June Government Contracts Legislative And Regulatory Update

Our June edition of “Government Contracts Legislative and Regulatory Update” offers a summary of the relevant changes that took place during the month of May.

Highlights this month include:

FCC proposed rule to avoid purchasing products that threaten national security DoD issues final rule regarding voluntary disclosures of defective pricing National Defense Authorization Act for Fiscal Year 2019 moves through the House and Senate This update will also be available in Contract Management Magazine, which is published monthly by the National Contract Management Association (NCMA).

Regulations

FCC proposes rule to avoid purchasing products that threaten national security Key rate and threshold adjustments Final Rule Updates the Responsibilities of the Small and Disadvantaged Business Utilization DoD issues final rule regarding voluntary disclosures of defective pricing Implications of the changing cost and pricing data thresholds for prime contractors and subcontractors Legislation

National Defense Authorization Act for Fiscal Year 2019 passes both chambers and heads to conference Regulations

FCC proposed rule to avoid purchasing products that threaten national security

On May 2, 2018, the Federal Communications Commission (FCC) followed through on its April 18 notice of proposed rulemaking, by introducing a proposed rule designed to “ensure that Universal Service Fund [USF] funding is not spent on equipment or services from suppliers that pose a national security threat.” The FCC based its authority for the proposed rule on sections 1, 201(b) and 254 of the Communications Act of 1934 (47 USC §§151 et seq.).

Though the proposed rule specifically contemplates Chinese companies Huawei Technologies Company and ZTE Corporation as businesses whose products threaten the country's national security, any final rule would likely prohibit the use of USF money to purchase products from any company the FCC determines to “pose a national security threat to the integrity of communications networks or the communications supply chain.” The means by which the FCC purports to make such a determination remain unclear, as the Commission requests comment on “how to identify companies that pose [such] a national security threat.” The FCC expects the proposed rule not only to affect “the recipient of [USF] funding,” but also “any contractor or subcontractor of the recipient.” Here, again, the FCC seeks comment on the manner and extent to which its proposed rule should be applied. Other issues upon which the FCC petitions input include the types of equipment and services the rule would cover; the manner of audit, compliance and enforcement procedures; the extent of any waiver policies; and any additional cost/benefit analyses the FCC might not yet have considered. Comments must be made on or before July 2, 2018 to be considered. Written comments may be submitted through www.regulations.gov or www.fcc.gov/ecfs/. (83 Fed. Reg. 19,196, 05/2/2018)

Key rate and threshold adjustments

Last month saw a series of key rate and threshold increases codified in the Federal Acquisition Regulation (FAR), all of which were introduced on May 1 and went into effect on May 31, 2018. Each of the rules purports to reduce government costs, while their net effect on the contracting community is likely more nuanced.

Threshold increase for task- and delivery-order protests

First, the Department of Defense (DoD), General Service Administration (GSA) and National Aeronautics Space Administration (NASA) announced a new rule (i) raising the threshold for task- and delivery-order protests to $25 million from $10 million (applicable to all DoD, NASA and Coast Guard contracts), and (ii) repealing the sunset date for authority to protest the placement of an order (for all other civilian agencies). According to the GAO, fewer than 10 protests are filed each year between $10 million and $25 million; thus, any “lost benefit to interested parties” no longer able to protest was deemed “de minimis.” Despite the fact “the FAR Council is not able to monetize [the] cost savings” from this “deregulatory action,” the higher threshold is expected to “result in savings for GAO and the affected Executive branch agencies” as the GAO will have fewer protests to adjudicate and the government fewer to defend. This rule implements section 835 of the National Defense Authorization Act for Fiscal Year 2017 (2017 NDAA), Pub. L. 114-328, 130 Stat. 2000 (Dec. 23, 2016) (amending 41 U.S.C. 4106(f)). (83 Fed. Reg. 19,145, 05/01/2018)

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