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FEDERAL CONTRACTOR AUTHORITY. Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government, including a federally-owned or leased facility or site, due to facility closures or other restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020 for COVID–19: Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.

As I read the above, it gives contracting officers authority to reimburse contractors and/or subcontractors for the cost of keeping employees "in a ready state" as direct contract costs, and gives contracting officers funding and authority to modify contracts (without consideration) for the costs of doing so.

Anybody read it differently?

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That’s the way I read it too.  
 

This kind of ties in to one of the Q&As in the OMB memo.  Nobody addressed it as if it’s the elephant in the room.   
 

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How should agencies address requests for equitable adjustment associated with costs related to safety measures taken by contractors to protect their employees from COVID-19, including costs associated with performance disruptions caused by the government (e.g., closure of an office building) when performance doesn't allow for telework (e.g., work requires access to secure location, or involves building maintenance)?


Requests for equitable adjustment should be considered on a case-by-case basis in accordance with existing agency practices, taking into account, among other factors, whether the requested costs would be allowable and reasonable to protect the health and safetyofcontractemployeesaspartoftheperformanceofthecontract. Thestandardfor what is "reasonable," according to FAR § 31.201-3, is what a prudent person would do under the circumstances prevailing at the time the decision was made to incur the cost (e.g., did the contractor take actions consistent with CDC guidance; did the contractor reach out to the contracting officer or the contracting officer representative to discuss appropriate actions)

Agencies may take into consideration whether it is beneficial to keep skilled professionals or key personnel in a mobile ready state for activities the agency deems critical to national security or other high priorities (e.g. , national security professionals, skilled scientists).

It’s really no different that commercial retainer fees or paying contractors to maintain idle production lines intact under Defense Mobilization 

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Don't forget the provided. . .  Who will be first to figure out the amount?  

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Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.

 

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I am not sure there is a whole lot of additional funding needed.  The contracts should have been funded because work was being performed.  It looks like Section 3610 gives authority to bill for "ready state".

The sticking point that I see is the non mandatory language.  Using "may" instead of "shall" is going to create huge inconsistencies in implementation. 

23 hours ago, here_2_help said:

"..appropriations, funds made available to an agency by this Act or any other Act MAY be used by such agency to modify the terms and conditions of a contract.."

 

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I agree with bob7947. The contractor must first figure out the amount of the refundable tax credit to which it is entitled under the FFCRA (Division G) before it can seek relief under section 3610 of the CARES Act (Division A). That shouldn't be too difficult to do; however, because the CARES Act was enacted in March and FFCRA did not go into effect until April 1, contractors will have to look to CARES to recover reimbursement for the cost of paid leave they provided to their employees during parts of March to keep them in a ready state and to protect contractor-employees and federal employees.

Of course, other conditions must be met, too to recover under CARES. The reason for the paid leave must have been because the job site (e.g., building) was closed or because other restrictions were in place, AND the contractor's work was not portable, meaning the work could not be done remotely.

For example, we instructed employees and contractors not to come to our building if they were exhibiting flu-like symptoms, if they had been tested for COVID-19, tested positive for COVID-19 or if they felt ill, or if they had been in contact with anyone that had these symptoms. If their work was not portable (e.g., maintenance technicians, lighting technicians), the restriction we imposed entitles them to recover under CARES.

Also noteworthy, FFCRA also provides funds to employers to allow its employees to take leave for childcare reasons if a child's school is closed. However, CARES does not appear to provide authority to reimburse contractors for leave they give their employees to stay home for childcare reasons. So, unless FFCRA is applicable retroactively, contractors who provided paid leave for childcare reasons in March may not be able to recover under CARES.

 

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On ‎4‎/‎4‎/‎2020 at 1:25 PM, rios0311 said:

The contractor must first figure out the amount of the refundable tax credit to which it is entitled under the FFCRA (Division G) before it can seek relief under section 3610 of the CARES Act (Division A). … Also noteworthy, FFCRA also provides funds to employers to allow its employees to take leave for childcare reasons if a child's school is closed. However, CARES does not appear to provide authority to reimburse contractors for leave they give their employees to stay home for childcare reasons. So, unless FFCRA is applicable retroactively, contractors who provided paid leave for childcare reasons in March may not be able to recover under CARES.

Interesting points. I've checked a couple of legal sites and I'm seeing that the FFCRA only applies to companies with less than 500 employees. If a contractor has more than 500 employees, then the FFCRA is not applicable.

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On 3/31/2020 at 11:06 AM, here_2_help said:

minimum applicable contract billing rates

How are we defining minimum applicable contract billing rates? Any insight into the intent of this language? It's certainly dependent upon contract type. I would think FFPLOE would be straight forward. T&M/LH have rates for the prime and each subcontractor - I would think the "minimum applicable" rate is simply the corresponding rate regardless of whether or not the rates differ between prime and sub(s). Now, for cost-type contracts, would it be the fully burdened actual costs incurred? That's the position that makes the most sense to me; however, I'm certainly not a true expert on the matter. My agency is getting a little wrapped around the axle on this term.

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On ‎4‎/‎7‎/‎2020 at 6:48 AM, brenl87 said:

How are we defining minimum applicable contract billing rates? Any insight into the intent of this language? It's certainly dependent upon contract type. I would think FFPLOE would be straight forward. T&M/LH have rates for the prime and each subcontractor - I would think the "minimum applicable" rate is simply the corresponding rate regardless of whether or not the rates differ between prime and sub(s). Now, for cost-type contracts, would it be the fully burdened actual costs incurred? That's the position that makes the most sense to me; however, I'm certainly not a true expert on the matter. My agency is getting a little wrapped around the axle on this term.

Agree with you. The language is inartfully written and potentially problematic with respect to cost-type contracts. I'm wondering whether the phrase means "without overtime premium" because I don't know what else it could mean, since YES labor costs under cost-type contracts get fully burdened through fee.

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37 minutes ago, here_2_help said:

Agree with you. The language is inartfully written and potentially problematic with respect to cost-type contracts. I'm wondering whether the phrase means "without overtime premium" because I don't know what else it could mean, since YES labor costs under cost-type contracts get fully burdened through fee.

I think for most contracts the phrase ends up meaning without any type of premium pay, like hazardous duty, overtime, shift differential, etc.

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I'm told the DPC has issued a Class Deviation (on 08 April) that defines several ambiguous Section 3610 terms. You should look for it in the DPAP policy vault. I don't have a Class Deviation identifier, unfortunately.

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On 4/7/2020 at 9:48 AM, brenl87 said:

How are we defining minimum applicable contract billing rates? Any insight into the intent of this language? It's certainly dependent upon contract type. I would think FFPLOE would be straight forward. T&M/LH have rates for the prime and each subcontractor - I would think the "minimum applicable" rate is simply the corresponding rate regardless of whether or not the rates differ between prime and sub(s). Now, for cost-type contracts, would it be the fully burdened actual costs incurred? That's the position that makes the most sense to me; however, I'm certainly not a true expert on the matter. My agency is getting a little wrapped around the axle on this term.

I did a check this past weekend and there is no committee report to go with this law.  It was rammed through Congress in an effort to keep the economy afloat and I believe it is 880 pages.  We will be dealing with it for many years to come.  In addition, all the deviations, the invoking of P. L. 85-804, possible contracting by non-contracting types, etc., etc. etc., will feed the media with stories for many years to come.  Then will come the "corrective measures" etc., etc., etc.  You can check the amounts for ventilator contracts by checking HHS's website.  

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  • 2 weeks later...
On 4/1/2020 at 10:57 AM, In the Woods said:

I am not sure there is a whole lot of additional funding needed.  The contracts should have been funded because work was being performed.  It looks like Section 3610 gives authority to bill for "ready state".

The sticking point that I see is the non mandatory language.  Using "may" instead of "shall" is going to create huge inconsistencies in implementation. 

 

DPC did a good job explaining this.  From what I gather, confusion isn’t that bad now.

Woods, couple of comments.  One is additional funding could be significant.  If a company keeps large staffs idle for a couple months, that adds up.  To complete the contract, the cost can be quite large because of double paying those employees.

The “may” language is intentional.  It’s only used when it’s critical for an agency to keep staff on standby.  You would say “shall” and pay everybody.

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2 hours ago, bob7947 said:

New opportunities to un-confuse any current or future confusion.

Early Engagement Opportunity: Implementation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

This was posted to the Home Page but I'm trying to get all the Section 3610 clarifications and future clarifications in one place.

Bob, thanks for this.

FYI and for others, there are some sites that are already aggregating Federal guidance. Bob, let me know if you want their addresses and I'll email them to you.

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  • 1 month later...

From -- H. R. 6800 - The Heroes Act

Section 70402 of the above act has passed the House with a clarification of the language in Section 3610 of the Cares Act.  There are concerns about this clarification and its cost to the government.  

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SEC. 70402. GUIDANCE ON THE IMPLEMENTATION OF SECTION 3610 OF THE CARES ACT.

Not later than 15 days after the date of the enactment of this Act, the Director of the Office of Management and Budget shall issue guidance to ensure uniform implementation across agencies of section 3610 of the CARES Act (Public Law 116–136). Any such guidance shall—

(1) limit the basic requirements for reimbursement to those included in such Act and the effective date for such reimbursement shall be January 31, 2020; and

(2) clarify that the term “minimum applicable contract billing rates” as used in such section includes the financial impact incurred as a consequence of keeping the employees or subcontractors of the contractor in a ready state (such as the base hourly wage rate of an employee, plus indirect costs, fees, and general and administrative expenses).

Maybe we have an answer or a guess.  The section above is from the Cares 2 bill or H. R. 6800.  In an April 20, 2020 press transcript, Ellen Lord answered:

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STAFF: Tony Bertuca?

Q: Hi, ma'am. Thank you.

In terms of the Section 3610 authorities that were put out, that would reimburse contractors for COVID-related delays or facility closures, do you need new money from Congress to pay for that? And how much do you think something like that's going to cost the department ultimately, if you're looking at three-month delays on things?

MS. LORD: We believe it will cost us something and that what's part of our ask for this new package that we're talking about, the CARES Act 2. So we're talking billions and billions on that one.

Q: And, yes, how many billions would you say, I guess?

Thank you.

MS. LORD: I can't say. We're not through OMB yet.

Q: All right, thank you. Billions and billions, though, thanks.

When one thinks of the overall cost of the CARES law and H. R. 6800 as trillions and trillions, maybe billions and billions is fair and reasonable.

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I wonder how much of the cost is attributed to contractors knowing they get reimbursed and not being concerned?  The alternative is contractors assigning individuals to temporary jobs waiting for the COVID-19 measure to lift.  That keeps revenue for the idle employees coming in but the Act took away that incentive.

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19 hours ago, formerfed said:

I wonder how much of the cost is attributed to contractors knowing they get reimbursed and not being concerned?  The alternative is contractors assigning individuals to temporary jobs waiting for the COVID-19 measure to lift.  That keeps revenue for the idle employees coming in but the Act took away that incentive.

Let me tell you that contractors are very concerned. As you probably know, Section 3610 authorizes -- but does not mandate -- reimbursement of contractor stand-bye time expenses. Any potential reimbursement is subject to limitation of funds. If you believe that contractors are cavalierly spending away, expecting full reimbursement, then you don't know any contractors. Every contractor I know (and I am in touch with many, including the largest) is very concerned about incurring costs and not be reimbursed for them.

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On 5/30/2020 at 3:21 PM, formerfed said:

I wonder how much of the cost is attributed to contractors knowing they get reimbursed and not being concerned?  The alternative is contractors assigning individuals to temporary jobs waiting for the COVID-19 measure to lift.  That keeps revenue for the idle employees coming in but the Act took away that incentive.

I concur with here_2_help.  Contractors are also wondering when they will receive their reimbursement.  I'm figuring there are contracting offices waiting for direction from their chief financial officer on the specifics regarding the disbursement of funds to the contracting offices, etc.

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7 hours ago, here_2_help said:

Let me tell you that contractors are very concerned. As you probably know, Section 3610 authorizes -- but does not mandate -- reimbursement of contractor stand-bye time expenses. Any potential reimbursement is subject to limitation of funds. If you believe that contractors are cavalierly spending away, expecting full reimbursement, then you don't know any contractors. Every contractor I know (and I am in touch with many, including the largest) is very concerned about incurring costs and not be reimbursed for them.

That wasn’t what I meant.  Let me say it differently.  Are contractors sufficiently motivated to find billable alternatives for displaced employees?  An example.  A contractor is told to stop and just can’t perform.    They have employees needed to be kept in a ready state.  The contractor is reasonable confident they will ultimately get reimbursed by the government for costs.  It might be a long wait though.  Or they can move those employees to some other billable work in the interim.  That means immediate revenue.  But what’s the incentive for the contractor to keep that employee in a non billable ready state later getting reimbursed hopefully and bring on other employees for the alternative work? 

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1 hour ago, formerfed said:

That wasn’t what I meant.  Let me say it differently.  Are contractors sufficiently motivated to find billable alternatives for displaced employees?  An example.  A contractor is told to stop and just can’t perform.    They have employees needed to be kept in a ready state.  The contractor is reasonable confident they will ultimately get reimbursed by the government for costs.  It might be a long wait though.  Or they can move those employees to some other billable work in the interim.  That means immediate revenue.  But what’s the incentive for the contractor to keep that employee in a non billable ready state later getting reimbursed hopefully and bring on other employees for the alternative work? 

In order of precedence, contractors are motivated by:

1. Cash flow

2. Revenue

3. Profit

You can pretty much count on a contractor to make decisions based on enhancing as many of those things as possible. If your speculation/concern is that a contractor would hire more employees than it needs while keeping others on standby, let me assure you that it (a) takes a long time, and (b) costs a lot of money to hire new employees -- assuming you can find employees with the right skillsets. Especially these days. (You should try doing Zoom interviews; not fun.)

To sum up, I suppose your concerns have merit in a very theoretical sense; but practically I don't give them much weight.

 

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H2H,

I think you understand my thoughts.  The only thing a little off base is I’m not saying necessarily hire brand new employees.  Most large corporations have a large pool to draw staffing from.  I just said “bring on other employees.”

I agree about the cost of brining on new employees.  

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