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.
In an April 6, 2011 decision, the GAO overturned the award of a $24.6 million task order to Booz Allen Hamilton, Inc. (“BAH”), sustaining the protest of the incumbent Solers, Inc. (“Solers”). This procurement has a long and storied protest history. The Defense Information Systems Agency (“DISA”) originally awarded the contract to Solers in September 2010. BAH filed a protest, in response to which DISA took corrective action. After the reopening of discussions and evaluation of offerors revised proposals, the Agency awarded the contract to BAH, despite Solers’ technical superiority, based on BAH’s lower price and superior past performance. This time Solers protested.