New Regulations Control Procurement of Stimulus Funds Immediately

On March 31, 2009, the Civilian Agency Acquisition Counsel and the Defense Acquisition Regulations Council ("Councils") agreed on and implemented interim rules, effective March 31, 2009, amending the Federal Acquisition Regulation ("FAR") in response to the American Recovery and Reinvestment Act ("ARRA" or "Stimulus Bill").  Specifically, the regulations address the following subjects required by the ARRA: (1) whistleblower protection; (2) the "Buy American" requirements for construction materials; (3) requirements for publicizing contract actions; (4) reporting requirements; and (5) Government Accountability Office ("GAO") and Inspector General ("IG") access to records and contractor employees.  The Councils are accepting written comments on the interim rules until June 1, 2009 prior to the release of final rules.  The new regulations are summarized below; further detail will also be available soon on the Jackson Kelly Government Contracts Monitor. 

Whistleblower Protections:   The new whistleblower protections, located at FAR 3.907, prohibit non-Federal employers receiving funds under the Stimulus Bill from discharging, demoting, or discriminating against employees as a reprisal for disclosing certain covered information to certain categories of Government officials or a person with supervisory authority over the employee.  Although March 31, 2009 is the effective date of these rules, Contracting Officers must modify all existing contracts to include these protections.  The whistleblower protections are broad in scope and apply to contracts below the simplified acquisition threshold, commercial item contracts at both the prime and subcontract levels, and Commercially Available Off-the-Shelf ("COTS") Item contracts.  To avoid penalties for an alleged reprisal, the regulations require a contractor demonstrate by clear and convincing evidence that it would have taken the action constituting the alleged reprisal in the absence of the disclosure.  Penalties for violations include an agency order to reinstate the employee and/or an agency order to pay the employee an amount equal to the aggregate amount of all costs and expenses including attorney fees and expert witness fees that were reasonably incurred in the process of bringing the complaint regarding the reprisal.  The agency must make a determination whether a contractor subjected a complainant to a reprisal prohibited by the regulation no later than 30 days after receiving an IG report regarding the events.

"Buy American" Requirements:   The "Buy American" regulations apply to contracts below the simplified acquisition threshold and prohibit the use of Stimulus funds for any project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.  While the rule’s effective date is March 31, 2009, it requires Contracting Officers modify existing contracts to reflect these rules.  If a contractor refuses to accept the modification, the contractor will not be eligible for receipt of ARRA funds.  The Buy American requirement is only imposed to the extent permitted by existing United States trade agreements.  Thus, goods purchased from countries with whom the United States has trade agreements are treated the same as domestic products.  Additionally, if one of the following three waiver circumstances is satisfied, contractors can purchase and use foreign materials: (1) the goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; (2) the inclusion of iron, steel, or manufactured goods produced in the United States will increase the cost of the contract by more than twenty-five percent; or (3) applying the domestic preference would be inconsistent with the public interest.  If an agency determines that one of the waiver circumstances applies and selects a proposal that includes foreign products, it must publish in the Federal Register a detailed written justification for its use of the exception. 

Publicizing Contract Actions:   Contracts, including proposed contract actions, issued under task or delivery orders that are expected to exceed $25,000 funded in whole or in part by ARRA, must follow the publication procedures in FAR 5.201.  Contracting officers are directed to use the instructions at www.fedbizopps.gov to identify proposed contract actions, and must ensure that the description required by FAR 5.207(a)(16) includes a narrative of the products and services that is clear and unambiguous to the general public.  Under this rule, procurement officials must also provide a rationale to the public for any contract action that is not fixed-price and/or does not use a competitive approach.

Reporting Requirements:   Contractors receiving ARRA funds are required to submit quarterly an online report at www.federalreporting.gov that includes general contract information as well as a description of the services provided and the jobs created through the contract.  The first reports are due by July 10, 2009 and must be submitted thereafter no later than the 10th day after the end of each calendar quarter.  These requirements apply to prime contractors and first-tier subcontractors that hold commercial item contracts and COTS contracts, as well as contracts under the simplified acquisition threshold.  Although March 31, 2009 is the effective date of these requirements, Contracting Officers must modify existing contracts to reflect these reporting rules. 

GAO and IG Access to Records and Contractor Employees:   The new regulations provide greater authority to the GAO to audit both contracts and subcontracts that receive ARRA funds, and to interview contractor and subcontractor employees.  IGs are granted the same rights, except the ability to interview subcontractor workers.  These rights are granted with respect to contracts below the simplified acquisition threshold and with respect to commercial items contracts.

Conclusion

This increased level of oversight means it is now more important than ever for Government contractors and subcontractors receiving ARRA funds to have in place effective compliance programs.