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The Government continues to take steps to address its Defense Industrial Base supply chain cybersecurity. Below are some of the emerging developments you should be following in this space:

Cybersecurity Maturity Model Certification (CMMC)

Previously we reported on the Department of Defense’s (DoD’s) activities to roll out a CMMC program. DoD has now rolled out a corrected version of the CMMC Model, version 1.02. The Model mandates that DoD contractors, and their supply chains, be certified to have systems in place that meet the certification level cybersecurity requirements for the data that they will be required to handle under DoD contracts and subcontracts.

The DoD Acquisition Council opened a rulemaking case to establish a clause for the inclusion of CMMC certification requirements in its procurements. DAR Case 2019-D041 provides for establishment of a rule that will implement “a standard DoD-wide methodology for assessing DoD contractor compliance with all security requirements in the [NIST SP 800-171] …, and a DoD certification process, known as the Cybersecurity Maturity Model Certification (CMMC), that measures a company’s maturity and institutionalization of cybersecurity practices and processes.” Currently, the draft DFARS rule is being reviewed by the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget. Once it gets through this rulemaking process, and any concerns identified by OIRA are addressed, the rule should be ready for issuance in the Federal Register. It may be issued as an interim rule or as a proposed rule. However, it is a significant rule and must go through the procurement rule-making notice and comment process.

The previously announced schedule for roll out of CMMC was: establish CMMC-Accreditation Body (CMMC-AB) in January 2020, train certifiers, issue ten pilot Requests for Information by June 2020, issue pilot Requests for Proposals (RFPs) in September 2020, and award contracts containing CMMC provisions thereafter. Contractors must be certified at the designated CMMC level to receive these pilot awards. They must also ensure that their supply chains comply with mandated levels of certification where their performance involves Controlled Unclassified Information (CUI). Given the delays being experienced due to the COVID-19 situation, this schedule may be impacted.

CMMC-Accreditation Body (CMMC-AB)

DoD has entered into a Memorandum of Understanding (MOU) with the CMMC-AB, which will establish the standards, training, and processes for conducting the government contractor audits for certification purposes. The certifying persons or entities, once properly vetted through processes established by the CMMC-AB, will be known as CMMC Third Party Assessment Organizations (C3PAOs).

Apparently some entities are already claiming to be C3PAOs capable of providing companies with the CMMC certification needed to contract with the DoD in coming months. However, the CMMC-AB has not yet established its program. Nor has it conducted any training or certification of C3PAOs. Once it does, it will establish a CMMC Marketplace that will list approved C3PAOs.

Beware of entities that say that they can engage in review and certification now. At best, they are entities that would seek to assist you in getting ready for compliance. However, they cannot certify you. At worst, they may be entities seeking to access your systems and information for other than lawful purposes.

On April 22, 2020, the CMMC-AB issued an RFP for a continuous monitoring solution. The RFP called for responses by May 1, 2020, and anticipated selection of a solution by May 8, 2020. A CMMC-AB continuous monitoring system was not something identified in the CMMC. If actually implemented, a CMMC-AB continuous monitoring system is likely to pose a number of issues that will need to be addressed at the government, contractor and supply chain levels — from the basis of authority for such a system, to concerns about contractor privacy, to concerns about security of contractor systems issues arising from the monitoring solution, to the parameters for protecting a contractor’s crown jewels from unauthorized access and use by the Government and others.

Defense Contract Management Agency (DCMA) Cybersecurity Audits Continue

Pending implementation of the CMMC, it is our understanding that the DCMA is continuing to conduct its cybersecurity audits of the Defense Industrial Base (DIB) based on the cybersecurity clause, DFARS 252.204-7012 Safeguarding Covered Defense Information and Cyber Incident Reporting, the DCMA Contractor Purchasing System Review Guidebook, Appendix 24, and the applicable standard, National Institute of Standards and Technology (NIST) Special Publications 800-171 Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations. In February 2020, NIST issued a Revision 2 to NIST SP 800-171.

Controlled Unclassified Information (CUI)

The Federal Acquisition Regulatory (FAR) Council opened a rulemaking case in 2017, FAR Case 2017-016, to establish a rule to address agency policies for designating, safeguarding, disseminating, marking, decontrolling, and disposing of CUI. The current FAR Open Cases state that the rule has been drafted and is currently awaiting concurrence by the Civilian Agency Acquisition Council.

Contractors have been waiting for the rule for years now as CUI triggers the application of the cybersecurity standards. Knowing what is considered CUI is needed to establish where and what cybersecurity is required and which contractor systems are affected.

When finalized, these and other elements will need to be woven together to create the fabric of DoD cybersecurity that a DIB contractor and its supply chain must use to appropriately cover their systems and information.

Contact the author of this blog or your Stinson attorney if you have questions about this article, or government contracting matters.

 

Government contractors should consider all contract performance vitally important because they can’t always control which past performance is considered by agency evaluators. The recent Government Accountability Office (GAO) decision in Sayres & Associates Corporation (Sayres), B-418382 (March 31, 2020) reminds offerors that poor past performance, even under just one contract, can have lasting negative effects on the ability to receive awards.

The Department of the Navy (Navy) sought to obtain program management support services related to its DDG-1000 Destroyer program. To this end, the underlying request for proposals (RFP), issued in April 2018 as a small business set-aside, contemplated the award of a cost-plus-fixed-fee task order to an offeror holding a Navy SeaPort Enhanced contract.

The solicitation stated that award would be made on a best-value tradeoff based on three factors: (1) technical and management, (2) past performance, and (3) total evaluated price. The RFP provided that the technical factor was more important than past performance, and that the technical and past performance factors combined were significantly more important than price, though the price factor’s importance would increase if the proposals were otherwise equally matched or if there was a significant difference between the offerors’ prices such that the price premium reduced the value of superior ratings under other factors.

Under the past performance evaluation factor, the RFP required offerors to provide relevant past performance references, as well as past performance references for each significant subcontractor. In addition, the solicitation explained that the government could limit or, particularly relevant here, expand the number of references it contacts, as the government could contact references not provided by the offeror and review performance data obtained from government databases or personal knowledge. Overall, past performance would be evaluated based on recency, relevance, and quality, and assigned an adjectival rating of (1) substantial confidence, (2) satisfactory confidence, (3) limited confidence, (4) no confidence, or (5) unknown confidence.

The Navy received three offers. Sayres’s proposal received an Outstanding technical and management rating and a Satisfactory Confidence past performance rating, and had a total evaluated price of $70,229,306. Reliability and Performance Technologies, LLC’s (RPT’s) proposal received a Good technical and management rating and Substantial Confidence past performance rating, and had a total evaluated price of $59,203,221. That is, Sayres was higher-rated on the technical factor, lower-rated on past performance, and offered a higher price than RPT. Ultimately, the award was made to RPT.

Sayres protested on numerous grounds, including that the Navy improperly evaluated its past performance. The crux of Sayres’s argument was that the Navy improperly considered its past performance under a DDG-51 Destroyer program support contract. The DDG-51 support contract was not referenced in Sayres’s proposal. Moreover, according to Sayres, the Navy “cherry-picked” its review of the DDG-51 support contract performance, as there were more recent, and less negative, past performance reports, and, overall, the Navy placed undue importance on the DDG-51 support contract.

The Navy, in turn, argued that the DDG-51 support contract was particularly relevant to its evaluation, since Sayres’s work thereunder was most similar to the scope of the task order under the instant procurement for the DDG-1000 Destroyer program. The Navy also explained that it was first made aware of Sayres’s poor performance under the DDG-51 support contract because the DDG-51 and DDG-1000 programs had adjacent offices. Due to this knowledge, the Navy sought out the contract performance assessment reports (CPARs) for Sayres’s work under the DDG-51 support contract in its evaluation. These CPARs indicated unsatisfactory or marginal ratings in Sayres’s quality, schedule, and management performance.

The GAO agreed with the Navy. Noting that agencies have discretion in their evaluation of the relative merit and relevance of past performance references, the GAO found the Navy’s evaluation reasonable. Indeed, the solicitation put offerors on notice that the Navy could seek additional sources of past performance information from personal knowledge as well as government databases, such as the CPARS. Moreover, agencies are not required to seek out all possible sources of past performance information, for example, by interviewing officials in the relevant contracting office, and can reasonably choose to rely on the annual, final versions of CPARs as opposed to interim CPARs. To the extent that Sayres argued that the Navy should have considered more recent CPARs, i.e. from 2019 and 2020, these newer CPARs were not available when the proposals were evaluated in 2018. Thus, the GAO denied the protest on this ground.

For offerors, this decision serves as an important reminder that, in negotiated procurements, federal law requires that agencies consider the offerors’ past performance in determining the best value to the government. Depending on the solicitation, this past performance information may come from a number of sources, some of which offerors have no control over. In light of this, it is crucial that offerors consistently perform in a satisfactory or exemplary manner – even one misstep can tarnish a contractor’s past performance and hinder the ability to obtain future awards.

Section 3610 of the CARES Act provides for funding to aid government contractors whose employees or subcontractors “cannot perform work on a site that has been approved by the federal government, including federally-owned or leased facility or site, due to facility closures or other restrictions” and cannot telework during the COVID-19 public health emergency. As noted in a previous Stinson alert, section 3610 raised a number of questions. On April 8, 2020, DoD issued an immediately effective Class Deviation for section 3610 that attempts to strike a balance between the necessity of maintaining overall readiness and the importance of ensuring a responsible use of public funds for DoD contractors and subcontractors. Related Implementation Guidance and Implementation Guidance FAQs were issued the next day.

Section 3610

Section 3610 of the CARES Act allows executive branch agencies, including DoD to fund certain contractor costs for payment of leave, and to retain readiness where the contractor’s or its subcontractor’s employees cannot perform due to “closures or other restrictions” and they are “unable to telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020,” for the coronavirus (COVID–19). More particularly, the section facilitates, subject to the availability of funds, government reimbursement of a government contractor “at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave,” where the contractor expends such funds “to keep its employees or subcontractors in a ready state, including to protect the life and safety of government and contractor personnel, but in no event beyond September 30, 2020.”

FAR Part 31 and DFARS Part 231 Class Deviation

Implementing section 3610 of the CARES Act, the new DoD Class Deviation to FAR Part 31 and DFARS Part 231 “authorizes contracting officers to use the attached DFARS 231.205-79, CARES Act section 3610 Implementation, as a framework for implementation of section 3610.” The Class Deviation 2020-O0013 directs that a new cost principle, DFARS 231.205-79, and accompanying CARES Act Section 3610 Implementation, be used by DoD contracting officers to appropriately balance flexibilities and appropriate limitations when implementing section 3610.

The Class Deviation expressly recognizes the imperative to support DoD contractors that are “struggling to maintain a mission-ready workforce due to work site closures, personnel quarantines, and state and local restrictions on movement related to the COVID-19 pandemic” when such issues cannot be overcome through remote work. But it also emphasizes the importance of contracting officers continuing to act as “good stewards of taxpayer funds while they support contractor resilience,” which means they will hold contractors responsible for supporting any claimed costs. In addition to appropriately documenting all claimed leave costs for their employees, contractors must be ready to identify credits that may reduce reimbursement under section 3610. Indeed, the Class Deviation directs contracting officers to secure representations from contractors regarding any other relief claimed or received, including an affirmation that the contractor has not or will not pursue reimbursement for the same costs accounted for under their request.

It also requires contracting officers to consider the immediacy of the specific circumstances of the contractor involved and respond accordingly. As the Class Deviation recognizes, some contractors will have more immediate needs than others, depending on the nature of their contracts and their performance requirements. For example, the impact of COVID-19 on a contractor providing janitorial services at a now-closed federal facility will be significantly more dire than that on a contractor whose employees are able to work from home. For this reason, the survival of many of the businesses the CARES Act is designed to assist may depend on the contracting officer’s efficiency in this regard. Contractors should keep this in mind when seeking relief under section 3610—and tailor their request to contracting officers to highlight the immediacy of the coronavirus-related impacts they are experiencing.

DFARS 231.205-79

The DoD Class Deviation establishes a new cost principle that applies only to a contractor (i) established in writing by the cognizant contracting officer to be an affected contractor; and (ii) whose employees or subcontractor employees cannot perform at a government-approved facility or site due to closures or other restrictions and are unable to telework because their jobs cannot be performed remotely. It also reiterates that the maximum reimbursement allowed under section 3610 will be reduced by the amount of any credits a contractor is allowed pursuant to laws specifically identifiable to the COVID-19 public health crisis declared on January 31, 2020, including the Families First Coronavirus Response Act (Pub. L. 116– 127), the CARES Act (Pub. L. 116-136), “or other credit allowed by law that is specifically identifiable with the public health emergency declared on January 31, 2020 for COVID–19.”

Under the cost principle, “costs of paid leave (including sick leave), are allowable at the appropriate rates under the contract for up to an average of 40 hours per week, and may be charged as direct charges, if appropriate,” so long as they are incurred either for the purpose of keeping contractor employees and subcontractor employees in a ready state notwithstanding risks arising from the COVID-19 public health emergency, or protecting the life and safety of government and contractor personnel against such COVID-19 risks.

Only costs “incurred as a consequence of granting paid leave as a result of the COVID-19 national emergency and that would not be incurred in the normal course of the contractor’s business” are allowable. In addition, covered paid leave is limited to leave taken between January 31, 2020 and September 30, 2020 by employees who otherwise would be performing work on a site that has been approved for work by the federal government, but the work cannot be performed at such facility because it has been closed or made practically inaccessible or inoperable and the employees have been granted leave because their job duties cannot be performed remotely during the COVID-19 public health emergency. In this regard, the cost principle states that a facility “is deemed inaccessible … to the extent that travel to the facility is prohibited or made impracticable by applicable Federal, State, or local law, including temporary orders having the effect of law.”

Contractors seeking to take advantage of this cost principle must segregate and identify such costs in their records so that compliance with all applicable terms can be reasonably ascertained.

Implementation Guidance

The DoD Implementation Guidance issued on April 9 starts with the premise that contractors usually include leave costs as part of their indirect rates which are wrapped into their fixed price for a fixed price contract; labor rate for time and materials type contracts; or as a cost element under cost-reimbursement contracts.

For fixed price contracts, these adjustments are not to include any increase in profit, but are only to address increased costs of providing leave as permitted under section 3610. Where cost increases impact multiple contracts, then the contractor is required to “reasonably allocate” these increased costs across the affected contracts. These increased costs should be pursued through submission of a request for equitable adjustment and will need to be negotiated with the appropriate administrative contracting officer.

For cost reimbursement contracts, the increased costs should be placed in a separate account and efforts to address such increased costs should be coordinated with the contracting officer.

For time and materials or labor hour contracts, a request for equitable adjustment must be prepared and a separate contract line item will be established to address these segregated costs.

Where cost impacts fall on a contractor’s fixed, time and materials, labor hour, and/or cost reimbursement contracts, segregation of costs and coordination with the contracting officer will be needed. Note that cost reimbursement will depend on the availability of funds in accordance with section 3610.

Whether fixed price, cost reimbursement, time and materials or labor contract contracts, it will be important for contractors to segregate, track and trace their costs to determine allowability and cost recovery terms.

Implementation Guidance FAQs

DoD’s Implementation Guidance frequently asked questions (FAQ) seeks to address some immediate questions about this new cost principle. It is expected that these FAQs will be expanded as new questions are asked and answered.

Among other things, the Implementation Guidance FAQs explain that the determination of whether to provide relief under section 3610 will vary based on contract type and the specific facts. A contractor seeking such relief “should describe the actions the contractor has taken to continue performing work under the contract, the circumstances that made it necessary to grant employee leave, an explanation of why it was not feasible for employees to continue performance via telework or other remote work, and how the leave served to keep employees in a ready state.” This is consistent with the statement in the Class Deviation that even contractors that are considered part of the essential critical infrastructure workforce, or that have been directed to implement the Continuation of Essential Services Plan in their contract must demonstrate that all reasonable efforts were made to continue contract performance.

Relief will be provided on a case-by-case basis. Contracting officers must consider the “particular circumstances of each contract, including, among other things, the impacts realized from COVID-19, Defense Industrial Base telework or remote work efforts, the availability of funds for reimbursement, applicable laws and regulations, and any relief the contractor has secured or may secure through the CARES Act and/or other laws enacted in response to this national emergency. It is also important to remember that relief under section 3610 is discretionary not mandatory, and in any event will be subject to availability of funds.

The FAQs also provide that, in addition to FAR-based contracts, this form of section 3610 relief may be applied to other forms of agreements, including Other Transaction Agreements. It also leaves open the possibility that it could be applied to commercial item contracts.

The FAQs also address other important questions about DoD’s implementation that are not clear from the terms of section 3610 or the implementing deviation:

  • The Class Deviation does not provide advance payment relief; relief would be provided where the contractor has incurred the costs.
  • For purposes of section 3610, the “approved” work site is broadly construed to include the contractor’s location and any other places of performance specifically identified in the contract—and may include multiple work sites and/or locations.
  • Relief under section 3610 may, in the contracting officer’s discretion, be made available in cases where the work sites are open and accessible, but, for public health reasons or family care issues, contractor employees cannot be in the workplace and cannot otherwise work remotely. In this case, however, contractors bear the burden of supporting any claimed costs, including claimed leave costs for their employees, with appropriate documentation.
  • Contractors should segregate costs that would be allowable under existing cost principles from leave costs that are only allowable if the leave complies with the new DFARS 231.205-79. Only allowable leave, that is compliant with the new cost principle, and which is not recovered through other means, e.g., existing leave, other credits or relief forms, may be included under this new cost category. The FAQs suggest that other relief that needs to be included may arise through state or local government reimbursement

Despite DoD’s having issued a policy, cost principle, guidance and FAQs on this relief form, questions still remain:

  • Will other executive branch agencies issue their own implementing deviation and guidance to apply section 3610 relief?
  • Will a contract clause be issued to be included in a contract so as to implement this type of relief, or will it be handled solely as a cost principle to be applied pursuant to another contract clause, such as one of the FAR clauses covering Changes, Excusable Delay, Allowable Cost and Payment, etc.?
  • Will the costs of leave made allowable under section 3610 be charged as direct or indirect costs? Absent specific rule or guidance, it is likely that this will have to be addressed through negotiation, REA or claim avenues.
  • How will contractors be required to allocate the relevant paid leave costs? FAQs suggest the costs should be included in a newly created cost category for negotiated allocation. Whether and how this will impact disclosed accounting practices and procedures, will need to be addressed in further guidance.
  • How does this new cost principle impact the terms of any FAR, Defense Federal Acquisition Regulation Supplement (DFARS), or agency supplement clause, or any other preexisting contract unique terms that might exist, including those that address cost or funding limits?

Rather than providing specific relief to any contract or type of contract, the DoD Class Deviation authorizes reimbursement for certain COVID-19-related costs under certain conditions and provides authority for agencies to “modify the terms of a contract” to reimburse the described costs. Calculating the impacts and addressing them in an appropriate way for a contractor may be challenging given the potential number and complexity of the contractor’s business organizations and contracts. Additionally, this is not a funded mandate in the CARES Act.

Whether and to what extent relief will be forthcoming remains to be seen. Indeed, it is unclear whether other federal agencies will follow DoD’s implementation and interpretative guidance, or if they will apply section 3610 differently. As of this date, there is no open FAR case on the provision. Last, and quite significant, contractors making assertions for themselves, or their subcontractors, need to remember that their submissions must be accurate and complete. Under the False Claims Act, each recorded assertion of impact and request for relief therefor may be considered an actual or implied certification of the accuracy, currency, and completeness of a claim. Severe penalties may be exacted if a claim is determined to be false or fraudulent. Care in tracking and documenting costs and asserting any request for relief are imperative. Fulsome disclosure and transparency will be important.

This is an area where further guidance is expected. We are watching developments closely. If you have questions about this alert, or have specific questions about obtaining or pursuing relief under this framework, please contact one of the authors listed below, the Stinson Coronavirus Task Force, or the Stinson LLP contact with whom you regularly work.

On April 6, 2020 the Small Business Administration, in conjunction with the Department of Treasury, issued additional set of Frequently Asked Questions (FAQs) to address questions regarding the Paycheck Protection Program (PPP). Among other things, these FAQs provide yet another “clarification” of the eligibility provisions under the SBA interim final regulation – some businesses with more than 500 employees may qualify for PPP loans if their business has 500 or fewer employees whose principal residence is in the U.S., in addition to previously stated eligibility criteria:

3. Question: Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?

 Answer: No. In addition to small business concerns, a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates (if applicable). Similarly, PPP loans are also available for qualifying tax-exempt nonprofit organizations described in section 501(c)(3) of the Internal Revenue Code (IRC), tax-exempt veterans organization described in section 501(c)(19) of the IRC, and Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act that have 500 or fewer employees whose principal place of residence is in the United States, or meet the SBA employee-based size standards for the industry in which they operate.

Note that these PPP loans apply the affiliation rules of 13 C.F.R. 121.301(f), excluding the totality of the circumstances provision.  It is the responsibility of the applicant to analyze and address affiliation and  other questions on the application accurately.  This is of particular importance since the applicant must certify in its application that it is eligible for a PPP loan, and providing a false statement is subject to criminal and monetary penalties, not to mention potential liability under the False Claims Act which could be triggered even if the statement was not “knowingly” false. Businesses considering their eligibility for the PPP should carefully review all SBA and Department of Treasury guidance, in addition to the SBA’s interim final PPP regulation.   Many companies have been anxiously awaiting further guidance that would relax the affiliation rules.  The FAQs were updated on April 7th and April 8th, but none of the updates have addressed affiliation matters.

If you have questions about this blog, the PPP, or other parts of the CARES Act, contact our COVID Response CARES Team, Jack Bowling, Susan Warshaw Ebner, Gerald Weidner, David Jenson, Judith Araujo, or your Stinson counsel.  We are closely monitoring developments in this space and will be issuing further alerts in coming days.

In addition to providing relief to individuals, employees, small and non-small businesses, the Coronavirus Aid, Relief, and Economic Security (CARES) Act also mobilizes government and government contractors to address the special needs arising from the emergency and this relief package:

Defense Production Act (DPA)

The Defense Production Act (DPA) provides for creation, maintenance, expansion, or restoration of domestic capabilities essential for the national defense, including military, emergency preparedness, homeland security, and critical infrastructure protection and restoration activities. The DPA, and implementing regulations, authorize agencies to issue rated orders and emergency preparedness directives to obtain materials, supplies, and services for these national defense purposes. The DPA establishes parameters to limit the funding and scope of orders so that both commercial and governmental needs can be addressed appropriately.

However, for the next two years, the CARES Act removes the requirement for prior congressional action and prior notice to Congress for DPA orders to correct a resource shortfall, even where the aggregated amount of such orders would exceed $50 million. It also removes the cap on the DPA funds available for DPA activities for the next two years. Such provisions are intended to remove impediments to quickly taking actions to obtain manufacture, production and distribution of needed supplies and services.

It is likely that commercial entities, even those that may not have understood themselves to be part of the government’s supply chain, will begin to see rated order provisions in their purchase orders and supplier agreements in the coming days, weeks and months. Recipients of direct contracts and orders from the government will be receiving these rated orders and directives and will have an obligation to flow down the rated orders’ requirements and DPA provisions to their commercial and noncommercial subcontractors and suppliers to ensure that they will be able to timely supply the quantity and quality of ordered materials.

Recipients of DPA rated orders or directives at all tiers must accept these orders if they produce, manufacture, or supply the items being ordered. If there are issues with regard to scheduling or having sufficient quantities to meet rated and unrated, or commercial orders, rated orders come first and must be satisfied. There is a short window for accepting or rejecting an order, or offering alternatives, where you anticipate difficulties in meeting the stated requirements.

These are special terms and conditions that run contrary to typical commercial contracting terms. Knowing the rules and how to respond is important. Failure to comply with such provisions can have serious consequences.

Federal Contractor Reimbursement for Limited Leave

Section 3610 of the Act provides authority, subject to the availability of funds, for the Government to reimburse a government contractor “at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave,” where the contractor expends such funds “to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020.” This authority to reimburse such government contractors for paid leave states that it will apply only where a contractor or its subcontractor “cannot perform work on a site that has been approved by the Federal Government, including federally-owned or leased facility or site, due to facility closures or other restrictions” and they cannot telework during this public health emergency. The Act also provides that such payment reimbursement “shall be reduced by the amount of credit” the contractor is allowed under the payroll tax credits permitted under the Families First Coronavirus Response Act, and the CARES Act. Questions that need answers include: whether and to what extent this relief will be made available to government contractors that have encountered obstacles to contract performance; the extent to which such funding will be made “available”; and whether this relief is in addition to normal stop work, excusable delay, and changes relief provisions included in existing contracts.

Special Inspector General for Pandemic Recovery

The Act establishes an Office of Special Inspector General for Pandemic Recovery (SIGPR) to audit and investigate the loans, loan guarantees, and other investments being made by the Secretary of Treasury for programs covered by the CARES Act. The SIGPR and his or her auditors and employees will audit or investigate concerns and work to ensure that the activities pursuant to the CARES Act are being properly issued, administered and used by banks, investment entities, applicants and recipients.

Turning square corners in seeking, obtaining, and carrying out these loan and investment matters will be critical. Whether involved in these activities at the banking or investment level, as an applicant or recipient of a loan or investment, or involved in addressing the research and development, manufacture, production, or distribution of needed supplies and services under the Act, it is important that you know and understand the rules and requirements. Ensure you, and your personnel involved in these activities, know what to do and that you and they document your proper activities. If questions arise, having an effective compliance plan in place and operating will aid in addressing concerns, and in responding to and addressing matters in the event of a SIGPR audit or investigation.

Conflicts of Interest

Notably the CARES Act also includes conflict of interest provisions to ensure that covered entities, in which covered individuals—including the president of the United States, the vice president of the United States, a head of an executive department, or a member of Congress, as well as their spouse, child, son- or daughter-in-law—have an equity interest which is directly or indirectly a controlling interest, may not be eligible for any emergency relief or taxpayer protections available under Section 4003 of the CARES Act.

Congressional Oversight Commission

The CARES Act also establishes a Congressional Oversight Commission to hold hearings, take testimony, and receive evidence regarding the CARES Act. The specific reason for the commission is not defined. It is unclear whether and to what extent the commission will supplant traditional types of hearings and investigations by the House and Senate regarding enacted programs. Given the bipartisan nature of the commission and that it will have representatives on it that are appointed by the House and Senate majority and minority leaders, precisely what the commission will focus on and accomplish will have to be seen.

Additional information on the CARES Act can be found here. If you have questions about this article, please contact the authors or the Stinson counsel with whom you regularly work.