United States: Year In Review: Regulatory Developments

Last Updated: January 26 2016
Article by Cynthia O. Akatugba and Michael C. Mateer

As part of our Year in Review series, we are highlighting the most significant federal regulations of 2015 and summarizing the resulting requirements for federal contractors.

I. Cybersecurity

Cybersecurity was a hot topic in 2015—for good reason.  Following massive data breaches at Fortune 500 companies, the Office of Personnel Management announced in June 2015 that its systems had also been attacked, compromising the personal information of millions of federal employees.  To strengthen its cybersecurity, DoD issued several rules applicable to its contractors.  Primarily, the regulations provide for mandatory reporting for breaches of more classes of information and streamlined reporting channels.  Among other things, contractors must report cybersecurity breaches of their information technology systems not only for unclassified controlled technical information, but also "covered defense information," which includes operations security information, export-controlled information, and any information subject to special protection under other government laws and policies.  Specific regulations include the following:

  1. DoD Privacy Program, 80 FR 4201, Department of Defense, Final Rule, January 27, 2015.

DoD significantly amended its policies and procedures implementing the Privacy Act of 1974.  Effective February 26, 2015, DoD contractors must adopt more rigorous procedures to protect against the disclosure of personally identifiable information (PII) like an individual's name, social security number, or date of birth.  Contractors must limit the availability of records with PII to those who "need to know" and limit collection of PII to when it is necessary to accomplish a DoD purpose.

  1. Supply Chain Risk (DFARS Case 2012-D050), 80 FR 67243, Department of Defense, Final Rule, October 30, 2015.

This regulation allows DoD to consider the impact of supply chain risk—the risk that an adversary will harm important government or contractor information technology systems—in procurements for information technology related to national security systems.  The interim rule established a new provision and clause, DFARS 239.7306, for inclusion in all solicitations and contracts where portions of the contract may be used to support or link with any National Security Systems starting in November 2015.  The final rule does not require prime contractors to flow down supply chain risk requirements to subcontractors and is restricted to covered systems rather than all information technology acquisitions.

  1. Network Penetration Reporting and Contracting for Cloud Services (DFARS Case 2013-D018), 80 FR 81472, Department of Defense, Interim Rule, December 30, 2015.

First issued in August 2015, DoD modified several DFARS sections including 252.204-7008 and 252.204-7012, to require contractors to put safeguards in place that meet the security requirements specified in NIST Special Publication (SP) 800-171, "Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations."  These requirements flowdown to those subcontractors that will house covered defense information or will provide "operationally critical support."  Since August, DoD has provided contractors with several extensions to implement these requirements, including an extension in October issued via class deviation which provided contractors nine months from the date of contract award to implement a specific provision of SP 800-171.  DoD issued another extension in December, which gives contractors until December 31, 2017, to implement all the requirements of SP 800-171.  Comments on the interim rule issued on December 30, 2015, close on February 29, 2016.

II. Contractor Qualifications

The most significant development in the realm of contractor qualifications is a new requirement that offerors disclose unpaid tax liabilities and felony convictions. Based on a provision in the Consolidated and Further Continuing Appropriations Act, 2015, the impact of this requirement on procurement procedures remains to be seen.  Specific contractor qualification regulations in 2015 include the following:

  1. Prohibition on Contracting with Inverted Domestic Corporations, 80 FR 38306, 80 FR 38309, FAR Council, Final Rule, July 2, 2015.

The FAR Council amended the FAR to continue a longstanding rule prohibiting agencies from using appropriated (or otherwise made available) funds for contracts with foreign incorporated entities that are inverted domestic corporations or subsidiaries of such entities. Generally speaking, inverted domestic corporations are corporations or partnerships that were once incorporated in the United States but are now incorporated in a foreign country.  Although the FAR prohibition has been in place since 2008, this rule changes the certification language and notice requirements for contractors.  Offerors on federal solicitations must certify as to whether it is or is not an inverted domestic corporation or subsidiary of one.  In addition, contractors that become an inverted domestic corporation or a subsidiary of such a corporation during contract performance must give written notice to the contracting officer within five business days of the inversion event.

  1. Prohibition on Contracting with Corporations With Delinquent Taxes or a Felony Conviction, 80 FR 75903, FAR Council, Interim Rule, December 4, 2015.

This FAR requirement prohibits the federal government from contracting with entities that have an unpaid tax liability or a federal felony conviction.  Effective February 26, 2016, offerors must specify whether they: (1) have been convicted of a felony under federal law; or (2) have an unpaid federal tax liability for which they have exhausted all judicial and administrative remedies, and that is not being paid pursuant to an agreement with the taxing authority.  Offerors for contracts that are larger than $5 million with the Departments of Commerce, Justice, and NASA, as well as some smaller agencies, must certify that they have filed all federal tax returns for the last three years, have not been convicted of a criminal offense under the tax code, and have not been notified of any unpaid tax liability in the past 90 days, for which the liability remains unsatisfied.  Comments on the interim rule close on February 2, 2016.

III. Employment and Labor

Topics still very much under debate for the rest of the business community were put to rest for federal contractors with a series of Executive Orders and Department of Labor Regulations that, among other things, raise the minimum wage and protect conversations about compensation in the workplace.  Specific regulations include the following:

  1. Prohibitions Against Pay Secrecy Policies and Actions, 80 FR 54933, Department of Labor, Final Rule, September 11, 2015.

The Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) amended the Equal Opportunity clause and other regulations to provide that, effective January 11, 2016, contractors cannot maintain pay secrecy policies.  This regulation prohibits contractors from firing or discriminating against any employee or job applicant because of inquiries about compensation.  It allows employees and job applicants to file complaints with OFCCP if they believe an employer discriminated against them for discussing or disclosing compensation information.  In addition, contractors must disseminate a nondiscrimination provision provided by the OFCCP.

  1. Establishing a Minimum Wage for Contractors, 80 FR 55646, 80 FR 57874, Department of Labor, Notice, September 16, 2015.

The Department of Labor issued a notice that beginning on January 1, 2016, the applicable minimum wage for employees of federal contractors is $10.15 per hour for workers performing work on or in connection with covered contracts and $5.85 per hour for tipped employees.

Relatedly, on December 4, 2015, the FAR Council adopted as final and effective immediately an earlier interim FAR rule that provides that contractors with contracts containing the FAR clauses at 52.222-6, Construction Wage Rate Requirements, or 52.222-41, Service Contract Labor Standards, i.e., "covered contracts," cannot pay less than the applicable minimum wage to workers for all hours worked on or in connection with a covered contract.  Contractors must also include a minimum wage contract clause in covered subcontracts and require covered subcontractors to include the substance of the clause in covered lower-tier contracts.  Contractors can request price adjustments only after the effective date of the new annual minimum wage, and prices will be adjusted only for increased labor costs (including subcontractor labor costs) as a result of an increase in the minimum wage.  For more information on the final rule, see 80 FR 75915.

  1. Further Amendments to Equal Employment Opportunity, 80 FR 75907, FAR Council, Final Rule, December 4, 2015.

This rule implements Executive Order 13672, which amends the Equal Opportunity Clause, FAR 52.222-26, to add sexual orientation and gender identity to the lists of prohibited bases of discrimination.  This change will affect all contracts and subcontracts containing the Equal Opportunity Clause.  Thus, under the new version of the clause, federal contractors and subcontractors cannot discriminate in employment matters on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin.

  1. Updating Federal Contractor Reporting of Veterans' Employment, 80 FR 75908, FAR Council, Interim Rule, December 4, 2015.

The FAR Council amended various FAR provisions to implement a final rule issued by the Department of Labor Veterans Employment and Training Service in September 2014.  Under this rule, contractors and subcontractors must report, as part of their annual Federal Contractor Veterans' Employment Report VETS-4212, the total number of employees and new hires who qualify for certain categories of protected veterans status as opposed to the previous requirement to report the total number of veterans protected in each job category.  This rule becomes effective on February 26, 2016, and applies to solicitations and contracts awarded or modified after that date.  Comments close on February 2, 2016.

IV. Human Trafficking

The attention to human trafficking in the past five years has culminated in procurement provisions aimed at combatting this problem in federal contracting, which became effective early in 2015.  Specific regulations include the following:

  1. Ending Trafficking in Persons, 80 FR 4967, FAR Council, Final Rule, January 29, 2015.

Effective March 2, 2015, new FAR clauses provide that contractors and subcontractors cannot use misleading or fraudulent recruitment practices; destroy, conceal, or confiscate identity or immigration documents; charge employees recruitment fees; provide housing that fails to meet the host country housing and safety standards; or fail to provide a written employment contract.  For acquisitions of supplies or services to be performed outside the United States that exceed $500,000, contractors and subcontractors must have a compliance plan that includes procedures to prevent human trafficking and to monitor, detect, and terminate any agents or subcontractors engaged in such activities and certify implementation of the compliance plan.  Contracting officers must report substantiated violations of this rule in the Federal Awardee Performance and Integrity Information System (FAPIIS) system, which contains information contracting officers must consider in making responsibility determinations.  In addition, the contracting officer will post information about violations by subcontractors to the prime contractor's record.  Prime contractors have an opportunity to post "any mitigating factors" in FAPIIS.

  1. Further Implementation of Trafficking in Persons Policy (DFARS Case 2013-D007), 80 FR 4999, Department of Defense, Final Rule, January 29, 2015.

As of January 2015, federal contractors and subcontractors working in or outside the United States must display hotline posters on combating trafficking in persons and whistleblowing, unless it is a contract for the acquisition of commercial items or a contract that does not exceed $5 million.  In addition, offerors must represent that they:  (1) do not engage in human trafficking, (2) have hiring and subcontracting policies to prevent human trafficking, and (3) have notified employees and subcontractors of their responsibility to report violations.  In addition, the rule incorporates the contractor employee bill of rights, developed in 2009 by the Army Air Force Exchange Services as Concessionaire Bill of Rights, into DFARS clause 252.225-7040(d)(8), Contractor Personnel Supporting U.S. Armed Forces Deployed Outside the United States.  Among other things, this provision states that an employee has the right to hold their own identity or immigration documents and receive agreed-upon wages on time.

V. Small Business

  1. Sole Source Contracts for Women-Owned Small Businesses, 80 FR 81888, FAR Council, Interim Rule, December 31, 2015.

The FAR Council recently amended various FAR provisions to allow contracting officers to award sole-source contracts to women-owned small businesses (WOSBs) and economically disadvantaged women-owned small businesses (EDWOSB).  This is in addition to the set-aside procedures already available for WOSBs and EDWOSBs.  Based on an earlier rule by the Small Business Administration, 80 FR 55019, an WOSB or EDWOSB is eligible for a sole source contract of up to $6.5 million for manufacturing and $4 million for all other contracts so long as the firm is responsible, the contracting officer does not have a reasonable expectation that two or more WOSBs or EDWOSBs will submit offers, and the offered price is fair and reasonable.  The Small Business Administration's rule became effective on October 14, 2015.  Comments on the FAR rule close on February 29, 2016.

VI. Whistleblowers

The government continued its focus on encouraging whistleblowers to report fraud, waste, and abuse.  Specific regulations include the following:

  1. Prohibition on Contracting with Entities That Require Certain Internal Confidentiality Agreements, DARS Tracking Number: 2016-O0003, Department of Defense, Class Deviation, October 29, 2015.

Based on provisions in the 2015 Continuing and Further Appropriations Act, DoD issued this class deviation prohibiting contractors from requiring their employees or subcontractors to sign confidentiality agreements that would restrict the employees or subcontractors from reporting fraud, waste, or abuse, or cooperating with law enforcement investigations of such allegations. the class deviation creates DFARS clauses 252.203-7996 and 252.203-7997.  Under these DFARS clauses, contractors must notify their employees and subcontractors that any such prior restrictions are invalid. Moreover, in submitting an offer for a solicitation with a DoD agency, offerors must represent that they do not require their employees or contractors to sign or comply with a prohibited confidentiality agreement.  The new DFARS clauses have appeared in DoD solicitations since the end of October 2015, and Contracting Officers are required to modify DoD contracts awarded after October 1, 2015 to include the clause, if feasible.

VII. Miscellaneous

  1. Adjustment of Acquisition-Related Thresholds, 80 FR 38293, FAR Council, Final Rule, July 2, 2015.

In 2015, we also saw an increase in the acquisition-related thresholds in the FAR to adjust for inflation. An "acquisition-related threshold" is a dollar amount specified in law, Executive order, or regulation that is a factor in determining the applicable acquisition procedures.  Adjustments to most of these thresholds occur every five years. The DoD issued a separate rule, 80 FR 36903, 80 FR 45899, to update the threshold amounts in multiple DFARS provisions.  The FAR and DFARS rules provide the various new threshold amounts.  In most cases, thresholds increased by 7 to 12 percent.

  1. Permanent Authority for Use of Simplified Acquisition Procedures for Certain Commercial Items, 80 FR 38311, FAR Council, Final Rule, July 2, 2015.

The FAR Council made permanent the simplified procedures under FAR subparts 13.5 and 18.2 for purchases of commercial items over the simplified acquisition threshold but under $6.5 million.  The simplified acquisition procedures may also be used for acquisitions that do not exceed $12 million when the acquisition is for commercial items that are to be used in support of a contingency operation or to facilitate the defense or recovery from nuclear, biological, chemical, or radiological attack.

  1. Taxes-Foreign Contracts in Afghanistan (DFARS Case 2014-D003), 80 FR 81467, Department of Defense, Final Rule, December 30, 2015.

Finally, while U.S. presence in Afghanistan has significantly decreased since 2014, federal contractors continue to perform services under various contracts.  Pursuant to the bilateral security agreement, entitled "The Security and Defense Cooperation Agreement between the Islamic Republic of Afghanistan and the United States of America," signed on September 30, 2014, and the North Atlantic Treaty Organization (NATO) Status of Forces Agreement (SOFA) signed on September 30, 2014, contracts performed in Afghanistan are exempt from Afghan taxes.  This rule creates two new clauses:  (1) DFARS 252.229-7014, Taxes—Foreign Contracts in Afghanistan; and (2) DFARS 252.229-7015, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement).  Contracting Officers must include these clauses in solicitations and contracts to be performed in Afghanistan, including those solicitations and contracts below the simplified acquisition threshold and those for the acquisition of commercial items or commercially available off-the-shelf items.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Cynthia O. Akatugba
Michael C. Mateer
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions