In a further effort to provide guidance to federal agencies on the contractual aspects of the American Recovery and Reinvestment Act of 2009 ("Recovery Act"), the FAR Councils recently issued five new FAR Rules which implement various restrictions that Congress imposed on the use of Recovery Act funds. These interim rules, each of which took effect on March 31, 2009, reflect the extraordinary level of oversight and supervision that confront contractors and subcontractors who receive Recovery Act funds - oversight that now includes the right for Government auditors to interview employees of contractors and subcontractors who accept Recovery Act funds. In particular, these rules address the following issues:

  • GAO/IG Audits And Employee Interviews. FAR Case 2009-011 , 74 Fed. Reg. 14646 (March 31, 2009), implements the provisions in Sections 902, 1514 and 1515 of the Recovery Act regarding expanded investigation powers over contractors and subcontractors using Recovery Act funds. Under this interim rule, contractors and subcontractors who accept Recovery Act funds are required to grant GAO and/or agency IGs the right to:
    • examine any contractor or subcontractor's records pertaining to transactions related to the contract, and
    • interview any officer or employee regarding any transaction related to the contract. (With respect to subcontracts, only GAO has the right to interview the subcontractor's officers or employees.)

It is important to note that the broad audit rights granted under this clause, which took effect immediately, apply to all contracts and subcontracts using Recovery Act funds - including contracts and subcontracts for commercial items and commercially-available-off-the-shelf (COTS) items, as well as contracts and subcontracts under the simplified acquisition threshold.

  • Buy American Act. FAR Case 2009-008 , 74 Fed. Reg. 14623 (March 31, 2009), creates a new set of regulations at FAR Subpart 25.6 ("American Recovery And Reinvestment Act - Buy American Act - Construction Materials") to implement the Buy American provisions in Section 1605 of the Recovery Act. Consistent with the Act, the new FAR Rule requires that all "iron, steel, and manufactured goods" used for the "construction, alteration, maintenance, or repair of a public building or public work" must be "manufactured" in the United States. The new FAR Rule also contains definitions of key terms (e.g., "steel," "manufactured construction material" and "unmanufactured construction material"); and creates a list of "Recovery Act designated countries" from which construction materials can be acquired.

The new Recovery Act Buy American Act provisions in FAR Subpart 25.6 include country of origin standards that differ slightly from the existing standards contained elsewhere in FAR Part 25. Most notably, country of origin determinations for construction materials acquired in connection with the Recovery Act are not subject to the two part test of FAR 25.001(c), which generally requires that a product must be "manufactured in the United States," and the "cost of domestic components must exceed 50 percent of the cost of all the components." By contrast, the Recovery Act's Buy American rules do not include a "cost of components" test, but instead require that construction materials acquired in connection with the Recovery Act must be "produced or manufactured" in the United States; according to the new FAR Rule, these restrictions "do not apply to steel or iron used as components of other manufactured construction material." FAR 25.602(a)(2)(i). Indeed, the new FAR Rule expressly states that "[t]here is no requirement with regard to the origin of components or subcomponents in other manufactured construction material, as long as the manufacture of the construction material occurs in the United States." FAR 25.602(a)(2)(ii).

Finally, the new FAR Rule includes procedures for waiving the Recovery Act's Buy American restrictions, in circumstances where the head of the contracting activity makes a finding of nonavailability; where the contracting officer determines that the cost of domestic construction materials is "unreasonable," using specific evaluation factors called for in FAR 25.605; or where the head of the agency determines that application of the Recovery Act's Buy American restrictions is inconsistent with the public interest.

  • Whistleblower Protections. FAR Case 2009-012 , 74 Fed. Reg. 14633 (March 31, 2009), implements the whistleblower protections from Section 1553 of the Recovery Act, by prohibiting non-federal employers from "discharging, demoting, or otherwise discriminating against" any employee who reports information that the employee "reasonably believes" constitutes evidence of "gross mismanagement," "gross waste," "substantial and specific danger to public health or safety," "an abuse of authority," or "a violation of law, rule, or regulation" in connection with the use of Recovery Act funds.

The rule also includes procedures for whistleblowers to file complaints of reprisal with the agency IG, and for agency heads to grant a range of administrative remedies in the event the IG finds a "sufficient basis" to conclude that reprisal has occurred. Among other things, these remedies may include reinstatement and compensation (including back pay); compensatory damages; "employment benefits, and other terms and conditions of employment that would apply to the person in that position if the reprisal had not been taken"; and attorneys fees and expenses.

  • Publicizing Contract Actions. FAR Case 2009-010 , 74 Fed. Reg. 14636 (March 31, 2009), addresses the requirements of the Recovery Act and OMB's implementing guidance to make certain information on Recovery Act contracts available to the public. Under this interim rule, agencies are required to publicly post presolicitation notices of proposed contract actions using Recovery Act funds, as well as announcements of contract awards. In addition, contracting officers are required to identify all contracts that are funded, in whole or in part, using Recovery Act funds.

Agencies are also required to publicly post a justification explaining the rationale for any contract that is not both fixed price and awarded using competitive procedures. In posting these justifications, contracting officers are advised that care should be taken not to include proprietary information or information that would compromise national security, since the required justifications are to be made available to the public.

  • Reporting Requirements. Finally, under FAR Case 2009-009 , 74 Fed. Reg. 14639 (March 31, 2009), contractors and subcontractors that accept Recovery Act funds are required to submit detailed quarterly reports regarding their use of those funds, including inter alia information regarding:
  • The amount of Recovery Act funds invoiced;
  • A description of the "employment impact" of work funded by the Recovery Act, including number and types of "jobs created" or "jobs retained" by the prime contractor; and
  • The names and "total compensation" (as defined in the rule) for the five highest compensated officers of the contractor or subcontract for the calendar year in which the contract or subcontract is awarded. See Wiley Rein Alert dated April 7, 2009.