Government Contracts Legislative and Regulatory Updates - January 2018

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Our January edition of "Government Contracts Legislative and Regulatory Update" offers a summary of the relevant changes that took place during the month of December.

Highlights this month include:

  • President Trump signs $700B defense policy bill for FY 2018
  • Congress passes, and President Trump signs, temporary funding to avert a government shutdown
  • DoD provides new compliance guidance for contractors regarding DFARS 252.204-7012

Legislation

President Trump signs $700B defense policy bill for FY 2018

Joseph G. Martinez, Partner in Dentons’ Government Contracts practice, K. Tyler Thomas, Associate in Dentons’ Government Contracts practice, and Chris W.K. Fetzer, Senior Advisor in Dentons’ Public Policy and Regulation practice have provided insight on the final version of the FY18 NDAA. Click here for their analysis.

House of Representatives passes Cybersecurity and Infrastructure Security Agency Act of 2017

On Monday, December 11, 2017, the House of Representatives passed the Cybersecurity and Infrastructure Security Agency Act of 2017 (CISAA), the purpose of which is to centralize authority and responsibility for cybersecurity at the US Department of Homeland Security (DHS), primarily by reorganizing its National Protection and Programs Directorate (NPPD), specifically elevating it into its own operational agency and re-designating it as the “Cybersecurity and Infrastructure Security Agency (CISA).” As background, the NPPD is responsible for securing federal networks and US critical infrastructure from cyber and physical threats.

Chiefly, the bill directs the CISA to be headed by a Director of National Cybersecurity and Infrastructure Security who will lead national efforts to protect and enhance the security and resiliency of US cybersecurity, emergency communications, and critical infrastructure. To facilitate this effort, the new CISA will be divided into three divisions: cybersecurity, infrastructure security and emergency communications. This division will enable the CISA to better coordinate a government response in the event of a cyberattack, particularly the emergency communications aspect. (All nonemergency communications will take place through the new cybersecurity division, which will also serve as a hub for risk assessment and cybersecurity intelligence.)

Government contractors that partner with the NPPD (or CISA, if this bill becomes law) can expect a more organized and efficient flow of cybersecurity information and, it is hoped, a quicker response to a cyber incident. (H.R. 3359, 07/24/2017)

Congress passes, and President Trump signs, temporary funding to avert a government shutdown

On December 21, 2017, the Senate passed a short-term extension of federal funding to keep the government from shutting down for three more weeks, thereby by pushing a number of policy battles into 2018. This emergency funding bill, which passed the Senate by a vote of 66 to 32 and the House by a vote of 231 to 188, will keep the government open at current levels of spending through January 19, 2018.

One of the most noteworthy provisions in the stopgap measure waives a budget rule that would trigger automatic cuts to Medicare and several other federal programs because of the deficit impact of the tax overhaul passed on December 20, 2017. In addition, the continuing resolution funds the popular Children’s Health Insurance Program (CHIP) until March.

The operative word here is “temporary.” Government contractors should pay attention to developments on this front and prepare themselves, to the maximum extent possible, for the possibility of a government shutdown. (Pub. Law No. 115-96, 12/22/2017)

Industry Developments

DoD provides new compliance guidance for contractors regarding DFARS 252.204-7012

On December 1, 2017, the Department of Defense (DoD) updated its internal guidance regarding compliance with the requirements of Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012, “Safeguarding Covered Defense Information and Cyber Incident Reporting.” Specifically, the office of Defense Procurement and Acquisition Policy (DPAP) updated its Procedures, Guidance and Information (PGI) with respect to DFARS 252.204-7012. Despite the fact that the PGI provides internal procedures, guidance and supplemental information to DoD, it enables contractors to glean insight into how DoD interprets its own regulations. Highlights of the updated PGI include:

  • Directing the requiring activity to create a “work statement or specification that includes the identification of covered defense information [(CDI)] or operationally critical support.” This is consistent with DoD statements to industry that procuring entities are responsible for notifying contractors when contract performance involves CDI.
  • Removing statements that (i) the safeguarding requirements apply until such time as the requiring activity removes or changes the designation, and (ii) the CO must coordinate with the requiring activity about disposition of CDI associated with a contract.
  • Clarifying that DoD is responsible for designating one point of contact to coordinate “additional actions required of the contractor, on behalf of affected DoD components.” 
  • Specifying that once a damage assessment is complete, the requiring activity must provide the CO with a report that documents “actions taken to close out the cyber incident.”

Defense contractors should review this updated guidance to ensure strict compliance with DFARS 252.204-7012.

Overseas weapons sales nearly doubled in 2017

Proposed sales of weapons and military equipment to foreign countries nearly doubled in FY17, to approximately $54.2 billion, as compared to $36.7 billion in FY16. In both years, the primary recipients were Middle Eastern counties. Indeed, in 2017, about $32 billion of the $54.2 billion in proposed weapons and military equipment sales was destined for Bahrain, Iraq, Israel, Kuwait, Qatar, Saudi Arabia and the UAE. The largest single proposed sale was to the Kuwait Air Force, which wants 32 Boeing Co. F/A-18E/F fighter aircraft and associated equipment.

As global tensions escalate, spanning multiple countries and continents, US makers of weapons and military equipment are likely to discover new and growing markets for foreign military sales. This will be bolstered by President Trump’s desire to facilitate overseas arms sales to strengthen and protect US allies and create jobs for US workers.

President Trump’s administration cuts new rulemaking by 75 percent

The number of new rules proposed by federal agencies within the first 10 months of President Trump’s presidency is down approximately 75 percent, compared with comparable periods during the presidencies of George W. Bush and Barack Obama. For example, during President George W. Bush's first 10 months, federal agencies submitted 250 significant final rules to the Office of Information and Regulatory Affairs (OIRA). During the same period of the Obama administration, this number jumped to 280. At the end of President Trump's first 10 months, that number had plummeted to 72. Further, the number of proposals and notices submitted to OIRA have followed similar trajectories. Federal agencies in the Bush administration submitted 465 regulatory actions; in the Obama administration, 547; and in the Trump administration, 172. Interestingly, however, with respect to nonsignificant administrative rules, the amount of final rules published by the three administrations were roughly comparable to each other. Final rules published in the first 10 months of the Bush administration totaled 3,503, compared to 2,887 under Obama and 2,734 in the Trump administration.

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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