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Taking A Closer Look At The House’s 2018 NDAA Bill

July 28, 2017

Earlier this month, the House passed its bill authorizing $696 billion in Department of Defense (DoD) spending for the 2018 fiscal year. The Senate Armed Services Committee recently completed markup of the Senate’s version of NDAA 2018, and now that healthcare legislation is off the calendar, the Senate should begin consideration of its bill shortly.

Getting back to the bill that passed the House, though, certain aspects of the authorization have already attracted significant attention, including a proposed establishment of a Space Corps, which would be a distinct military service within the U.S. Air Force. Other noted aspects of the bill include provisions that prevent a new round of base realignment and closures, that reauthorize the Women’s Business Center program, that provide significant resources to hiring and training acquisition personnel on acquisition of commercial items, and that establish a program for acquiring commercial products from “online marketplaces” widely used in the private sector. Whether these or other House provisions survive after a Senate bill is passed and conflicts worked out remains to be seen.

Nevertheless, for DoD contractors, the House bill certainly reflects the priorities of agency and industry constituencies vocal enough to have their spending priorities expressed in the proposed legislation. Indeed, to the extent the House bill represents a wishlist of defense spending, it may offer a glimpse, albeit hazy and imperfect, of potential opportunities that may someday materialize in future DoD solicitations and Broad Agency Announcements. Consequently, even at this stage contractors - particularly technology innovators and small business subcontractors - wishing to make predictions on which way DoD budgetary winds will blow may want to take a close look at the House bill.

The bill, for example, includes authorizations for typical expenditures such as aircraft, submarine and destroyer acquisitions. Of greater interest to construction contractors and subcontractors, perhaps, the House bill also includes authorizations for approximately $10 billion in military construction projects, land acquisition, and family housing projects for the Army, Navy, Air Force, National Guard and Reserve, and defense agencies.

The bill also points to new and intriguing defense systems that may drive future technological innovation. For example, in addition to authorizing expenditures for ground-based missile defense systems, the House bill also authorizes DoD to develop a space-based “sensor layer” for detection and tracking of ballistic and hypersonic missiles, as well as a space-based “intercept layer” for targeting and intercept of ballistic missiles. And an interesting, if not sobering, glimpse of the kinds of threats DoD may arm against in the future is offered in provisions that established the “Commission to Assess the Threat to the United States from Electromagnetic Pulse Attacks and Events,” which is supposed to assess and make recommendations with respect to the threat to the U.S. from electromagnetic pulse attacks and events. In connection with the establishment of the space-based missile programs and the electromagnetic pulse attack commission, the bill requires DoD agencies to examine and report on both mature technologies and technologies requiring further research and development, as well as the feasibility and cost of solutions. Consequently, any public reports that come out of these programs should be of interest to companies pursuing emerging technologies.  

To view or download the House's version of 2018 NDAA, go here.

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A Closer Look at the "Buy American And Hire American" Executive Order

May 8, 2017

A few weeks ago, President Trump signed an executive order, titled Buy American And Hire American (the "EO"), aimed at maximizing the use of goods, products and materials produced in the U.S.  It is important to note that the EO, signed on April 18 and that can be found here, does not propose any new additional laws; nor does it amend existing laws or regulations. Rather, the EO signals the administration's intent to vigorously enforce laws already on the books.  In particular, with respect to its “Hire American” mandate, the EO reflects the administration’s desire to rigorously enforce and administer laws permitting the immigration of foreign workers of U.S. employers.  Similarly, although the EO expresses the goal of maximizing the use of U.S.-made goods, products and materials under federal procurements, the EO purports to try to reach this goal by requiring every executive agency to “scrupulously monitor, enforce, and comply with Buy American Laws” and to “minimize the use of waivers.”

At first glance, because the EO focuses on administration and enforcement of already existing laws but announces no new programs or agency initiatives, the impact of the EO might seem muted.  However, the EO by its terms anticipates increased scrutiny by agencies over contractors’ compliance with foreign-worker immigration rules and “Buy American Laws."  Government contractors, therefore, would do well to take this time to identify the practices that may be subject to this scrutiny by reviewing their hiring and employment procedures and by examining their supply chains to identify any services or products of foreign origin.

Moreover, the tenor, if not the terms, of the EO signals that significant changes, indeed, are coming.

Hire American

Government contractors that rely on foreign workers for expertise and to meet technical capability requirements must already square their practices with requirements under the International Traffic In Arms Regulations (ITAR) and the Export Administration Regulations (EAR).  The EO now requires the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security to “propose new rules and issue new guidance, to supersede or revise previous rules and guidance” on immigration laws and programs, including the H-1B visa program.  That program permits employers to hire temporarily highly skilled qualified foreign workers in specialty occupations, and under the EO the Secretary of State, Attorney General, Secretary of Labor and Secretary of Homeland Security are required to propose reforms that will ensure H-1B visas are awarded to “the most-skilled” or “highest-paid” petition beneficiaries.

Government contractors that hire foreign employees should, therefore, not only review their practices to ensure compliance with existing rules, but follow closely upcoming developments that might propose or flesh out standards for determining "the most-skilled" program beneficiaries.

Buy American

With regard to the Buy American requirements, the EO sets out a series of mandates for federal agencies, as well as for the Secretary of Commerce, the Director of the Office of Management and Budget, and the U.S. Trade Representative.  For example, within 150 days of the EO, agency heads must make several assessments on their agencies' monitoring, enforcement and compliance with Buy American Laws and their use of waivers. Agencies also are required to develop and propose policies to ensure maximum use of U.S.-produced materials. Another EO requirement is that the Secretary of Commerce and U.S. Trade Representative assess, within 150 days of the EO, the impact of U.S. free trade agreements, as well as the World Trade Organization Agreement on Government Procurement, on Buy American Laws and domestic procurement preferences.

A “Buy American Law” is defined broadly by the EO to include all statutes, regulations, rules, and executive orders relating to federal procurement that require, or provide a preference for, the purchase or acquisition of U.S.-produced goods, products, or materials. Consequently, the scope of the EO includes the Buy American Act of 1933 (BAA).

The BAA generally restricts government contractors from using foreign products to meet contract requirements in contracts above a minimum dollar threshold. As implemented in federal acquisition regulations, contractors that use foreign-made products are subject to price penalties.  These penalties do not apply if a government contract is for “information technology that is a commercial item.” (See FAR 25.103(e).)  The BAA exception for IT commercial items derives from a statutory exemption granted by Congress. Congress, in the Trade Agreements Act, also gave the President the authority to waive BAA requirements on eligible products or services that are produced under contracts above minimum thresholds and that originate from countries that have signed international agreements with the U.S.

Although stopping short of stating so, the EO implies that after the Secretary of Commerce and U.S. Trade Representative have assessed the impact of free trade agreements on the BAA and domestic procurement preferences, the scope of the foreign products or services excepted from the BAA under the TAA might be narrowed.

Government contractors with foreign suppliers or producers should pay close attention to any future developments that might limit the scope of any exceptions to the BAA, particularly those arising from trade agreements, or that impose additional requirements or restrictions on products or services that may be subject to any exceptions.

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President Signs Joint Resolution Repealing Government Contractor “Blacklisting” Rule

March 30, 2017

Earlier this week, on Monday, March 27, 2017, President Trump signed a joint resolution (which you can read here) declaring that the Fair Pay and Safe Workplaces rule would “have no force or effect.”

As we wrote about in our prior bulletin here, on June 30, 2014, President Obama signed Executive Order 13673 (the “E.O.”), entitled Fair Pay and Safe Workplaces, mandating that before a contracting officer can award a contract, he or she must determine if a contractor is a responsible source to do business with the federal government.  The E.O. and subsequent implementing final FAR regulation (found here) consequently required contractors bidding on contracts with a value over $500,000 to disclose whether they have been found to have violated 14 identified federal labor laws and executive orders, or their state law equivalents. In addition, prospective subcontractors were required to make similar disclosures for subcontracts with an estimated valued over $500,000 at any tier, with the exception of subcontracts for commercially available off-the-shelf items. The E.O. and FAR rule also required agencies to adopt procedures to assist contractors and subcontractors to comply with labor laws, required contractors and subcontractors to provide individuals with information each pay period regarding how they are paid (the “paycheck transparency” rule), required contractors and subcontractors to provide notice to workers who are treated as independent contractors that they are so treated, and addressed mandatory arbitration of certain employee claims.

Last October, however, a day before the FAR rule was to take effect, a district court decision granted a preliminary injunction (which you can read here) that put all aspects of the E.O. and FAR rule on hold except for the paycheck transparency rule.

The joint resolution signed by President Trump earlier this week now repeals all aspects of the E.O. and FAR rule, including the paycheck transparency rule.

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Newly Released: Using Joint Ventures To Capture Federal Government Contracting Opportunities, Second Edition - Free Download!

February 1, 2017

In May and July 2016, the U.S. Small Business Administration (SBA), which is charged with regulating and enforcing the rules on small business participation in federal government contracting, made changes to the regulations that cover the use of joint ventures in federal government contracting. To a large extent, the changes made to the regulations have provided clarity and consistency in how joint ventures can be used by businesses that wish to compete for federal government contracts. But the most significant impact of the changes has been to increase the contracting opportunities that are available to small businesses and the teaming partners that collaborate with them in joint ventures.

Indeed, the recent changes to the rules covering joint ventures clearly are intended to provide small businesses additional incentives to make greater use of joint venture arrangements. As the momentum toward contract consolidation continues, and contracts continue to grow larger and more complex, small businesses participating in the federal government market would do well to explore joint venture arrangements in the face of this federal government contracting reality: small businesses must aggressively establish teaming partnerships to stay competitive.  In this second edition of our white paper, we discuss the rules on joint ventures that enable businesses to form strategic teaming relationships in order to pursue the expanded government contracting opportunities that are now available to them.  Enter your e-mail to receive a download link and vew the paper.

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