Our September edition of "Government Contracts Legislative and Regulatory Update" offers a summary of the relevant changes that took place during the month of August.
Highlights this month include:
- FY 2019 National Defense Authorization Act Signed into Law
- FAR Council Issues Final Rule Regarding Paid Sick Leave for Federal Contractors (FAR Case 2017-001)
- FAR Council Issues Final Rule for Non-Retaliation for Disclosure of Compensation Information (FAR Case 2016-007)
- DoD Issues Final Rule Repealing Technical Interchange Requirement for IR&D
- DoD Issues Proposed Rule Regarding Contractor Completion of Anti-Terrorism Awareness Training
- DoD Issues Proposed Rule Clarifying Applicability of Buy American Exceptions to Photovoltaic Devices
- DOD Issues Proposed Rule Regarding Performance-Based Payments
- DoD Issues Proposed Rule to Allow More Than Five Offerors on Two-Phase Design-Build Solicitations
FY 2019 National Defense Authorization Act Signed into Law
As previously reported, President Trump signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA) into law (Pub. L. No: 115-232) on August 13, 2018. Our insight regarding key provisions of the NDAA is available here.
FAR Council Issues Final Rule Regarding Paid Sick Leave for Federal Contractors (FAR Case 2017-001)
On August 22, 2018, DoD, GSA, and NASA converted to a final rule, without change, the interim rule that promulgated the paid sick leave regulations applicable to certain government contracts. The interim rule, issued on December 16, 2016, amended the FAR to implement Executive Order (EO) 13706 and a Department of Labor final rule, both titled Establishing Paid Sick Leave for Federal Contractors, which Dentons previously analyzed. The interim rule applied to contracts and subcontracts at all tiers covered by the Service Contract Labor Standards statute, or the Wage Rate Requirements (Construction) statute, which require performance in whole or in part within the United States. For procurement contracts where employees' wages are governed by the Fair Labor Standards Act, the interim rule applied when the contract exceeded the micro-purchase threshold, as defined in FAR 2.101. The rule required contractors to allow all employees performing work on or in connection with a contract covered by the EO to accrue and use paid sick leave in accordance with EO 13706 and 29 CFR Part 13. As a result, covered employees could earn up to 7 days or more of paid sick leave annually, including paid sick leave for family care. Government contractors are subject to these requirements when their contracts include FAR 52.222-26, Paid Sick Leave Under Executive Order 13706. These provisions were already in effect because of the prior interim rule, but now have been adopted as final in the FAR. (83 Fed. Reg. 42569, Aug. 22, 2018.)
FAR Council Issues Final Rule for Non-Retaliation for Disclosure of Compensation Information (FAR Case 2016-007)
On August 22, 2018, DoD, GSA, and NASA adopted as final, without change, an interim rule amending the FAR to implement EO 13665, Non-Retaliation for Disclosure of Compensation Information. The interim rule, originally issued on September 30, 2016, also implemented a final rule issued by the Department of Labor. The interim rule made adjustments to FAR Subpart 22.8, FAR 52.222-26, Equal Opportunity, and related clauses. For example, it added the discrimination prohibition at FAR 22.802. It also added definitions to FAR 52.222-26 for the terms "compensation," "compensation information," and "essential job functions." It also added paragraph (c)(5) to FAR 52.222-26, prohibiting contractors from discharging, or in any manner discriminating against, any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. These provisions were already in effect based on the prior interim rule, but now have been adopted as final in the FAR. (83 Fed. Reg. 42570, Aug. 22, 2018.)
DoD Issues Final Rule Repealing Technical Interchange Requirement for IR&D
On August 24, 2018, DoD issued a final rule to remove the technical interchange requirement for major contractors that intend to generate independent research and develop (IR&D) costs. The final rule removes the text at DFARS 231.205-18(c)(iii)(C)(4). This provision required major contractors to engage in and document a technical interchange with the Government prior to generating IR&D costs for IR&D projects initiated in fiscal year 2017 and later, in order for those costs to be determined allowable. With the promulgation of the final rule, major contractors no longer are required to participate in technical interchanges to ensure their IR&D costs will be allowable. The final rule follows Class Deviation 2017-O0010 issued by Director of Defense Pricing Shay Assad, dated September 14, 2017 and discussed by Dentons here, which removed the requirement for major contractors to engage in and document technical interchanges with DoD. (83 Fed. Reg. 42787, Aug. 24, 2018.)
DoD Issues Proposed Rule Regarding Contractor Completion of Anti-Terrorism Awareness Training
On August 24, 2018, DoD issued a proposed rule which would require covered contractors to complete Level I antiterrorism awareness training. It would create a new subpart in the DFARS to advise contracting officers of the training requirement, the authorized sources of training, and when training must be completed by contractors. This subpart also prescribes a new DFARS clause 252.204-7XXX, Antiterrorism Awareness Training for Contractors, for use in all solicitations and contracts, including those for the acquisition of commercial items, when contractor personnel will require routine physical access to a Federally-controlled facility or military installation. The new DFARS clause would also advise contractors of the training requirements, provide a reference to additional information and guidance available on the internet, and instruct contractors to include the clause in all subcontracts. (83 Fed. Reg. 42820, Aug. 24, 2018.)
DoD Issues Proposed Rule Clarifying Applicability of Buy American Exceptions to Photovoltaic Devices
On August 24, 2018, DoD issued a proposed rule to implement a FY 2018 NDAA provision that repeals the FY 2015 NDAA restrictions on the source of photovoltaic devices in contracts awarded by DoD that result in DoD ownership of photovoltaic devices by means other than DoD purchase of the photovoltaic devices as end products. The FY 2018 NDAA repealed Section 858 of the FY 2015 NDAA because that section did not specifically reference the Buy American statute. Consequently, the exceptions available under the Buy American statute did not automatically apply to photovoltaic devices provided under covered contracts. Reflecting this change, the proposed rule essentially reinstates the DFARS regulations as they existed prior to Section 858 of the FY 2015 NDAA except for certain minor residual provisions. (83 Fed. Reg. 42822, Aug. 24, 2018.)
DoD Issues Proposed Rule Regarding Performance-Based Payments
On August 24, 2018, DoD issued a proposed rule to implement a section of the National Defense Authorization Act for Fiscal Year 2017, which addresses the preference for performance-based payments, and to streamline the performance-based payment process. The proposed rule would also amend the DFARS to revise progress payments and performance-based payments policies for DoD contracts. These revisions would provide an opportunity for small entities to qualify for increased customary progress payment rates and maximum performance-based payment rates based on whether the offeror/contractor has met certain performance criteria. The proposed rule would also delete the current regulations relating to performance-based payments at DFARS Subpart 232.10 and the associated clauses at DFARS 252.232-7012, Performance-Based Payments—Whole Contract Basis, and DFARS 252.232-7013, Performance-Based Payments—Deliverable Item Basis. Under the proposed rule's new provisions, a customary progress payment rate of 50 percent would apply for other than small businesses, the 90 percent rate would apply for small businesses, and it provides criteria by which contractors can achieve a customary progress payment rate of up to 95 percent. (83 Fed. Reg. 42831, Aug. 24, 2018.)
DoD Issues Proposed Rule to Allow More Than Five Offerors on Two-Phase Design-Build Solicitations
On August 24, 2018, DoD issued a proposed rule to implement Section 823 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. 115-91). Section 823 amended 10 U.S.C. § 2305a to allow for more than the maximum number of five offerors without submission of a justification to the head of the contracting activity when a solicitation is issued using two-phase design-build selection procedures for an indefinite-delivery, indefinite-quantity (IDIQ) contract that exceeds $4 million. The proposed rule implements Section 823 by adding a new DFARS section 236.303-1(a)(4), to be used in lieu of the procedures at FAR 36.303-1(a)(4), which would provide new authority to exceed the five-offeror maximum when the solicitation is for an IDIQ contract that exceeds $4 million and states that the number of offerors is at the contracting officer's discretion when the solicitation is for a contract that does not exceed $4 million. (83 Fed. Reg. 42850, Aug. 24, 2018.)
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