Preparing for the Rollout of the Cybersecurity Maturity Model Certification: It Is All about the Timing

Michael Joseph Montalbano

The Department of Defense (“DoD”) is expected to begin rolling out the Cybersecurity Maturity Model Certification (“CMMC”) program later this year. As a brief refresher, the CMMC is a certification system implemented by DoD to protect Controlled Unclassified Information (“CUI”) and other sensitive contract information. There are five CMMC levels of ascending sophistication. The most common CMMC levels are expected to be Level 1 and Level 3. Level 1 will require contractors to put into place basic safeguarding practices to protect federal contract information. Level 3 will require contractors to put into place more stringent safeguarding practices that are designed to protect CUI. Contractors receive their CMMC after they pass an assessment by a CMMC Third Party Assessment Organization (“C3PAO”) or an individual assessor.

Although DoD will not fully implement the CMMC program until 2026, more and more contracts will require offerors to hold a CMMC demonstrating that their organizations have implemented the necessary cybersecurity controls. A nightmare scenario for any defense contractor is to find itself unable to compete for a lucrative DoD contract due to insufficient time to obtain the required CMMC before proposal deadlines. Fortunately, the Accreditation Body (“AB”) that is responsible for rolling out the CMMC program has provided estimated timelines for contractors seeking a CMMC. Continue reading “Preparing for the Rollout of the Cybersecurity Maturity Model Certification: It Is All about the Timing”

Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline

Justin A. Chiarodo, Merle M. DeLancey, Jr., and Robyn N. Burrows

We previously discussed key elements of the newly released interim rule (“the interim rule” or “the rule”) implementing Part B of Section 889 (“Part B”), which prohibits the federal government from contracting with entities that use certain Chinese telecommunications equipment. This post provides a more detailed analysis of the scope and application of the rule, as well as five compliance recommendations given the impending August 13th deadline.

Rule Applies to All Contracts Effective August 13, 2020

Part B applies to all solicitations, options, and modifications on or after August 13th, including contracts for commercial items, commercially available off-the-shelf (COTS) items, and contracts at or below both the micro-purchase and simplified acquisition thresholds. Like it did with respect to Part A, GSA intends to issue a Mass Modification requiring contractors to certify compliance with Part B. GSA has also released Q&As and FAQs to assist contractors with Part B implementation. The interim rule acknowledges that Part B will have a broad impact across contractors in a range of industries, including healthcare, education, automotive, aviation, and aerospace. The rule, however, does not apply to federal grant recipients (which are subject to a separate rulemaking). Continue reading “Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline”

Newly Released Interim Rule Implementing Part B of Section 889

Justin A. Chiarodo, Merle M. DeLancey Jr., and Robyn N. Burrows

On July 10, the government issued the    long-awaited Interim Rule implementing Part B of Section 889 (here is a link to the pre-publication version, with the official version soon to follow). Part B prohibits the federal government from contracting with entities that use certain Chinese telecommunications equipment (previously discussed in our blog posts here and here). The Interim Rule is 86 pages and addresses issues related to compliance with Part B, as well as clarifying aspects of Part A.

These are the key points federal contractors need to know:

  • Effective Date: The effective date remains August 13, 2020. The ban applies to solicitations, options, and modifications on or after August 13. However, as we previously discussed, the Department of Defense may allow its contractors more time to comply, despite the statutory deadline.
  • Required Representation: An offeror must represent that, after conducting a reasonable inquiry, it does/does not use covered telecommunications equipment/services.
    • “Reasonable inquiry” means an inquiry designed to uncover any information in the entity’s possession about the identity of the producer or provider of covered telecommunications equipment or services used by the entity. An internal or third-party audit is not required.
  • Scope of “Use”: Applies to the contractor’s use of covered technology, regardless of whether it is used to perform a federal contract. Thus, a contractor’s commercial operations are included.
  • Affiliates/Subsidiaries: The required representation is not applicable to affiliates or subsidiaries at this time. The FAR Council is considering whether to expand the scope of the representation/prohibition to cover an offeror’s domestic affiliates, parents, and subsidiaries. If expanded, it would be effective August 13, 2021.
  • Subcontractors: The ban and required representation are not applicable to subcontractors at this time. The ban only applies at the prime contractor level and does not include a flow down obligation.
  • Detailed Waiver Process: The Interim Rule includes a detailed and complex process for seeking a waiver (really a two-year delayed application).
  • Suggested Compliance Steps: The Interim Rule suggests contractors adopt a “robust, risk-based compliance approach” to include educating personnel on the ban and implementing corporate enterprise tracking to identify covered equipment/services.

Regulators are still seeking feedback from industry, which suggests the government’s willingness to incorporate changes in a final rule. But prime contractors need to act now. In the next 30 days, prime contractors need to determine through a “reasonable inquiry” whether they use covered equipment, regardless of whether that use relates to performance of a federal contract. To demonstrate a reasonable inquiry, contractors should memorialize all steps taken and decisions made in performing the inquiry.

A more detailed analysis is forthcoming. In the meantime, if you have any questions regarding compliance, please contact one of Blank Rome’s Government Contracts practice group attorneys for guidance.

Tricare Providers Are Not Federal Subcontractors

Merle M. DeLancey, Jr.

The Office of Federal Contract Compliance Programs (“OFCCP”) ended a long-running controversy by issuing a final rule stating that healthcare providers participating in the TRICARE military healthcare program are not federal subcontractors. TRICARE provides healthcare benefits to uniformed service members, retirees, and their families. In its final rule, the OFCCP, which enforces anti-discrimination laws as to government contractors, states that it does not have authority to enforce regulatory obligations in Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, including affirmative action obligations, with respect to TRICARE providers.

Controversy regarding the status of TRICARE providers as potential federal subcontractors began in 2007 when OFCCP first asserted its authority over an Orlando, Florida, hospital serving TRICARE beneficiaries. Years of litigation ensued. In 2011, Congress sought to resolve any confusion by including a provision in the National Defense Authorization Act for Fiscal Year 2012 barring the OFCCP from asserting jurisdiction over a healthcare provider based on TRICARE participation.

Notwithstanding Congress’ clear intent to foreclose OFCCP’s further assertions of jurisdiction based solely on TRICARE, the agency continued its enforcement efforts. Eventually, perhaps seeing the writing on the wall, in 2014, the agency implemented a five-year moratorium on enforcement actions against TRICARE providers. In 2018, OFCCP extended the moratorium an additional two years during which, in November 2019, the agency initiated a proposed rulemaking leading to its final rule issued earlier this month.

The OFCCP’s final rule makes clear, for now, that TRICARE providers are not required to comply with certain employment protections involving race, sex, and other characteristics, including implementing affirmative action plans. In the final rule, the agency states that even if it had authority over TRICARE providers, it would grant a national interest exception for the providers.

According to the agency, the final rule gives certainty to more than 87,000 healthcare providers regarding their legal obligations and aims to improve access to medical care for veterans and their families, increase cost savings for TRICARE providers, and allocate the agency’s limited resources more efficiently.

The final rule only applies to healthcare providers under the TRICARE program. To the extent a healthcare provider has a separate federal prime contract or subcontract, it is still subject to the agency’s rules and regulations. Thus, if you are a TRICARE provider, you can breathe a sigh of relief but you must remain vigilant regarding direct contracts with other federal agencies and, more importantly, scrutinize whether subcontracts involving federal healthcare programs, other than TRICARE, could nonetheless make you a federal subcontractor subject to OFCCP’s rules and regulations and other Federal Acquisition Regulations. Our previous guidance in this area can be found in our blog post, Who Is a Subcontractor under a Federal Government Contract? 

What Does a Potential One-Year Delay for Part B of Section 889 Mean for Your Compliance Efforts?

Justin A. Chiarodo, Merle DeLancey Jr., and Robyn N. Burrows

In remarks to Congress and statements this week, the Department of Defense (“DoD”) announced that it is considering a one-year delay for full implementation of Part B of the Section 889 ban (we previously summarized the ban, which prohibits the government from contracting with entities using certain Chinese telecommunications equipment, here). The ban is currently scheduled to go into effect on August 13, 2020. What does this welcome development mean for contractors? We think it warrants prioritizing near-term compliance efforts to high-risk areas, pending forthcoming rulemaking that will provide needed specifics on the way forward.


During June 10 remarks before the House Armed Services Committee, Undersecretary for Acquisition and Sustainment Ellen Lord expressed the DoD’s full support for the intent of Section 889, but admitted she is “very concerned” about being able to accomplish Part B implementation by August 13. As to whether the DoD can meet the current timeline given COVID-19 disruptions and the lack of an interim rule, Ms. Lord acknowledged that “we need more time” for contractors to comply.

Following the undersecretary’s testimony, the DoD announced that it is considering adding contract language giving its suppliers an additional year to reach full compliance with Part B. Though not final, the DoD’s proposed delay could relieve DoD contractors from full compliance with the impending August deadline. We anticipate this approach would be similar to the phase-in period for compliance with the Defense Federal Acquisition Regulation Supplement Safeguarding and Cyber Incident Reporting clause. It is not yet clear whether the Office of Management and Budget, which currently has the draft interim rule for Part B, will incorporate a delayed implementation into that forthcoming rule.

The DoD also signaled that it is poised to advocate for a more risk-based approach to Part B implementation and rulemaking. During her testimony, Ms. Lord expressed concern with the “unintended consequences” of a minor infraction several layers deep within the supply chain potentially shutting down major portions of the defense industrial base by disqualifying key prime contractors from doing business with the federal government. The DoD suggested that the use of a risk-based approach may be useful to achieve effective implementation. The DoD’s consideration of a risk-based approach indicates that it is equally concerned about its contractors’ ability to comply with a strict application of Part B.

How DoD’s Announcements Inform Compliance Efforts with Part B

Without an interim rule and with less than two months before the statutory August deadline, how should contractors begin implementing Part B? Given the DoD’s recent comments suggesting a risk-based approach, contractors should consider adjusting their Part B implementation efforts using a risk assessment framework, prioritizing high-risk areas. That is, contractors should identify the extent to which telecommunications or video surveillance equipment is used to support government contracts, the nature of that work, and the frequency with which the technology is used.

The nature of the product’s telecommunication function also informs its risk potential. For example, computers, routers, phones, and network equipment can generally be considered a higher priority area than technology that, although technically subject to the ban, presents a moderate to low cybersecurity risk, depending on the nature and frequency of use (e.g., HVAC systems, fax machines, copiers, scanners).

Contractors should also communicate with key suppliers to ensure that they are aware of the rule and are similarly working to prepare for Part B.

Although the DoD’s statements are welcome news—and reflect that the government is mindful of the challenges presented by the ban—the DoD remains committed to Section 889 and contractors should proceed accordingly.

Nothing Is Certain except Death, Taxes, and Now COVID-19 Contracts and Relief Funding Audits

Merle M. DeLancey Jr.

Despite COVID-19 article overload—and understandable fatigue—there is no doubt that there will be substantial audit activity related to COVID-19 contracts and receipt of relief funding. All of the ingredients for a Perfect Storm are present: unprecedented federal and state spending causing significant government budget deficits, coupled with hyper-partisan politics, and the creation of multiple government audit functions. Add in revenue-stressed government contractors perhaps focusing less on compliance, with a workforce working remotely, and you have everything necessary for a Perfect Storm. Let’s face it, the press and politicians are—or will be—on the lookout for relief funds and sweetheart contracts awarded to companies with cozy relationships with the executive branch, contracts that didn’t provide the intended benefit, and contracts and relief funds that have otherwise already received media attention.

There is nothing you can do to prevent an audit, but you can be prepared.  Below are some very general guidelines you can follow now to make your life easier in the future if you do become the target of an audit or potential audit.

  1. Memorialize Everything. Too many things are happening too fast.  Information that you think you will remember (so you don’t bother to write down or don’t write down with sufficient detail) will be forgotten. Audits can occur two, three, or even five years after the fact. Memories fade. Employees retire or move on.
  2. Ensure You Have Contracting Officer Approvals. Only contracting officers have warrants and only they can authorize changes to contracts that affect dollars, schedule changes, deliverables, and requirements. If you didn’t get contracting officer approval at the time, go back and request approval (in writing) now.
  3. Establish Commonsensical and Clear Labeling. At some point in time, you have moved to a new home and someone has told you to take an extra 30 seconds to add more detailed descriptions on your boxes. For example, while the label “closet” seemed adequate when packing-up, it is not useful when you are looking for bed sheets to sleep on at midnight for the first night in your new home. The same is true with government contracts. Simply labeling a folder or e-mail “HHS contract” is better than nothing, but it is not very helpful when trying to locate a specific conversation or contract modification.
  4. Centralize Contract Files for a Later, Easy Location. It is of no value to maintain documents and records if you cannot find them. Establish standard operating procedures (“SOPs”) so that someone walking in off the street two years from now can read them and easily understand where files are located.
  5. Archive E-mails to Avoid Automatic Deletion Programs. Company information technology systems are overwhelmed. As a result, many companies have implemented programs that automatically delete e-mails after a certain period of time. Design an SOP so that relevant government contracting e-mails are archived in a manner to avoid deletion.
  6. Perform Periodic Internal Spot Reviews. Simply having a compliance policy and procedures are no longer enough. You need to periodically confirm that the policy and procedures are being followed—and are effective. Conduct periodic spot checks and memorialize the results. Remember, the only thing worse than not having a compliance program, is having a program and not following it.
  7. Conduct Exit Interviews and Laptop Ghosting. Know how to find former employees. Don’t simply accept a former employee’s laptop, clean it, and reissue it to another employee. Take the extra time to ghost the laptop and save the contents in a place that you can locate at a later date (again, think two years from now). In addition, take the time to interview departing employees and, among other information, determine the location (hard and soft copy) of relevant government contracting files.

It makes no sense to work hard to win these contracts, help a state or the federal government respond to the COVID-19 national emergency, and record revenue today to only years later have to give back the money you earned because you don’t have documents in your contract files to substantiate information requested by an auditor. To be clear, auditors may be very nice people, but they don’t care that you did a great job and helped an agency achieve its mission. Auditors have a job to do. They have checklists to follow. If the required documents are not provided or available, they cannot and will not check the box. Rather, they will tell you to provide your explanation to the next level of review. Take the time now and follow the above guidelines to protect yourself. You will hate it now and claim that there just isn’t enough time in the day but, if and when you get that audit request, you will be thankful.

12 Steps for Reducing CARES Act Enforcement Risks

William E. Lawler III, Gregory F. Linsin, Justin A. Chiarodo, Dominique L. Casimir, and Sara N. Gerber

The Coronavirus Aid, Relief and Economic Security, or CARES, Act provides more than a trillion dollars in relief to both small and large businesses in the form of loans, grants and tax credits, designed to quickly stabilize the economy during the ongoing crisis.

But this is not free money: The CARES Act also includes a robust oversight and enforcement regime to enable the government to combat fraud, waste and abuse. Experience shows that when this much government money is being spent, there will be investigations and enforcement actions.

The CARES Act is complex with evolving regulatory guidelines, and this increases the potential for missteps by companies trying to take advantage of the program’s benefits while navigating program requirements. How can companies manage this uncertainty and reduce the risk of becoming an enforcement target?

We offer 12 suggested steps.

To read the full article that was published in Law360 on May 11, 2020, please click here.

Veterans Affairs Granted Unprecedented Procurement Authority under P.L. 85-804

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. Continue reading “Veterans Affairs Granted Unprecedented Procurement Authority under P.L. 85-804”

VA Federal Supply Schedule Contracts and the Coronavirus

Merle M. DeLancey Jr.

In response to the coronavirus COVID-19 pandemic, the Department of Veterans Affairs (“VA”) has relaxed procurement rules and regulations to facilitate purchases from VA federal supply schedules (“FSS”). On March 20, 2020, the VA National Acquisition Center (“NAC”) informed all VA FSS holders that, based upon the President’s invocation of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the “Stafford Act”), state and local governments, territories, and tribes have full access to VA FSS contracts. See Presidential Declaration of National Emergency COVID-19 – State and Local Government Ordering Procedures.

Thus, even if a contractor did not elect to participate in Disaster Recovery Purchasing at the time of contract award, contractors are now permitted to accept any orders by state and local governments. However, whether to accept any state or local government order is voluntary not mandatory. Continue reading “VA Federal Supply Schedule Contracts and the Coronavirus”

GSA Federal Supply Schedules Contracts and the Coronavirus: Risks and Rewards

Merle M. DeLancey Jr.

On March 19, 2020, the General Services Administration (“GSA”) issued guidance regarding its process for issuing Defense Priorities and Allocation System (“DPAS”) Rated Orders. Significantly, however, GSA reminded its contracting officers that “[e]xisting Government sources of supply and contract vehicles should be considered first. Check to see if the required supplies are available.” See gsa.gov/buying-selling/purchasing-programs/gsa-schedules/gsa-schedule-offerings/consolidated-schedule/industrial-products-services-category and gsaadvantage.gov/advantage/search/specialCategory.do?cat=ADV.DR. GSA federal supply schedules (“FSS”) can be a contracting officer’s one-stop shop for protective equipment, disinfectants, hand sanitizers, and other products and supplies to combat the coronavirus COVID-19. The GSA FSS also offers a variety of solutions for agencies looking for teleworking options. See gsa.gov/buying-selling/purchasing-programs/gsa-schedules/gsa-schedule-offerings/consolidated-schedule/professional-services-category.

The largest active buyer in the market right now remains the federal government. FSS is an important tool for the government to get supplies and services, but do not be fooled. With these potential opportunities, there also are potential risks for FSS contractors that fail to follow the terms and conditions of their FSS contracts and/or seek to cut corners.

As is often the case, FSS vendors go above and beyond to provide services or deliver supplies to federal agencies to respond to emergency situations like the COVID-19 pandemic. As is also the case, months later, after the dust settles, agency offices of inspector general arrive to audit contracts. Inevitably, in the effort to expeditiously fill government orders, things get overlooked or ignored, and “but I was helping the agency fulfill its mission in response to a pandemic” is not a defense that will resonate with government auditors.

Based upon our experience, here are some tips for FSS vendors to follow and/or traps to avoid: Continue reading “GSA Federal Supply Schedules Contracts and the Coronavirus: Risks and Rewards”