Weekly Update for Government Contractors and Commercial Businesses – January 2021

PilieroMazza PLLC

BUSINESS & TRANSACTIONS

Purchase Agreement Components, Part 2: Indemnification Provisions, January 8, 2021, Frank Massaro
In an acquisition, particularly an equity acquisition, a buyer must perform extensive due diligence on the target company to understand, as thoroughly as possible, the risks associated with the acquisition. In most cases, however, the buyer cannot fully evaluate or even identify all sources of risk that it will assume post-closing. To address these uncertainties and allocate these potential risks, the buyer and seller negotiate indemnification provisions that set forth the scope of each party’s obligation to reimburse the other party for certain losses associated with the acquisition that may arise following closing. This blog, Part 2 in a 5-part series, discusses common indemnification provisions in purchase agreements and how they affect a buyer’s ability to recover for losses post-closing. Visit this link to access Part 1 in the series “Purchase Agreement Components, Part 1: Options for Forms of Purchase Price Consideration in Acquisition Agreements.” Read more here.

Upcoming Business & Transactions Presentations

WEBINAR: Pub K’s Government Contracts Annual Review 2021: Mergers and Acquisitions Panel, January 27, 2021, Kathryn Hickey. Read more here.

GOVERNMENT CONTRACTS

Third-Party Data-Rights Restrictions: Non-Conforming Legend? Not a Problem, January 6, 2021, Cy Alba
In federal contracting, the laws and regulations surrounding data rights and intellectual property (IP) rights can instill fear in many companies, especially small businesses. A misstep could have you assigning unlimited rights or even ownership of your IP to the federal government. For a broader explanation of some of the challenges government contractors face, please check out our earlier blogs here and here. Generally, to ensure protection of its rights vis-à-vis the federal government, a contractor must include an applicable legend from the Federal Acquisition Regulation (FAR) / Defense Federal Acquisition Regulation Supplement (DFARS) on every delivered item. Legends vary, but some examples can be seen at DFARS 252.227-7013(f). If you fail to use the exact legend, then the government will likely have unlimited rights, which includes the right to provide your IP to third parties. The Federal Circuit recently clarified, however, that the requirement to include the exact legend in the FAR / DFARS does not apply if you are trying to restrict the rights of third parties, but not the federal government directly. This could be a win for government contractors seeking to protect their company value and limit third-party access to their IP, even when the federal government takes unlimited rights, but the litigation in this matter is not yet complete. Read more here.

PPP Round Deux Update, December 30, 2020, Cy Alba
On December 27, 2020, the President signed the Consolidated Appropriations Act of 2021, which includes the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. The act allows a “Second Draw” of Paycheck Protection Program (PPP) loans up to $2 million, expands the permissible uses for which such loans may be used, simplifies the loan forgiveness application for some borrowers, and makes other related changes to the PPP program. While 2021 may bring relief in the form of vaccines to combat the deadly coronavirus, many businesses will continue to need access to this important relief package. Read more here.

PPP Round Deux: Who Qualifies, For How Much, and Forgiveness Changes, December 24, 2020, Cy Alba
While the President vetoed the 2021 NDAA—and has put COVID relief into question—he has not yet acted on the Consolidated Appropriations Act, 2021, which contained the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act dealing with the second round of PPP Loans. So, while the act may be in jeopardy of a veto also, it has not yet occurred and, regardless, it is likely many of the PPP Loan provisions contained in the act will be in any final bill put forward before year end, or early next year even if the veto threat is realized. Thus, we dug through the 5,500-page bill and pulled out key PPP Loan provisions that many clients have been asking about. While this is a preliminary review, we will review key aspects of any future bill once signed by the President and report back on any changes. Read more here.

GAO Holds that SAM Registration Pertains to a Bidder’s Responsibility, Not Responsiveness of a Bid, December 29, 2020, Christine Fries
On December 16, 2020, the Government Accountability Office (GAO) sustained a protest by a contractor that was eliminated from a competition because its System for Award Management (SAM) registration had expired. Holding that registration in SAM pertains to a bidder’s responsibility, not the responsiveness of the bid, GAO directed the agency to afford the bidder an opportunity to cure the matter after bid opening and before the award rather than finding the bidder to be ineligible for award. This holding should provide some comfort to contractors, particularly small businesses, that may experience difficulties with SAM registrations while bidding for work. Read more here.

Government Contractors: 5 Takeaways from DOJ’s Remarks on First Year of Procurement Collusion Strike Force, December 21, 2020, Jackie Unger
In November 2019, the U.S. Department of Justice (DOJ) announced the creation of the Procurement Collusion Strike Force (PCSF), an interagency partnership aimed at preventing and prosecuting anticompetitive behaviors in government procurements. The dual purposes of the PCSF are to (1) deter and prevent anticompetitive conduct in the procurement process through outreach and training to government and industry procurement personnel and (2) jointly investigate and prosecute procurement collusion and fraud by leveraging partnerships in the law enforcement and inspector general communities. The PCSF signifies the government’s high priority on preventing procurement fraud, and government contractors should develop a compliance program to protect against anticompetitive conduct. For more background on the PCSF, check out my previous blog post here. Read more here.

COFC Confirms Rule of Two Analysis Applies Before Agency Decides to Utilize a Multiple-Award Vehicle, December 15, 2020, Sam Finnerty
On November 30, 2020, the U.S. Court of Federal Claims (COFC) issued a decision that supported the Small Business Administration (SBA) position regarding the Rule of Two analysis requirements for government acquisitions. The central question surrounding the case was whether the U.S. Army could cancel a FAR Part 8 service-disabled veteran-owned small business set-aside procurement under the General Services Administration (GSA) Federal Supply Schedule (FSS) and move the requirement to a multiple-award indefinite-delivery, indefinite-quantity (MAIDIQ) contract vehicle that the plaintiff, The Tolliver Group, Inc. (Tolliver), did not hold. In its protest, Tolliver argued, in part, that the Army’s actions violated the Rule of Two because the agency was required to determine whether two or more small businesses were capable of performing the requirement prior to choosing to put the procurement on the MAIDIQ contract. The COFC’s decision confirms that the Rule of Two analysis applies before an agency elects to procure a requirement from a multiple-award contract vehicle under FAR Part 16.5. Read more here.

SBA and Treasury Announce PPP Re-Opening; Issue New Guidance
The Small Business Administration (SBA), in consultation with the Department of the Treasury, announced that the Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers. Read more here.

IRS Blesses Tax Breaks on Forgiven PPP Loans After Law Change
The Internal Revenue Service (IRS) issued a revenue ruling that declares a previous revenue ruling obsolete in light of the language in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was included in the Consolidated Appropriations Act of 2021. Specifically, eligible recipients do not need to include forgiven indebtedness in their gross income, and no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income. Read more here.

GSA Releases Polaris Draft RFP
The General Services Administration (GSA) released a draft request for proposals (RFP) for the Polaris small business government-wide acquisition contract (GWAC). The contract will have three pools: small businesses, HUBZone, and women-owned small businesses. The GWAC will have a focus on emerging technologies, and feedback on the draft solicitation is due by 4:00 p.m. Central Time on January 29, 2021. Read more here.

DOD Establishes Special Access Program Corporate Portfolio Program
DOD published a memorandum establishing its new Special Access Program Corporate Portfolio Program. The program is meant to strengthen DOD engagement with the defense industrial base (DIB) by increasing DOD’s ability to share critical information and collaborate with the DIB. The memorandum details purposes for the program and outlines implementation. Read more here. Related reporting from Air Force Magazine is available here.

Verification of Eligibility for the WOSB Program
The Department of Defense (DOD) published a memo outlining a procedure that contracting officers should use to verify the eligibility of a concern for a set-aside or sole-source award under the Women-Owned Small Business (WOSB) program, in lieu of using the procedures in FAR 19.1503(b) through (d). Read more here.

House Passes Bill to Codify and Revamp FedRAMP
Nextgov reported that the House of Representatives passed the FedRAMP Authorization Act, which would codify and reform the Federal Risk and Authorization Management Program (FedRAMP). Namely, the bill (H.R. 3941) provides statutory authority for FedRAMP within the General Services Administration (GSA); requires GSA to establish a government-wide program that provides the authoritative, standardized approach to security assessment and authorization for cloud computing products and services that process unclassified information used by agencies; and establishes the Joint Authorization Board to conduct security assessments of cloud computing services and issue provisional authorizations to operate to cloud service providers that meet FedRAMP security guidelines. The bill must go before the Senate for consideration. Read more here.

GAO Bid Protest Annual Report to Congress for Fiscal Year 2020
The Government Accountability Office (GAO) published its annual bid protest report. The report provides data concerning GAO’s overall protest filings for Fiscal Year 2020 and includes a summary of the most prevalent grounds for sustaining protests. Read more here.

DOD Codifies NISPOM
The Department of Defense  published a final rule with request for comment, codifying the National Industrial Security Program Operating Manual (NISPOM) in regulation. The NISPOM establishes requirements for the protection of classified information disclosed to or developed by contractors, licensees, grantees, or certificate holders to prevent unauthorized disclosure. In addition to adding the NISPOM to the Code of Federal Regulations, the rule incorporates the requirements of Security Executive Agent Directive (SEAD) 3, “Reporting Requirements for Personnel with Access to Classified Information or Who Hold a Sensitive Position.” SEAD 3 requires reporting by all contractor cleared personnel who have been granted eligibility for access to classified information. The rule provides for a single nation-wide implementation plan which will include SEAD 3 reporting by all contractor cleared personnel to report specific activities that may adversely impact their continued national security eligibility, such as reporting of foreign travel and foreign contacts. The rule is effective February 24, 2021. Comments are due February 19, 2021. Read more here.

Small Entity Government Use License Exception
The Department of Commerce published a final rule amending the rules of practice in patent cases. The rule clarifies and expands exceptions to a rule pertaining to government use licenses and their effect on small entity status for purposes of paying reduced patent fees. The change is designed to support independent inventors, small business concerns, and nonprofit organizations in filing patent applications and to encourage collaboration with the federal government by expanding the opportunities to qualify for the small entity patent fees discount for inventions made during the course of federally funded or federally supported research. The rule is effective January 20, 2021. Read more here.

Upcoming Government Contracts Presentations

WEBINAR: SBA’s Final Rule on Mentor-Protégé Programs: Key Changes for Government Contractors, January 14, 2021, Peter Ford and Anna Wright. Read more here.

WEBINAR: Past Performance: How to Use Yours, Benefit from Others’, and Defend It from Attacks, January 20, 2021, Sam Finnerty. Read more here.

WEBINAR: Your Guiding Light to GSA’s New GWAC – Join Us for an In-Depth Review of GSA’s New Polaris RFP, January 27, 2021, Cy Alba. Read more here.

WEBINAR: COVID-19 Relief in 2021: What Small Businesses Need to Know, February 2, 2021, Cy AlbaNichole Atallah, and Kathryn Hickey. Read more here.

LABOR & EMPLOYMENT

To Offer or Not to Offer FFCRA Leave? December 31, 2021, Sarah Nash
Earlier this month we reported that under the latest stimulus bill, the Families First Coronavirus Response Act (FFCRA) mandatory leave requirements expire on December 31, 2020. However, the bill, which was signed into law on December 27, 2020, does include the option for employers to voluntarily continue to provide employees with FFCRA leave—and in turn to receive a tax credit for such qualified leave—through March 31, 2021. Companies should note that while the deadline to take advantage of the tax credit is extended, the statutory limits on hours of leave and the amount of pay eligible for the credit remains the same. We’ve previously reported on these limits hereAdditionally, employers who opt to take advantage of the extended tax credit period may not discriminate against employees who take FFCRA leave. Read more here.

Second Wave of COVID Relief Is Here: 3 Key Provisions Employers Need to Know, December 21, 2020, Nichole Atallah and Sara Nasseri
After months of deliberation and endless negotiation, Congress sealed the deal late Sunday night on a $900 billion COVID-19 economic relief package, finally delivering long-overdue help to businesses and individuals. While much of the relief seems to be an extension of benefits and rights afforded under the previously passed Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, there are some notable variations that employers should be aware of. The following summary outlines 3 key provisions employers need to know and should plan for immediately. Read more here.

DOL Publishes Final Rule to Clarify Independent Contractor Status Under the FLSA
The Department of Labor (DOL) published a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (FLSA). It is intended to promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy. The rule is effective March 8, 2021. Read more here. DOL’s related press release is available here.

Upcoming Labor & Employment Presentations

WEBINAR: Government Contracts Compliance: Employment, Health and Safety, January 14, 2021, Nichole Atallah. Read more here.

WEBINAR: Looking Ahead: Labor & Employment Policy, What to Watch for in 2021, January 20, 2021, Nichole Atallah and Sara Nasseri. Read more here.

WEBINAR: Pub K’s Government Contracts Annual Review 2021: Labor and Employment Panel, January 25, 2021, Nichole Atallah. Read more here.

WEBINAR: May the Clause Be with You: FAR 52.223-6, Drug-Free Workplace, January 26, 2021, Sarah Nash. Read more here.

LITIGATION & DISPUTE RESOLUTION

D.C. Expands False Claims Act Liability to Tax-Related Claims: What District Taxpayers Should Expect, December 21, 2020, Camilla Hundley
Earlier this month, the District of Columbia Council passed an amendment to its False Claims Act, which extended the Act to include tax-related claims. Under the amended D.C. False Claims Act, violations may be alleged against persons and entities filing taxes in D.C.: (1) that report at least $1 million in income and (2) that understate tax liability or seek a tax refund resulting in damages of $350,000 or more. D.C. joins only two states—New York and Illinois—that authorize tax fraud claims under their False Claims Acts; even the federal False Claims Act expressly excludes tax-related false claims. In 2015, New York’s largest-ever qui tam recovery was made under its False Claims Act tax provision, when Sprint paid $330 million to settle claims that it had fraudulently avoided its obligations to collect and pay state and local taxes on certain wireless phone plans. If enforcement in New York is any indicator of what to expect in D.C., large District taxpayers should beware. Below are the three primary ways the D.C. amendment could expand your tax-related liability. Read more here.

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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