Public Procurement International

Webinar – Recovering from the Pandemic: European Initiatives, U.S. Perspectives – 14 May 2020

Thursday, May 14, 2020 – 9:00 Eastern US – 14:00 UK – 15:00 CET

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The European Union has launched important initiatives in response to the COVID-19 pandemic, in joint procurement and funding innovation to drive the recovery. In the United States, governments’ initial response was marred by fierce competition between federal and state governments for critical medical supplies. But U.S. governments have a long tradition of joint procurement (called “cooperative purchasing”) among governments, and in funding innovation through various initiatives including the Small Business Innovation Research (SBIR) program. International organizations, including the United Nations, have also played an important part in coordinating international relief efforts in procurement.

Join a free hourlong webinar held through George Washington University Law School’s Government Procurement Program and the University of Turin’s School of Management and Economics, to discuss the European Union and its member states’ initiatives, and U.S. and transnational perspectives. Experts will present the European initiatives, with commentary from U.S.-based businesspeople, attorneys and academics with long experience in cross-border procurement and innovation through public procurement.

https://youtu.be/HRSN9IGCpJU

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Program Slides – PDF

Program Chat

Background Article for Webinar

**Registrants were from over thirty countries across five continents**

Panelists

Lucian Cernat, Chief Trade Economist, European Commission – welcoming remarks.

Bertrand Wert, PhD, Innovation Maker for the European Innovation Council, Accelerator, in the Business Acceleration Services team, where he has been in charge since 2015 of supporting innovative SMEs that are members of the Accelerator to gain access to public and private procurers of innovation. The EIC Accelerator programme supports the most innovative European SMEs, via grants and equity, to commercialise their innovative solutions and to look for investors. Bertrand worked from 2009 to 2015 for Directorate General GROW of the European Commission, in the team developing the “Innovation Union” strategy. Meanwhile, piloting demand-driven policy interventions, he managed several public procurement networks or “buyers’ groups” of innovation (Pre-Commercial Procurement & Public Procurement of Innovation).

Jekaterina Novikova is Innovation Policy Coordinator at the European Commission, Directorate General for Research and Innovation in the newly created European Innovation Council Task Force. Her areas of responsibility include innovation procurement and the connection of innovation ecosystems under the Horizon Europe program. An EU official since 2005, she spent five years in management positions implementing FP-7 and Horizon 2020 research projects. As an EU fellow, she spent the academic year 2018-2019 in the US, at the University of California, Berkeley where she conducted research on how the US government, universities and industry facilitate the transition of research results to market. Jekaterina is a Certified Chartered Accountant and holds an MA in European Affairs from Lund University, Sweden.

Ivo Locatelli, Senior Expert–Team Leader in innovation procurement at the European Commission (DG GROW (Internal Market, Industry, Entrepreneurship and SMEs)). Ivo has written on innovative procurement in the European Union, and will draw on his assessment of Europe’s experience to discuss next steps in joint procurement among the member states.

Stephan Corvers (s.corvers@corvers.com), managing director of Corvers Procurement Services (Netherlands), a private company which has been operating in the field of European procurement since 2000. Corvers has been involved in a wide range of procurement projects, relating to new markets, new products or services, new distribution channels, and new technology. Corvers is a contractor for the EAFIP-initiative of the European Commission.

Discussants

Benedetta Audia, United Nations Office for Project Services (UNOPS) as Corporate Legal Advisor, where she heads the commercial and institutional law practice and has played a lead role in UNOPS’ response to the COVID-19 pandemic. She is an adjunct professor at George Washington University Law School, a Visiting Professor of Public International Law at LUISS Guido Carli University. She holds a Juris Doctor degree in Public International Law and two Masters Degrees (in Corporate Law and Legal Advanced World Studies).

Justin Kaufman, General Counsel, NASPO ValuePoint, leading U.S. publicly led “cooperative purchasing” vehicle, coordinated through the National Association of State Procurement Officers (NASPO) and used by all 50 states and hundreds of local governments across the United States. Justin has worked for many years in cooperative purchasing in the United States, and was a contributing author to Joint Public Procurement and Innovation: Lessons Across Borders (G. Racca & C. Yukins, eds., 2019).

Thomas Hendrix, Managing Partner, Decisive Point, a venture advisory and investment firm focused on advanced technology. Tommy works regularly with emerging companies in the SBIR program, building innovative solutions for government. Tommy served in the US Army for nearly 10 years as a Ranger, Green Beret, and Commander in a counter-terrorism response force. He holds an MBA from Columbia Business School and a BS in Law and Legal Systems from the United States Military Academy at West Point, and is a candidate for a Master of Studies in Law at George Washington University. Prior research he has done on improving innovation in government-funded research and development is here.

Moderators

Professors Gabriella Racca (University of Turin) and Christopher Yukins (George Washington University

A special note to the international procurement community — the World Bank needs your help in its worldwide survey of emergency procurement practices for the COVID-19 pandemic, available here

Past Webinars

COVID-19: Contractors’ Road to Recovery – Webinar – 6 May 2020

Webinar – May 6, 2020 – 12 noon Eastern

Join another outstanding 60-minute webinar with the National Bar Association and George Washington University Law School’s Government Procurement Program, to discuss contractors’ road to recovery – the challenges and opportunities facing government contractors as the country emerges from the COVID-19 pandemic

https://www.youtube.com/watch?v=Ew6HTSwVzTU

Program Slides

Program Chat

Background Article

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Panelists

Michael Bennett, Evans & Chambers Technology, LLC; Chair, DC Board of Elections

Michelle Coleman, Counsel, Crowell & Moring

Danielle Conway, Dean, Penn State Dickinson Law

Dominique Casimir, Partner, Blank Rome LLP

Liza Craig, Counsel, Reed Smith

Kendra Perkins Norwood, Wiley. For an earlier webinar on Section 3610 reimbursement in which Kendra Perkins Norwood and other attorneys from the government and the private sector participated, click here.

Judge Jeri Somers, Chair, US Civilian Board of Contract Appeals

Moderators: National Bar Association President Alfreda Robinson (GW Law School) & Christopher Yukins (GW Law School)

COVID-19: Small Business Resources

Brochure for Small Businesses – Beating COVID-19

Previous Webinars

Office of Management & Budget Issues Guidance on Contractor COVID-19 Reimbursement Under the CARES Act’s Section 3610

On April 17, 2020, the U.S. Office of Management and Budget, part of the White House, issued guidance on how agencies should implement contractor reimbursement for employees granted leave to mitigate the COVID-19 pandemic. This is a major milestone in COVID-19 procurement developments, and a detailed analysis is available here.

Protectionism in a Pandemic: Does It Make Sense?

The first phase of the COVID-19 pandemic brought a new wave of trade controls, as countries imposed new barriers against trade in vital supplies such as masks and ventilators. Now as the COVID-19 pandemic enters its next phase – as the disease recedes in some populations, and attacks others with new ferocity – a simple but critical question has come into focus: do trade barriers make sense in a pandemic?

One striking aspect of the pandemic has been the global supply chain needed for supplies essential to fight the virus. In an April 2020 report, the World Trade Organization highlighted the global sources for medical supplies, and the World Health Organization and other international organizations have stressed the need for international cooperation in fighting the COVID-19 pandemic.

Concerns over new protectionism in the United States arose earlier this year, when the Trump administration signaled that the United States might withdraw from the WTO Government Procurement Agreement (GPA) in response to a GAO study which suggested that European exporters enjoy lop-sided access to the federal procurement market. Lucian Cernat and Zornitsa Kutlina-Dimitrova, trade economists at the European Commission, have responded that the U.S.-EU trade balance in procurement, if read broadly, is actually much more favorable to the United States.

Robert Anderson (previously at the WTO) has pointed out that leaving the GPA could do permanent damage to the postwar trade regime in procurement, and Jean Heilman Grier (a former staffer at the Office of the U.S. Trade Representative who has written extensively on the GPA) has argued that leaving the GPA could severely disadvantage the United States in future trade negotiations. [Editor’s note: Robert Anderson’s assessment of the flexibilities already available to member parties in times of crisis is available here: Keeping markets open while ensuring due flexibility for governments in a time of economic and public health crisis: the role of the WTO Agreement on Government Procurement (GPA).] The U.S. business community (including the National Foreign Trade Council) has also lodged strong objections to leaving the GPA. Perhaps as a result of the many voices of opposition, the Trump administration’s initiative to leave the GPA has quieted, at least for now.

Another potential Trump administration initiative would impose new trade controls to force pharmaceutical companies to bring their production to the United States. This initiative, long pressed by senior White House trade advisor Peter Navarro, appears to have faded as well.

The Trump administration instead took a focused approach to trade controls, when on April 10, 2020 the Federal Emergency Management Agency imposed export controls under the Defense Production Act on personal protection equipment, including certain masks and gloves. At the same time, companies such as 3M were being savaged by President Trump for shipping emergency supplies abroad, even when (as 3M made clear) those shipments might be critical to other countries’ efforts to fight the pandemic.

But even the Trump administration’s most aggressive export controls, such as those aimed at Iran, Cuba, Venezuela and other sanctioned nations, will not necessarily block life-saving supplies. As Tom McSorley and his colleagues have pointed out, exceptions built into the U.S. export regime will still allow humanitarian supplies to reach Iran and other nations under U.S. sanctions. The FEMA ban on exports of PPE also allows for exceptions – under FEMA’s approval – for humanitarian purposes, Tom McSorley and his colleagues have noted. [Editor’s update: FEMA’s exceptions to the export ban — including a blanket exception for shipments to Canada and Mexico — are published in draft form here.]

Even more striking was the Trump administration’s decision to waive certain import controls – long the heart of Trump’s “Buy American” rhetoric – on vital items in short supply, from N95 masks to bleach. In normal times, the U.S. General Services Administration, which runs “schedule” contracts used by federal agencies for tens of billions of dollars in annual sales, complies with the Trade Agreements Act (TAA) by banning supplies from countries that have not entered into free trade agreements with the United States (“non-TAA” countries). Because of acute shortages in fighting the pandemic, however, GSA has temporarily lifted that ban for certain supplies. [Editor’s note: Jean Grier’s summary of this development is at Perspectives on Trade: ‘US Temporarily Lifts Procurement Ban’] The Trump administration’s abrupt volte face suggests that trade controls can raise dangerous barriers in times of crisis.

Even more striking was the Trump administration’s decision to waive certain import controls – long the heart of Trump’s “Buy American” rhetoric – on federal procurements of vital items in short supply

Simon Evenett – University of St. Gallen (Switzerland)

U.S. trade controls in the pandemic are part of a broader trend around the world, as nations try to reshape trade flows to husband supplies needed to address the COVID-19 disease. Those trade controls, which Simon Evenett of the University of St. Gallen calls “sickening-thy-neighbor” measures, raise serious humanitarian and political questions now that some countries no longer need equipment that is desperately sought in other nations. With the pandemic receding, New York will now share ventilators it no longer needs with Maryland and Ohio; should the United States do the same for Senegal, or for new hotspots such as Sweden? And what role should international institutions, such as the WTO, the World Bank and the OECD, play in facilitating international cooperation rather than trade barriers – global cooperation, as Laurence Folliot Lalliot has argued, that will be needed to save lives. (An update: EU Commissioner Phil Hogan on April 16, 2020 called for a temporary international ban on tariffs for vitally needed COVID-19 supplies, and made clear that European Union cannot “on-shore” its manufacturing in the long term — it will continue to rely on an international supply chain for key medical supplies.)

Laurence Folliot Lalliot – University of Paris Nanterre

Solving that puzzle – weighing protectionism in the pandemic – may require a new set of policy metrics. Zornitsa Kutlina-Dimitrova of the European Commission has argued that trade restraints make little sense when weighed against the secondary economic effects (e.g., the industrial atrophy, the isolation from innovation) that trade controls cause. Her research bears special attention now, when human lives – not just dollars – weigh in the balance.

Editor’s note: Join a free GW Law webinar on Tuesday, April 21, 2020 at 9:00 ET/14:00 UK/15:00 CET/21:00 CST. Simon Evenett, Robert Anderson, Jean Heilman Grier, Tom McSorley and Zornitsa Kutlina-Dimitrova (invited) will convene before a worldwide audience to discuss “Protectionism in the Pandemic.” The program will be moderated by Laurence Folliot Lalliot, Vanessa Sciarra of the NFTC and Christopher Yukins. Program information and registration.

Fighting Fraud in COVID-19 Sourcing – Webinar – April 9, 2020

A new threat has emerged in the pandemic: fraud in the supply chain for critical COVID-19 supplies. Governments the world over are fighting back against price gouging and defective supplies. What tools are available, and will they work? Join a free one-hour webinar with GW Law, as experts discuss these critical global developments in anti-corruption and procurement.

April 9, 2020, 9 am ET/15:00 CET/21:00 CST

Presented with the kind cooperation of the International Anti-Corruption Academy (IACA)

https://youtu.be/LbWhybyRAaw

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Program Slides – 9 April 2020 Download

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Panelists

Michael Bowsher QC – Monckton Chambers / King’s College, London (London)

Thomas Hendrix – GW Law / Decisive Point (New York)

Aris Georgopoulos — University of Nottingham (United Kingdom)

Rocco Burdo, Head, Analysis and Research Section, Intelligence Office, Anti-Fraud and Controls Department, Customs and Monopolies Agency (Italy)

Jessica Tillipman — GW Law (Washington)

Mihály Fazekas – Central European University (Budapest) DIGIWIST Report

Paul Whittaker – OECD (Paris) OECD – Corruption in Procurement

Moderators: Christopher Yukins, GW Law School (Washington); Jean-Bernard Auby (Professor emeritus, Sciences Po Law School (Paris)); Gabriella Racca (University of Turin); Laurence Folliot Lalliot (University of Paris Nanterre (joining from Dakar))

**Registrants from 40+ Countries and Territories**

Resources on COVID-19 and Public Procurement

Previous Webinars

GSA Delays “Electronic Marketplaces” Contract Awards

Because of the COVID-19 crisis, the U.S. General Services Administration (GSA) has delayed award of contracts that would allow federal officials to purchase directly from online commercial marketplaces, such as Amazon.com (if it received one of the contracts). The delay is noteworthy because many observers have asked whether allowing officials to purchase directly from commercial marketplaces could have mitigated supply failures in the current crisis.

The GSA announcement stated:

Commercial Platforms Acquisition Delayed

04/01/2020 12:12 PM EDT

As we all continue to adjust our professional and personal lives due to the extraordinary circumstances surrounding the COVID-19 situation, I hope this communication finds you well. First and foremost, I want to thank those who are providing critical support to the COVID-19 response. In addition to my role leading the Commercial Platforms initiative, my organization is heavily involved with providing IT Hardware and Services support to agencies across the country – as they work to implement telework procedures and other mission critical functions remotely.

Not surprisingly, GSA’s resources have shifted to support the COVID-19 response, and we’re having to prioritize certain activities to support the immediate needs of the federal government. As a result, the contracting team for the Commercial Platforms proof of concept has also had to shift their focus to COVID-19 response efforts. A delay is anticipated in the contract award to e-marketplace platform providers for the proof of concept. We will continue to move forward as we are able, recognizing that many of our acquisition professionals are prioritizing COVID-19 response work over other acquisition initiatives. Our goal is to make the contract award in the coming months.

Again, thank you for your ongoing support and understanding as we all navigate these extraordinary circumstances. This Interact group will continue to be a resource where you can receive up-to-date information about the Commercial Platforms initiative. You can learn more about GSA’s COVID-19 activities at www.gsa.gov/covid19.

– Laura Stanton
Deputy Assistant Commissioner for Category Management,
Information Technology Category

Trump Administration’s Fight Against Counterfeit Trade May Impact GSA’s Electronic Marketplaces Initiative — Which Is No Longer Stalled by Protest

Request Denied by GAO for Documents in Pending Protest Regarding GSA “Electronic Marketplaces” Procurement

U.S. Government To Award Billions Of Dollars In Contracts To Open Electronic Marketplaces To Government Customers—Though Serious Questions Remain

Defense Department Issues Critical Memo on Contractor Reimbursement During COVID-19 Crisis

Kim Herrington, Acting Principal Director, Defense Pricing and Contracting (photo: US Army)

The U.S. Department of Defense has issued a critical memorandum on how contractor requests for additional contract payments in response to the COVID-19 crisis should be handled. The memorandum, issued on March 30, 2020 by Kim Herrington, Acting Principal Director, Defense Pricing and Contracting, noted that further guidance is expected.

Mr. Herrington’s memorandum discussed other possible grounds of contractor relief, such as stop-work orders. Most critically, his memorandum suggested that contracting officials, when considering contractor requests for compensation for additional costs (“requests for equitable adjustments”), should take into account the reimbursement for contractors contemplated by Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, discussed here, which President Trump signed into law on March 27, 2020.

Under Section 3610 of the CARES 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.”

The Defense Department memorandum stated, in relevant part:

When reviewing requests for equitable adjustment, contracting officers are to take into account, among other factors, whether the requested costs would be allowable, allocable and reasonable to protect the health and safety of contract employees as part of the performance of the contract. Equitable adjustments to the contract or reliance on an excusable delay should not negatively affect contractor performance ratings.

In response to this national emergency, on March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES). Most notable within the act is Section 3610, Federal Contractor Authority, which provides discretion for the agency to modify the terms and conditions of the contract to reimburse paid leave where contractor employees could not access work sites or telework but actions were needed to keep such employees in a ready state (Attachment 1). Section 3610 is included for information only. DPC [Defense Pricing & Contracting] will provide implementing guidance for this section as soon as practicable.

The Office of Management and Budget, and many senior procurement officials of the Military Departments and Agencies have promulgated guidance similar to that in this memo regarding management of contract performance impacts due to COVID-19, many of which are available at https://www.acq.osd.mil/dpap/pacc/cc/COVID-19.html. They share the common theme that contracting officers are trusted and empowered to make the difficult decisions on appropriate adjustment to each contract. Both during and after the COVID-19 emergency, contracting officers must work closely with our industry partners to ensure continuity of operations and mission effectiveness, while protecting the continuing vitality of the DIB [Defense Industrial Base] that is so critical to our national security. Please ensure widest distribution of this guidance.

Editor’s note: These and other developments in COVID-19 contracting will be discussed in a free international webinar on Thursday, April 2, at 9 am ET.

Straight Talk: Emergency Procurement in the COVID-19 Pandemic – April 2, 2020

Thursday, April 2, 9:00 ET/15:00 CET/21:00 CST

Duration: 60 minutes

Governments’ procurements of critically needed supplies for COVID-19 – such as ventilators, masks, and other protective equipment – are collapsing in the face of a worldwide pandemic and global shortage. Join this free webinar with George Washington University Law School to discuss the emerging economic, business, political and legal aspects of what may well be the biggest procurement challenge of our time, with private and public experts from Asia, Africa, Europe and the Americas.

Topics:

What critical supplies are needed
Where are those supplies, and how are they being sourced
How are procurement systems coping
What business and legal strategies work
Will more international cooperation be needed

Guests:

Gian Liuigi Albano, CONSIP (Italy’s centralized purchasing agency)
William Kovacic, GW Law School (former chair, U.S. Federal Trade Commission)
Ben Koberna, EASiBUY (USA)
CAO Fuguo, Law School of the Central University of Finance and Economics (Director, China Procurement Research Center) (Beijing, China)
Simon Evenett, University of St Gallen (Switzerland)

Moderators: Christopher Yukins, GW Law School (USA); Laurence Folliot Lalliot, University of Paris (based in Senegal); David Drabkin (USA)

Emergency Procurement-Program Slides – 2 April 2020 Download

Resources on COVID-19 and Public Procurement

Over 300 registrants from over 30 nations, across five continents

Program Video

https://youtu.be/ABx_wiDSg0I

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Summary of Program by Adam Al-Sarraf: English Spanish

GWU Law Moot Court Advances Online

Thanks to the extraordinary efforts of government contracts program director Karen Thornton and Judge Jeri Somers (Chair of the U.S. Civilian Court of Contract Appeals (CBCA)), and of course the student-contestants and many moot judges from the U.S. procurement community, the memorable 2020 Arnold & Porter Government Contracts Moot Court competition was able to proceed online. The finalists:

Amanda McDowell (JD’21, GWLaw) & Justin Baird (JD’21, GWLaw), CloudCrane Corporation

Gabriella Paez & Rita (JD’21, GMU Law) & Regelbrugge (JD’21, GMU Law), U.S. Government

We hope you will tune in to watch these exceptionally skilled and polished advocates argue the topical issues in this Other Transaction Authority case of first impression on

Tuesday, March 24, at 6pm

via livestream: https://stream.meet.google.com/stream/ed5f3e0f-d57e-46b7-a189-e1137206ef6e

Please help us spread the word to create a large virtual audience for this important event!

Our presiding judges will be Kyle Chadwick (Judge, Civilian Board of Contract Appeals), Timothy McIlmail (Judge, Armed Services Board of Contract Appeals), and Beverly Russell (Judge, Civilian Board of Contract Appeals).

The student bios are below:

• Justin Baird is a 2L at GWLaw, where he is a member of the Public Contract Law Journal and treasurer of the Corporate and Business Law Society. He will join Foley & Lardner as a summer associate.

• Amanda McDowell is a 2L at GWLaw, where she was recently appointed Editor in Chief of the Public Contract Law Journal. She is currently a law clerk at DLA Piper and will join Crowell & Moring as a summer associate.

• Gabriella Paez is a 2L at the George Mason University, Antonin Scalia Law School, where she is a member of the Trial Advocacy Association and the Moot Court Board, as well as an articles editor on the GMU Civil Rights Law Journal. She is currently an intern at the United States Attorney’s Office for the District of Columbia.

• Rita Regelbrugge is a 2L at the George Mason University, Antonin Scalia Law School, where she is a member of the Trial Advocacy Association and the Moot Court Board, as well as Editor in Chief of the Journal for Law Economics and Policy. She is currently a judicial intern at the Civilian Board of Contract Appeals. She will divide her summer as a summer associate at Wiley and Pillsbury.

Trump’s Procurement Mistake May Cost American Lives

At a press briefing on March 19, President Trump brushed aside demands that the federal government take the lead in buying medical equipment – including the coronavirus tests, ventilators and protective gear – critically needed to save lives in the current pandemic. “We are not a shipping clerk” Trump said, and left it to the states to take first responsibility for procuring life-saving equipment.

Is President Trump right – should state governments be left to procure emergency equipment – or is this one of the most serious mistakes he has made in this pandemic?

The need for emergency equipment is desperate. On March 18, for example, the New York Times reported that there are only roughly 170,000 ventilators in this country, although many hundreds of thousands of coronavirus patients may need them soon. In a March 19 interview, Governor Andrew Cuomo of New York was brutally direct. “We now have about 5,000, 6,000 ventilators in New York State,” Cuomo reported. “We are going to need about 30,000 ventilators because these people who come in all have respiratory illnesses.” Experience in Italy, already overwhelmed by the pandemic, shows that if emergency equipment is not procured immediately, thousands of American patients and healthcare providers may die unnecessarily.

Trump’s comment deflecting responsibility for buying emergency equipment came at a March 19 White House press briefing, when he was asked why the federal government had (by executive order) invoked, but not triggered, the Defense Production Act. The Act allows the federal government to direct manufacturers to produce vitally needed items. The states’ governors, Trump responded, “are supposed to be doing a lot of this work.” The federal government, he continued, “is not supposed to be out there buying vast amounts of items and then shipping.” “You know,” Trump said, “we’re not a shipping clerk. The governors are supposed to be – as with testing, the governors are supposed – are supposed to be doing it.”

Trump’s insistence that the states take the lead in emergency procurement contradicts his own administration’s “Crimson Contagion” study, confidentially drafted before the pandemic and disclosed on March 19 by the New York Times. The Trump administration draft report clearly foresaw that the federal government would have to coordinate equipment requests from the states in times of pandemic. Public health experts now reinforce the administration’s own conclusion: the federal government must take the lead in purchasing emergency equipment such as ventilators.

Trump’s approach also contradicts what other nations facing the same pandemic are doing. Italy, for example, has centralized (and radically simplified) procurements of emergency equipment. CONSIP, the Italian centralized purchasing agency, has taken charge of buying thousands of ventilators, and it has open requests to the market for emergency equipment.

By pushing procurement responsibility out to the states, Trump’s approach also ignores a critical tool available to the federal government: the United States’ unmatched ability to assure vendors that if they build equipment, the manufacturers’ costs will be covered even if the equipment is never used.

While the Defense Production Act allows the government to direct the production process – always a risky prospect – the federal government’s contracting tools include the power to “terminate for convenience.” This simple, largely unknown contracting power became a central part of U.S. procurement after World War I, when the federal government canceled large numbers of wartime contracts. The termination for convenience clause – now required in every federal supply contract – says that while the government may terminate contracts for its own convenience (a right most commercial parties do not have), the United States will make its contractors whole if the federal government does prematurely end a contract.

This simple termination right is extremely powerful in a time of crisis, because it means that manufacturers – from Ford to Tesla – can incur huge cost risks in retooling to build vital equipment. Although contractors may lose commercial opportunities by temporarily retooling their production lines, at least those companies know their sunk costs will be covered by the United States – and here, that federal government guarantee may enable many more manufacturers to join this battle against death by disease.

“This simple termination right is extremely powerful in a time of crisis, because it means that manufacturers . . . can incur huge cost risks in retooling to build vital equipment.”

This simple procurement tool also explains why the federal government must take the lead in procuring emergency equipment. State governments typically have the same contract clause – the same right of termination for convenience – but state governments do not have the federal government’s massive resources backing the promise to make manufacturers whole, or the United States’ preeminent market position. In contrast to the states’ limited resources, the U.S. government’s procurement rules channel the federal government’s nearly unlimited resources – its commitment to pay, and the world’s largest procurement apparatus – to drive procurement of equipment that will save lives. The time for the federal government to exercise that procurement power is now.

By Christopher Yukins, the Lynn David Research Professor in Government Procurement Law at the George Washington University Law School, Washington, DC. The Law School’s government procurement program will host an international online colloquium on public procurement and the COVID-19 pandemic on Tuesday, March 24, 2020, at 12:00 ET.

Thursday, May 14, 2020 – 9:00 Eastern US – 14:00 UK – 15:00 CET

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