Category: United States

On March 27, 2020, Congress sent to the President the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will provide over $2.2 trillion in government funding as the United States weathers the COVID-19 pandemic.  President Trump promptly signed the Act, the product of a bipartisan compromise between the White House and Congress.  Among many other forms of relief, the CARES Act provides funding to preserve public health and economic stability in various sectors, including federal contracting – a market sector that employs several million American workers. 

The CARES Act stands as an important example for the international procurement community – a COVID-19 measure that both reduces health risk and drives economic recovery through existing public contracts.

The challenge now is for federal agencies to deploy the CARES Act’s funding, consistent with the goals of President Trump and Congress to use the CARES Act to —

• Preserve workers’ health:  Section 3610 of the CARES Act protects workers’ health by allowing contractors to send their non-essential employees home during the pandemic, using leave paid for by the federal government. 

• Minimize the spread of the coronavirus:  Keeping contractor employees at home will retard the spread of the COVID-19 virus, by reducing social exposure to the virus in millions of offices, factories and homes.

• Save the contracting base:  The CARES Act directs funding to fragile sectors of the U.S. economy, including the thousands of companies that support the federal government.  Without CARES Act funding, many contractors – including vulnerable small businesses – may collapse, destroying vital parts of the government’s contracting base.

• Jump-start the stalled economy:  When President Trump signed the CARES Act, he pointed out that the legislation ultimately may cost over $6 trillion – stimulus funding which is critically needed, as the President noted, for the American economy to rebound in the coming months. 

In the next few weeks, procurement leaders from across government will need to implement the CARES Act.  This article assesses some of the key questions those leaders will need to address.  To make sense of the CARES Act, we will examine the Act and its purposes in an integrated way, looking both at Section 3610 (which authorized contractor reimbursement) and at other, parallel provisions of the Act.  As the late Supreme Court Justice Antonin Scalia (an expert on statutory interpretation) explained:

“Statutory construction . . . is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme—because the same terminology is used elsewhere in a context that makes its meaning clear, or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.”

What does the CARES Act call on agencies to do for contractors?  Under Section 3610 of the Act, agencies may in their discretion use any “funds made available to the agency” by Congress to modify any contract or other agreement to reimburse contractors for workers’ lost time up to September 30, if the contractor provides leave to its employees or subcontractors “to protect the life and safety of Government and contractor personnel.”

What work locations are covered for reimbursement?  A contractor may recover only if its work location has been approved by the government – in other words, a contractor cannot “game” the government by unilaterally naming a work site (such as New York City or New Orleans) where it may be impossible to perform.

What if the contractor employees can telework?  The government has strongly encouraged contractor telework, through policies issued by the Office of Management and Budget and the Defense Department.  If employees can do telework from home, then reimbursement may not be available.

How will contractors’ reimbursement be calculated?  Section 3610 is clear:  the CARES Act allows agencies to reimburse contractors at “minimum applicable contract billing rates” for up to an average of 40 hours per week for paid leave (including sick leave).

What kinds of contracts will be covered?  The CARES Act does not exclude any contract types, or provide detail on how different contract types should be handled.  This may have been due to the rushed legislative process.  S. 3548, the prior Senate bill, was introduced late the prior week, and then was blocked by a partisan battle in the Senate.  The final language of the CARES Act reflects rapid legislative drafting, which naturally left gaps in the statutory language.  Applying the maxims of statutory interpretation explained above by Justice Scalia, we can look to other sections of the CARES Act (discussed below), which also address contractor reimbursement but do not distinguish between types of contracts. 

What’s to keep contractors from cheating ?  The CARES Act makes relief under the Act subject to audit by the Government Accountability Office (Congress’ watchdog agency), and nothing in the Act suggests that contractors seeking reimbursement will be exempt from the criminal and civil fraud laws, debarment and exclusion rules that the government normally uses to block bad actors.

Although Section 3610 is silent on the mechanics of reimbursement . . . other provisions of the Act shed light on Congress’ intent.

How should contractors seek reimbursement?  Although Section 3610 is silent on the mechanics of reimbursement — a detail normally left to the agencies — other provisions of the Act may shed light on Congress’ intent.  Section 18006, for example, says that educational institutions that receive funding “shall, to the greatest extent practicable” continue to pay their contractors during the period of any disruptions or closures related to the coronavirus.  Section 4113 explains how contractors in the aviation industry are to seek reimbursement by applying for an amount, “using sworn financial statements or other appropriate data, as to the amount of wages, salaries, benefits, and other compensation” that the contractors paid their employees.  Section 19005 says that the Architect of the Capitol is to “continue to make payments provided for under . . . contract for the weekly salaries and benefits of . . . [contractor] employees” who are “furloughed or otherwise unable to work” during closures.  Finally, Section 3610 itself explains that any contractor’s reimbursement will need to be reduced by the value of other credits the contractor receives, such as the tax credits afforded for employee leave under the Coronavirus Families First Response Act. 

Taking these provisions together – “holistically,” to use Justice Scalia’s famous term – it becomes clearer how in practice agencies can afford contractors relief under the Act.  What Congress and the President clearly expect is that contracting agencies will move quickly to advance the nation’s recovery – and Americans’ health – by allowing contractors to seek reimbursement for covered COVID-19 losses.

Editor’s note:  On April 2, a free GW Law webinar will discuss these and other emerging international developments in COVID-19 emergency procurement, with panelists from government, business, economics and the law, who will join us from Europe, Asia, Africa and the Americas.