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Sequestration

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A few questions and thoughts on the impact of sequestration on contracts.

First, would the agencies be liable for costs associated with application to their contracts? Or, is the sequestration a Sovereign Act?

I assume that it is not a Sovereign Act.

If the government is liable, if the sequester occurs on Friday, must the contracting officers take any steps notify contractors to trigger the 60 day notice requirement set out in the Worker Adjustment and Retraining Notification (WARN) Act?

A discussion in the next to last paragraph of a DOL Memorandum implies that contractors need not provide a 60 day notice to affected employees “before the date of the Budget Control Act (BCA) sequestration order”. http://special.defen...-jane-oates.pdf.

The BCA states that the President shall order a sequestration. If he does this on 1 March, I assume that his order triggers the 60 day notice of the WARN Act. Thus, the agency could be liable for the full labor costs of the affected employees for a maximum of 60 days from 1 March.

If the sequestration order is not sufficient, then I assume that agencies could be liable for up to 60 days after the contracting officers issue their change orders, terminations, etc. So, it would be in agencies' interests that contracting officers act quickly.

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Here is how I have looked at it--

-- Sequestration is internal to the Government -- a contract IS NOT sequestered; rather, a portion of the the agency's funding is sequestered.

-- A Government agency has many options in dealing with its sequestration.

-- If a Government agency decides to deal with all or a portion of its sequestration by reducing its contract expenditures, then the agency will make a partial or complete termination for convenience decision (or just slow down the rate of funding in incrementally funded cost-reimbursement contracts).

-- If a Government agency decides to partially or completely terminate a contract for its convenience, then the normal T4C rules apply. The authority for the termination is the contract's termination clause, not the sequestration order.

-- Complying with the WARN Act is an employer's responsibility, not a contracting agency's responsibility. An employer cannot transfer its responsibility or liability under the WARN Act back to the Government contracting agency. After all, who is to say that a T4C automatically results in the lay-off of employees -- the employer could decide to keep the workers on the payroll by shifting them to other work -- but the lay-off is the employer's decision, not the contracting agency's decision.

-- The WARN Act itself relieves the employer of the 60-day notice responsibility when its lay-off decision is for "unforeseeable business circumstances" -- see page 3 of the JANE OATES document linked in the original posting -- but this is the employer's burden, not the contracting agency's burden.

-- There is no 60-day Government liability, as asked by the original posting -- the normal T4C liabilities apply, and that's all.

As I wrote above, this is how I am looking at it.

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Guest Vern Edwards

I think ji20874 has it right. The government will be "liable" for any formal and constructive action that it takes under the contract and for any breach of contract.

The WARN Act takes the employer off the hook if "the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required." That ought to cover contractors whose contracts are terminated on short notice and without prior warning from the government.

I think that some acts by federal agencies in response to the sequestration might be sovereign acts, as long as they are public and general and not directed at particular contractors. Thus, general slowdowns by agencies in response to the sequestration -- such as actions by the FAA to close airport towers or processing delays due to agency furloughs that affect performance -- might be sovereign acts.

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In regard to the WARN Act, remember the sequester was scheduled to begin January 1, 2013. That meant that 60 day notices would have to be sent out by November 2, 2012 if contractors wanted to be cautious about potential layoffs. In fact, many contractors, such as Lockheed Martin had stated intentions to do so. However, if those notices had been sent out, they would have gone out about one week before the presidential election. In October, DoL sent a letter to several contractors, in which, it can be argued, DoL promised that the government would indemnify the contractors for any legal costs incurred in defending suits brought against the contractors for layoffs without the sixty day notice.

If the sequester occurs and layoffs follow, it will be interesting to see how this DoL letter plays in any resulting lawsuits.

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Guest Vern Edwards

Well, I'm not sure that the sequester alone is enough to trigger the WARN Act. It seems to me that a contractor would have to have pretty specific information about its contracts in order to know that it must close a plant or make a mass layoff.

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Having spent the morning working sequester drills, I can tell you that my agency, at least, has lots of flexibility in how we get to our number. Right now we are looking at things we can cut and the impact of those cuts. I'm sure there will be a lot of discussion next week about whether it is better to reduce non-personnel funds for a program (and this would include contractor costs) or personnel funds for the same program and what the right mix is. And the word "optics" will get thrown all over the place before a decision is made.

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Don't know about where you are, but the Sun rose in Colorado this morning.

QED, the world did NOT end.

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Our agency got hit with a little over 2% of the $85B which put with other restraints such as the continuing resolution equates to 5% less than we said we needed for the FY. Notices were sent out to say they doubted any furloughs would occur before June and exempted some personnel. They also seem to think there is flexibility in where cuts can be made. I am glad this is so but I don't understand how the same cut across the board mandate has suddenly become flexible.

P.S. Could I take my furlough days the last two weeks of September please. haha.

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Boof - If I am going to be furloughed two days per pay period (I am in DoD and this is the furlough plan unless the idiots in the _____ Party (take your pick, to me they are all idiots but one is more idiotic than the other) actually do something about this) I am going to ask for Thurs-Fri of week 2 in one pay period and Mon-Tues of week 1 in the next pay period. I don't expect to get it, and if I do I don't know where the money for my "vacation" will come from, but that is my plan.

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The taxpayers could probably save $85 billion alone by cancelling the low priority and nice-to-have items in the year-end buying spree.

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I just noticed the "like" button for the first time.

I tried liking a post here, but was informed -not too subtly, either - that I had already reached my daily quota for positive likes,

so I guess my quota is "zero."

Mr. Antonio rightfully fears that I will go overboard.

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I've found that "likes" and "dislikes" often distract users. My intent is always to keep the software from allowing them.

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Bob,

when I was a kid, my Mom put a pork chop necklace on me so the dog would play with me.

You remember my type from high school, I assume. Trying to buy friends and loyalty.

So, when I saw the botton, I thought to myself that I could ingratiate myself with folks here.

Distraction ? - absolutely.

____

What's the deal with "warning points," and how do I get some ?

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The taxpayers could probably save $85 billion alone by cancelling the low priority and nice-to-have items in the year-end buying spree.

But..but, Joel, we must spend all of our budget so they don't try and pare down our money in future years! We must spend it!

At least, that is the common argument that you year, they have to meet their obligation rates. What a terrible metric to measure a program office by. It just invites waste.

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