Each month, Venable's Government Contracts Group publishes a summary of recent policy and legal developments of interest to the government contractor community.

The federal government took several noteworthy actions in the closing days and weeks of 2023 that contractors should be aware of—including enacting new conflicts of interest rules for Defense Department contractors, outlining new cybersecurity certifications, finalizing standards for nondisplacement of employees under service contracts, proposing to reduce single-use plastics from federal suppliers, and extending the window for inflationary relief. Topline highlights are arranged below, primarily by branch of government.

Congressional

Congress Passes National Defense Authorization Act for FY2024, Pres. Biden Signs into Law

On December 22, 2023, President Biden signed into law the National Defense Authorization Act (NDAA) for fiscal year 2024 (Pub. L. 118-31), setting in motion the Pentagon's budget and priorities for this year. As Venable recently discussed in detail, the NDAA for FY2024 reflects Congress's continued desire to tighten controls on, and oversight of, federal contracting—including contractors that perform consulting services for "covered entities," deterring conflicts of interest, further curtailing contracts with Russia, and revising certain contracting procedures for small businesses and their affiliates.

For example, Section 804 prohibits the secretary of defense from "enter[ing] into a contract for the procurement of goods or services with any person that is or that has fossil fuel business operations with a person [including corporations or other entities] that is not less than 50 percent owned, individually or collectively" by an authority of the Russian government, or a fossil fuel company that operates in the Russian Federation, "except if the fossil fuel company transports oil or gas … through the Russian Federation for sale outside of the Russian Federation … and that was extracted from a country other than the Russian Federation with respect to the energy sector of which the President has not imposed sanctions as of the date on which the contract is awarded." The provision includes waiver authority under certain conditions and does not apply to those who have "a valid license to operate in Russia issued by the Office of Foreign Assets Control of the Department of the Treasury."

Section 812 of the NDAA seeks to prevent conflicts of interest—i.e., certain contractor business dealings with the governments of China, Russia, and other designated countries and entities—in Defense Department contracts by requiring consulting services contractors to certify before entering into a contract that "neither the entity nor any subsidiaries or affiliates of the entity … hold a contract for consulting services with one or more covered foreign entities" or that "the entity maintains a Conflict of Interest Mitigation plan … that is auditable by a contract oversight entity." The provision—which will be adopted later this year via an amendment to the Department of Defense Supplement to the Federal Acquisition Regulation (DFARS)—will generally prohibit the Defense Department from contracting for consulting services with any entity that cannot make the required certifications.

Additionally, among other contractor-relevant provisions, Section 824 extends for another year the window for contractors to seek inflation adjustment relief pursuant to Section 822 of the NDAA for FY2023. Section 822 gave the secretary of defense temporary, express statutory authority to provide extraordinary contractual relief under Pub. L. 85-804 to contractors facing unexpected costs due to economic inflation. While the original window for filing requests for relief was set to expire at the close of 2023, Section 824 of the NDAA for FY2024 extends the application period through December 31, 2024.

For more on the NDAA and the contractor community, see Venable's coverage here.

House Select Committee on the CCP Issues 150 Policy Recommendations, Includes Procurement-Related Measures

On December 12, 2023, the U.S. House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party issued a bipartisan report adopting nearly 150 policy recommendations for "a strategy to fundamentally reset the United States' economic and technological competition with the People's Republic of China." Many of the proposals touch on or concern federal procurement policy. For example, "Recommendation 5" would "Require the U.S. government to prevent U.S. reliance on the PRC for advanced technology and to protect the U.S. market from harmful PRC technology," including by enacting "comprehensive reform to federal procurement to prevent federal agencies from acquiring directly from or contracting with companies that use foreign adversary-controlled technology whose use could pose a threat to U.S. national security," and "[r]elevant sectors should include semiconductors, drones, AI technology, etc., produced in foreign adversary countries or by foreign adversary companies." See Report at 22-25.

While these policies take the form of recommendations rather than legislation, the bipartisan nature of the report may suggest that there will be congressional interest in advancing related legislation in the near future—such as via a defense authorization bill or related legislative vehicles.

Executive

Defense Department's Cybersecurity Maturity Model Certification (CMMC) Program Proposed Rule

On December 26, 2023, the Department of Defense issued its long-awaited proposed rule concerning the Cybersecurity Maturity Model Certification (CMMC) Program, along with related guidance documents. As Venable recently discussed in detail, the Defense Department has been developing the CMMC Program for several years now and describes it as a new "assessment mechanism" designed to "ensure defense contractors and subcontractors have … implemented required security measures to expand application of existing security requirements for Federal Contract Information (FCI) and add new Controlled Unclassified Information (CUI) security requirements for certain priority programs."

In short, CMMC is a future Defense Department program that will require contractors and subcontractors to demonstrate continual compliance with numerous cybersecurity measures in order to remain eligible for and win new federal awards. Depending on the data at issue, this may require a self-assessment of compliance with a handful of security measures or obtaining certification from a third-party contractor (or the Defense Department itself) of compliance with more than 100 security measures.

Given the scope and complexity of the proposed rule, Venable's Government Contracts team provided a deep-dive FAQ for contractors last month, which is available here. Contractors should note that the Defense Department is accepting public comments on the proposed CMMC rule on or before February 26, 2024.

Other Final and Proposed Rules

• On December 13, 2023, the Defense Department issued a proposed rule amending the National Industrial Security Program Operating Manual (NISPOM) to "address implementation guidance and costs for the Security Executive Agent Directive (SEAD) 3, clarifications on procedures for the protection and reproduction of classified information, controlled unclassified information (CUI), National Interest Determination (NID) requirements for cleared contractors operating under a Special Security Agreement for Foreign Ownership, Control or Influence, and eligibility determinations for personnel security clearance processes and requirements." See 88 Fed. Reg. 86288. The Federal Register notice provides that "[t]he proposed changes are mostly insignificant in that by themselves, these proposed changes create no additional requirements to current NISP policy," but rather "seek to provide updated, accurate information" and "to clarify terminology in relation to safeguarding requirements." Id. At 86291. Nonetheless, the Defense Department is accepting public comments on the proposed amendments on or before February 12, 2024, and contractors that work within the intelligence and national security spheres and/or are otherwise subject to NISPOM should be cognizant of how the changes may impact their processes and operations.
• On December 14, 2023, the Federal Acquisition Regulatory Council issued a final rule requiring government contractors to reach project labor agreements (PLAs) with unions on certain federal construction projects. The rule implements Executive Order 14063, which "mandates that Federal Government agencies require the use of [PLAs] for large-scale Federal construction projects, where the total estimated cost to the Government is $35 million or more, unless an exception applies." 88 Fed. Reg. 88708, 88709. Per the FAR Council's notice, "[a] PLA is defined as a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project and is an agreement described in 29 U.S.C. 158(f)." Id. at 88723. The notice further explains that "[r]equiring a PLA means that every contractor and subcontractor engaged in construction on the project agree, for that project, to negotiate or become a party to a PLA with one or more labor organizations." Id. In contrast to the "current" regulations at FAR subpart 22.5, which "encourage the use of PLAs for large-scale Federal construction projects," "[t]his rule implements E.O. 14063, Use of Project Labor Agreements for Federal Construction Projects, which requires the use of PLAs in large-scale Federal construction projects unless an exception applies." Id. The rule takes effect on January 22, 2024.
• On December 22, 2023, the Defense Department issued a proposed amendment to the DFARS to implement Section 803 of the NDAA for FY2023. Section 803 modifies 10 U.S.C. § 3455 to provide additional guidance regarding data requirements to support a determination of commerciality and price reasonableness for certain procurements associated with major weapon systems. The proposed rule would modify DFARS 234.7002 to "clarif[y] the data an offeror is required to provide when a subsystem of [a] major weapon system or a component or spare part for a major weapon system or subsystem is proposed as a commercial product. This proposed rule also clarifies the data to be provided to the contracting officer to determine price reasonableness for such actions." 88 Fed. Reg. 88554, 88555. According to the Federal Register notice, "[t]his proposed rule is expected to result in the timely submission of data, which may decrease the time it takes for a contracting officer to determine a product to be commercial, to determine price reasonableness, and to award the contract." Id. The Defense Department is accepting public comments on the proposed amendments on or before February 20, 2024.
• On December 26, 2023, the General Services Administration (GSA) issued a proposal rule to amend the General Services Administration Acquisition Regulation (GSAR) to add a new provision and clause to identify single-use plastic free (SUP-free) packaging availability for products under the Federal Supply Schedules (FSS), with the goal of reducing single-use plastic packaging. See 88 Fed. Reg. 88856. GSA's notice provides that "one element that is consistent across [GSA's] acquisitions is the presence of product packaging and shipment packaging," that "[s]ingle-use plastic packaging has an additional cost that is often built into the proposed price, or the price is later realized in the cost of waste management," and "the cost of cleaning up environmental pollution and the cost of impacts to human health … are often not accounted for in the price of the product." Id. The rule—which, for example, would require offerors to identify whether they offer SUP-free packaging—"represents a small step in addressing the larger problem of too much plastic waste." Id. GSA further states that it "encourages ordering activities [i.e., agencies], when placing FSS orders and establishing blanket purchase agreements (BPAs), to include a preference for sustainable solutions such as SUP-free packaging," and that "[t]he overall intent is to encourage industry partners … to reduce this critical waste stream, and to be acknowledged for their efforts in furtherance of this endeavor." Id. at 88857. GSA is accepting public comments on the proposed rule on or before February 26, 2024.

Legal / Judicial Branch

The Government Accountability Office (GAO) published two sustained protest decisions in December.

First, in Washington Bus. Dynamics, LLC, B-421953 (Dec. 18, 2023), protestor Washington Business Dynamics, LLC (WBD) challenged OPM's establishment of a BPA with the awardee, a service-disabled veteran-owned small business (SDVOSB), alleging the OPM's evaluation of quotations and best-value decision was unreasonable. The procurement was pursuant to FAR subpart 8.4.

Prior to reaching the merits, however, the GAO had to first grapple with whether WBD was an interested party, because—as OPM alleged—WBD was no longer a SDVOSB and therefore was ineligible for award of the BPA. The GAO analyzed the relevant SBA regulation, 13 C.F.R.§ 121.404, concerning when a firm's size status is determined, reiterated "SBA's long-standing rule that a prime contractor that is small at the time of the contract award remains small for all orders issued under the contract, unless the [contracting officer], in his or her role discretion, chooses to request recertification on an individual order-by-order basis," and concluded that the RFQ for the subject BPA to be issued under the FSS did not include an express size recertification requirement. Id. at *9-10 (quotation omitted).

On the merits, the GAO found for WBD on effectively all grounds, agreeing with WBD that OPM's evaluation—which awarded both offerors High Confidence on all non-price factors—"was unreasonable, inconsistent with the terms of the solicitation, and insufficiently documented, and that the agency's best-value trade-off determination failed to meaningfully compare vendors' quotations." Id. at *13.

Second, in Great Lakes Dredge & Dock Co., LLC, B-421676.4 (Dec. 19, 2023), the protestor, Great Lakes, challenged the cancellation of invitation for bids (IFB) issued under FAR part 14 by the Army Corps of Engineers (Corps) for beachfill and periodic nourishment for shoreline areas in New Jersey. Great Lakes also challenged the agency's conversion of the IFB to a negotiated procurement. After initially receiving sealed bids that exceeded the government's cost estimates, and after holding meetings with bidders, the Corps canceled the procurement, citing unreasonable prices and a lack of available funds. Id. at *2. Following corrective action, the Corps again followed the same pattern, including attempting to convert the procurement to a negotiated procurement under FAR part 15. Id. The GAO ultimately denied all of Great Lakes' protest grounds regarding the agency's basis for cancellation—i.e., lack of sufficient funding. However, the GAO sustained on the ground that "a lack of sufficient funding does not . . . provide the agency with the legal authority to convert the IFB to a negotiated procurement." Id. at *3-6.

Finally, on December 19, 2023, President Biden nominated Judge Robin M. Meriweather to the United States Court of Federal Claims. Judge Meriweather has been a United States magistrate judge on the U.S. District Court for the District of Columbia since 2017 and previously served as an assistant U.S. attorney in the U.S. Attorney's Office for the District of Columbia from 2007 to 2017, including as the deputy chief of the Civil Division in that office from 2011 to 2017. If Judge Meriweather is confirmed, the Court of Federal Claims will have a full 16-judge bench with no vacancies.