DOD Deviation Provides Updated Guidance on CARES Act REAs for COVID-Related Paid Leave

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Back in April, we blogged about the Department of Defense’s (DOD) initial guidance on the implementation of Section 3610 of the CARES Act.  You may remember that Section 3610 allows government contractors to obtain reimbursement for paid leave intended to maintain its workforce during the COVID-19 pandemic.  Since that time, DOD has issued (and then revised) a deviation – DFARS 231.205-79 CARES Act Section 3610 – Implementation – , which governs the process by which DOD contractors can obtain an equitable adjustment for paid leave costs incurred as a result of COVID-19.  You can see the latest version of DFARS 231.205-79, as well as DOD guidance on the process, in Class Deviation 2020-O0013 Revision 1.

On August 17, 2020, the DOD issued Class Deviation 2020-O0021, which provides additional guidance on the process for obtaining reimbursement for paid leave costs incurred as a result of COVID-19.  This new guidance clarifies a few critical points.  First, it acknowledges that many DOD contractors have multiple DOD contracts, and may make a request for reimbursement on multiple contracts.  The DOD is authorized “to address a section 3610 reimbursement request at any level in any DoD Component for any reason, including administrative convenience.”  In other words, the DOD may elect to process a request at an agency-wide or even Department-wide level, rather than forcing contractors to submit requests on individual contracts.  For many large DOD contractors, this should significantly streamline the process. 

Class Deviation 2020-O0021 also provides three checklists for various types of requests.  The first covers requests in an amount less than $2,000,000 on a single contract.  The second covers requests on single contracts in excess of $2,000,000, and requests on multiple contracts.  The third checklist covers global requests including all of a contractor’s DOD contracts.  These checklists clarify exactly what information is required to support each type of request.

Class Deviation 2020-O0021 further authorizes contracting officers to reimburse paid leave costs incurred by subcontractors on DOD contracts.  Consistent with general practice concerning pass-through claims, such costs must be submitted by and through the prime contractor, who is responsible for analyzing the request for accuracy and compliance with Section 3610.  As with prime contractors, subcontractors are entitled to claim for their hard costs only: no markup for profit will be permitted.  Prime contractors should be aware that they may be held accountable for false claims for reimbursement made by their subcontractors which they pass through to the government.

In addition, Class Deviation 2020-O0021 provides exact language that the contracting officer must include in contract modifications implementing Section 3610, including a specific breakdown of amounts that are being provided for subcontractors and “the time period for which section 3610 paid leave costs are being reimbursed.”  The time period is of critical importance, as Section 3610 of the CARES Act only covers paid leave costs incurred between March 27, 2020 and September 30, 2020.  Given the current legislative gridlock in Washington, it is not clear if or when the Act will be extended.  Contractors should strike quickly while funds are still available to secure reimbursement for paid leave incurred during this time period.  

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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