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.
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
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.
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.
Rep. Anthony Brown (D-Md.), speaker pro tempore, gavels $2 trillion CARES Act’s passage in House by voice vote
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.
COVID-19 Cases as of 24 March 2020 – Source: World Health Organization data – Wikimedia
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.
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.
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:
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
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.
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.
The international procurement community is grappling with the COVID-19 coronavirus and its effects. To learn from procurement leaders in Europe and the United States how agencies and contractors are responding, GW Law held a free online colloquium (Zoom webinar) on Tuesday, March 24, 2020, at 12 noon ET.
On March 10, 2020, Caroline Nicholas (UNCITRAL) and Christopher Yukins joined King’s College, London’s online course in procurement, by videoconference.
As a result of its January 2020 trade deal with China, under which the United States agreed to find new ways to stop counterfeit goods in online marketplaces, the Trump administration has stepped up its fight to stop counterfeit goods from China – and that fight may have a direct impact on a pending GSA procurement (no longer under protest) to open commercial online marketplaces to federal purchasers.
In a
recent piece,
Jason Miller of Federal News Network asked whether President Trump’s January
31, 2020 Executive Order, Ensuring Safe & Lawful E-Commerce for US
Consumers, Businesses, Government Supply Chains, and Intellectual Property
Rights, may affect the U.S. General Services Administration (GSA) “electronic
marketplaces” acquisition.
Counterfeit goods (photo: USCBP)
GSA’s “electronic marketplaces” procurement was previously stalled by a protest by Overstock.com at the U.S. Government Accountability Office (GAO). The grounds for that protest may never be known, since the protest was withdrawn on February 24, 2020. The “electronic marketplaces” procurement would allow federal officials (users – not necessarily contracting officials) to make billions of dollars in micro-purchases (generally below $10,000) directly from the awardee commercial e-commerce platforms.
President Donald J. Trump (Official White House photo by Shealah Craighead)
Section 1. Policy. E-commerce,
including transactions involving smaller express-carrier or international mail
packages, is being exploited by traffickers to introduce contraband into the
United States, and by foreign exporters and United States importers to avoid
applicable customs duties, taxes, and fees.
* * * *
It is the policy of the United States Government that any person
who knowingly, or with gross negligence, imports, or facilitates the
importation of, merchandise into the United States in material violation of Federal
law evidences conduct of so serious and compelling a nature that it should be
referred to U.S. Customs and Border Protection (CBP) of the Department of
Homeland Security for a determination whether such conduct affects that
person’s present responsibility to participate in transactions with the Federal
Government.
It is the policy of the United States Government, as reflected
in Executive Order 12549 of February 18, 1986 (Debarment and Suspension), and
elsewhere, to protect the public interest and ensure the integrity of Federal
programs by transacting only with presently responsible persons. In
furtherance of this policy, the nonprocurement debarment and suspension system
enables executive departments and agencies to exclude from Federal programs persons
who are not presently responsible. CBP implements this system by
suspending and debarring persons who flout the customs laws, among other
persons who lack present responsibility. To achieve the policy goals
stated herein, the United States Government shall consider all appropriate
actions that it can take to ensure that persons that CBP suspends or debars are
excluded from participating in the importation of merchandise into the United
States.
It is the policy of the United States Government that express consignment operators, carriers, hub facilities, international posts, customs brokers, and other entities, including e-commerce platform operators, should not facilitate importation involving persons who are suspended or debarred by CBP.
Peter Navarro
Senior White House trade adviser Peter Navarro said this on CNN on the same day:
The DHS will
immediately begin working to combat trafficking in counterfeit and pirated goods
by: aggressively applying civil fines and penalties to bad actors, suspending
and debarring repeat offenders and treating foreign sellers of goods as
responsible parties subject to sanctions.
As this new
report documents, the private sector can do much more to combat counterfeit and
pirated products trafficking. It sets forth a set of private sector
“best practices” that include: significantly enhanced third-party
marketplace vetting; limits on high-risk products such as prescription drugs,
infant formula and airbag components; rapid notice and takedown procedures; and
pre-sale identification of third-party sellers. The administration also
wants e-commerce platforms to provide clearly identifiable country of origin
disclosures, which brick-and-mortar retail providers are required to
provide but online sellers often are not.
These best
practices are not meant as mere suggestions. The federal government will use
all means necessary to encourage rapid adoption and to monitor progress.
Taken together, these announcements suggest:
GSA’s assessment of the electronic marketplaces bidders may include the “best practices” outlined by Peter Navarro. Navarro called on Amazon and other e-commerce platforms to fight counterfeits in the wake of the recent U.S. trade agreement with China, and he again cited those “best practices” in an interview with the Washington Post, in which he sharply criticized Amazon and others for not having adequate protections against counterfeiters. GSA’s “Statement of Objectives” for the electronic marketplaces procurement already calls on the e-marketplaces to control supply chain risk; the revised solicitation was not explicit as to whether these new anti-counterfeit concerns would also be part of the technical evaluation and/or the contracting officer’s responsibility assessment for award.
The Trump administration’s focus on preventing counterfeits suggest that federal users buying directly with government purchase cards may be required, or at least strongly encouraged, to use the e-commerce platforms eventually approved under GSA’s “electronic marketplaces” initiative. Federal users, in other words, may be discouraged from making direct purchases outside the GSA-approved platforms.
Mass debarments of vendors on the e-commerce platforms — which are very possible, because the government has no other ready means (e.g., past performance or technical evaluations, responsibility determinations, etc.) to protect itself when federal users make rapid purchases from the e-commerce platforms — may begin with Customs and Border Protection (CBP) debarments:
CBP may target for debarment any third-party vendor on an e-commerce platform that “knowingly, or with gross negligence, imports, or facilitates the importation of, merchandise into the United States in material violation of Federal law.” While the Executive Order focuses on counterfeits and contraband, in principle a wider array of importing firms may be at risk if they facilitate violations of federal law.
The e-commerce platforms themselves may be targeted for debarment, on the same grounds. Since each user micro-purchase is a new purchase, debarment (a bar against purchasing) may in effect disable an e-commerce platform from selling to further federal purchasers.
Wednesday, February 19, 2020, 9 am – GWU Law Learning Center – Room LLC006 – 2028 G Street NW
Join Andrea Sundstrand (Stockholm University) and Colette Langos (University of Adelaide) to discuss developments in Europe and Australia in defense procurement. Professor Sundstrand will discuss how defense procurement is treated under European law, including under the leading decisions of the Court of Justice for the European Union. Colette Langos will present a “snapshot” of the law and policy landscape surrounding Australian defense procurement. The session is free, and light refreshments will be served.
Session will be held downstairs at the GWU Law Learning Center, 2028 G Street NW
