Uncertainty all around for federal contractors

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You can forgive federal contractors for a little confusion. There’s a new White House executive order on use of immigrant labor. From Congress there’s uncertainty over whether relief for them will continue as government offices remain closed. For more, Federal Drive with Tom Temin turned to the president and CEO of the Professional Services Council, David Berteau.

Interview transcript:

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Tom Temin: With so much going on, David, what are your choices for the most confusing and difficult to deal with possibilities for contractors, and I guess for the federal government?

David Berteau: Well Tom, you’re right. There’s a lot of chaos in terms of different moving parts and it’s difficult to see what the ultimate game plan is for bringing these all together, right. When we reach the end of last week, we had had a whole series of negotiations between the legislative and executive branch on the next COVID-19 bill, those produced no bill and no agreement. And in fact, I think the closest that came to agreeing is they agreed that they need to have an agreement at some point, it’s an important step, but it doesn’t get you very far. So the President over the weekend issued three memos and one executive order, in addition to a series of other executive orders he issued last week. We’re still analyzing those and looking for potential impact on our members, although I think the biggest impact is not so much from the documents themselves, but from that indication those documents give us that we’re not close to a deal, a legislative deal that can pass both Houses and be signed by the President. Congress, of course, will break, you’d almost have to have that deal already written down because once you reach the agreement, you still got to write the legislative language, which we found in the CARES Act, if you do it too fast, you end up with a lot of ambiguity and uncertainty in the bills and then you got to come back and fix those later, right. So it’s almost impossible even if they reached an agreement at this hour to get legislation written in time to pass it, Congress is about to leave because the Democratic National Convention, the virtual convention is next week. A couple weeks after that the Republicans have their convention. So we’re really looking now at September before we reach agreement.

Tom Temin: And one of the questions might have been in some of these bills is 3610 payments to contractors who can’t get to work because the government is still largely closed in terms of the offices, and so that’s a big question mark.

David Berteau: It’s a huge question mark. The government has maximized teleworking, but as we all know, there are jobs you cannot do by teleworking, and you can only do by being there in person. Because of the physical distancing requirements or other health and safety precautions, not everybody can be in the workplaces. So the question is, how do you keep those people on the payroll for when you do need them, section 3610 provided in the CARES Act, passed back in March, for reimbursement to keep those people on the payroll. It has been working over 30,000 employees in July were being covered all in whole or in part with section 3610 reimbursements without additional appropriations. So this is just programs finding the money within available funds as the law provides. The authority to do that expires September 30, so we were hoping that the next COVID bill would extend that authority. There’s language we’ve seen that would do that, but without a bill, then we have to find another vehicle to do that. It could be one of the appropriations bills, it could be the continuing resolution. I think we’re likely to get a continuing resolution. It could be other legislation and even retroactively date back dating to the expiration date. This is important though for workers that companies have spent years building up the workforce, and if you lose them, you may not get them back, especially in today’s environment.

Tom Temin: I guess members are probably worried whether there will be a lapse in appropriations, a so called partial shutdown, given the schedule and the lack of agreement on so many things. The House has pretty much wrapped up its budget bill business, but the Senate has not even taken up most of that stuff.

David Berteau: That’s right. The house has passed 10 of the 12 appropriate bills. Only the Department of Homeland Security and the legislative branch bills, those are generally held in abeyance until we reach agreement on things. But there’s no agreement on the distribution of those numbers, and of course there’s a lot of policy provisions in there as well, so those bills are not going to be the basis for final law. The Senate hasn’t released anything yet, even at the subcommittee level in terms of its markup, and the Senate can move fast when they need to, but without agreement on the overall framework, it’s very hard to get agreement on the individual pieces. We’ve always pushed for four year appropriations. We know this is way better for government, it’s better for government agencies, it’s better for contractors. But failing that, we like of course to see a continuing resolution. I think actions over the last few days have increased the possibility of in fact no agreement even on a CR, even on the level of what the spending would be, and therefore the possibility of a shutdown. If each party believes that the other party will suffer more from an impasse, it reduces the incentives to compromise. None of us think that’s correct, but sometimes they seem to believe it themselves. We’re urging our members now to start thinking and planning. October 1 is not far away, Tom, and it’s time to have those conversations with your government customers: what happens in the event of a shutdown?

Tom Temin: Got it. Let’s talk about the Huawei ban, the section 889.

David Berteau: The shut down of a different and more immediate impact, right. So this is a law that was passed two years ago in August of 2018 as part of the fiscal year 19 National Defense Authorization Act. Part A took effect last year, Part B takes effect on Thursday, August 13. It says that a company has to certify that it has no prohibited products from Huawei or any of the other companies in any of their systems in order for the government to award them a contract. Now the basis for that certification is laid out in a guidance documents, but it’s still up to each company what they’re going to certify. What we’re curious to see is whether or not this slows down the award of contracts, Will it make contracting officers say, I need to take another look at that. Solicitations and evaluations that have been underway for months didn’t have that provision in because the FAR clause didn’t exist until two weeks ago, right. We’re going to be watching very closely on Friday to see whether or not awards still happen. And of course, this is the time of year where we have maximum number of awards, we’re gearing up for the end of year contract dynamic.

Tom Temin: Right. And that was another provision that could have been in one of the bills that have not passed, which is to extend that deadline of Thursday to some reasonable date.

David Berteau: There’s actually no list of what those prohibited products are. You have to figure out yourself, you know who the prohibited companies are, but you don’t know their affiliates or subsidiaries worldwide, right. And there’s no list of viable alternatives — if you have a prohibited product what do you replace it with? Who pays for it? How much time do you have? None of that has been laid out. We’re gonna struggle with this.

Tom Temin: I wonder if someone’s employee’s cell phone that has TikTok on it, that could be a banned product.

David Berteau: Well, you and I were talking earlier. I mean, we both have the same wireless carrier, right? Would you be willing to certify that nowhere in the system if you and I are talking on our cell phones that nowhere in that system, is there a prohibited product? You have no basis for that.

Tom Temin: Right, it gets to be absurd.

David Berteau: It does. However, we do agree that there is risk associated with that that is important to have those constraints put in place. The question is how do we do it in such a way that actually improves security rather than creates more chaos?

Tom Temin: And the final question on the foreign workers study presidential order, it didn’t really tell people to stop using immigrant labor.

David Berteau: A careful reading of the executive order, you’re right does say that it doesn’t take effect immediately. There’s a study that needs to be completed and submitted to the President. H1B visas are visas that are issued to employ foreign nationals, and one of the requirements for issuing the visa is you’ve got to demonstrate that in fact there’s no American who can take the job. And so you’ve already sort of net that test. And we do have a number of member companies that do rely on such and such employees, as well as the more that commercial companies that are global are selling to the federal government, whether it’s cloud services or IT management systems or legacy system modernization, those companies have a global workforce, these are not a job that you can replace in America. Ultimately, I think what matters is whether the government gets what it needs in order to operate, and the question of which workers do it, while important, is a secondary question. We’re going to watch this closely. We’re waiting for input and analysis from our member companies as well. So it’s quite a chaotic situation right now. A lot of moving parts this week.

Tom Temin: David Berteau is president and CEO of the Professional Services Council. Thanks so much.

David Berteau: Thank you Tom.