Government Contracting for COVID-19- What to Know in the Current Contracting Environment

Paul BaileyWritten by: Paul Bailey, Partner

March 25, 2020

 

From a contracting perspective, we have been here before, most recently with the war on terrorism and Overseas Contingency Contracts. Contractors and PCO’s responded with great speed to deliver critical products and services to support the warfighter. In some cases, typical business or best practices were sacrificed for expedited delivery to the field to protect the warfighter. However, later-in-time post award government audits identified problematic contract and performance issues that resulted in questioned and non-recoverable cost by contractors.

 

Complicating the current environment, in the past several years, we have had significant changes to government contracting public law and regulations, including, but not limited to the changes listed below:

  • Implementation of enhanced procurement requirements under 2 CFR 200 Subpart D, subjecting grants to generally the same rules and regulation as contracts;
  • An increase in the Truthful Cost or Pricing Data threshold for most agencies, a.k.a. “TINA” and other regulatory-based threshold;
  • The 2020 National Defense Authorization Act, Section 803, likely requiring access to sole source contractor cost or pricing data below the TINA threshold; and
  • Safeguarding Covered Defense Information and Controlled Unclassified Information and the evolving Cybersecurity Maturity Model Certification (CMMC) requirements.

While the COVID-19 crisis ultimately impacts all industries, the immediate acquisition requirements will likely be focused on medical supplies, medical services, clinical trials and continued research and development in the biotech and pharma industries to find a viable vaccine or treatment. Related public law of Bayh-Dole was written in part with considerations for reducing the cost of medical products and services. The perception of paying too much will surely be revisited with post award audits. To avoid issues of the past, new and existing contractors should pay particular attention to:

Accounting for the cost of delivery/performance which is based largely on the contract type and value. Many companies turning their production capability to support the federal response to COVID-19 will qualify as a “Non-Traditional Contractor” allowing for procurements on a FAR Part 12 commercial item (fixed price) basis. But please don’t think that all Contracting Officers are thinking commercial items. Many, in spite of the regulations and guidance, will push you towards negotiated procurements/awards on a FAR Part 15 basis, and in the absence of competition (see final rule change to FAR 15.403-1 and new DoD regulation 252.215-7010)(c)(3), your new award may likely be subject to disclosure of cost or pricing data and likely post award audit. This is all going to happen quick and if or when someone says “cost and pricing data” or “certified cost and pricing data,” you better understand what that means in order to protect yourself. Furthermore, it is absolutely critical to document the negotiation and all disclosures made to the government because if it’s not in writing, it didn’t happen.

Following award and during contract performance, be mindful of supporting post award audits:

  • Account for changes in contract performance from proposed scope. Ideally, changes are segregated and cost is accumulated with separate charge or task numbers that can be substantiated following delivery of product or services. Information is helpful in substantiating a request for equitable adjustment for changes.
  • Retain cost and pricing records, including basis of estimates and efficiencies realized during contact performance to respond to post award challenges of defective pricing.
  • Memorialize changes to contract performance in writing with contract modifications.

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government.

Contact Capital Edge Consulting for more information:

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Call our Team:1-855-Cap Edge (855-227-3343)
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