John M. Clerici and Merle M. DeLancey Jr.
On April 10, 2020, the President issued a Memorandum to the Secretary of the Department of Veterans Affairs (“DVA”) authorizing the exercise of authority under Public Law 85-804, 50 U.S.C. §§ 1431-35. (See Memorandum on Authorizing the Exercise of Authority under Public Law 85-804.) This is a significant action that contractors must understand and be prepared to use for their benefit.
P.L. 85-804’s expansive powers are rarely invoked, used only in unique circumstances that require “extraordinary contractual actions.” See FAR Part 50. President Obama relied on P.L. 85-804 in 2014 when he granted the Administrator of the United States Agency for International Development (“USAID”) the authority to indemnify companies from lawsuits related to contracts performed in Africa in support of USAID’s response to the Ebola outbreak. Because there are now other legal authorities the U.S. Government may use to offer liability protection in certain circumstances (e.g., the SAFETY Act of 2002; the PREP Act of 2005), conferring liability protection under P.L. 85-804 is uncommon. The use of the law to broadly expand the U.S. Government’s contracting powers is truly extraordinary.
P.L. 85-804 authorizes certain federal agencies, including the DVA, to grant broad contractual relief even if the relief is prohibited by other statutes or common law, as long as it “facilitate[s] the national defense.” FAR 50.101-1(a). This authorization allows an agency, for example, to enter into contracts without following procurement procedures typically required by the Federal Acquisition Regulations (“FAR”), or to increase a contract price without consideration. This action essentially gives DVA the authority to contract with private entities without regard to any other law or regulation, including the FAR. Under the statute, agencies may
enter into contracts or into amendments or modifications of contracts heretofore or hereafter made and to make advance payments thereon, without regard to other provisions of law relating to the making, performance, amendment, or modification of contracts, whenever [the President] deems that such action would facilitate the national defense.
50 U.S.C. § 1431 (2018). Generally, the government is prohibited from entering into open-ended indemnification agreements due to the Anti-Deficiency Act. The President’s actions suspend this prohibition with regard to actions taken by the DVA under the April 10, 2020, P.L. 85-804 authorization.
Any contractor seeking to respond or pursue solutions to the COVID-19 pandemic with DVA, which normally would not fit the traditional government contracting paradigm, should ensure that the Agency affirms the actions it is directing are pursuant to this P.L. 85-804 authorization. While this authority provides the U.S. Government the ability to streamline acquisitions to the most expansive possible ways, it also removes any legal or regulatory protections afforded contractors by the FAR and other procurement statutes. The remedy for any monetary or other damages that may occur in these circumstances is limited to a petition for extraordinary relief under P.L 85-804, which essentially is guided by principles of equity rather than guided by express laws or regulations. Thus, while DVA’s potential use of this authority absolutely provides the ability for contract simplicity, it is not without risks that should be analyzed at the time of contract formation and managed throughout performance as much as possible through record keeping and notices to the contracting officer, when appropriate.
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