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

President Signs Fiscal Responsibility Act Suspending Debt Ceiling:

The Fiscal Responsibility Act (H.R. 3746) suspends the $31.4 trillion debt ceiling through January 1, 2025, which avoids default and allows the government to continue borrowing money and pay its bills on time. The Act also establishes caps on defense and nondefense discretionary spending that will be enforced by sequestration. The budget authority for defense programs will increase from $858 billion in FY2023 to $886 billion in FY2024 and $895 billion in FY2025, while budget authority for nondefense discretionary programs will decrease from $767 billion in FY2023 to $704 billion in FY2024 and $711 billion in FY2025.

U.S. Supreme Court Weighs in on False Claims Act Knowledge Requirement:

The U.S. Supreme Court recently issued a unanimous opinion in United States ex rel. Schutte v. SuperValu Inc., holding that a contractor can "knowingly" submit a false claim where it would have been objectively reasonable for the contractor to believe that the claim was not false at the time it was submitted. A contractor's subjective belief that its claim for payment is unlawful or very likely unlawful is, on its own, sufficient to establish the required knowledge of a claim's falsity under the FCA. Read more in Venable's client alert here.

Biden Administration Revokes Federal Contractor Vaccine Mandate Effective May 12:

Effective May 12, 2023, Executive Order (EO) 14099, "Moving Beyond COVID-19 Vaccination Requirements for Federal Workers," terminates the federal contractor vaccine mandate and related requirements under EO 14042. Shortly thereafter, the FAR Council revoked its September 30, 2021 guidance regarding deviations to the FAR to implement EO 14042, and the Safer Federal Workforce Task Force revoked "all prior guidance" implementing EO 14042. On May 24, 2023, the U.S. Department of Defense (DOD) revoked Class Deviation 2021-O0009 implementing EO 14042. DOD noted that "contracting officers may modify existing contracts, task orders, and delivery orders to remove the class deviation clause (i.e., with the next modification)," but confirmed that "[t]he class deviation clause is not enforceable even if contracting officers do not modify existing contracts, task orders, and delivery orders to remove it."

NIST Issues Proposed Revision 3 to Cybersecurity Controls and Requirements to Protect Information on Non-Federal Information Systems:

On May 10, 2023, the National Institute of Standards and Technology (NIST) released a much-anticipated public draft of Revision 3 to NIST Special Publication (SP) 800-171, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations (Revision 3), which establishes security controls that apply to non-federal information systems that store, process, or transmit controlled unclassified information (CUI) or that provide protection for such components, and only where no other applicable law, regulation, or policy prescribes different or more specific safeguarding requirements. Comments on the proposed revision are due July 14, 2023.

Interim Rule Implements New FAR Clause Prohibiting a ByteDance Covered Application: The FAR Council issued an interim rule on June 2, 2023 amending the FAR to include FAR 52.204–27 (JUN 2023), which prohibits contractors from having or using TikTok or any successor application developed by ByteDance Limited on any information technology owned or managed by the government, or on any information technology used or provided by the contractor under a contract, including equipment provided by the contractor's employees. The interim rule requires contracting officers to include the clause in solicitations issued on or after June 2, 2023 and in solicitations issued before the effective date if award of the resulting contract(s) occurs on or after the effective date. Contracting officers must also modify existing IDIQ contracts to incorporate FAR 52.204–27 by July 3, 2023 to apply to future orders. Finally, contracting officers must include the clause if it exercises an option or modifies an existing contract or task or delivery order to extend the period of performance. Contractors should determine whether compliance with this new requirement will increase its costs and, if so, be prepared to assert entitlement.

GSA Multiple Award Schedule Updates:

• GSA and SBA Announce 8(a) MAS Pool Initiative: On May 25, 2023, the U.S. Small Business Administration (SBA) and the General Services Administration (GSA) announced their joint 8(a) MAS Pool Initiative to help small disadvantaged businesses participating in the 8(a) Business Development Program gain access to more federal contracts in GSA's Multiple Award Schedule (MAS) Program and advance President Biden's goal to increase contracts to SDBs. This agreement will establish a pool of 8(a) firms to make it easier for procurement officials to locate and contract with small disadvantaged businesses across industries.
• GSA Releases Important Update for 8(a) MAS Contractors on Upcoming Changes: On May 30, 2023, GSA and SBA signed a revised 8(a) Program Partnership Agreement (PA) that is intended to increase contracting opportunities for 8(a) firms and make it easier for GSA customers to use the MAS program to access solutions from 8(a) contractors. Once fully implemented, the PA will provide increased ordering flexibility under the MAS Program, including authority for sole source awards to 8(a) firms.
• GSA Pilots New Platform to Manage GSA Advantage Catalogs: On May 1, 2023, the General Services Administration (GSA) began piloting its new FAS Catalog Platform (FCP), which will replace the Schedule Input Program and simplify the process for Multiple Award Schedule (MAS) contractors to access and manage their catalogs on GSA's central purchasing website, GSA Advantage!. GSA started the FCP pilot with contractors holding the Office Supplies 4th Generation Special Item Number, will onboard additional contractors starting October 2023, and will continue in phases until all vendors are using the FCP.
• Inspector General Criticizes GSA's Transactional Data Reporting Program: On May 1, 2023, the GSA Office of the Inspector General (OIG) released another report criticizing GSA's Transactional Data Reporting (TDR) program. For years, OIG has maintained that the TDR pilot, under which Schedule contractors submit periodic pricing data instead of complying with GSA's onerous Price Reductions Clause (PRC), does not adequately ensure that MAS customers receive fair and reasonable prices on Schedule products and services. OIG contends that the data collected under TDR is "almost entirely inaccurate, unreliable, and unusable." GSA continues to support the pilot, and OIG's critics have noted that OIG depends on the PRC for much of its auditing function.

DOD Regulatory Updates:

• DOD Reinstates Pre-COVID Progress Payment Rates for Large Businesses: Since May 2020, DOD Class Deviation 2020-O0010 increased the progress payment rates under DFARS 232.501-1 to 90 percent for large business concerns and 95 percent for small business concerns. On May 8, 2023, after the Biden administration announced the termination of the COVID-19 national emergency last month, DOD issued Revision 2 to reinstate the progress payment rate of 80 percent for new contracts with large businesses, consistent with FAR 52.232-16. DOD retained the temporary increase to the progress payment rate of 95 percent for small business concerns.
• Class Deviation on Limitations on the Procurement of DOD Non-Tactical Vehicles: On May 10, 2023, DOD issued a Class Deviation prohibiting contracting officers from obligating any of the funds authorized to be appropriated by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023 (Pub. L. 117-263) or otherwise made available to DoD, for the procurement of DoD nontactical vehicles that are electric vehicles, advanced-biofuel-powered vehicles, or hydrogen-powered vehicles, or any components or spare parts associated with such vehicles, that do not comply with Federal Acquisition Regulation (FAR) subpart 22.15, Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor.
• Proposed DFARS Rule Regarding Consolidation of DoD Government Property Clauses (DFARS Case 2020-D029): This proposed rule will consolidate several clauses governing the management and reporting of government property into one Management and Reporting of Government Property clause. The new clause will require contractors to use DOD's government-furnished property module instead of legacy applications when reporting receipt, shipment, transfer, or loss of government property, and for reporting excess property. The proposed rule clarifies that there will be no changes to the government property data that contractors are required to report, but that there will be changes to the application used to submit the information. Comments on the proposed rule are due on June 26, 2023.
• Final DFARS Rule on Undefinitized Contract Actions (UCAs) (DFARS Case 2021-D003): DFARS 217.7404-3 requires definitization of the contract by the earlier of 180 days after a contractor submits a qualifying proposal or before 50 percent of the work is complete. This final rule now specifies that appropriate penalties for a contractor's failure to meet the qualifying proposal date in the contract definitization schedule can include (1) withholding an amount of up to 5 percent of all subsequent requests; (2) documenting the noncompliance in the contractor's past performance evaluation; or (3) terminating the contract for default.
• Proposed DFARS Rule on Restriction on Certain Metal Products (DFARS Case 2021-D015): DFARS 225.7018–2(a) currently restricts the acquisition of covered materials melted or produced in North Korea, China, Russia, or Iran (covered materials include samarium-cobalt magnets, neodymium-iron-boron magnets, tantalum metals and alloys, tungsten metal powder, and tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy). This proposed rule will amend the clause to state that effective January 1, 2026, the restriction on covered materials will expand in scope to the entire supply chain for the covered materials to include all upstream mining, refining, separation, and melting. Comments on the proposed rule are due June 26, 2023.