Co-authored by Michael H. Payne and Craig A. Schroeder
On February 17, 2009, the President signed Public Law 111-5, the American Recovery and Reinvestment Act of 2009 (also known as “ARRA,” the “Recovery Act,” and the “Stimulus Act”), including a number of provisions to be implemented in Federal Government contracts. The Recovery Act’s purposes are to stimulate the economy and to create and retain jobs. The Act gives preference to activities that can be started and completed expeditiously, including a goal of using at least 50 percent of the funds made available by it for activities that can be initiated not later than June 17, 2009.
An Interim Rule issued on March 31, 2009, implements section 1512, which is also known as the “Jobs Accountability Act.” Subsection (c) of section 1512 requires contractors that receive awards (or modifications to existing awards) funded, in whole or in part, by the Recovery Act to report quarterly on the use of the funds. The comment period on the interim rule expires on June 1, 2009. In addition, a new section was added to the FAR, subpart 4.15, “American Recovery and Reinvestment Act – Reporting Requirements,” and a new clause was added to implement the reporting requirements, FAR 52.204-11. Contracting Officers are now required to include the new clause in solicitations and contracts funded in whole or in part with Recovery Act funds, except classified solicitations and contracts. Commercial item contracts and Commercially Available Off-The-Shelf (COTS) item contracts are covered, as well as actions under the simplified acquisition threshold.
Effective March 31, 2009, five (5) interim Federal Acquisition Regulation (FAR) rules went into effect that implement several requirements of the Recovery Act. See Federal Acquisition Circular (FAC) 2005-32, published at 74 Fed. Reg. 14,639 (Mar. 31, 2009). These new rules only apply to federal procurement contracts funded with stimulus money. Their goal is increased transparency and accountability in the spending of Stimulus Act funds. The new rules include:
1. Reporting Requirements for Recipients of Recovery Funds (See 74 Federal Register 14639);
2. Publicizing Contract Actions (See 74 Federal Register 14636);
3. GAO and IG Access to Company Employees (See 74 Federal Register 14646);
4. Whistleblower Protections (See 74 Federal Register 14633); and
5. Buy American Requirements for Construction Materials (See 74 Federal Register 14623).
Each rule is discussed, in turn, below.
1. Reporting Requirements for Recipients of Recovery Funds
This is the most onerous of the new requirements and contractors must now file quarterly reports documenting their use of stimulus funds. See FAR Case 2009-009, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act)— Reporting Requirements, 74 Fed. Reg. 14,639 (Mar. 31, 2009). Information on the Recovery Act may be found on the Recovery Act website.
The new mandated contract clause, FAR 52.204-11, which must be included in all contracts receiving stimulus funds, requires the prime contractor, and first-tier subcontractors, to report the following information:
(i) Contract and order number;
(ii) Amount of stimulus funds invoiced by the contractor for the reporting period;
(iii) List of significant supplies delivered or services performed;
(iv) Assessment of the contractor’s progress on the contract;
(v) Employment impact of the contract (e.g., an estimate of the number of jobs created and retained);
(vi) The names and compensation of the five most highly compensated officers of the contractor for the calendar year in which the contract is awarded if the contractor receives 80 percent and $25 million or more of its annual gross revenues from federal awards and the public does not have access to the information through periodic reports filed with the Securities and Exchange Commission or the Internal Revenue Service; and
(vii) Detailed information on first-tier subcontracts.
Reporting on invoices submitted prior to June 30, 2009 are due no later than July 10, 2009. After those dates, contractor reports must be submitted no later than the 10th day after the end of each calendar quarter. The new reporting requirements apply to all solicitations and contracts funded in whole or in part with Recovery Act funds, except classified solicitations and contracts. This includes Government-wide Acquisition Contracts (GWACs), multi-agency contracts (MACs), Federal Supply Schedule (FSS) contracts, or agency indefinite-delivery indefinite-quantity (ID/IQ) contracts that will be funded with Recovery Act funds.
2. Publicizing Contract Actions
are now required to enter data in the Federal Procurement Data System for any contract action funded, even in part, by the Stimulus Act. See FAR Case 2009-010, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — Publicizing Contract Actions, 74 Fed. Reg. 14,636 (Mar. 31, 2009). They must now also post the following on the FedBizOpps.gov website for any covered contract action:
(i) Identification of action;
(ii) Pre-award notices for orders exceeding $25,000;
(iii) A “clear and unambiguous” description of supplies and services; and
(iv) A rationale for awarding any action that is not fixed-price and awarded through competitive procedures.
3. GAO and IG Access to Company Employees
The interim rules amend the FAR to provide new authorities to the Comptroller General, or Government Accountability Office (GAO), and agency inspector generals (IGs). See FAR Case 2009-011, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — GAO/IG Access, 74 Fed. Reg. 14,646 (Mar. 31, 2009).
GAO and agency IGs are now authorized to audit prime contracts and subcontracts and interview prime contractor personnel, and GAO is authorized to interview subcontractor personnel for FAR Part 12, 14, and 15 contracts funded by the stimulus plan. The rules, however, do not grant IGs the authority to interview subcontractor employees. See 74 Fed. Reg. 14,647.
Notably, a separate interim rule authorizes the Comptroller General to interview current contractor employees when conducting audits regardless of whether the contract is funded by the stimulus plan. See FAR Case 2008-026, Interim Rule, GAO Access to Contractor Employees, 74 Fed. Reg. 14,649 (Mar. 31, 2009). Commercial-item contracts not funded by the stimulus plan are exempt from the new oversight authority.
4. Whistleblower Protections
Additional protections for state, local, and government contractor whistleblowers are also provided for in a new clause of the interim rules. See FAR Case 2009-012, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act) — Whistleblower Protections, 74 Fed. Reg. 14,633 (Mar. 31, 2009). Essentially, the clause prohibits a non-federal employer receiving stimulus funds from discriminating against an employee as a reprisal for making a disclosure of what the employee reasonably believes to be evidence of gross mismanagement, misuse, or waste of stimulus funds or a violation of law related to a contract involving stimulus funds. In addition, contractors receiving stimulus funds must now post a notice of their employees’ rights and remedies relating to whistleblower protections. This whistleblower clause must be included in all stimulus-funded contracts and subcontracts.
5. Buy American Requirements for Construction
Last, but not least, the rules implement the Buy American requirements for federal buildings and public works funded by the stimulus plan. See FAR Case 2009-008, Interim Rule, American Recovery and Reinvestment Act of 2009 (the Recovery Act — Buy American Requirements for Construction Material, 74 Fed. Reg. 14,623 (Mar. 31, 2009). Essentially, it prohibits, with certain exceptions, the use of stimulus funds for the construction, alteration, maintenance, or repair of a public building or work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.
The new and pre-existing compliance obligations will continue to be of paramount importance due to the increased authority and funding provided to GAO and the agency IGs to perform oversight functions. Undoubtedly, the mix of new reporting obligations and increased oversight is a significant change in the compliance environment faced by government contractors and could expose contractors to new liability risks. These requirements are evolving and further changes are possible when the final rules are issued.
Michael H. Payne is the Chairman of the Federal Contracting Practice Group of the law firm of Cohen Seglias Pallas Greenhall & Furman PC