Section 3610 of the CARES Act authorizes Federal agencies to reimburse Federal contractors (and subcontractors) for paid leave to maintain a ready workforce. This authority applies to contractors and subcontractors who, because of the nature of their job responsibilities, cannot work off-site, and cannot perform work on-site due to closures. These are individuals who possess security clearances and must access classified information to perform their work.
Section 3610 is not automatic. Each agency has the discretion whether to exercise its authority. Over the last week we have seen agencies implement procedures permitting contracting officers to modify contracts to authorize companies that may submit invoices seeking reimbursement. On April 9, 2020 DOD issued a class deviation permitting a contractor to seek reimbursement for up to an average of 40 hours per week per employee as a charge to a Federal contract. The class deviation provides instruction on how to document and invoice for such costs. DOD also issued a FAQ addressing many common questions.
The FAQ clarifies that Section 3610 of the Act is broadly drafted and could be construed to apply to Other Transaction Agreements (“OTAs”). The deviation applies to contracts in place from January 31,2020 through September 30, 2020.
Other agencies subject to national industrial security requirements have also encouraged contracting officers to issue modifications authorizing contractors to invoice for costs incurred to maintain a ready workforce. At least one agency has taken the position that a contractor that applies for a loan under the Small Business Administration Paycheck Protection Program will not be eligible to seek reimbursement for any labor costs under Section 3610 of the Act.
These developments are important first steps in permitting the recovery of costs relating to a cleared workforce idled by COVID-19. To help ensure recovery of these costs, we recommend:
- Ensuring that your prime contract or subcontract has been amended to permit recovery of these costs;
- Seeking concurrence from your contracting officer or subcontracting administrator for your method for charging these costs;
- Maintaining contemporaneous documentation to support your position that events relating to COVID-19 caused the labor disruptions; and
- To the extent possible, mitigating the cost of idle labor by temporarily reassigning employees.