Government Contracts Update

On August 25, 2016, the DOL and the Federal Acquisition Regulatory (FAR) Council published the final regulations and guidance implementing President Obama's "Fair Pay and Safe Workplaces" Executive Order (E.O. 13673) (the Executive Order). The Executive Order, often referred to as the "blacklisting" executive order, and the applicable regulations, require current and prospective federal contractors with covered contracts to disclose labor law decisions (i.e., administrative determinations, arbitral awards, and civil judgments) as well as violations of 14 federal workplace laws, including the Fair Labor Standards Act, the Family Medical Leave Act, and the National Labor Relations Act, along with state law equivalents (to be determined at a later date by the DOL). Federal agencies must then consider and assess these workplace compliance histories in determining whether to award contracts or subcontracts valued at $500,000 or more. In addition, the Executive Order and final rules impose pay transparency obligations on covered contractors and subcontractors, which require the provision of information regarding hours worked, overtime hours, pay, deductions, exempt/nonexempt status, and, if applicable, status as an independent contractor to covered workers. Finally, the regulations prohibit contractors with contracts valued at $1,000,000 or more from entering into, prior to disputes, agreements with employees under which Title VII or any tort-related claims would be subject to mandatory arbitration.

Of primary importance, the final regulations clarify issues left open by the proposed regulations, by setting forth a phased-in implementation schedule for reporting and compliance requirements. Specifically:

  • Voluntary Pre-Assessments: Beginning September 12, 2016, for purposes of future bids, contractors may request from the DOL pre-assessments of their workplace compliance history.
  • Effective Date and Applicability to Certain Prime Contractors: On October 25, 2016, the final regulations become effective. Disclosures and workplace compliance assessments begin for all prime contractors under consideration for contracts valued at or greater than $50 million. The initial reporting disclosure period is one year, but gradually increases to three years by October 25, 2018.
  • Paycheck Transparency Obligations: On January 1, 2017, the paycheck transparency obligations become effective.
  • Decrease in Prime Contract Value Threshold: On April 25, 2017, disclosures and workplace compliance assessments begin for all prime contractors under consideration for contracts valued at or greater than $500,000.
  • Applicability to Subcontractors: On October 25, 2017, disclosures and assessments begin for all subcontractors under consideration for subcontracts valued at or greater than $500,000. Subcontractors must make the requisite disclosure to the DOL and report the DOL assessment to the prime contractor.

While the Executive Order and the final rule may face legal challenges, it is without question that they place additional burdens on both federal prime and subcontractors, and such prime and subcontractors should be mindful of contract modifications and extensions to covered contracts that include the implementing FAR clauses and begin taking steps to comply. Certainly, the disclosure obligations can have far-reaching implications that should be thoughtfully considered prior to submission, much like any issue that could have an exclusionary effect (e.g., mandatory disclosures). Thus, in addition to providing the requisite information, contractors should consider providing positive, prospective information that portrays current compliance and conduct.

NOTICE: PROPOSED RULE CHANGE—USAID Rule Would Allow Use of Foreign Contracting Officers

On August 19, 2016, the USAID issued a proposed rule that would allow the agency to expand a pilot program that has been in place since 2011 to use certain foreign nationals as contracting officers. According to the agency, it currently possesses a warranted contracting staff of just 150 personnel located overseas. This rule is intended, at least in part, to help the agency address a shortage of U.S. contracting officers while also helping to bolster host country technical capacity.

While the rule seeks to lift previous restrictions on citizenship for contracting officers, it is unclear what parameters will be imposed, as the rule fails to set out hiring criteria or minimum requirements. Thus, while certain aspects of this effort appear appealing, it is unclear whether this will be an ultimate improvement over the thinly spread staff of today. In addition, the new rule seeks to make clear that USAID's rule that certain employment restrictions are related to third-country nationals and cooperating country nationals employed by a USAID contractor does not apply to consultants.

Government contractors should consider carefully whether these changes could impose additional contracting hurdles or hardships, or, conversely, should be supported, and submit comments accordingly. Comments are due no later than October 18, 2016.

NOTICE: COMMENTS SOLICITED—OMB Seeks Comments for a Second Time on Anti-Kickback Procedures

On August 26, 2016, the OMB issued a notice of request for public comments on a previously approved information collection requirement concerning anti-kickback procedures. This is OMB's second attempt at soliciting input (no comments were received after its first public notice dated May 18, 2016).

The FAR 52.203–7, Anti-Kickback Procedures, requires that all contractors have in place and follow reasonable procedures designed to prevent and detect, in their own operations and direct business relationships, violations of 41 U.S.C. Chapter 87, Kickbacks. Whenever prime contractors or subcontractors have reasonable grounds to believe that a violation of the statute may have occurred, they are required to report the possible violation in writing to the contracting agency's inspector general, the head of the contracting agency if an agency does not have an inspector general, or the U.S. Department of Justice. The federal government uses the information to determine if any violations of the statute have occurred. There is no federal government-wide data collection process or system that identifies the number of alleged violations of 41 U.S.C. Chapter 87 that are reported annually.

Public comments are particularly invited on whether the collection of information is necessary for the proper performance of functions of the FAR, and whether it will have practical utility; whether the federal government's estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which the government can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.

This notice is important for at least two reasons. First, government contractors should consider whether they wish to provide input on a process that they may ultimately find themselves subjected to, if for no other reason than how such information should be handled or how the data submitted is to be utilized. Second, government contractors should heed the federal government's interest in this area as a warning that increased scrutiny and enforcement activity in the anti-kickback arena may be on the horizon and, thus, review their code of conduct and related policies to ensure they meet the FAR's requirements and embody best practices in this area.