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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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Final Far Rule Issued On Privacy Training Requirements And Payments To Government Subcontractors

December 21, 2016
Have a Joyful Holiday Season and a Happy New Year!
As the end of the year approaches, we'd like to thank all the readers of The GovCon Bulletin™ for following along and for all the thoughtful comments and feedback we received throughout the year.  We wish everyone a joyful holiday season, a happy and safe New Years Day, and a prosperous 2017!  
Mark Amadeo


Privacy Training Requirements

On December 20, 2016, Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA), collectively the "Federal Agencies," issued a final rule amending the Federal Acquisition Regulation (FAR) to require that contractors whose employees have access to a system of records or handle personally identifiable information complete privacy training. This final rule, which you can find here, becomes effective January 19, 2017.

The proposed rule that initially imposed the privacy training requirement, published on October 14, 2011, provides guidance to contractors on the kind of privacy training that addresses the protection of privacy in accordance with the Privacy Act of 1974 and the handling and safeguarding of personally identifiable information (PII).  The proposed rule requires contractors to identify employees who handle PII, have access to a system of records, or design, develop, maintain, or operate a system of records.  These employees are required to complete initial privacy training and annual privacy training thereafter.  Under the proposed rule, a contractor with employees involved in these activities is also required to maintain records indicating that its employees completed the requisite training and to provide these records to the contracting officer upon request.  A prime contractor is required to flow-down these requirements to all applicable subcontracts.

The final rule now makes several clarifications to the proposed rule.  Specifically, the final rule clarifies that contractors have flexibility to utilize privacy training from any source that meets the minimum content requirements, unless the agency specifies in the contract that only agency-provided training is acceptable.  The final rule also provides a number of clarifications addressing the substance of the minimal privacy training requirements.  The final rule revised the definition for PII and clarifies that the privacy training must be role-based, must provide foundational as well as more advanced levels of training, and must have measures in place to test the knowledge level of users. More specifically, at a minimum, privacy training must cover—

  • The provisions of the Privacy Act of 1974, including penalties for violations of the Act;
  • The appropriate handling and safeguarding of PII;
  • The authorized and official use of a system of records or any other PII;
  • Restrictions on the use of unauthorized equipment to create, collect, use, process, store, maintain, disseminate, disclose, dispose, or otherwise access, or store PII;
  • The prohibition against the unauthorized use of a system of records or unauthorized disclosure, access, handling, or use of PII or systems of records; and
  • Procedures to be followed in the event of a potential or confirmed breach of a system of records or unauthorized disclosure, access, handling, or use of PII.

In response to comments expressing concern over the applicability of the rule to commercial item contracts, the final rule also clarifies that the privacy training requirement applies to contracts and subcontracts for commercial items when they involve access to a system of records.

Lastly, the final rule makes clear that it is applicable to contracts and subcontracts at or below the simplified acquisition threshold (SAT) and to contracts and subcontracts for commercial-items, including contracts and subcontracts for commercially available off-the-shelf (COTS) items. 

Payments To Subcontractors

On December 20, 2016, the Federal Agencies also issued a final rule amending FAR to implement a requirement under the Small Business Jobs Act of 2010 that contractors notify the contracting officer, in writing, if the contractor pays a reduced price to a small business subcontractor or if the contractor's payment to a small business subcontractor is more than 90 days past due.  The final rule also requires contracting officers to record the identity of contractors with a history of late or reduced payments to small business subcontractors in the Federal Awardee Performance and Integrity System (FAPIIS).  This final rule, which you can find here, becomes effective January 19, 2017.

As we wrote about in our earlier bulletin (here), the Federal Agencies first proposed these requirements in a proposed rule issued January 20, 2016 under which contracting officers are required to report to FAPIIS a contractor that has a history of three or more unjustified payments under a single contract within a 12-month period.  Under the proposed rule, unjustified untimely or reduced payments to small business subcontractors are now included in ratings for small business subcontracting past performance evaluation factors.

The final rule now incorporates significant changes in response to comments received on the proposed rule. The final rule now provides a reporting window of 14 days from the date of any occurrence of untimely or reduced payment for prime contractors to report to the contracting officer. The final rule also includes examples of payment and nonpayment situations that are not considered unjustified, including if:

  • There is a contract dispute on performance;
  • Partial payment is made for amounts not in dispute;
  • A payment is reduced due to past overpayments;
  • There is an administrative mistake; and
  • Late performance by the subcontractor leads to later payment by the prime contractor.

The final rule preamble also makes clear that the rule applies to contracts for the acquisition of commercial items and commercially available off-the-shelf items.