A Blank Rome team represented KPMG LLP in a successful bid protest before the Government Accountability Office (“GAO”), in which KPMG challenged the award decision of the United States Air Force in a procurement for visible accessible understandable linked trusted (“VAULT”) subject matter expert support.
In case you have not been following this development, the Office of Federal Contract Compliance (“OFCCP”) intends to release certain EEO-1 data in response to a FOIA request. Specifically, OFCCP intends to release EEO-1 Type 2 Reports submitted by federal contractors from 2016 to 2022. All multi-establishment companies (i.e., any corporation that does business out of multiple physical locations) are required to submit Type 2 Reports. These reports must include data for all employees of the company (i.e., all employees at headquarters as well as at all establishments) categorized by race/ethnicity, sex, and job category.
OFCCP is notifying contractors who have not objected that it intends to release the requested EEO-1 Data after the start of the new year. In e-mails sent to contractors at the end of November 2022, OFCCP stated:
The objection period is now closed, and we are sending this message to confirm we have not received an objection from your organization regarding release of the requested data. Because we have received no objection, we are providing your organization with notice that its Type 2 EEO-1 data is subject to release under FOIA, and OFCCP intends to release this data after January 2, 2023.
The e-mail notice instructs companies to contact OFCCP “as soon as possible but no later than January 2, 2023” if OFCCP has erred and the company did timely object to release of its data or the company was not a federal contractor during the applicable time period.
On October 18, 2022, Senate Majority Leader Chuck Schumer (D-NY) issued a press release signaling a potentially significant expansion of Section 889 through a proposed amendment to the 2023 National Defense Authorization Act (“NDAA”). Schumer’s proposal is aimed at extending the telecommunications supply chain prohibitions in Section 889 to the semiconductor manufacturing industry.
Section 889 currently prohibits contractors from providing the federal government or using any products or services that incorporate “covered telecommunications equipment or services” from five Chinese telecom companies and their affiliates and subsidiaries: (1) Huawei Technologies Company, (2) ZTE Corporation, (3) Hytera Communications Corporation, (4) Hangzhou Hikvision Digital Technology Company, and (5) Dahua Technology Company.
Schumer’s 2023 NDAA amendment would expand Section 889 by banning semiconductor products like microchips from the following three Chinese entities: (1) Semiconductor Manufacturing International Corporation (“SMIC”), (2) ChangXin Memory Technologies (“CXMT”), and (3) Yangtze Memory Technologies Corp. (“YMTC”). Schumer noted that these companies have known links to the Chinese state security and intelligence apparatuses. The amendment is aimed at filling a gap in federal procurement restrictions that currently do not include semiconductor technology and services, creating a vulnerability for cyberattacks and data privacy. The amendment would not take effect until three years after the NDAA’s enactment, or until 2025.
Although we do not yet know whether Schumer’s amendment will be incorporated into the final NDAA bill, contractors should nevertheless begin evaluating their supply chains to identify any semiconductor products from any of the three named Chinese manufacturers. Schumer’s amendment signals a continually expansive interpretation and enforcement of Section 889, which may be reflected in the final rulemaking for Section 889. The current FAR docket anticipates a final rule in December 2022, although these deadlines continue to be moving targets.
The federal False Claims Act (“FCA”) is one of the United States’ most effective tools to detect and prevent fraud against the Government. One reason the FCA is so effective is that it encourages the employees of an organization to come forward as claimants and receive a share of any financial recovery to the Government. Recognizing the central role of these whistleblowers in the FCA’s enforcement scheme, Congress included an anti-retaliation provision in the statute that protects them when they report suspected fraudulent conduct. Under the FCA’s anti-retaliation provision, employees, contractors, or agents can sue for damages on their own behalf if they are “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done” in connection with a reported FCA violation. 31 U.S.C. § 3730(h)(1). Likewise, nearly every state also affords some degree of whistleblower protection, either statutorily or in the common law.
Justin’s session, “Legal and DoJ Matters,” will take place Wednesday, November 9, from 8:30 to 10:00 a.m., and the panel will cover settlement and judgments from recent civil fraud and false claims, penalty assessments, and emerging issues.
The Government Accountability Office (“GAO”) has released its Annual Report to Congress summarizing bid protest activity for Fiscal Year 2022 (GAO-23-900462). The report mostly shows a continuation of recent trends: the overall number of GAO protests continues to drop, “effectiveness” remains high and stable (51 percent), and there are very few hearings (two for the year). Of note, preaward solicitation challenges were one of the most successful types of protest at GAO, for the first time ever since GAO began reporting the bases for successful protests in 2013. Below we break down what contractors can glean from this latest report.
Overall numbers down
The total number of protests filed at GAO continues to fall. The chart below shows the number of protest actions reported by GAO over the last several years.
On October 20, 2022, the U.S. Department of the Treasury (“Treasury”), in its role as chair of the Committee on Foreign Investment in the United States (“CFIUS”), issued the first-ever CFIUS Enforcement and Penalty Guidelines (the “Guidelines”). The Guidelines apprise the public of CFIUS’s intention to penalize violations of the CFIUS regulations, emphasize the importance of voluntary self-disclosures of violations, and provide a basic overview of the penalty process.
As a threshold matter, it is important to clarify what constitutes a “violation” in the CFIUS context. The relevant regulations provide for CFIUS review of certain foreign investments in U.S. businesses and empower CFIUS to block or mitigate such investments on national security grounds. While CFIUS retains broad discretion to take such action in the context of transactions, “violations” punishable by monetary penalties only arise in specific circumstances.
The protester alleged that it should have been assigned a strength for its transition plan, which exceeded the Navy’s schedule for workload turnover and would be completed “well in advance of the 60-day requirement.”
The Agency argued that, as GAO has held, it is not required to document determinations of adequacy or explain why a proposal did not receive a strength for a particular item. The Agency represented that it reviewed the protester’s transition plan and did not consider the proposed ability to transition faster than the 60-day requirement to be a strength.
GAO found this insufficient and that the agency “provides no explanation—contemporaneous or otherwise—to support the reasonableness of its evaluation of Tech Marine’s transition plan.”
GAO stated it failed to see, and the Agency failed to explain, why exceeding the transition schedule would not benefit the Agency.
GAO recommended the Agency reevaluate Tech Marine’s proposal and make a new source selection determination.
Effective October 25, 2022, the domestic content requirements for government purchases subject to the Buy American Act (“BAA”) will increase. A March 7, 2022, final rule implemented significant domestic content threshold increases over a seven-year timeframe for procurements subject to the BAA requirements of FAR Part 25. These increases were based on President Biden’s January 25, 2021, Executive Order 14005, Ensuring the Future Is Made in All of America by All of America’s Workers. (See, Buy American Act—Final Rule: What Has Changed?) Note that these changes apply to the BAA as implemented in non-Department of Defense (“DoD”) purchases—the rules for implementing the BAA in DoD acquisitions are set forth in the DFARS, and differ from the FAR implementation in several important respects that we will address in a future post.
Unlike the Trade Agreements Act (“TAA”), which bans government purchases of non-compliant products, the BAA applies pricing preferences to encourage government agencies to purchase “domestic end products.” Thus, items that are not BAA compliant may still be purchased by government agencies, but they must be significantly less expensive. Currently, FAR Part 25 provides that large businesses offering domestic end products receive a 20 percent price preference and small businesses offering domestic end products receive a 30 percent price preference. The FAR sets forth a two-part test to determine whether a manufactured end product or construction material qualifies as a domestic end product: (1) the end product or construction material must be manufactured in the United States; and (2) the cost of any components mined, produced, or manufactured in the United States must exceed a certain percentage of the cost of all components.