Keeping Up With the FAR

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2 Keeping Up With the FAR Breakout Session #: D09 Amy Hernandez Strategic FAR Advisors, LLC Stephanie Alexander BOOST LLC Gunjan R. Talati Kilpatrick Townsend & Stockton, LLP Date: Tuesday, July 26 Time: 11:15am-12:30pm

3 FAR & FAR Supplements DOD (Army, Navy, Air Force, DLS); HHS; USDA; State; OPM, DOE; VA; USAID; etc.

4 Gov t Contracts SOME GROUND RULES FAR Federal Acquisition Regulations Other Issues Competitively Bid or Negotiated Can be whole other presentation. Most of contract is Non-negotiable; force & effect of law; Clauses not in the contract may still be read into the contract Flow-down requirements to subcontractors Prescribed claims and disputes procedures IMPORTANT TO KNOW HOW THESE WORK!! Timeliness & Waiver/Accord & Satisfaction Small Business, Subcontracting/MBE requirements Prompt Pay and Bonding Issues (no mechanic s lien rights) Policy and Audit Rights Criminal and Civil Exposure Can t defraud the Government States have similar structures.

5 The Christian Doctrine It s In There G.L. Christian & Assoc. v. United States, 213 F.2d 418 (Ct. Cl. 1963) In other words regardless of whether or not a clause is express or inserted by reference, a court can interpret the contract as if all mandatory clauses are present even if not

6 The Christian Doctrine: Examples of Some Mandatory Provisions for Prime Contractors The Buy-American Act FAR (1)-(4) The Payment Clause FAR (1)-(7) Termination for Default FAR ; Equal Opportunity and Affirmative Action Clauses FAR The Miller Act Davis-Bacon Act Changes Clause Disputes Clause BUT NOT the Termination for Convenience Clause

7 Recent Changes Fair Pay and Safe Workplaces E.O Fair Pay and Safe Workplaces FAR final rule; DOL guidance expected in 2016 E.O. applies to prime contractors and subcontractors bidding contracts >$500,000 Disclosure requirements - Potentially burdensome for contractors and subcontractors Mandatory disclosure of any administrative action, judgment or decision for violation of listed laws and regulations for the previous 3 years Lists 14 federal statutes/regs, including FLSA, SCA, DBA, ADA, ADEA, FMOLA, NLRA, OSHA, E.O (Affirmative Action) Pre-award representations and certifications - Updated every 6 months during performance Contractors also required to disclose on behalf of subcontractors and flow-down the provision to subcontractors

8 Recent Changes Sick Days E.O : Sick Days Effective Jan. 1, 2017 Applies to contracts and contract-like instruments that Involve procurement of services of construction Are covered by the SCA Are for concessions Are with the federal government, concern federal property or lands, and are related to offering services for federal employees, their dependents or the general public, or Involve employees whose wages are governed by the DBA, SCA, or FLSA

9 Recent Changes Sick Days E.O : Sick Days Requires federal contractors and subcontractors to allow employees to accrue one hour of paid sick leave per 30 worked (must allow employees to accrue up to 56 hours per year) Employees can use sick days for any personal or family health issue, domestic violence, sexual assault or stalking issues (includes related counseling, court proceedings, relocation) Must allow employees to carry accrued sick leave from year to year Employers not required to pay out unused sick leave when employee leaves, but must reinstate all accrued hours if employee is re-hired within 12 months of leaving Potentially burdensome for contractors and subcontractors

10 Recent Changes LGBT Nondiscrimination Amendments to E.O Applies to contractors and subcontractors covered by E.O and Updates E.O to extend protections to LGBT workers Substitutes sex, sexual orientation, gender identity or national origin for sex or national origin Contractor may not discriminate on the basis of sexual orientation, gender identity Contractors should review their SOPs and AAP

11 Recent Changes Pay Transparency E.O : Pay Transparency Prohibits pay secrecy Contractors and subcontractors may not discharge or in any other manner discriminate against any employee or applicant for employment because such employee has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant Does not affect wrongful/unauthorized disclosure by employees whose essential job functions involve accessing and disclosing compensation information in violation of workplace rules Requires that federal contractors and subcontractors requires provision explaining this policy in employee handbooks and manuals

12 Recent Changes False Claims Act Supreme Court s decision in Universal Health Services, Inc. v. Escobar Recognizes implied certification liability Emphasis on materiality Resolves split amount the Circuit Courts 11

13 Recent Changes WOSBs Certifications Sole Source Authority 12

14 Internal Investigations Involving Contractor Employees (Yates Memo) Potential penalties for labor violation includes false claims liability (implied certification), criminal fraud Yates Memo: DOJ and OIG Investigations have shifted from enterprise-centric to employee-centric Example: corporations must proffer the names of involved individuals to get cooperation credit (Yates Memo Point 1) Privilege considerations Upjohn more important than ever Weigh the company s interest in cooperation and disclosure against the employee s constitutional rights in a criminal matter

15 DCAA/DCMA Hot Topics DCAA news Incurred Cost Backlog still an issue Forward Pricing audit timeliness still lagging at average 85 days for FY 2015 (compared to 28 days in FY 2008) DCAA preparing for major internal reorganization to be effective October 1, 2016 The 7 largest Defense Contractors will be realigned into Corporate Audit Directorates with all audit offices for all divisions reporting up to a single Corporate Audit Director (SES) for each contractor Northrop Grumman in Falls Church, VA Raytheon, General Dynamics and BAE in Lowell, MA Boeing and Honeywell in St. Louis, MO Lockheed Martin in Ft. Worth, TX L-3 will have a similar structure but will be aligned to the Field Detachment All other DCAA branch offices and suboffices will be realigned to one of three new regions (East, Central, Western) 14

16 New DCAA Regional Structure 15

17 DCAA/DCMA Hot Topics DCAA news FY 2017 priorities will be: Continued reduction of incurred cost backlog Business system audits for high risk locations Real time audits More TINA audits (Center of Excellence for TINA audits was established in FY 2015) Continued small business outreach via NDIA and SBTC Sensitive audit areas with continued focus: Compensation MRD 16-PSP-005(R) regarding use of blended rates DCAA requesting real time systems access Short response times for data requests and formal report responses Internal audit reports Increased burden on contractors to support detailed walkthroughs of proposals DCAA is looking for any reason to say proposals are inadequate and get them off their plate! 16

18 DCAA/DCMA Hot Topics DCMA News Incurred Cost Working with DCAA to disposition more multi year audits Utilizing Quick Closeout Procedures where applicable Established a Contract Closeout Center Entering into burn down plans with contractors Business Systems Coordinating with CPSR teams and DCAA for consistent approach Significant Cost Areas Under Scrutiny Compensation Unsupported costs Reductions to base costs impacting forward pricing rates 17

19 DCAA/DCMA Hot Topics DCMA News Commercial Acquisitions Supporting DFARS Case 2016-D006, Procurement of Commercial Items Draft Proposed Rule Standing up six Commercial Item Centers of Excellence, organized geographically and aligned to various market sectors Agreements with individual contractors on the type of information needed to support Commerciality Determinations and Price reasonableness in a format already in use by the contractor 18

20 QUESTIONS?

21 Thank you. Amy Hernandez Strategic FAR Advisors, LLC Stephanie Alexander Boost LLC Gunjan R. Talati Kilpatrick Townsend & Stockton, LLP