DoD Offers Guidance for Contractors on Inflation and Economic Price Adjustment Clauses

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Amanda C. DeLaPerriere 

On May 25, 2022, the Department of Defense (“DoD”) issued a memorandum recognizing that contractors are not immune from the “period of unusually high” inflation. The memorandum, titled “Guidance on Inflation and Economic Price Adjustments,” provides guidelines on when relief from cost increases due to inflation is appropriate and provides considerations for the proper use of economic price adjustment (“EPA”) clauses when entering into new contracts.

For existing DoD contracts, whether contractors can get relief from inflation depends on the type of contract.

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Proposed Bill Would Bar Contractors from Conducting Business in Russia

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Robyn N. Burrows

On March 21, 2022, Representative Carolyn B. Maloney (D-NY), Chairwoman of the House Oversight and Reform Committee, introduced the “Federal Contracting for Peace and Security Act” (H.R. 7185). In light of Russia’s military invasion of Ukraine, the proposed bill would prohibit federal agencies from contracting with companies operating in Russia. The Committee approved an amended version on April 6, and the bill will be sent to the House of Representatives for further consideration. If passed, the bill would have a significant impact on government contractors that continue to operate in Russia by terminating existing contracts and barring them from further contracting opportunities.

We provide below an overview of the key elements of the bill. We anticipate further clarifications as the bill proceeds through the legislative process. Contractors should closely monitor these developments as this legislation will likely pose challenges to companies seeking to quickly disentangle themselves from any ongoing Russian business.

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GSA Relaxes Price Increase Limitations for FSS Contractors

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Merle M. DeLancey Jr. and Sara N. Gerber


The General Services Administration (“GSA”) Office of Governmentwide Policy recently authorized contracting officers to provide relief to GSA contractors experiencing cost increases due to surging inflation. See Acquisition Letter. To assist struggling contractors, GSA issued a temporary moratorium on the enforcement of certain limitations contained in GSA economic price adjustment (“EPA”) clauses.

GSA issued the moratorium in response to an uptick in contractors’ requests for price increases and removal of items from their Federal Supply Schedule (“FSS”) contracts to avoid selling at a loss. In issuing the moratorium, GSA recognized that inflationary pressures and price volatility, caused by supply chain disruptions, strong demand, and labor shortages, are ongoing concerns unlikely to abate in the near term. GSA acknowledged that it must help contractors weather this “unusual time”—especially small businesses and new market entrants—to ensure a resilient and diverse federal industrial base and the government’s continued access to critical “products, services, and solutions.”

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New Federal Circuit Guidance Regarding Patent and Latent Ambiguities

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Stephanie M. Harden, Patrick F. Collins, and Ustina M. Ibrahim*

Stephanie Harden's Headshot Photo

Ambiguities in a solicitation or contract have long been one of the greatest traps for unwary contractors. At the solicitation phase, a failure to identify a “patent” (i.e., obvious) ambiguity often results in the contractor losing the competition with no viable bid protest challenge. This is because such ambiguities are construed in the agency’s favor. A contractor seeking to recover added costs based upon an ambiguous contract term will be unable to recover such costs if the ambiguity is “patent” and the Government disagrees with the contractor’s interpretation.

Traditional Test for Patent vs. Latent Ambiguities

So how does one distinguish between “patent” and “latent” ambiguities? Numerous Federal Circuit authorities tell us that a patent ambiguity arises where there is “an obvious omission, inconsistency or discrepancy of significance” that “could have been discovered by reasonable and customary care.” E.g., Per Aarsleff A/S v. United States, 829 F.3d 1303, 1312-13 (Fed. Cir. 2016) (internal quotations omitted). By contrast, a latent ambiguity is a “hidden or concealed defect which is not apparent on the face of the document, could not be discovered by reasonable and customary care, and is not so patent and glaring as to impose an affirmative duty on plaintiff to seek clarification.” Id. (internal quotations omitted).

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Buy American Act—Final Rule: What Has Changed?

Scott Arnold and Ustina M. Ibrahim*

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On March 7, 2022, the FAR Council published the final rule containing changes to Buy American Act (“BAA”) domestic preference requirements.

This final rule is a significant step towards implementation of a policy to enhance domestic preferences announced by President Biden in E.O. 14005 just a few days after taking office. You may recall that the FAR Council previously issued a proposed rule that contemplated (1) phased increases in domestic content thresholds, (2) enhanced preferences for critical products and components, and (3) post-award reporting requirements for critical products and components. See our prior posts addressing President Biden’s E.O. 14005 and the proposed rule.

The final rule retained most of what the FAR Council initially proposed, but there are a few changes that we discuss below. We also point out some aspects of the new policy that remain to be fleshed out in future rulemaking.

Increased Domestic Content Thresholds

The proposed rule contemplated increasing the current domestic content threshold from 55 percent to 60 percent, with subsequent increases to 65 percent and 75 percent beginning in calendar years 2024 and 2029, respectively. The final rule retains these increases but allows for a longer period than typically provided before the first increase to 60 percent becomes effective. The 60 percent threshold will take effect October 25, 2022—over six months after publication, rather than the customary 30 or 60 days after publication. Thus, contractors and agencies have several more months to plan for the new threshold.

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Government Contractor FAQ: What’s up with the Vaccine Mandates?

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Scott ArnoldJustin A. ChiarodoStephanie M. Harden, and Samarth Barot

Lawsuits challenging the Biden Administration’s many vaccine mandates have changed the compliance landscape over the last few months. This post summarizes the current status of the four major mandates:

      1. Occupational Safety and Health Administration (“OSHA”) mandate;
      2. Healthcare Worker mandate;
      3. Federal Employee mandate; and
      4. Federal Contractor mandate.

Spoiler alert: The Federal Contractor mandate–which has caused the most significant confusion for Government contractors since its issuance–still does.

1. OSHA Mandate

OSHA’s Emergency Temporary Standard (“ETS”) required that all employees of employers with 100 or more employees either be fully vaccinated or wear a mask and submit to weekly COVID‑19 testing. On January 13, 2022, the Supreme Court upheld a preliminary injunction of the OSHA mandate, finding that it likely exceeded OSHA’s authority.

Status: Withdrawn (OSHA announced that it was withdrawing the ETS on January 26, 2022).

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Expect GSA to More Closely Scrutinize Trade Agreements Act Compliance

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Merle M. DeLancey Jr.

On January 21, 2022, the General Services Administration (“GSA”) Office of Inspector General (“OIG”) informed the Federal Acquisition Service (“FAS”) that ongoing monitoring by the OIG found that the FAS failed to properly monitor the sale of products for compliance with the Trade Agreements Act (“TAA”) during the COVID-19 response. Previously, in April 2020, GSA relaxed compliance with the TAA for a limited number of Federal Supply Classes (“FSCs”) to aid the government’s response to the COVID-19 pandemic. The applicable FSCs included those covering N95 masks, cleaners and disinfectants, disposable gloves, and hand sanitizers. After several extensions, the TAA exception policy expired on April 30, 2021.

The OIG identified two deficiencies in FAS’ implementation of the TAA exception policy. First, the OIG found that FAS failed to properly track the addition of non-compliant products to contracts. As a result, after expiration of the exception policy, there was no effective way for GSA to remove the non-compliant products from contracts. Second, the OIG found that GSA improperly permitted the addition of non-compliant products to GSA contracts. For example, some products that were added were unrelated to the government’s response to the pandemic; some products were added to GSA contracts prior to the effective date of the TAA exception policy; and, remarkably, in one case, a product was added to a contract that identified North Korea as its country of origin.

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Affirmative Action Program Compliance Alert: OFCCP Online Contractor Portal

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Merle M. DeLancey Jr.

Beginning February 1, 2022, contractors and subcontractors required to maintain affirmative action plans (“AAPs”) can register for access to a new secure online contractor portal. The portal was developed and will be monitored by the Office of Federal Contract Compliance Programs (“OFCCP”). OFCCP has been working on an information and verification process for three years. In August 2021, the Office of Management and Budget approved OFCCP’s use of the portal. The portal provides contractors a secure method of (i) annually certifying compliance with AAP requirements and (ii) submitting AAPs to OFCCP during audits or compliance evaluations.

Executive Order 11246 and Section 503 of the Rehabilitation Act of 1973 require contractors and subcontractors that hold a contract valued at $50,000 or more and employ 50 or more employees to comply with equal employment and affirmative action requirements. This includes developing and maintaining written AAPs. Currently, only services and supply contractors, not construction contractors, are required to certify compliance.

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Government Contractor Q&A: Impact of Nationwide Injunction Prohibiting Enforcement of Federal Contractor Vaccine Mandate

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Scott ArnoldJustin A. Chiarodo, and Stephanie M. Harden

Stephanie Harden's Headshot Photo

Yesterday the U.S. District Court for the Southern District of Georgia issued a preliminary injunction against enforcement of Executive Order (“EO”) 14042, under which prime contractors and subcontractors are required to ensure that all of their employees working “on or in connection with” covered federal contracts are fully vaccinated against COVID-19 (“Vaccine Mandate”). The order was issued in a lawsuit filed by the States of Georgia, Alabama, Idaho, Kansas, South Carolina, Utah, and West Virginia; governors of several of those states; and various state agencies that challenged the Biden Administration’s authority to issue the Vaccine Mandate. In its decision, State of Georgia, et. al. v. Biden, No. 1:21-cv-163, the court agreed with the plaintiffs’ argument that the Administration improperly relied on the Federal Property and Administrative Services Act (“FPASA”) to issue the Vaccine Mandate, concluding that the FPASA’s authorization for the President to impose policies to promote economy and efficiency in procurement did not extend to polices focused primarily on public health.

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The Federal Contractor Vaccine Mandate: What You Need to Know

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WATCH WEBINAR RECORDING
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Brian S. Gocial, Stephanie M. Harden, and Frederick G. (“Gus”) Sandstrom

Stephanie Harden's Headshot Photo
Gus Sandstrom's headshot photo

Blank Rome LLP and the National Defense Industrial Association (“NDIA”) Delaware Valley Chapter are pleased to present this new live webinar on Monday, December 6, 2021, from 12:00 to 1:00 p.m. EST.

The rules and guidance around the federal contractor COVID-19 vaccine mandate are changing by the day. Please join Blank Rome’s Government Contracts and Labor & Employment attorneys for timely analysis of what federal contractors need to be prepared, including an in-depth discussion of:

  • Latest guidance: What do prime contractors need to know to comply? 
  • Which of my employees are covered by the mandate? 
  • Does the mandate apply to subcontractors? 
  • How do I deal with exemption requests? 
  • What should I do if my workforce is not fully vaccinated?

PRESENTERS

ABOUT NDIA

The National Defense Industrial Association drives strategic dialogue in national security by identifying key issues and leveraging the knowledge and experience of its military, government, industry, and academic members to address them. You can learn more about them on their website.

QUESTIONS? Please contact Alena Leon, Business Development Consultant.

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