In an April 1, 2020 letter to U.S. Secretary of Defense Mark Esper and Under Secretary of Defense for Acquisition and Sustainment Ellen Lord, a bipartisan group from Ohio’s congressional delegation (including both senators) asked the Defense Department to provide more guidance to line contracting officials, so that they can deal effectively with contractors in the COVID-19 crisis. The letter noted:
U.S. Secretary of Defense Mark Esper (photo: US Army/DoD)
We appreciate the guidance issued by the Office of Management and Budget (OMB) within the last two weeks as well as the memorandum released by Under Secretary Lord on March 20, 2020 regarding designation of the Defense Industrial Base as Essential Critical Infrastructure. Despite the prompt release of this instruction, we are concerned that guidance to the defense contractor workforce remains ambiguous and lacks uniformity in application.
The letter asked for specific guidance on handling employees (allowing them to telework, for example), and on how to seek financial relief (if necessary) under Section 3610 of the CARES Act:
Under Secretary of Defense Ellen Lord (photo: US Army/DoD)
In the event working on-site or telework is not possible, direct contracting officers to exercise the available authorities found in OMB Memorandum M-20-17 [NB: probably should be M-20-18] and Section 3610, Federal Contractor Authority of the CARES Act of 2020 to maintain a source of cashflow to keep this vital workforce intact and prevent avoidable reductions in forces during this crisis.
The letter noted that the DoD policy of leaving these decisions to the discretion of individual contracting officers — a potentially critical problem in deploying contractor relief under Section 3610 — had created uncertainty in a time of crisis:
Thus far, the DoD policy of delegating key decision-making authorities to the lowest levels has caused the contractor workforce great concern because of uncertain, and often conflicting guidance. The defense contractor community needs stability and continuity in this time of crisis and these steps will enable contractors to meet their obligations while protecting their workforce.
The Defense Department issued an initial memorandum on implementation of Section 3610 on March 30, 2020, and further guidance is expected.
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.
