Executive Order Increases the Minimum Wage for Federal Contractors—What Is the Impact?

Scott Arnold

Legal developments aimed at government contractors do not always make headline news in mainstream media, but last week’s Executive Order on Increasing the Minimum Wage for Federal Contractors, April 27, 2021 (“Executive Order”), did get widespread attention, perhaps because it is viewed by some in political circles as the next best thing for an administration that sees substantial congressional hurdles for more broadly applicable minimum wage increase legislation. So you have probably heard about about the Executive Order, but how will it impact government contractors?

What does the Executive Order do?

The Executive Order will increase the hourly minimum wage for workers working on or in connection with federal government contracts to $15.00, effective January 30, 2022. This will be a substantial increase from the current minimum wage of $10.95 applicable to most federal contracts pursuant Executive Order 13658. (EO 13658 originally set a federal contractor minimum wage of $10.10, effective January 1, 2015, when it was issued by President Obama in early 2014. That minimum wage has since increased annually.)

How will the increase be implemented?

The Secretary of Labor is to issue implementing regulations by November 24, 2021, and the Federal Acquisition Regulatory Council is to amend the FAR to provide the new minimum wage provisions in federal procurement solicitations, contracts, and contract-like instruments within 60 days after issuance of the Labor Department’s implementing regulations.

Continue reading “Executive Order Increases the Minimum Wage for Federal Contractors—What Is the Impact?”

Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!

Merle M. DeLancey Jr., Craig Stetson*, and Jennifer A. Short

In our last post on this topic, we touched on how the acceptance, use, and forgiveness of Paycheck Protection Program (“PPP”) loans can be viewed in the context of a Defense Contract Audit Agency (“DCAA”) audit. This post focuses on audits and investigations involving PPP loans. Close scrutiny of PPP loans is not a prediction; it is reality. The Small Business Administration (“SBA”) has announced it will audit all PPP loans in excess of two million dollars following a lender’s submission of a borrower’s loan forgiveness application, and it reserves the right to “spot check” any PPP loan of a lesser amount at its discretion. The Department of Justice has already charged multiple individuals with PPP fraud. And this is just the beginning of what many think will be a tidal wave of enforcement activity involving PPP loans.

Overview of the PPP

The PPP is the largest relief measure for small businesses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The government has made available nearly one trillion dollars in PPP relief funds through four separate funding measures ($349 billion via the CARES Act; $310 billion via the PPP and Health Care Enhancement Act; $284 billion via the Consolidated Appropriations Act of 2021; and $7.25 billion via American Rescue Plan Act of 2021).

The PPP makes available guaranteed SBA loans to small business that meet certain eligibility requirements. In addition, PPP loans can be forgiven fully if used properly to cover specified business expenses such as payroll, rent, utilities, mortgage interest, and other limited uses. As of April 11, 2021, the SBA had approved more than 9.5 million loans totaling more than $755 billion using more than 5,400 lenders.

Continue reading “Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!”

M&A Dealmaker Perspectives on Transaction Structure and Value

Dean S. Nordlinger*

Recently, I hosted the third session of Blank Rome’s new on-demand webinar series, “Strategically Speaking,” with featured guests Mitchell Martin of The McLean Group and Scott Brezler of Dixon Hughes Goodman LLP bout the key issues that arise in mergers and acquisitions (“M&A”) transactions involving govcon firms. You are invited to watch the recording on demand here; I hope you find it helpful and informative.

Martin has held a number of financial advisory positions with leading investment banks focused on M&A for logistics and defense and government services companies, and is currently the co-head of The McLean Group’s M&A practice, as well as its Defense, Government & Intelligence (“DGI”) practice. Brezler currently heads the Government Contracting practice for Dixon Hughes Goodman LLP and previously served as chairman of the Small and Emerging Contractors Advisory Forum.

Our session includes an informative and helpful discussion, including:

      • A high-level overview of M&A:
          • A seller’s perspective on an M&A transaction;
          • A buyer’s perspective on an M&A transaction;
          • The reality of the M&A process:
              • Time, resources, and money; and
              • Deep scrutiny of a seller.
      • A high-level overview of purchase price (and tracking the value):
          • Identifying and understanding the purchase price component parts;
          • Breaking down the component parts and transaction terms to track value;
          • What a seller gets at closing vs what remains “at risk” post-closing; and
          • What’s the impact of each item/issue on an aggregated basis.
      • Structuring the purchase price:
          • Use of and recent trends in earnouts and impact on value; and
          • Use of and recent trends in rollover equity on value.
      • The impact of acquisition/tax structuring on purchase price and value:
          • GovCon regulations impact on acquisition structure;
          • Acquisition structure impact on transaction value to seller; and
          • Acquisition structure impact on transaction value to buyer. 
      • Weaponizing working capital:
          • Net working capital and impact on overall deal value;
          • Negotiation of working capital (in the letter of intent); and
          • Things sellers do to their advantage, things sellers do to their detriment.
      • Importance of employee incentive plans & retention:
          • “Key employees” as a buyer condition to closing;
          • Negotiation of key employee retention bonuses:
            • Cooperation between buyer and seller on what it should be;
            • Does the seller have any preexisting retention in place;
            • Who bears the burden vs. benefit; and
          • Buyer redirect of purchase price to use as retention bonuses for key employees.

PAST SESSIONS OF STRATEGICALLY SPEAKING NOW AVAILABLE ON DEMAND:

Session I: Navigating the Future of Office Leases with Featured Guests Chethan Rao and Andrew Roberts of global commercial real estate firm Newmark. Watch the Webinar >>

Session II: Pivoting & Positioning Small Businesses for Dynamic (Full & Open) Growthwith Featured Guests Gilbert Dussek of Gunnison Consulting Group and Kevin Robbins of Blue Delta Capital Partners. Watch the Webinar >>


*Dean Nordlinger is a partner in our Corporate practice whose new “Strategically Speaking” webinar series includes discussions with a variety of seasoned professionals and subject matter experts about critical and challenging issues that government contractors and other companies (and business owners) face throughout their life cycle.

COVID-Related Audits and the DCAA’s New Audit Direction

Merle M. DeLancey Jr. and Craig Stetson*

This is the third in a series of posts regarding what we believe will be an onslaught of government investigations and audits of COVID relief funds and contracting. Previously, we identified likely categories of programs, contracts, and companies the government might investigate or audit. Below, we discuss the Defense Contract Audit Agency’s (“DCAA”) current direction, interests, and initiatives related to contractors’ receipt of COVID relief funds and the impact an uncertain business environment may have on government contract pricing and costing forecasts.

COVID Relief Funds

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) funding opportunities come with unique government contract compliance requirements and financial reporting obligations. The funding is not “free” and may result in financial consequences to unwary contractors. DCAA knows this and will be conducting audits to test contractors’ compliance with unique relief fund requirements. Contractors unaware of these accounting and reporting requirements risk DCAA questioning or denying costs.

In January 2021, DCAA issued an audit alert to its regional offices pertaining to COVID relief legislation and regulation.[1] The audit alert includes frequently asked questions and answers (“FAQs”) concerning contractors’ request or receipt of COVID relief funding. Originally released last summer, the FAQs have been revised and expanded several times. The FAQs telegraph DCAA’s position on various instances where COVID relief funding intersects with or impacts government contract cost accounting and compliance.

Continue reading “COVID-Related Audits and the DCAA’s New Audit Direction”

Pivoting & Positioning Small Businesses for Dynamic (Full & Open) Growth

Dean S. Nordlinger*

Recently, I hosted the second session of Blank Rome’s new on-demand webinar series, “Strategically Speaking,” with featured guests Gilbert Dussek of Gunnison Consulting Group and Kevin Robbins of Blue Delta Capital Partners about the key issues that growing government contracts firms face in their business life cycle as they transform from small to “other-than-small” businesses. You are invited to watch the recording on demand here; I hope you find it helpful and informative.

Dussek has been a successful high-level operator on both large and small govcon platforms and in 2019 became CEO of Gunnison, a leader in software development, data analytics, and enterprise system testing for leading government customers. Robbins has served multiple roles as a consultant to and an owner/investor in govcon companies and is a co-founder of Blue Delta, a growth capital firm focused on the U.S. federal government services marketplace, particularly technology-enabled solutions and services companies.

Our session includes an informative and helpful discussion focused on:

  • Reviewing Blue Delta’s and Gunnison’s decision to team up:
    • Factors that went into Blue Delta’s decision to invest in Gunnison; and
    • The driving and differentiating attributes that Blue Delta looks for in “investable” target companies
  • Strategically growing from an SBSA to full & open govcon company:
    • Building, scouting, and acquiring talent; and
    • Competitively bidding on and winning, or acquiring, F&O contracts
  • Identifying and filtering acquisition targets and structuring acquisitions:
    • The roles of company culture, chemistry (of personnel), and vision; and
    • Sourcing and valuing target companies
  • Describing Gunnison-Blue Delta’s corporate growth strategy:
    • How Blue Delta thinks about portfolio company construction; and
    • Gunnison’s near-term and long-term visions and plans

*Dean Nordlinger is a partner in our Corporate practice whose new “Strategically Speaking” webinar series includes discussions with a variety of seasoned professionals and subject matter experts about critical and challenging issues that government contractors and other companies (and business owners) face throughout their life cycle.

The Likely Targets of COVID-Related Audits and Investigations

Merle M. DeLancey Jr. and Craig Stetson*

This is the second in a series of posts regarding what we believe will be an onslaught of government investigations and audits of COVID relief funds and contracting. Previously, we identified the government offices that will be conducting the investigations and performing the audits. Below, we identify three categories of programs, contracts, and companies we believe are more likely to be investigated or audited.

Programs/Contracts

The first group of companies ripe for audits are those accepting COVID relief funding and contractors performing large COVID-specific contracts, as well as contractors performing traditional government contracts that entail certain COVID-related twists impacting performance.

Companies accepting COVID relief funds are likely at the top of auditors’ lists for several reasons. First, because of the magnitude of funds at issue. Second, due to the complex and ambiguous eligibility, use, and reporting requirements. For example, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and supplemental legislation appropriated funds to reimburse eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID. Receipt of funds was easy. Most recipients’ funds were automatically deposited into their bank accounts. But healthcare provider recipients have not yet been required to file reports attesting to the proper utilization of the relief funds. Relief funds recipients in other non-healthcare industries may also be affected. Certain monies received under the CARES Act also involve ongoing and downstream reporting requirements by companies regarding statutory limitations on compensation paid to certain employees and the receipt of a variety of potential tax credits. Thus, recipients’ use of funds has not been tested, and it is unlikely that all usage has been in compliance with the ambiguous requirements and multiple rounds of agency guidance and interpretations.

Continue reading “The Likely Targets of COVID-Related Audits and Investigations”

Will Federal Contractors Be Required to Certify Employee COVID Vaccinations?

Albert B. Krachman and Brooke T. Iley

Do not be surprised if, before the end of 2021, the federal government begins requiring contractors to certify or represent that their employees have received COVID vaccinations. The federal government has long conditioned contract awards on contractor compliance with emerging social policy mandates. This practice dates backs to the 1960s, when collateral social policy clauses began appearing in federal contracts. The National Emergency created by COVID-19 would appear ripe for a similar federal government action in federal contracting.

Several factors are converging in the United States which signal the potential for a COVID vaccine Certification or Representation. First, the supply issue should be mostly resolved by June 30, 2021. The Biden administration has committed to make enough vaccines available for every adult in the country by the end of May 2021. Second, the administration has been extremely active in making procurement law changes to conform to its policy objectives. Crafting an Executive Order on COVID Vaccines for federal contractor employees is clearly within the administration’s wheelhouse and target zone. Third, as reported in the March 8, 2021, Wall Street Journal, the largest employers in the country, across all sectors, are already engaged in large scale efforts to vaccinate their own employees. Fourth, while the law in this area is still evolving, the prevailing view is that, with certain exceptions, private employers are legally permitted to mandate their employees receive COVID vaccinations as a condition of continuing employment, subject to a variety of considerations related to employee legal, medical, and workplace accommodations. Finally, the federal government might find a federal contractor vaccine mandate a helpful leverage point in the evolving conflict with those states choosing to disregard COVID protections.

Continue reading “Will Federal Contractors Be Required to Certify Employee COVID Vaccinations?”

Under Biden Administration, Will Federal Drug Pricing Transparency Efforts Continue to Outpace State Laws?

Merle M. DeLancey Jr.

During 2019 and 2020, states enacted fewer laws requiring drug manufacturers to disclose pricing and related information. Initially, the slowdown may have been due to federal actions to rein in drug prices through the Trump administration’s multiple executive orders. Thereafter, states were focused on responding to the pandemic and drug pricing was understandably placed on the back burner.

Circumstances have since changed. We now have a new president and administration, and the country is hopefully turning the corner on the COVID-19 pandemic. Inevitably, the federal government and states will again turn their focus to drug prices. While the Trump administration’s executive orders made for good public sound bites, they had little to no actual impact on drug prices. At the end of the day, most of the Trump administration’s initiatives never made it to the regulatory rulemaking phase and those that did were met with legal challenges.

Only a month in, the Biden administration has issued multiple executive orders and memoranda reversing prior executive orders and freezing pending regulations and enforcement policies with respect to existing regulations. After a brief discussion of what we have seen in the early days of the Biden administration in terms of drug pricing, this article reviews new and existing state laws requiring drug manufacturers to report pricing and other information. Thereafter, we again question the efficacy of the state price transparency efforts and what manufacturers should be doing in terms of compliance.

To read or download the full client alert, please click here.

Surviving Proposal Weaknesses after Discussions: What Not to Do

Albert B. Krachman

With apologies to Paul Simon, this is another in a series of articles on the 50 ways contractors can lose awards on federal contracts. These cautionary tales should inform anyone in a contractor organization with responsibility for authorizing, preparing, or negotiating competitive federal contract proposals.

Like the inverse of Steven Covey’s Seven Habits of Highly Effective People bestseller, the mistakes that lead to lost awards are well known and include: carelessness, greed, lack of attention to detail, procrastination, and cursory (or omitted) red-team reviews. This article highlights another surefire path to disaster: failing to adequately correct proposal weaknesses after discussions.

This lesson arises out of a clash between BNA and Lexis, legal search titans, over a U.S. Treasury contract. The combatants were seeking award of a contract for electronic research services for IRS staff, described in a GAO Bid Protest decision, LexisNexis, a Division of RELX Inc., B-418885; B-418885.2 (October 8, 2020).

Treasury’s solicitation required that offerors both describe their search solutions in technical proposals, and have a working computing solution, active for government testing. After initial proposal submissions and initial evaluations, the government advised offerors of weaknesses and deficiencies in their proposals and in their computing solutions. Treasury advised Lexis that its proposal suffered from a significant weakness due to Lexis’ computing solution’s return of erroneous search results. Discussions were opened and offerors were permitted to submit final proposal revisions. Offerors were also permitted to correct any deficiencies in their computing solutions before another round of government testing.

Continue reading “Surviving Proposal Weaknesses after Discussions: What Not to Do”

Blank Rome Government Contracts: 2020 Year-in-Review

As 2021 shifts into high gear, Blank Rome’s Government Contracts practice is pleased to share our 2020 Year-in-Review, covering key government contracts issues, recent practice news and recognitions, and our look at the year ahead.

Thanks to the trust and support of our clients and colleagues and our dedication to our Client Service Principles, we helped guide clients through an unprecedented 2020, and look forward to partnering with them to forge ahead in 2021.

We are particularly proud of Blank Rome’s commitment to diversity, equity, and inclusion, including our practice’s facilitation of the ABA Public Contract Law’s 21-Day Racial Equity Habit-Building Challenge. We will continue to actively support these important issues in 2021 and beyond, and firmly believe our collective and sustained action will make a difference in our profession.

Finally, if you have not already, we invite you and your team to subscribe to this Government Contracts Navigator blog, where we cover issues of importance to our government contracting community. We know there are a lot of blogs out there, but we keep a strong focus on the practical, with day-to-day business considerations in mind. Interested in the greatest hits? We’ve included in this report a list of the top 10 read posts in 2020. You can also follow us on Twitter @GovConBR.

Thank you for reading. And please let us know how we can help you and your business. Wishing you and your families health and success in 2021.

Justin A. Chiarodo
Chair, Government Contracts
202.420.2706 | jchiarodo@blankrome.com

Please visit our website to read our entire Blank Rome Government Contracts: 2020 Year-in-Review.