear divide along predictable lines.  Broker-dealers, issuers, and some practitioners lauded the proposal for bringing regulatory clarity to what has long been a cloudy issue while regulatory groups and investor advocates criticized the plan for allowing unregistered finders to conduct brokerage activities without sufficient investor protection mechanisms.
Continue Reading SEC Proposal to Exempt Finders from Registration Generates Split Reaction

On November 19, 2020, Peter Driscoll, director of the Office of Compliance Inspection and Examination (“OCIE”) of the Securities and Exchange Commission (“SEC”), gave a speech urging advisory firms to empower their Chief Compliance Officers (“CCOs”). The speech, made at the SEC’s annual compliance outreach conference, accompanied OCIE’s Risk Alert, issued the same day, identifying notable deficiencies and weaknesses regarding Registered Investment Advisors (“RIAs”) CCOs and compliance departments. Driscoll’s speech complemented the Risk Alert by outlining the fundamental requirements for CCOs: “empowered, senior and with authority.”
Continue Reading OCIE Director Instructs Advisers to Empower Chief Compliance Officers

On October 30, 2020 the FDA published a list of essential medicines, medical countermeasures, and critical inputs as required by President Trump’s August 2020 Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States (Executive Order 13944), which required the U.S. government to purchase “essential” medicines and medical supplies produced domestically, rather than abroad. We previously wrote about this Executive Order in August (available here), expecting that once the list was issued, government agencies would begin implementing the “Buy American” priorities for these products and materials. The FDA has identified around 227 drugs and 96 devices, along with their respective critical inputs or active ingredients, that the FDA believes “are medically necessary to have available at all times” for the public health. Agencies across the federal government should now begin making non-competitive awards “to the maximum extent permitted by law,” for drugs and medical supplies on this list that are produced in the United States. We have yet to see how agencies will implement these requirements in regulations or class deviations, but publication of this list is an important first step in implementing the rest of the “Buy American” priorities in the Executive Order.
Continue Reading “Buy American” Update: FDA Issues List Of Essential Medicines Required By Executive Order

After many years of being in draft form, NIST recently released its final version of Revision 5 of Special Publication 800-53, Security and Privacy Controls for Information Systems and Organizations to address a need for a more proactive and systematic approach to cybersecurity. With the release of Revision 5, NIST hopes to provide updated security and privacy controls that will make information systems more penetration resistant, limit damages from cyber-attacks, make systems more cyber-resilient, and protect individuals’ privacy. NIST intends this update to be usable by a more diverse set of consumer groups than previous iterations of the document permitted.
Continue Reading NIST Issues Long-Awaited Final Guidance on Security and Privacy Controls – SP 800-53

At long last, the Department of Defense (“DoD”) has provided its interim rule, published in the Federal Register on September 29, 2020, amending the Defense Federal Acquisition Regulation Supplement (“DFARS”) to set forth requirements for the Cybersecurity Maturity Model Certification (“CMMC”) program, as well as new requirements for a “NIST SP 800-171 DoD Assessment Methodology.”  The interim rule is effective November 30, 2020, and comments to the interim rule should be submitted by November 30 as well.  Continue reading for our breakdown of key provisions.
Continue Reading DoD’s Long Awaited Rule on CMMC – Plus a New Cybersecurity Assessment Methodology for Contractors to Start Right Now

On September 14, 2020, the Federal Acquisition Regulatory Council published the long anticipated proposed rule amending the Federal Acquisition Regulation (“FAR”) in accordance with President Trump’s Executive Order 13881, “Maximizing Use of American-Made Goods, Products, and Materials.” As previously discussed here, the Executive Order, signed on July 15, 2019, required significant changes to the implementing regulations of the Buy American Act, 41 U.S.C. §§ 8301-8305, changing policies dating back nearly 70 years. Accordingly, the proposed rule seeks to increase both the domestic content requirements and the evaluation preferences provided by the FAR for domestically manufactured goods, particularly with regard to domestic content requirements for steel or iron end products and products made predominantly from iron or steel. Most significantly, however, the proposed rule will revive heightened restrictions for commercially available-off-the-shelf (“COTS”) products that are made predominantly of iron or steel, requiring both the end product and 95 percent of the component parts be domestically sourced in order to qualify under the rule. The COTS exception remains available for other end products (that are not made predominantly of iron or steel), but the proposed rule still will impose heightened obligations and vendors now need to scrutinize their supply chains even more closely, even for COTS items. The FAR Council is accepting comments through November 13, 2020. A final rule is likely by early-2021.
Continue Reading Proposed Changes to the Buy American Act Regulations Implementing Trump Executive Orders