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Proposed Rule Clarifies 8(a) Sole-Source Justification Requirement

November 21, 2016
PROPOSED RULE CLARIFIES 8(a) SOLE-SOURCE JUSTIFICATION REQUIREMENT

On November 15, 2016, the U.S. Department of Defense, General Services Administration, and National Aeronautics and Space Administration issued a proposed rule, which can be found here, to clarify the justification requirement for 8(a) sole-source awards. Currently, an agency may not award a sole-source 8(a) contract over $22 million unless the contracting officer justifies the use of a sole-source contract in writing; the justification is approved by the appropriate official designated to approve contract awards for dollar amounts that are comparable to the amount of the sole-source contract; and the justification and related documentation are made available to the public.

The proposed rule clarifies that a justification under any other authority cannot be substituted for a sole-source 8(a) justification.

In addition, the proposed rule clarifies appropriate actions that contracting officers should take in the event a contract value rises above or below $22 million prior to award. Under the proposed rule, if the estimated contract value at the time of the submission of the offering letter exceeds $22 million, the contracting officer should include the approved justification with the offering letter. If the contract value at submission of the offering letter is less than or equal to $22 million, but the contract value at the time of award exceeds $22 million, the contracting officer should send the approved justification prior to contract award.

Lastly, the preamble to the proposed rule clarifies that if a contract modification is out of scope, it would be considered a new contract and would need to complete the appropriate process for a new contract and that contracting officers will use their discretion to determine if a modification is within the scope of an original contract.

Comments to the proposed rule are due on or before January 17, 2017.

DoD Issues Final Rules On Rights In Major Weapons Systems Technical Data and Prohibiting Cost-Plus Contracts For Family Housing & Construction Projects

October 25, 2016
DoD Issues Proposed and Final Rules Amending DFARS
Late last month, the U.S. Department of Defense (DoD) issued several proposed and final rules to amend the Defense Federal Acquisition Regulation Supplement (DFARS).  In this edition of the GovCon Bulletin™ we will summarize two of the final rules, one concerning the government’s rights in technical data and another concerning a prohibition against the use of cost-plus contracts for family housing and construction projects.  In the next edition of the GovCon Bulletin™ we will cover the two proposed rules, one concerning the DoD Pilot Mentor-Protégé Program and another concerning DoD’s Test Program for Negotiation of Comprehensive Small Business Subcontracting Plans.
Mark Amadeo

 
DOD ISSUES FINAL RULES ON RIGHTS IN MAJOR WEAPONS SYSTEMS TECHNICAL DATA AND PROHIBITING COST-PLUS CONTRACTS FOR FAMILY HOUSING & CONSTRUCTION PROJECTS

Rights In Technical Data Relating To Major Weapons Systems

On September 23, 2016, DoD issued a final rule (which can be found here) that changes, in some instances, how the government can challenge a contractor’s assertions of restrictions on the government’s rights to use, modify, reproduce, release, or disclose technical data. (For an overview of the government’s rights in technical data and computer software, see our white paper.) Prior to the amendment, a presumption that an item was developed at private expense (and thus properly subject to restrictions on the government’s rights) applied to all commercially available off-the-shelf (COTS) items, as well as to commercial items except major systems (or subsystems or components thereof) that were not COTS items. Contracting officers are required to apply the presumption whether or not a contractor or subcontractor responds to a challenge of an asserted restriction, and a failure to respond to a challenge cannot be the only basis for a decision denying the validity of an asserted restriction. In instances in which the presumption does not apply, however, contracting officers are required to sustain the challenge unless the contractor or subcontractor provides information that demonstrates that the item was developed exclusively at private expense.

As amended by the final rule, DFARS now applies the presumption that an item was developed at private expense to all commercial items and excludes from this presumption a narrower category of items. Specifically, the rule excludes from the presumption major weapons systems (or subsystems or components thereof) that are not (i) a commercial subsystem or component of a major weapon system, if the major weapon system was acquired as a commercial item in accordance with subpart 234.70 (10 U.S.C. 2379(a)); (ii) a component of a subsystem, if the subsystem was acquired as a commercial item in accordance with subpart 234.70 (10 U.S.C. 2379(b)); or (iii) any other component, if the component is a commercially available off-the-shelf item or a commercially available off-the-shelf item with modifications of a type customarily available in the commercial marketplace or minor modifications made to meet the government’s requirements.

Prohibition Against Use of Cost-Plus Contracts for Military Construction and Family Housing Projects

On September 23, 2016, DoD also issued a final rule (which can be found here) that prohibits any form of cost-plus (i.e., “cost-reimbursement” contract types defined in FAR 16.304, 16.305, and 16.306) contracting for military construction projects or military family housing projects. More specifically, for contracts in connection with a military construction project or a military family housing project, contracting officers cannot use cost-plus-fixed-fee, cost-plus-award-fee, or cost-plus-incentive-fee contract types.

DOL Issues Final Rule Establishing Paid Sick Leave For Federal Government Contractors

October 4, 2016
DOL ISSUES FINAL RULE ESTABLISHING PAID SICK LEAVE FOR FEDERAL GOVERNMENT CONTRACTORS

On September 30, 2016, the U.S. Department of Labor (DOL) issued a Final Rule implementing the mandate under Executive Order 13706 (Executive Order) that established paid sick leave for federal contractors.  The Executive Order, which was signed on September 15, 2015 (described in our prior bulletin here) requires parties that contract with the Federal Government to provide their employees with up to 7 days (56 hours) of paid sick leave annually, including paid leave allowing for family care. The Executive Order directed DOL to implement its requirements.  DOL’s Final Rule (found here), which does that, is summarized below.

Covered Contracts
The Executive Order applies to new contracts and replacements for expiring contracts with the Federal Government resulting from solicitations issued on or after January 1, 2017, or that are awarded outside the solicitation process on or after January 1, 2017.  Coverage of contracts and employees under the Final Rule is nearly identical to coverage under the executive order that requires the payment of a minimum wage to employees of Federal contractors, except that the Final Rule also covers employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions and certain contracts with the U.S. Postal Service.  Under the Final Rule, the Executive Order applies to four major categories of contracts:
(1) procurement contracts for construction covered by the Davis-Bacon Act (DBA); 
(2) service contracts covered by the McNamara-O’Hara Service Contract Act (SCA); 
(3) concessions contracts, including any concessions contracts excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b); and 
(4) contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

In addition, any subcontract of a covered contract that (like the upper-tier contract) falls into one of these four categories is subject to the paid sick leave requirements.

The Final Rule contains certain narrow exclusions from coverage for the following types of contractual agreements:
(1) grants; 
(2) contracts and agreements with and grants to Indian Tribes under Public Law 93-638, as amended; 
(3) any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000); and 
(4) any contracts for services, except for those otherwise expressly covered by the Final Rule, that are exempted from coverage under the SCA or its implementing regulations.

The Final Rule also excludes contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government, including those subject to the Walsh-Healey Public Contracts Act.

Covered Employees
The Final Rule and Executive Order apply to any person engaged in performing work on or in connection with a contract covered by the Executive Order whose wages are governed by the SCA, DBA, or Fair Labor Standards Act (FLSA), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions.  The Final Rule includes a narrow exemption from the rule’s accrual requirements for employees who perform work duties necessary to the performance of a covered contract (but who are not directly engaged in performing the specific work called for by the contract) and who spend less than 20 percent of their hours worked in a particular workweek performing work in connection with such contracts.

Collective Bargaining Agreements
If a collective bargaining agreement (CBA) that is ratified before September 30, 2016, applies to an employee’s work performed on or in connection with a covered contract, and the CBA provides the employee with at least 56 hours (or 7 days) of paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, the Executive Order and the Final Rule will not apply to the employee until the date the agreement terminates or January 1, 2020, whichever is first.  If the CBA provides paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, but the amount provided under the CBA is less than 56 hours (or 7 days), the contractor must provide covered employees with the difference between 56 hours (or 7 days) and the amount provided under the existing CBA in a manner consistent with the Executive Order and Final Rule or the terms and conditions of the CBA.

Paid Sick Leave
Accrual
Employees accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract.  As for employees for whom contractors are not already required to keep records of hours worked pursuant to the DBA, SCA, or FLSA (e.g., employees who are employed in a bona fide executive, administrative, or professional capacity under FLSA regulations), contractors can assume that the employees are working on or in connection with covered contracts for 40 hours each week. Contractors are also permitted to estimate time their employees work in connection with (rather than on) a covered contract as long as the estimate is reasonable and based on verifiable information.  The Final Rule also creates an option for contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue leave based on hours worked.  Accrual is calculated, and employees are to be notified in writing of the amount of paid sick leave they have available, at the end of each pay period or each month, whichever interval is shorter.

Maximum Accrual, Carryover, Reinstatement, and Payment for Unused Leave
Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next.  Contractors may also limit the amount of paid sick leave employees have accrued to 56 hours at any point in time.  Contractors are required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired within 12 months after separation unless contractors provide payment to employees for accrued, unused paid sick leave upon separation.  Contractors are not required to cash out employees for accrued, unused paid sick leave at the time of a job separation, but if they do provide cash-out, they will not be required to reinstate unused leave.

Use
An employee may use paid sick leave for an absence resulting from:
(i) physical or mental illness, injury, or medical condition of the employee;
(ii) obtaining diagnosis, care, or preventive care from a health care provider by the employee;
(iii) caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship who has any of the conditions or need for diagnosis, care, or preventive care described in (i) or (ii); or
(iv) domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (i) or (ii) or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (iii) in engaging in any of these activities.

Contractors must allow employees to use paid sick leave in increments as small as one hour (with a narrow exception for employees whose work makes it physically impossible to leave or return to the job during a shift).  Contractors may only limit the amount of paid sick leave an employee uses at once or per year on the basis of how much paid sick leave the employee has available.  When employees use paid sick leave, contractors must provide them with the same regular pay and benefits they would have received if they had not used the leave, except that they need not earn additional paid sick leave during that time.

Requests to Use Leave
An employee’s request to use paid sick leave may be made orally or in writing, but must be made at least 7 calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable.  A contractor must communicate any denial of a request in writing, with an explanation for the denial — which cannot be based on whether the employee has found a replacement worker or on the contractor’s operational needs.

Certification or Documentation of the Need to Use Leave
A contractor may require certification only for absences of three or more consecutive full days, and the employee must have received notice of the requirement to provide certification or documentation before he or she returns to work. Certification must be issued by a health care provider if paid sick leave is used for the physical or mental illness, injury, or medical condition of the employee; obtaining diagnosis, care, or preventive care from a health care provider by the employee; or caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity.  If the paid sick leave is used for an absence resulting from domestic violence, sexual assault, or stalking, documentation can be from a health care provider, counselor, representative of a victim services organization, attorney, clergy member, family member, or close friend; and self-certification is also permitted.  Records relating to medical histories shall be maintained as confidential records, and contractors are prohibited from disclosing any verification information and are required to maintain confidentiality about domestic abuse, sexual assault, or stalking, unless the employee consents or when disclosure is required by law.

Interaction with Other Laws and Paid Time Off (PTO) Policies
A contractor may not use paid sick leave required by the Executive Order and Final Rule toward the fulfillment of its SCA or DBA obligations.  A contractor’s obligations under the Executive Order and Final Rule have no effect on its obligations to comply with the Family and Medical Leave Act (FMLA); paid sick leave may be substituted for (i.e., may run concurrently with) unpaid FMLA leave, and all notices and certifications that satisfy FMLA requirements will satisfy the request for leave and certification requirements of the Final Rule.  With respect to state or local paid sick time laws, contractors must comply with any such laws as well as the Executive Order and Final Rule, but contractors may satisfy their Executive Order obligations by providing paid sick time that also fulfills the requirements of a State or local law provided that the paid sick time is accrued and may be used in a manner that meets or exceeds all of the requirements of the Executive Order and Final Rule.  Where the requirements of an applicable state or local law and the Final Rule differ, satisfying both will require a contractor to comply with the requirement that is more generous to employees.  A contractor’s existing PTO policy can fulfill the paid sick leave requirements of the Executive Order as long as it provides employees with at least the same rights and benefits as the Final Rule requires.  So if a contractor provides 56 hours of PTO that meets the requirements described in the Executive Order and the Final Rule and employees can use the leave for any purpose, the contractor does not have to provide separate paid sick leave even if an employee uses all of the time for vacation.  As for PTO policies that provide more than 56 hours of leave, a contractor may choose to either (1) provide all PTO used for the purposes described in the Final Rule in compliance with all of the rule’s requirements or (2) track, and make and maintain records reflecting, the amount of paid time off an employee uses for the purposes described in the rule, in which case the contractor need only provide, for each accrual year, up to 56 hours of PTO the employee requests to use for such purposes that complies with the rule’s requirements, such as for certification, documentation and recordkeeping.

Multiemployer Plans
A contractor may fulfill its obligations under the Executive Order jointly with other contractors who make contributions to a multiemployer plan (maintained pursuant to one or more CBAs) on behalf of employees who receive access to paid sick leave that complies with the Executive Order.

Enforcement Procedures
Complaints may be filed with DOL’s Wage and Hour Division (WHD) by any person or entity that believes a violation of the Executive Order or the Final Rule has occurred.  The Final Rule contains a mechanism for WHD investigations and informal complaint resolution and specifies remedies and sanctions for violations of the Executive Order and the Final Rule, including the payment of damages and debarment.  The Final Rule also includes an administrative process, including administrative hearings, to resolve disputes of fact or law.

DOL Publishes 2017 Minimum Wage Rates For Federal Government Contractors

September 23, 2016
DOL PUBLISHES 2017 MINIMUM WAGE RATES FOR FEDERAL GOVERNMENT CONTRACTORS

On September 20, 2016, the Wage and Hour Division of the U.S. Department of Labor (DOL) issued a notice, which can be found here, announcing the applicable minimum wage rate to be paid beginning on January 1, 2017, to workers performing work on or in connection with Federal contracts covered by Executive Order 13658.  

Executive Order 13658 established a methodology for setting and raising annually the hourly minimum wage paid by contractors to workers performing work on covered Federal contracts, including the minimum hourly cash wage that must be paid to tipped employees performing work on or in connection with covered contracts.

The applicable minimum wage is currently $10.15 per hour, and the applicable minimum cash wage that generally must be paid to tipped employees performing work on or in connection with covered contracts is currently $5.85 per hour. Beginning January 1, 2017, the minimum wage rate that generally must be paid to workers performing work on or in connection with covered contracts will increase to $10.20 per hour and the required minimum cash wage that generally must be paid to tipped employees performing work on or in connection with covered contracts will increase to $6.80 per hour.