PilieroMazza’s Weekly Update is an e-mail sent on Fridays that recaps legislative and regulatory issues affecting businesses of all sizes. When government agencies propose significant changes to existing regulations or Congress passes legislation of special interest to the small business community, we follow-up the Weekly Update with an analysis of the proposed change and the likely impact on small business.
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Weekly Report for April 19, 2019
GOVERNMENT CONTRACTINGAs reported by Bloomberg Government, the Department of Health and Human Services is competing for a follow-on contract worth as much as $347 million to continue implementing the federal employee and contractor identification, authentication, and cybersecurity standards outlined in the Homeland Security Presidential Directive-12 (HSPD-12). The scope of the contract—called the HSPD-12 Identity, Credential, and Access Management (ICAM) Systems Integration Support (SiS)—falls into two domains. Both domains aim to ensure that employees and contractors have credentials for access to HHS facilities and systems, including a smart card management system, logical access management system, public key infrastructure services, and physical access systems. Domain 1 services are for support of the steady-state operations and maintenance (O&M) of the Identity, Credential, and (logical) Access Management (ICAM) systems and capabilities, as well as the development of new capabilities required to enhance solution components. Domain 2 is for ancillary strategic services related to enterprise ICAM capabilities aligned with the Federal Identity, Credential and Access Management (FICAM) Roadmap, HSPD-12 policy, standards, and guidelines. Domain 2 contractors will assist HHS in planning, prototyping and piloting IAM@HHS processes and components that utilize best practices for interoperability, achieve enterprise efficiencies and accommodate future changes in regulations, guidance, and business needs. Responses are due May 15, 2019.
According to Law360, the Environmental Protection Agency (EPA) is seeking proposals to clean up abandoned mines on or near Navajo land under a contract valued at about $220 million, with the agency saying it is exclusively looking for bids from small businesses. The agency said that it expects to award multiple contracts for cleanup, response, and construction services to small businesses over a five-year period. Work will take place at former uranium mine sites in the Navajo and Grants, New Mexico, mining district areas. According to the agency, 30 million tons of ore were mined on and adjacent to Navajo Nation land between 1944 and 1986, resulting in 523 abandoned mines. In recent years, the agency has reached enforcement agreements and settlements totaling $1.7 billion with mining companies, aimed at reducing the risk of radiation exposure to Navajo people. Thanks to these settlements, there is now funding available to clean up 219 of the 523 abandoned mines. The agency has identified 46 mines as cleanup priorities given their proximity to homes and the risk of potential water contamination they pose, according to its website.
According to Bloomberg Government, the Department of Education’s Federal Student Aid (FSA) office is seeking small businesses to deliver Middleware architecture and services technology under a 10-year, $100 million contract, per a final request for proposal released on April 15. Middleware—software that connects a computer’s operating system and the applications running on it—allows for data management, cybersecurity services, and support for communications and cloud computing. The FSA contract, known as Enterprise Middleware Architecture and Services (EMAS), will help FSA migrate applications to the cloud and provide program management, quality assurance, architecture management, release and deployment management, security, and ancillary support. Proposals are due May 14, and FSA plans to announce single or multiple contract awards in June. The contract is expected to start sometime between July and September.
The Department of Justice reported that Fortinet, Inc. has agreed to a settlement valued at $545,000 to resolve allegations it violated the False Claims Act by falsely representing its products were in compliance with the Trade Agreements Act (TAA), 19 U.S.C. § 2501 et seq. The TAA generally prohibits certain government contractors from purchasing products that are not entirely from, or “substantially transformed” in, the United States or certain designated countries. Fortinet acknowledged that between January of 2009 and the fall of 2016, the responsible employee directed certain employees and contractors to change product labels so that no country of origin was listed, or to include the phrases “Designed in the United States and Canada,” or “Assembled in the United States.” Fortinet acknowledged that the responsible employee’s actions involved products sold to certain distributors that subsequently sold them to resellers, which in turn sold a portion of them to U.S. government end users. The responsible employee has since been terminated from employment with Fortinet.
LABOR AND EMPLOYMENTAccording to Government Executive, the Department of Veterans Affairs (VA) Office of Inspector General (OIG) is investigating a new office that was designed to protect whistleblowers from reprisal but faces allegations of aiding retaliation against them. The VA/OIG is investigating allegations of senior VA employee misconduct and is looking into activities at the Office of Accountability and Whistleblower Protection (OAWP) as part of an ongoing review of the implementation of the 2017 law that created OAWP. President Trump created OAWP by executive order in 2017 and later codified it when he signed the 2017 VA Accountability and Whistleblower Protection Act into law. Per the article, the office was mostly celebrated, with advocates hopeful that the focus on the rights and protections for whistleblowers would reverse a culture infamous for intimidation and reprisal. However, Government Executive noted that that optimism has largely soured leading to hotline tips to the inspector general and bipartisan scrutiny from Congress. Some VA employees reportedly told Government Executive that they felt betrayed or neglected by an office they believed would help them.
The Department of Labor reported that Fine Tune Enterprises Inc.—a cleaning service company based in Orlando, Florida—paid $123,650 in back wages and fringe benefits to 44 employees after a Wage and Hour Division (WHD) investigation found the employer violated labor requirements of the Davis Bacon and Related Acts (DBRA) and the Contract Work Hours and Safety Standards Act (CWHSSA). WHD determined that the employer paid its employees incorrect prevailing wage and benefit rates when it used the rates assigned to a janitor under the McNamara-O'Hara Service Contract Act, instead of general laborer rates applicable under DBRA and required for the work performed. Applying the wrong rates also led to the employer's failure to pay the required overtime rates, and to maintain accurate wage information on the employer's certified payrolls. The prime contractor, Hensel Phelps, subcontracted to Fine Tune Enterprises Inc. to perform cleanup work with NASA funds at the John F. Kennedy Space Center. WHD determined Hensel Phelps provided the incorrect wage determination to Fine Tune Enterprises in their contract, leading to the wage discrepancies. To remedy the error, Hensel Phelps issued a check for the full amount of back wages and fringe benefits to the subcontractor for payment to the affected employees.
According to Law360, while the U.S. Supreme Court has kept employment-law watchers waiting on whether it will take up the question of whether bias against LGBT workers is covered under Title VII, trial courts have been left to tackle tricky questions involving the viability of sexual orientation and gender identity discrimination claims. Over the past few months, the high court has been considering whether to grant certiorari in a closely watched trio of cases — Altitude Express v. Zarda; Bostock v. Clayton County, Georgia; and R.G. & G.R. Harris Funeral Homes Inc. v. EEOC — that involve questions about the scope of Title VII of the Civil Rights Act. As people wait to see whether the Supreme Court will take the cases, cases are playing out at the trial court level amid shifting circuit precedents on the issue. One recent development in Title VII cases came out of the Third Circuit, where a Pennsylvania federal judge ruled in favor of a casino and held that individuals cannot pursue sexual orientation claims under Title VII.
An Agency’s Corrective Action Decision Is Not Immune to Protest – What Does It Take to Win?Michelle E. Litteken
Corrective action is a common outcome of a bid protest. Indeed, the U.S. Government Accountability Office (GAO) reported that 29% of the protests filed in FY 2018 resulted in corrective action. If you are a protester, that may be great news. In the case of a post-award protest, it likely means that you have another shot at award. However, if you are an intervenor, it means the agency chose not to defend your award, and you could lose the contract. What can an intervenor do?
New IRS Requirements for EIN Applications Go Into Effect May 13, 2019By Kathryn L. Hickey
As we have all been scrambling to get our taxes completed this month, a new IRS requirement may have been overlooked that goes into effect on May 13, 2019. This new requirement impacts the process by which any new entity (including sole proprietorships, partnerships, limited liability companies, trusts, and corporations) can apply for an Employer Identification Number (EIN), the 9-digit identification number assigned to entities for tax filing and reporting purposes. The new requirements will impact all of our clients engaged in forming new entities, in particular, clients who utilize holding company structures and those who participate in joint ventures.
Thinking of Forming a Mentor-Protégé Joint Venture? Timing MattersBy Kathryn V. Flood
If you are thinking of forming a mentor-protégé joint venture to pursue a particular set-aside contract, it is critical that your timing has enough built-in cushion to ensure that all of the necessary approvals and entity-formation steps are accomplished before you submit your proposal. There is a fairly rigid sequencing of the steps involved in putting together the mentor-protégé application and subsequent joint venture agreement—make sure you do not fall into the trap of skipping a step, or otherwise you may put your proposal at risk.
Could You Be the Target of a Government Claim?By Michelle E. Litteken
Most contractors know that they may submit a claim under the Contract Disputes Act (CDA) if a problem arises during performance. However, many contractors are not aware that the government also has the ability to bring a claim. Likewise, contractors may not understand the options for responding to a government claim. Given the potential gravity of a government claim, these are issues contractors should be aware of.
EEOC Announces New EEO-1 Pay Data Reporting DeadlineBy Sarah L. Nash
September 30, 2019, marks the newly announced deadline for employers who submit annual EEO-1 reports to report employee 2018 pay data to the Equal Employment Opportunity Commission (EEOC). The EEOC revealed the new deadline in a federal court submission last week. The judge in the case will still need to approve of the EEOC's plan before it becomes the official cutoff date.
The Relationship Between Privacy and TrustBy David T. Shafer
Recently, there has been an advertisement running during March Madness from Apple that is all about privacy. If your household has been watching as much college basketball as mine has, then you've likely seen it. It's a minute full of real-world examples of how people value their personal privacy. None of those examples are particularly significant but, in the aggregate, it shows that this remains an issue that people are deeply concerned about. That concern, of course, is then applied to technology. In the ad, it is an iPhone. In your business, it is your e-mail server, your website, your social media presence and the computer and phones your business uses to conduct its business.
When Cybersecurity Is a Hot Topic, GSA Expands Its Cybersecurity Service OfferingsBy Emily J. Rouleau
The General Services Administration (GSA) recently expanded its cybersecurity service offerings for federal, state, and local governments. Specifically, GSA worked in collaboration with the Department of Homeland Security and the Office of Management and Budget to develop IT Schedule 70's Highly Adaptive Cybersecurity Services (HACS) Special Item Number (SIN) 132-45 to make it easier for agencies to procure quality cybersecurity services.
Weekly Report for April 12, 2019
GOVERNMENT CONTRACTINGThe Small Business Administration (SBA) issued a notification of the availability of a white paper regarding the revision of its size standards methodology and explaining how it establishes, reviews, or revises small business size standards. The revised white paper, entitled “SBA's Size Standards Methodology (April 2019)” (Revised Methodology) is available on the SBA's website, as well as on the Federal rulemaking portal. SBA intends to apply the Revised Methodology to the ongoing second five-year comprehensive review of size standards required by the Small Business Jobs Act of 2010 (Jobs Act). On April 27, 2018, SBA published a notification seeking comments on proposed revisions to its size standards methodology. The notification discusses the comments SBA received on the proposed Revised Methodology and the SBA’s responses, followed by a description of major changes to the methodology and their impacts on size standards. The Revised Methodology is effective on April 11, 2019. 84 Fed. Reg. 70, 14587.
Secretary of the Department of Veterans Affairs (VA) Robert Wilkie announced an increase to the VA’s goals for contracting with Service-Disabled Veteran-Owned Small Businesses (SDVOSB) and Veteran-Owned Small Businesses (VOSB). For Fiscal Year (FY) 2019, the VA seeks to award at least 15% of its total contract dollars to SDVOSBs and at least 17% to VOSBs, representing a 5% increase in both goals, a significant change not noted since 2010. The law directs the VA to consider SDVOSBs first and VOSBs second, before considering other small business program preferences. Other federal agencies are covered by an SDVOSB program administered by the Small Business Administration, with a goal of only 3% for SDVOSBs. At these agencies, the government-wide SDVOSB program has equal priority with other small business socioeconomic programs. In FY 2017, the VA awarded more than one-fourth of the dollars given to SDVOSBs by the federal government, more than all other federal civilian agencies combined. Previously, the SDVOSB and VOSB goals were 10% and 12% established by former VA Secretary Eric Shinseki in FY 2010.
The National Security Agency/Central Security Service (NSA/CSS) Office of the Inspector General (OIG) issued a report after it conducted an audit of award fee contracts. The audit revealed that (1) neither the use of award fee contracts nor the fee percentages established thereunder were properly justified; (2) the NSA/CSS’s obligations for award fee contracts have increased while the Department of Defense is moving toward objective incentive arrangements; and (3) the NSA/CSS does not evaluate the effectiveness of award fees. The OIG found that there was insufficient evidence to support the determination that the use of award fee contracts and the award fee percentages established under the contracts were appropriate. Therefore, the OIG questioned $636 million in award fees earned over multiple years associated with 54 contracts and made three recommendations to assist NSA/CSS in addressing the record-keeping deficiencies and data analysis requirements identified in the audit. More information on the audit can be found in an article on Government Executive.
The Department of Defense (DoD) Inspector General (IG) evaluated whether the actions taken by Defense Contract Management Agency (DCMA) contracting officers on DoD contractor executive compensation questioned by Defense Contract Audit Agency (DCAA) complied with the Federal Acquisition Regulation (FAR), DoD Instructions, and agency policy. DCAA audits DoD contractor compensation and other costs claimed on Government contracts to determine if the costs comply with the FAR and any other applicable criteria. To determine if the compensation that DoD contractors claim for its executives is reasonable, DCAA compares the DoD contractor’s claimed compensation to the average for comparable jobs published in private compensation surveys. For 18 of 35 audit reports selected for evaluation, the IG found that DCMA contracting officers failed to comply with the FAR and DoD Instruction requirements to document adequate rationale when they do not sustain DCAA’s recommendations. As a result of not sustaining the DCAA recommendations, the contracting officers reimbursed DoD contractors $22.5 million in executive compensation that DCAA reported as unreasonable. More information on the report can be found here.
According to Bloomberg Law, contract spending obligations in fiscal 2020 are expected to range from $583 billion to $630 billion, according to an estimate based on data from Bloomberg Government’s Market Forecast Dashboard. That is a significant increase from the $560 billion that was reported in Fiscal Year 2018. The forecast range represents the spending growth of four to 12 percent through September 2020. Growth through the end of Fiscal Year 2019, ending in about six months on September 30, is currently estimated to increase by one to six percent from 2018 levels. Bloomberg Government’s 2020 forecast shows that some of the biggest increases will be in the markets for aircraft ($41 billion), IT outsourcing ($39 billion), and management and advisory services ($37 billion).
LABOR AND EMPLOYMENTThe Department of Labor (DOL) Wage and Hour Division issued a notice of proposed rulemaking and request for comments on a proposed rule intended to update and clarify the DOL’s interpretation of joint employer status under the Fair Labor Standards Act (FLSA or Act), which has not been significantly revised in over 60 years. The proposed changes are designed to promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy. The DOL proposes that if an employee has an employer who suffers, permits, or otherwise employs the employee to work and another person simultaneously benefits from that work, the other person is the employee's joint employer under the Act for those hours worked only if that person is acting directly or indirectly in the interest of the employer in relation to the employee. To make that determination simpler and more consistent, the Department proposes to adopt a four-factor balancing test derived (with one modification) from Bonnette v. California Health & Welfare Agency. A plurality of circuit courts use or incorporate Bonnette' s factors in their joint-employer test. The DOL’s proposed test would assess whether the potential joint employer:
• Hires or fires the employee;
• Supervises and controls the employee's work schedule or conditions of employment;
• Determines the employee's rate and method of payment; and
• Maintains the employee's employment records.
Comments to the proposed rule are due June 10, 2019. 84 Fed. Reg. 68, 14043.
According to Bloomberg Government, the DOL proposed to conduct construction-industry-focused compliance checks. The DOL’s Office of Federal Contract Compliance Programs regularly selects government contractors for random audits to enforce equal employment opportunity laws, but compliance checks are not full-blown audits, which are known as compliance reviews. Per Bloomberg Government, the compliance checks would vary, depending on if the company directly holds a federal contract or is federally assisted. Companies that directly hold contracts would submit an affirmative action plan, personnel and payroll records, job advertisements, and other records for review. Federally assisted contractors that are at least partially funded by the government would not have to turn over an affirmative action plan.
According to Bloomberg Government, the National Labor Relations Board (NLRB) wants to release proposed changes to its rules for union elections sometime this spring. The NLRB announced the timing of its election rule proposals in a memo to an American Bar Association group, made public on April 4. NLRB Chairman John Ring previously announced that the board would take a piecemeal approach to amend its election rules, but he did not provide a time frame for that effort. The agency has rarely used formal notice-and-comment rulemaking to establish rules, and instead acts through decisions in individual cases. The announcement on the election proposal timing confirms that the NLRB will move forward with election rulemaking even as it works on a controversial regulation about when two business entities share liability for a group of contracted or franchised workers.
Following COFC Decision, GSA Rescinds Alliant 2 Small Business AwardsBy Timothy F. Valley
On March 26, 2019, the General Services Administration ("GSA") posted a notice on FedBizOpps that it was taking corrective action in response to the recent Court of Federal Claims ("COFC") decision in the bid protest of Citizant, Inc. v. United States, No. 18-856C (Mar. 25, 2019). As part of that corrective action, GSA rescinded all 81 of the Alliant 2 Small Business ("A2SB") contracts it awarded in February 2018. A2SB, issued under Solicitation No. QTA0016GBA0002 in June 2016, is a government-wide acquisition contract, multiple-award, indefinite-delivery, indefinite-quantity contract for information technology services.
Weekly Report for April 5, 2019
HEARING ON THE SMALL BUSINESS RUNWAY EXTENSION ACTPilieroMazza’s Megan Connor testified at the House Small Business Subcommittee on Contracting and Infrastructure’s hearing on March 26, 2019, concerning the implementation of the Small Business Runway Extension Act (H.R. 6330) (the “Act”). The Act was signed into law in December 2018 and was designed to help small businesses successfully bridge the gap between competing in the small business space and the open marketplace against larger companies by changing the time period for determining a company’s size based on average annual receipts from the previous three years to the previous five years. However, the Act contained no clear implementation date, and the SBA has yet to issue regulations regarding the same. According to the House Committee on Small Business’s website and the hearing notice, the hearing considered “the current state of H.R. 6330’s implementation and potential solutions to mitigate any challenges during the process and if steps may be necessary to expand its reach.” Following her testimony, the Committee on Small Business sent follow-up questions to Ms. Connor, who provided written responses this week.
PILIEROMAZZA SUBMITS COMMENTS IN RESPONSE TO VA ACQUISITION REGULATION ON COMPETITION REQUIREMENTSOn April 2, 2019, PilieroMazza submitted comments to the U.S. Department of Veterans Affairs’ proposed rule issued on February 1, 2019, RIN 2900-AQ21—VA Acquisition Regulation: Competition Requirements.
Our firm represents small businesses operating across the government contracting spectrum, and many of these companies are SDVOSBs verified to participate in VA’s “Veterans First Contracting Program.” In representing these firms and working with VA, we have received numerous comments from our clients and have become familiar with how VA and the VA Acquisition Regulation implement the “Vets First” mandate under the Veterans Benefits, Health Care, and Information Technology Act of 2006. We believe SDVOSBs and VOSBs, as well as VA contracting officers, will benefit from the clarity this rulemaking provides and the further strengthening of the “Vets First” requirements in the VAAR when conducting procurements. Read our full comments here.
GOVERNMENT CONTRACTINGThe Department of Defense (DoD) issued several proposed rules and final rules this week amending the Defense Federal Acquisition Regulation Supplement (DFARS). According to Law360, the most consequential of three proposed rules would implement a statutory mandate requiring a preference for fixed-price deals in defense contracting. Under that proposed rule, DoD contracting officers would have to first consider a fixed-price contract when determining an appropriate contract type for a particular procurement. Contracting officers would also have to obtain approval from the head of their particular contracting office when awarding any cost-reimbursement contract above a certain price threshold: $50 million through the end of Fiscal Year 2019 and $25 million thereafter. Per Law360, a second proposed rule would bring DFARS in line with a Small Business Administration final rule published in May 2016 regarding the applicability of the "non-manufacturer rule" for certain small businesses. That rule requires that items sold but not made by small business under federal contracts be made in the U.S. or "outlying areas." Previously, DFARS provided an exemption for contracts of less than $25,000 awarded to small businesses considered "disadvantaged" under the SBA's 8(a) program; the proposed rule would remove that exemption. The proposed rules and final rules can be found at the following citations:
• Proposed Rules: 84 Fed. Reg. 62, 12179; 84 Fed. Reg. 62, 12182; 84 Fed. Reg. 62, 12187.
• Final Rules: 84 Fed. Reg. 62, 12137; 84 Fed. Reg. 62, 12138; 84 Fed. Reg. 62, 12139; 84 Fed. Reg. 62, 12140; 84 Fed. Reg. 62, 12141.
The Small Business Administration (SBA) issued final policy directives, effective May 2, 2019, amending the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program Policy Directives. Specifically, the Small Business Administration (SBA) combines the two directives into one document, clarifies the data rights and Phase III preference afforded to SBIR and STTR small business awardees, adds definitions relating to data rights, and clarifies the benchmarks for progress towards commercialization. 84 Fed. Reg. 63, 12794.
LABOR AND EMPLOYMENTAccording to Bloomberg Government, employers could be required to turn over their 2018 worker pay data to the Equal Employment Opportunity Commission (EEOC) by September 30, 2019. The EEOC opened the 2018 EEO-1 Survey in March, which requires private employers with 100 or more workers and federal contractors or first-tier subcontractors to file EEO-1 forms breaking down the employers’ workforces by race, ethnicity, gender, and job title, also known as Component 1 data. That data is used “to support civil rights enforcement and to analyze employment patterns, such as the representation of women and minorities within companies, industries or regions.” Reports must be submitted and certified by Friday, May 31, 2019. The EEOC was also ordered to file a brief explaining its plan for pay data following the district court’s order in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (TSC), which vacated the Office of Management and Budget’s stay on collection of Component 2 EEO-1 pay data; Component 2 EEO-1 pay data would require employers to break down pay data by race, gender, and ethnicity. In a submission to the district court filed this week, the EEOC said it would need to hire a data and analytics contractor to modify the agency’s data collection capabilities in order to hit the September deadline—an undertaking it said would cost “in excess of $3 million.”
According to Bloomberg Government, the Department of Labor’s (DOL) proposed rule to limit shared wage and hour liability for companies in franchise and staffing arrangements narrows the situations in which businesses can be considered “joint employers” of a group of workers. Bloomberg Government noted that the question often comes up when workers at a franchise restaurant try to sue the franchisor for unpaid minimum wages and overtime. It has also been at the center of debates over whether companies should be required to bargain with workers provided by a staffing firm. The DOL plans to weigh four factors—the ability to hire and fire, supervise and control schedules, set pay rates, and maintain employment records—to determine whether one company is a joint employer of another company’s workers and eases the liability franchisors face if a franchisee violates wage and hour laws. Per Bloomberg Government, the DOL’s publication of the proposed rule comes as the National Labor Relations Board (NLRB) is working on its own regulation to limit joint employer liability for collective bargaining and unfair labor practices. Bloomberg Government reported that the NLRB generally would require a company to exercise direct control over workers to be considered their joint employer.
According to Law360, the Department of Labor (DOL) kicked off a new pilot program that aims to speed up the discretionary suspension and debarment process to protect the federal government from working with contractors involved in inappropriate or illegal activities. The program seeks to cut down the processing time for discretionary suspension and debarment actions from months to just days, the DOL said in a news release announcing the program. Discretionary suspensions and debarments make contractors involved in things like fraud, theft, and bribery temporarily ineligible for contracting and transactions with the government. Under the program, the agency’s Office of Inspector General will include more information in its referrals to the Office of the Assistant Secretary for Administration and Management, a change that Law360 reported the DOL said will allow for quicker decisions.
According to Law360, the DOL issued opinion letters weighing in on Fair Labor Standards Act (FLSA) overtime exemptions for agricultural workers and teachers and on health industry employers’ use of an overtime structure that calculates workers’ pay across two weeks. Acting DOL Wage and Hour Division Administrator Keith Sonderling said in a letter that groups of farm workers may be ineligible for overtime under the FLSA’s agricultural exemption, which says farms don’t have to pay extra for excess time spent on certain agricultural work. He also said in a separate letter that “nutritional outreach instructors” at a West Virginia University are overtime-exempt, but claimed in a third letter that he did not have enough information to bless or reject a youth residential care facility’s use of the “8 and 80” overtime system. Opinion letters offer the Wage and Hour Division’s perspective on specific pay- and benefits-related questions posed by employers or other entities the DOL regulates. The letters, which do not bind judges but can bolster employers’ defenses to workers’ claims, do not name their recipients but provide circumstantial information about them.
CYBERSECURITYAccording to Bloomberg Government, government spending on cybersecurity is likely to grow in Fiscal Year 2019 as well as Fiscal Year 2020. Bloomberg Government reported that the analytical perspectives section on cybersecurity funding released in the fiscal 2020 budget request shows that President Donald Trump is seeking $17.4 billion for cybersecurity at defense and civilian agencies, an increase of 5 percent from the projected $16.6 billion in fiscal 2019 agency spending, projected in the September 28 continuing resolution. Bloomberg Government noted that the number is even higher than the fiscal 2019 budget request of $15.1 billion, which means agencies will have more than initially expected to spend on cyber-related programs this year.
According to a Nextgov article, the General Services Administration (GSA) expanded its cybersecurity service offerings to help federal agencies and state and local governments to protect their most valuable data. GSA announced the modernized Highly Adaptive Cybersecurity Services Special Item Number Tuesday, adding services that can help agencies meet administrative mandates to secure high-value assets on mission-critical systems. The HACS SIN debuted on GSA’s IT Schedule 70 contract in 2016 so agencies could access penetration testing, incident response, cyber hunt, and risk and vulnerability assessments from pre-vetted contractors. GSA consulted with the Department of Homeland Security and the Office of Management and Budget (OMB) to identify which services to add.
Cybersecurity's Increasing Impact on Prime Contract and Subcontract AwardsBy Jon Williams
Since last year, I have been writing about the increasing impact of cybersecurity on contract awards. DoD has issued guidance on how it will evaluate system security plans, and it has indicated that, along with cost, schedule, and performance, cybersecurity is the "fourth pillar" of its acquisitions. As a result, contractors need to shift their view of cybersecurity compliance as a cost center to a business driver and an increasingly important factor in gaining a competitive advantage.
DoD Proposes to Apply Non-Manufacturer Rule to All 8(a) ContractsBy Samuel Finnerty
Nearly three years ago, the U.S. Small Business Administration ("SBA") issued a final rule that standardized the limitations on subcontracting and the non-manufacturer rule ("NMR") that apply to small business concerns, including participants in SBA's 8(a) Business Development Program. In a step toward regulatory conformity, the Department of Defense ("DoD") is now proposing to implement the revised NMR for 8(a) participants that contract with DoD. These entities should familiarize themselves with the proposed rule ("Rule"), which is summarized below.
Weekly Report for March 29, 2019
GOVERNMENT CONTRACTINGThe Office of the Under Secretary of Defense released a class deviation, effective immediately, that implements section 1006 of the National Defense Authorization Act for Fiscal Year 2019. The class deviation prescribes that all contracting officers shall use the clause prescribed in the attachment to the class deviation when contracting with accounting firms providing financial statement auditing or audit remediation services to the Department of Defense in support of the audits required under 31 U.S.C. § 3521.
The Office of the Undersecretary of Defense released a memorandum regarding changes to certification standards for the contracting workforce, effective October 1, 2019. Specifically, “Intermediate Cost and Price Analysis” (CON 270) will no longer be required for Level II certification, and “Analyzing Contract Costs” (CLC 056) will be required for Level I certification.
According to Bloomberg Law, the General Services Administration (GSA) must reevaluate 81 contract awards made to small businesses under an IT services procurement worth $15 billion, per an order from the U.S. Court of Federal Claims. The Court of Federal Claims enjoined the GSA from proceeding with the current awardee list and directed it to reevaluate the proposals in a manner that addressed errors raised in a post-award bid protest brought by Citizant, Inc. The Court of Federal Claims’ decision can be found here.
The Government Accountability Office (GAO) released a report regarding the Department of Defense’s (DoD) simultaneous undertaking of new major acquisitions to replenish its missile warning, protected communications, navigation, and weather satellites at the same time as boosting efforts to increase space situational awareness and protect space assets. The GAO identified a wide range of resource and management challenges including growing threats to satellites, implementing leadership changes, and having the right resources and know-how. The GAO did the study because the DoD’s space systems provide critical capabilities that support military and other government operations. They can also be expensive to acquire and field, costing billions of dollars each year. Past GAO reports have recommended that DOD adopt acquisition best practices to help ensure cost and schedule goals are met. The DoD has generally agreed and has taken some actions to address these recommendations.
According to a Nextgov article, the federal government wants to hold defense contractors accountable for the cybersecurity of their supply chain, but experts testified that that would be difficult to achieve. The Senate Armed Services Committee held a hearing where defense contractor industry representatives explained that the increasingly complex levels of supply chains make it difficult for prime contractors to ensure all subcontractors are upholding cybersecurity protections and that ever-lengthening chain increases the possibility of compromised information or cyber attacks. The article reported that the panelists explained that a large part of the problem is that the government frequently does not have access to the contracts between primes and their subcontractors, or a prime contractor may know its immediate supplier is but not know the subcontractors that supplier uses—a loop that can repeat for each subcontractor. Per the article, Christopher Peters, CEO of Lucrum Group, told the Committee that prime contractors are hesitant to identify their subcontractors out of fear that the government may select the subcontractors instead of them on future contracts, which makes it nearly impossible for the government to ensure that all subcontractors on federal projects are abiding by cybersecurity protocols.
The Department of Justice (DOJ) announced that Kessey Reggie Durand, of Miami, Florida, pled guilty to one count of wire fraud in connection with his scheme to steal monthly pension payments from victims enrolled in pension plans managed by the Pension Benefit Guaranty Corporation (PBGC). Mr. Durand used personally identifiable information (PII) he obtained while working as a contractor at the PBGC’s Miami Field Office to create or take over online MyPBA accounts of pension plan participants. After commandeering those accounts, Mr. Durand changed the associated electronic direct deposit information in order to funnel victims’ monthly pension payments into accounts Mr. Durand controlled. In other cases, Mr. Durand tried to change participants’ electronic direct deposit information through social engineering, using stolen PII to call into the PBGC call center to trick operators into believing he was the participant requesting the change. The DOJ reported that Mr. Durand’s scheme spanned approximately five months and targeted over $100,000 in monthly pension payments.
LABOR AND EMPLOYMENTThe Department of Labor (DOL) Wage and Hour Division published a notice of proposed rulemaking (NPRM) and request for comments regarding updating regulations pertaining to the Fair Labor Standards Act (FLSA). The FLSA generally requires that covered, nonexempt employees receive overtime pay of at least one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. The regular rate includes all remuneration for employment, subject to the exclusions outlined in section 7(e) of the FLSA. In this NPRM, the DOL proposes updates to a number of regulations both to provide clarity and better reflect the 21st-century workplace. The proposed rule would clarify when unused paid leave, bona fide meal periods, reimbursements, benefit plans, and certain ancillary benefits may be excluded from the regular rate. Additionally, the DOL proposes minor clarifications and updates to part 548 of Title 29, which implements section 7(g)(3) of the FLSA, which permits employers, under specific circumstances, to use a basic rate to compute overtime compensation rather than a regular rate. Comments to the proposed rule are due May 28, 2019. 84 Fed. Reg. 61, 11888.
According to Bloomberg Government, the Department of Labor (DOL) wants to have its new overtime rule commented on, reviewed, and finalized by January 2020. Per Bloomberg Government, Tammy McCutchen, a Littler Mendelson attorney who was a Wage and Hour Division administrator under George W. Bush, explained there is a need for speed due to the November 2020 election. She opined that if a Democrat wins the 2020 election for president, there would be new leadership in the DOL and Department of Justice, and those officials may restart litigation in federal court defending the Obama administration’s overtime proposal or could put a stop to the Trump administration’s proposal before it is finalized. In 2004, the DOL took 13 months to review comments to the proposed overtime rule an issue the final rule. In 2010, the DOL turned around the Obama administration’s proposal in 10 months. However, Bloomberg Government noted that the DOL’s goal of reviewing comments and finalizing a rule in 8 to 10 months is risky because the DOL is unlikely to grant requests to extend the time for public comment beyond the May 21 deadline, and, to make the rule legally defensible, the DOL has to show it responded to each comment and considered each submission.
According to Law360, the House of Representatives passed the Paycheck Fairness Act (H.R. 7), which will be sent to the Senate. The House voted 242-187, largely along party lines, to advance the bill, sponsored by Rep. Rosa DeLauro (D-CT). The bill would make employers with pay gaps between men and women liable for damages unless they can show non-gender, business-based reasons for the differentials, among other things. The current version of the Equal Pay Act outlaws paying men and women differently for the same work, with four exceptions; employers can pay workers at different rates if they do so based on (1) seniority, (2) merit, (3) the quantity or quality of the employee’s work, or (4) "any other factor other than sex." The Paycheck Fairness Act would narrow the fourth exception, known as the catchall defense, to apply only to factors not "based upon or derived from" existing gender-based pay gaps, related to the job in question, consistent with business necessity, and fully account for any difference in pay between workers of different genders. Other provisions of the bill would block employers from punishing workers who discuss their pay, file Equal Pay Act claims, or initiate pay equity investigations as well as provide grants to cover salary negotiation training for women and girls, direct the Department of Labor to study pay disparities and provide information to employers, and require the Equal Employment Opportunity Commission to start collecting pay data from employers.
According to Law360, a National Labor Relations Board (NLRB) judge said that employers cannot bar workers from discussing the outcome of employment arbitration. Per Law360, the decision could curtail a key feature of arbitration agreements and tee up a new clash between labor law and the Federal Arbitration Act. According to the Law360 article, Administrative Law Judge Keltner Locke said that so-called confidentiality provisions in arbitration agreements infringe on workers' National Labor Relations Act (NLRA) rights to engage in concerted activity by barring them from discussing an employment term akin to their pay, and Judge Locke recommended that Pfizer Inc. eliminate a confidentiality policy. Per Law360, Judge Locke also said that the U.S. Supreme Court's Epic Systems Corp. v. Lewis decision allowing arbitration agreements does not shield the confidentiality clauses often included in those pacts.
Fourth Circuit Makes It Harder for Whistleblowers in FCA CasesBy Paul W. Mengel III
In a relatively recent decision, the U. S. Court of Appeals for the Fourth Circuit raised the bar a notch for whistleblowers in False Claim Act ("FCA") cases whose allegations lack specificity as to direct evidence of presentment for payment to the government for fraudulent services. Indeed, in her dissenting opinion in U.S. ex rel. David Grant v. United Airlines, Inc., No. 17-2151 (4th Cir. 2018), Judge Keenan opined that this ruling, affirming the dismissal of the claim at the pre-discovery pleading phase of the case, "effectively limits qui tam actions to whistleblowers in ‘white collar' positions with access to financial and other business records."
Weekly Report for March 22, 2019
HEARING ON THE SMALL BUSINESS RUNWAY EXTENSION ACTThe House Small Business Subcommittee on Contracting and Infrastructure is holding a hearing on Tuesday, March 26, 2019, at 10:00 a.m., concerning the implementation of the Small Business Runway Extension Act (H.R. 6330) (the “Act”). The Act was signed into law in December 2018 and was designed to help small businesses successfully bridge the gap between competing in the small business space and the open marketplace against larger companies by changing the time period for determining a company’s size based on average annual receipts from the previous three years to the previous five years. However, the Act contained no clear implementation date, and the SBA has yet to issue regulations regarding the same. According to the House Committee on Small Business’s website and the hearing notice, the hearing will “consider the current state of H.R. 6330’s implementation and potential solutions to mitigate any challenges during the process and if steps may be necessary to expand its reach.” PilieroMazza’s Megan Connor will testify at the hearing, which will take place in the Rayburn House Office Building, Room 2360.
GOVERNMENT CONTRACTINGThe Office of Management and Budget (OMB) released a memorandum, “Making Smarter Use of Common Contract Solutions and Practices,” which provides guidance on the use of category management. “Category management" refers to the business practice of buying common goods and services as an enterprise to eliminate redundancies, increase efficiency, and deliver more value and savings from the Government's acquisition programs. Teams of experts in each category of spending help agencies increase their use of common contract solutions and practices and bring decentralized spending into alignment with organized agency- and Government-level spending strategies by sharing market intelligence, Government and industry best practices, prices paid data, and other information to facilitate informed buying decisions. To implement category management, OMB will require agencies to carry out a set of tailored management actions and provide updates on these management actions to evaluate their progress in bringing common spending under management. The expected result is more effectively managed contract spending through a balance of Government-wide, agency-wide, and local contracts; reduced unnecessary contract duplication and cost avoidance; and continued achievement of small business goals and other socioeconomic requirements.
The Office of the Under Secretary of the Defense released a memorandum regarding reporting Department of Defense (DoD) use of Other Transactions (OTs) for prototype projects. The memorandum follows the data collection and reporting requirements established under 10 U.S.C. § 2371b, which covers the DoD’s use of OTs for prototype projects during Fiscal Year 2018 and provides a spreadsheet as a template to enable standardized collection of the required information. The report will include a list of each active OT characterized by Service or Agency, major command, contracting activity, award date, award value, appropriation, budget line item, consortium, period of performance, dollars obligated, and total expenditures for the reporting period, product service code, quantities, awardee/vendor, purpose/program goal/description and status of project. Reports are due April 18, 2019.
According to Bloomberg Government, the General Services Administration’s (GSA) OASIS on-ramps have been delayed at least until April due to protests. The main issue being disputed is how much past performance a small business (protégé) can rely on from a large business (mentor) that uses additional subcontractors when the mentor-protégé parties have established a joint venture. Bloomberg Government reported that GSA will likely need to make modifications to the RFP to comply with the Government Accountability Office’s (GAO) conclusions and recommendations in the Ekagra Partners LLC protest. The GSA also issued an update on March 8, 2019, indicating that it was reviewing the GAO’s recommendations that impacted the OASIS SB On-Ramping procurements. The GSA expects to complete its analysis of the GAO’s findings and share with industry next steps on OASIS SB on ramping by late March 2019. The GSA will post updates regarding next steps on both GSA’s Interact and FBO postings supporting this procurement activity.
According to Washington Technology, the Navy issued a sources-sought notice seeking support for how it maintains and procures submarines. More specifically, the Navy seeks help desk, operations, cybersecurity, software development, database management, and NMCI support. Notably, the notice also states that the Navy will determine the availability and technical capability of HUBZone firms to provide the required products and/or services. Per Washington Technology, the current contract is held by Trowbridge & Trowbridge, a woman-owned small business in McLean, Virginia, but the Navy is considering a HUBZone contract depending on whether HUBZone businesses respond to the notice and show they are qualified. The article also reports that at the top of the list of things the Navy is looking for is the ability to provide IT support services at the Portsmouth Naval Shipyard. Businesses also need to be able to support 3,400 users, operate a help desk operation, and have a capability maturity model integration (CMMI) level of level 3 or higher. Comments to the notice are due April 3, 2019, by 4:00 p.m. ET.
The Department of Justice (DOJ) Office of the Inspector General (OIG) completed an audit of 16 sole-source contract actions awarded to nine small businesses by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Seven of the nine small businesses included in the review were designated Alaska Native Corporations under the 8(a) program. The objectives of the audit were to assess ATF’s: (1) processes for soliciting small businesses for contract opportunities, (2) procedures and decisions for selecting and awarding sole-source contracts to small businesses, and (3) subsequent oversight of these types of awards. The DOJ/OIG identified several concerns and included 11 recommendations to improve how ATF competes, administers, and oversees awards to small businesses.
According to Law360, the General Services Administration (“GSA”) awarded Ernst & Young (EY) a $41.75 million deal to validate federal contractors and grant awardees, marking a significant shift away from a decades-long relationship with Dun and Bradstreet and the company's proprietary DUNS numbers. Under the deal, professional services firm EY will provide entity validation services for the federal award process for at least a year, and up to five years in total with options. All entities that want to do business with the federal government, or receive grants or similar payments, must be validated through the System for Award Management, or SAM. Per Law360, tracking entities has been carried out through DUNS—a proprietary system developed by commercial data and analytics firm Dun and Bradstreet Inc.—since 1978. The Law360 article reported that although the GSA's contract with EY marks a move away from D&B, the new deal will not completely sever the relationship, and the agency noted in its award announcement that "[d]uring the transition to the new provider, the government will receive continued service from Dun & Bradstreet to maintain award reporting and data integrity."
According to Law360, the U.S. Supreme Court grappled with when the "government knowledge" statute of limitations should apply in False Claims Act (FCA) cases during oral argument this week. The justices and parties reportedly explored the context, clarity, and congressional intent underlying the statute. In addition to an overarching, hard 10-year limit for claims, the FCA requires cases to be filed within either six years of the alleged violation or three years after material facts were or should have been known by "the official of the United States charged with responsibility to act in the circumstances," whichever is later. In the case before the Court, Relator Billy Joe Hunt sued Parsons Corp. accusing it of defrauding the Department of Defense on a contract to dispose of excess and abandoned munitions in Iraq but filed suit seven years after the alleged fraud and within three years of alerting FBI agents. Mr. Hunt's suit was initially dismissed as time-barred but was revived by the Eleventh Circuit, which found that the "government knowledge" statute of limitations applies even when the government does not intervene in a case. The transcript of the oral argument can be found here, and the Court will issue its decision in the coming months. The Court typically decides cases before it recesses for the summer at the end of June or beginning of July.
LABOR AND EMPLOYMENTThe Department of Labor (DOL) published its proposed rule amending overtime eligibility requirements on March 22, 2019. Under currently enforced law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. Workers making at least this salary level may be eligible for overtime based on their job duties. This salary level was set in 2004. The proposed rule increases the standard salary level to $679 per week (equivalent to $35,308 per year). Above this salary level, eligibility for overtime varies based on job duties. The proposed rule also increases the Highly Compensated Employee annual compensation level from $100,000 a year to $147,414 per year. Comments on the proposed rule are due May 21, 2019.
The Equal Employment Opportunity Commission (EEOC) opened the 2018 EEO-1 Survey. The agency requires private employers with 100 or more workers and federal contractors or first-tier subcontractors to file EEO-1 forms breaking down the employers’ workforces by race, ethnicity, gender, and job title. That data is used “to support civil rights enforcement and to analyze employment patterns, such as the representation of women and minorities within companies, industries or regions.” Reports must be submitted and certified by Friday, May 31, 2019, to the EEOC Office of Enterprise Data and Analytics’ Employer Data Team. Importantly, according to the EEOC’s website, it is working “diligently on next steps in the wake of the court's order in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (TSC), which vacated the Office of Management and Budget’s stay on collection of Component 2 EEO-1 pay data.” The EEOC further noted that it will provide further information as soon as possible. According to Bloomberg Government, employers do not have to turn over employee pay data for Fiscal Year 2018 at this time, but—also per Bloomberg Government—a federal judge has reportedly ordered the EEOC to file a brief with the court explaining its plan for collecting pay data by April 3, 2019.
The Department of Labor's Wage and Hour Division issued a Field Assistance Bulletin (FAB) reiterating employers' responsibilities under the H-1B visa program. The Field Assistance Bulletin confirms that if an H-1B employer chooses to provide notice through electronic media, the employer must ensure that affected American workers, including those employed by a third-party, have access to, and are aware of, the electronic notification. This guidance describes the conditions under which electronic notice satisfies these requirements and provides examples of different methods of posting.
Does SBA's New Recertification Rule Apply to My Contract? Recent OHA Decision Provides Some ClarityBy Samuel S. Finnerty
The U.S. Small Business Administration's ("SBA") regulations require a concern to recertify its socio-economic (e.g., SDVO SBC, HUBZone, WOSB/EDWOSB) and/or small business size status (1) within 30 days of an approved contract novation; (2) within 30 days of a transaction becoming final in the case of a merger, sale, or acquisition, where contract novation is not required; and (3) no more than 120 days prior to the end of the fifth year of a contract exceeding five years in duration (including options) and no more than 120 days prior to exercising any option thereafter. See 13 CFR §§ 121.404(g), 125.18(e)(1), 126.601(h)(1), and 127.503(h)(1). While these timelines are clear, the effect of recertification is subject to different interpretations. [Read More]
OFCCP Investigations on the Rise: How Should You Prepare?By Meghan F. Leemon
The number of Office of Federal Contract Compliance Programs (OFCCP) investigations is on the rise, and OFCCP has stated a continued focus on enforcement. OFCCP enforces the contractual promise of equal employment opportunity and affirmative action required of those that do business with the federal government. Between fiscal years 2015–2017, the OFCCP received an average of 648 complaints annually. However, in fiscal year 2018, this number more than doubled, jumping to 1,418 complaints received. And, in the first quarter of fiscal year 2019, 349 complaints were received. [Read More]
Misclassifying Employees Can Have Major ConsequencesBy Anthony M. Batt
Today's economy is saturated with new ways to earn money without being subject to a set schedule or traditional employer demands. With so many individuals working part-time jobs with more autonomy than ever, companies are struggling to determine whether to classify those workers as independent contractors or employees. The distinction between those two categories is extremely important and can affect all aspects of your business, including benefits, overtime pay, and workers' compensation. [Read More]