This guide pinpoints some of the major government contracts-related developments that occurred over the last six months. These developments create new opportunities and compliance requirements that people who conduct business with the Federal Government need to know about.
Major Regulatory Developments
Compliance: False Claims Act Penalties Almost Double
The U.S. Department of Justice issued an interim rule increasing monetary penalties for contractors. Civil monetary penalties under certain sections of the False Claims Act are increased from $5,500 to $10,781 (minimum penalty), and from $11,000 to $21,563 (maximum penalty). Considering that each transaction or invoice could be considered as a separate violation, compliance is paramount. You can read the entire rule, and it will be effective on August 1, 2016.
Compliance: New Cybersecurity Requirements For Federal Contractors
The U.S. Department of Defense, NASA and GSA issued a final rule amending the Federal Acquisition Regulation by adding a new subpart for the basic safeguarding of contractor information systems that process, store, or transmit Federal contracting information (FCI). (FAR 52.204-21) FCI means “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, but not including information provided by the Government to the public (such as on public Web sites) or simple transactional information, such as necessary to process payments.” This rule is expected to be applicable to most, if not all, of the new contracts. It is effective as of June 15, 2016.
Opportunity: Small Business Mentor-Protégé Program
The SBA is amending its regulations to establish a Government-wide mentor protégé program for all small business concerns. The new rule also makes changes to the current joint-venture provisions. This development is expected to create many new opportunities for small and not so small businesses. This rule will be effective on August 24, 2016.
Compliance: No Discrimination on the Basis of Sex
The U.S. Department of Labor’s Office of Federal Contract Compliance Programs created new nondiscrimination obligations that affect certain Federal Government contractors and subcontractors. The new obligations relate to the Executive Order 11246 – Equal Employment Opportunity. This order prohibits discrimination in employment on the basis of sex and requires employers to take affirmative action to ensure that applicants and employees are treated without regard to their sex. You can read our article on this major development or read the final rule, which will be effective on August 14, 2016.
Opportunity: Export Control Reform Revisions
As part of the Export Control Reform initiative, the Department of State updated the definitions of “export”, and “reexport or retransfer” in the International Traffic in Arms Regulations (ITAR). This is seen as a positive development by many because now the new ITAR definitions will be better synchronized with the Export Administration Regulations definitions. This rule will be effective on September 1, 2016.
Opportunity: GSA Transactional Data Reporting
GSA amended its rules to now require Federal Supply Schedule (FSS) contractors to report transactional data from orders placed against certain FSS contracts, Government-wide Acquisition Contracts and Government-wide Indefinite-Delivery, Indefinite-Quantity (IDIQ) contracts. Some experts believe that this rule could potentially result in significant savings to federal contractors because it may eliminate other reporting requirements. You can read our article on this development or review the rule, which became effective as of June 23, 2016.
Opportunity: The Freedom of Information Improvement Act of 2016
This law is designed to make major changes to the current Federal Government record disclosure practices. Among others, federal agencies are expected to post more records online and make records available to requesters in an electronic format. You can read a good summary on the White House website. This act became Public Law No. 114-185 on June 30, 2016.
Compliance: The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015
This law requires federal agencies to adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rulemaking, and make subsequent annual adjustments for inflation. This act became Public Law 114-74 on November 2, 2015. Now, federal agencies are required to publish interim final rules with the initial penalty adjustment amounts by July 1, 2016, and the new penalty levels will be legally binding on August 1, 2016. You can read our article on this development.
Significant Legal Decisions
Compliance: Universal Health Services, Inc. v. United States Et Al. Ex Rel. Escobar Et Al. (2016)
In this case, the U.S. Supreme Court considered whether a defendant should face False Claims Act (FCA) liability only if it failed to disclose the violation of a contractual, statutory, or regulatory provision that the Federal Government expressly designated a condition of payment. The Court answered this question by stating that defendants could be liable for violating certain requirements even if the requirements were not designated as conditions of payment. Any misrepresentation about compliance with a statutory, regulatory, or contractual requirement had to be material to the Federal Government’s payment decision in order to be actionable under the FCA. This case was decided on June 16, 2016.
Opportunity: Kingdomware Technologies, Inc. V. United States (2016)
In this case, the U.S. Supreme Court considered whether the Department of Veterans Affairs had to award contracts to veteran-owned small business concerns when there was a reasonable expectation that 2 or more such concerns would bid for the contract at a fair and reasonable price that offered best value to the U.S. Government. The Court answered this question with a unanimous yes! This decision creates many new opportunities for veteran-owned small business concerns. This case was decided on June 16, 2016.
Compliance: Remington Arms Co., LLC, v. The United States, and Colt Defense, LLC, and FN America, LLC (2016)
In this post-award bid protest, the U.S. Court of Federal Claims examined whether the contracting officer’s (“CO”) decision to award a contract to Colt while Colt was still in bankruptcy and labeled “high risk” by the Defense Contract Management Agency was arbitrary, capricious, and an abuse of discretion. The Court concluded that the CO’s decision was arbitrary and capricious because it was not supported by the record which showed that Colt was undergoing bankruptcy proceedings. This case was decided on March 30, 2016.
Opportunity: B-411466.3, Fluor Energy Technology Services, LLC
In this matter, the Government Accountability Office (“GAO”) recommended full reimbursement of costs for filing and pursuing protest where the agency unduly delayed taking corrective action in the face of a clearly meritorious protest. The protester was able to show that a reasonable agency inquiry into initial protest allegations would have revealed prejudicial errors in the agency’s cost realism evaluation. This matter was decided on June 7, 2016.
Note that is post is for educational use only and does not constitute legal advice.
About the Author:
Government Contract and Compliance Counsel
Wojciech Kornacki focuses on federal Government contract compliance, bid protests, and federal litigation. He represents clients in matters involving Government Accountability Office bid protests, federal agency debarments, Boards of Contract Appeals litigation, and Export Controls (ITAR and EAR) and Trade Agreements Act compliance.
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