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 repealed an extremely unpopular withholding requirement that has been haunting recipients of federal funds since 2005.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!"
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
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.”
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.
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.
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.
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.
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).
Even experienced contractors can find themselves in unfamiliar waters when delving for the first time in the world of government contracts. In many cases, the first step for a commercial company may be acting as a subcontractor (the "Subcontractor") for another company (the "Prime") that is contracting directly with the Government. Even though the Subcontractor’s contract is with the Prime and not the Government, certain federal regulations and policies may still apply and place obligations on the Subcontractor. For various reasons, including promoting federal policy and protecting itself contractually, the Government may require that certain clauses included in its contract with the Prime also be included in the subcontract between the Prime and Subcontractor. Similarly, the Prime, for reasons of consistency, to ensure that the Subcontractor’s performance will allow the Prime to meet its own contractual requirements, or to protect itself, may include provisions from the prime contract in the subcontract. Such clauses are colloquially known as "flowdown" clauses.