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? 

Adapting JV Proposal Strategies after GAO Downgrade Ruling

Albert B. Krachman

A recent U.S. Government Accountability Office decision involving a Small Business Administration-approved small business joint venture, or JV, suggests that JVs between large and small firms should adjust their proposal strategies to avoid downgrades on past performance when the small business JV member, and the JV itself, lack relevant past performance.

Background

Proposing on a set-aside contract as an SBA-approved JV between a small and large business has been an effective strategy for many years. A basic assumption of this approach—and a primary motivation for using a JV structure—has been that an agency evaluating the JV’s past performance would normally look at the combined past performance of the JV members.

In many respects, this evaluation assumption has been a main motivation for using the JV structure, in contrast to a prime-subcontractor structure.

Typically, the large business JV member will have greater and more relevant past performance than the small business. The thinking had been that the JV structure would allow both members to leverage the large JV partner’s past performance for evaluation purposes by imputing the large business’ past performance to the JV.

However, the recent GAO bid protest decision in ProSecure LLC calls this assumption into doubt, suggesting the need for adjustments to proposal strategies for large and small firms in JVs or that plan to use JVs.

To read the full article, please click here.

“Adapting JV Proposal Strategies after GAO Downgrade Ruling,” by Albert B. Krachman was first published in Law360 on June 17, 2020.

Spring Cleaning for Government Contractors? Think Compliance.

Merle M. DeLancey Jr.

If you’re like me, it’s the time of year when you clean out your garage and closets and do all those outside projects you delayed until the weather warmed up. If you are a government contractor, you should consider this to be the season to do some spring cleaning in terms of your government contract compliance programs and procedures. Not to be an alarmist, but there are numerous areas you can review now and, if you should find some compliance deficiencies, you still have ample time to get your house in order before an agency audit or the deadline for submission of certain government reports.

Set forth below is a list of areas you may want to clean up: Continue reading “Spring Cleaning for Government Contractors? Think Compliance.”

Top 10 Trends and Compliance Obligations in the Evolving World of Commercial Item Procurement

Blank Rome Partner Justin A. Chiarodo will be a presenter at BDO’s Winter 2019 Marketplace Outlook Update for Government Contractors, “Top 10 Trends and Compliance Obligations in the Evolving World of Commercial Item Procurement.” This live webinar will take place Thursday, February 28, 2019, from 12:30 to 1:30 p.m. EST.

For more information, please visit our website.

Who Is a Subcontractor under a Federal Government Contract?

Merle M. DeLancey Jr.

Recently, clients have asked if they or a vendor or supplier are a “subcontractor” under a federal government contract. Sometimes the answer is easy—e.g., you are a subcontractor when a prime contractor contracts directly with a vendor or supplier (hereinafter “vendor”) to perform a federal contract. But the lines become less clear when a prime contractor does not inform the vendor that the subcontract is being entered into in furtherance of a federal government contract or where the vendor supplies goods that the prime contractor uses to perform commercial and government contracts.

Why Is Subcontractor Status Important?

Subcontractor status is important to prime and subcontractors. A federal prime contractor is required to flow-down multiple Federal Acquisition Regulation (“FAR”) clauses to its subcontractors. See FAR 52.212-5(e). The required flowdown clauses that receive the most attention implement three antidiscrimination laws: Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, as amended; 29 U.S.C. § 793; and Section 402 of the Vietnam Era Veterans’ Readjustment Assistance Act, 38 U.S.C. § 4212. A prime contractor’s failure to flow down these clauses to its subcontractors could result in the prime contractor being held responsible and/or liable for its subcontractor’s noncompliance. Continue reading “Who Is a Subcontractor under a Federal Government Contract?”

New Rules Affecting Veteran-Owned Small Businesses (Important to Large Businesses, Too)

Merle M. DeLancey Jr.

Effective October 1, 2018, verification of Veteran-Owned Small Businesses (“VOSBs”) and Service-Disabled Veteran-Owned Small Businesses (“SDVOSBs”) now rests with the Small Business Administration (“SBA”). (See, VA Veteran-Owned Small Business (VOSB) Verification Guidelines.) Previously, the SBA and the Department of Veterans Affairs (“VA”) had concurrent jurisdiction over VOSB/SDVOSB “ownership” and “control” determinations. This led to the confusing and inconsistent results. Now, the VA will no longer vet (pun intended) contractors to determine if they are eligible VOSBs or SDVOSBs. Exclusive authority to verify these businesses is now with the SBA. The new rule clarifies the VA verification process and makes VA and SBA regulations concerning VOSB and SDVOSB joint ventures consistent. The new rule stems from the Fiscal Year 2017 National Defense Authorization Act, Public Law 114-840, which called for the SBA and VA to eliminate inconsistent regulatory interpretations of “ownership” and “control” requirements for VOSBs and SDVOSBs. Continue reading “New Rules Affecting Veteran-Owned Small Businesses (Important to Large Businesses, Too)”