Congressional, Executive, and Legal Developments for Government Contractors to Consider

Regulatory Developments:

• The National Defense Industrial Association (NDIA) now publishes a Regulation Tracker that lists open FAR and DFARS cases relevant to the defense community, including synopses and status descriptions.
• Pursuant to a final rule published by the U.S. Department of Labor, effective January 1, the minimum wage for certain federal contractors will increase from $10.35 to $10.60 per hour in accordance with Executive Order 13658. The new wage rate generally applies to workers being paid under federal contracts governed by the Fair Labor Standards Act, the Service Contract Labor Standards, or the Davis-Bacon Act.
• The Department of Veterans Affairs (VA) is proposing to amend and update its VA Acquisition Regulation (VAAR) to revise or remove policies superseded by the Federal Acquisition Regulation (FAR), remove procedural guidance that is internal to VA into the VA Acquisition Manual (VAAM), and incorporate new agency-specific regulations. The VA is seeking comments from the public by April 2, 2019.

Legislative Developments:

• The U.S. House of Representatives passed H.R.227, the Incentivizing Fairness in Subcontracting Act, sponsored by Rep. Nydia Valazquez (D-NY). The bill, which is intended "[t]o amend the Small Business Act to specify what credit is given for certain subcontractors and to provide a dispute process for non-payment to subcontractors," was referred to the Senate Committee on Small Business and Entrepreneurship on January 9.
• President Trump signed a joint resolution on January 25 to end the government shutdown for three weeks while negotiations continue over funding for the president's proposed southwest border wall. The House and Senate both passed a stopgap spending bill by voice vote, with President Trump signing it that same night to restore normal operations at shuttered federal agencies until February 15, and pay 800,000 federal workers who were either furloughed or forced to work without pay for thirty-five (35) days. The measure ended what had become the longest-running shutdown of the federal government in U.S. history.
• On January 28, Rep. Donald Norcross (D-NJ) introduced H.R.824, a bill to provide back pay to contractors of the federal government. The bill was referred to the Committee on Appropriations, in addition to the Committee on Oversight and Reform, for a period of time to be determined by the Speaker.

Reports & Other Memoranda:

• Early in the month, the Office of Management and Budget (OMB) published an outline, "Frequently Asked Questions During a Lapse in Appropriations." This guidance document provides key direction to agencies affected by the shutdown, which began on December 22, 2018 after Senate Democrats refused to support a continuing resolution that included $5.7 billion for President Trump's proposed border wall. The outline, which is based on legal opinions issued by the Department of Justice (DOJ) and guidance issued by OMB (generally, OMB Circular A-11, Section 124), offers Q&As to agencies facing contract and grant situations that arise during a lapse in appropriations.
• On January 7, the Congressional Research Service (CRS) published an update to its report on "Small Business Mentor-Protégé Programs." This report details and compares numerous federal mentor-protégé programs, including government-wide and agency-specific programs designed to assist various types of small businesses or other entities in obtaining and performing contracts. The report highlights the criticism that large businesses use these programs to perform federal contracts, contrary to small business procurement laws, regulations, and overall policy. Noting the susceptibility of such programs to fraud and misuse, the report concludes that "mentor-protégé programs will remain subject to congressional oversight or proposed legislation during the 115th [sic] Congress."
• On January 10, in the midst of the Federal Government shutdown, Rep. Bennie G. Thompson (D-MS), Chairman of the House Committee on Homeland Security, published a press release entitled "RE-RELEASE GAO REPORT FROM AUGUST: Trump's Wall Set to Waste Billions, Provide No Measurable Benefit." The original report, published by the U.S. Government Accountability Office (GAO) in July 2018, concluded that the Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP), had not yet assessed costs associated with deploying barriers in key locations at the southwest border, and further had failed to document its plans as required. DHS concurred with GAO's recommendations.
• On January 15, the Section 809 Panel – which has a congressional mandate to recommend changes to the way DoD procures technology – released its final report, which includes two parts and a separate set of summarized recommendations. The Panel concluded that the DoD must put its antiquated acquisition system on a "war footing approach" if it is expected to keep ahead of adversaries' technological advances. The final report includes fifty-eight (58) new recommendations aimed at "allow[ing] DoD to deliver and sustain technologically superior capability inside the turn of near-peer competitors and nonstate actors." Among the various recommendations to streamline the acquisition process, the Panel proposed eliminating protesters' ability to file a protest at the Court of Federal Claims after resolution of the same protest by the GAO.
• On January 23, in accordance with provisions of the National Defense Authorization Act for Fiscal Year 2018, GAO published a report entitled "Army Modernization: Steps Needed to Ensure Army Futures Command Fully Applies Leading Practices." In the report, GAO assessed the status of the Army's near- and long-term modernization efforts and documented the extent to which the Army has applied leading practices to these efforts. Although GAO concluded that the Army follows many leading practices in modernizing its equipment, one exception is that it intends to move new technologies into weapons systems before testing them in a realistic environment, which is likely to delay delivery and increase costs. GAO published four recommendations to improve the Army's modernization efforts, with which DoD concurred.
• The Office of the Director of National Intelligence (ODNI) published a report, "National Intelligence Strategy of the United States of America 2019." This report "provides the Intelligence Community (IC) with strategic direction from the Director of National Intelligence (DNI) for the next four years," supporting the national security priorities outlined in the National Security Strategy.
• On January 25, the day President Trump signed a continuing resolution to reopen many government functions and bring furloughed employees back to work, OMB published guidance documents entitled "M-19-08, Preparing for an Orderly Reopening Following the Partial Lapse in Appropriations" and "M-19-09, Reopening Departments and Agencies." These memoranda directed agencies "to prepare for an orderly reopening that carefully considers the timing and necessary steps needed to restart operations in a manner consistent with each agency's mission and with appropriate consideration for preserving the life, health, and safety of employees, contractors, and the general public."

From the Courts, Boards, and the GAO:

• In the Appeals of John Shaw LLC d/b/a Shaw Building Maintenance, ASBCA No. 61379, issued toward the end of 2018, the Armed Services Board of Contract Appeals dismissed a contractor's claims for "exemplary damages." The decision serves as a reminder that the Boards do not have subject matter jurisdiction to consider claims for punitive damages against the government and, more broadly, "[a]bsent express consent of Congress, no punitive damages can be recovered against the United States."
• The U.S. Court of Appeals for the Ninth Circuit recently published a decision affirming that an arbitrator may not set aside the terms of an arm's-length subcontract agreement, even where the terms of that agreement may operate to the detriment of one party. For our analysis of the Court's decision in Aspic Eng'g & Constr. Co. v. ECC Centcom Constructors LLC, No. 17-16510, D.C. No. 4:17-cv-00224-YGR (9th Cir. Jan. 28, 2019), please see our recent Government Contracts Update.