Developments around the corner for defense contractors affected by COVID

Defense contractors should pay close attention to two developments. An update on payments to contractors, and a review of how DoD spent its pandemic money.

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Defense contractors should pay close attention to a couple of days-old developments. First, a long-needed update to the rule concerning payments to contractors who can’t get into DoD facilities because of the coronavirus. Second, how the Pentagon spent its pandemic stimulus money – that’s about to come into the crosshairs of the Defense inspector general. For commentary, Federal Drive with Tom Temin turned to Alan Chvotkin, the executive vice president and counsel at the Professional Services Council.

Interview transcript:

Tom Temin: Alan, good to have you back. And I guess this idea of these 3610 payments is really something that’s been festering because the government is not moving toward getting people back into the offices.

Alan Chvotkin: Well, there’s a couple of different elements to this Tom that it’s important to keep in mind. First of all, 3610 is government wide available to all federal agencies. And yes, getting people back into the office is one element of it. The other is to give contractor employees and federal employees options to continue to do work even though it’s not at a physical location. And many of the contractors have been able to telework and therefore wouldn’t be subject to the 3610 reimbursement. I think the number of eligible employees is dwindling, but we’re nowhere close to zero just yet. And you’re right, it has taken a long time to get to this point. CARES Act was enacted in March 27 of this year, Congress was gracious and did the right thing by extending it out to December 11, through the enactment of the continuing resolution. And so we’re pleased to see the Department of Defense moving forward with updating it’s important class deviations, to bring them current with the change in the law. Regrettably, we haven’t seen that same action from other federal agencies who were affected.

Tom Temin: So the meaning of this, then is that people can expect to get compensation even if they are not able to work in government offices or work remotely?

Alan Chvotkin: That’s right, for a small subset of contractor employees who are required to be in maintained in what is called the, quote unquote, ready state, and is ready to come back to work but not yet able to come back to work and not able to telework or engage in other activities on the contract. This provides for a lot for those companies to be able to retain them on the on the payroll, and that’s critical. So many of these require security clearances, or other access issues that can’t get if you dropped them off the payroll. So this extends the eligibility, we still haven’t seen broad reimbursement for those hours worked and those dollars expended by companies to keep those employees on the payroll. That’s the next phase of our advocacy work.

Tom Temin: And turning to the issue of the Defense inspector general looking at the spending by the Pentagon of its pandemic relief money, that’s going to be interestingbecause there are items that they bought weapons systems that were authorized in the law. And so what might be lawful may not look so good to the public, but they’re also going to look at what might have been mistakes under the current law.

Alan Chvotkin: That’s their plan. In their public announcement last week, they noted that they’re going to be taking a look at the funding that’s been made available to increase the defense industrial base manufacturing capacity in accordance with both the CARES Act that was enacted, we just mentioned the March 27, as well as Defense Production Act authorities and other regulations. So this was a fully expected. The billions of dollars made available to the Department of Defense and to companies through the CARES Act. And as you said, there may be a little bit of misinformation by the public. I’m hopeful that over the next couple of months, the inspector general of the Department of Defense will be able to clarify what’s been used appropriately and where some questions still remain.

Tom Temin: But in the meantime, the IG has only told defense agencies to appoint someone to deal with the IG, the big paperwork push is yet to come.

Alan Chvotkin: Well, that’s right. And this is part of their normal processes, sort of give me the names of your point of contact, here’s what we’re doing. And over the next couple of months they’ll do the outreach, start collecting records, start interviewing people within the Department of Defense, and then start looking at what kind of contractor records we want. We’re not gonna see an answer DoD IG report on this till well into the next calendar year. But it’s helpful to have them looking, I think that’ll provide some important clarification around some misinformation that’s been out there.

Tom Temin: There’s also an update on the mentor-protege program from the Small Business Administration. What’s going on there?

Alan Chvotkin: Well, this is a actually a good thing for government and for the contractor community. Last week, October 16, SBA published a final rule, to consolidate all of the mentor-protege programs. SBA has managed several of them over the past couple of years, including starting with the program for the 8(a) companies. Then Congress told them to add additional mentor protege programs for HUBZone companies and women owned businesses, and then said, do it all government wide. So over time, we’ve just had a proliferation of mentor-protege programs. The underlying purpose of these mentor protege programs is to provide assistance, particularly to smaller companies to help them expand their capabilities to bid on and win business in the federal marketplace and ultimately perform. So there’s some rules and regulations around that. But the proliferation has caused confusion in the government and it’s caused confusion about companies. So this final rule, although a long time in the making, now consolidates all of them and says we’re going to have one governmentwide mentor-protege program, one consistent set of rules. And one mechanism to identify and hold accountable both mentors and protegees for providing the assistance. That’s a good news story for the government and it should minimize any confusion by contracting officers of how to pigeonhole work or activities around any one of these. And it’s a good news story for contractors as well, those companies that want to assist and be mentors will now have a single set of rules, whether you’re working at the Department of Homeland Security, or the General Services Administration, or the Agency for International Development. And it’ll help protegees who wants to compete not only in a single agency, but across multiple agencies. I’m pleased to see it. I think overwhelmingly the changes that SBA has adopted in this final rule makes sense. And I think it’s a good news story that everybody ought to be looking at.

Tom Temin: And does this program also apply to companies that are so called innovative that may have never done business with the government? The types that so many agencies say that they’re trying to get into federal contracting.

Alan Chvotkin: Absolutely so. A company can be a mentor with little government experience or a lot. A company can be a protege with a little bit of government experience or a lot. Again, it’s primarily aimed at helping the smaller companies increase their capabilities to compete in the marketplace. And that’s where most of the innovation is coming from anyway, from the smaller companies. But a large company who’s got some ideas on how to compete in the government marketplace can certainly be a mentor to a company, a smaller business, who’s already in the marketplace — it can work multiple ways.

Tom Temin: Alan Chvotkin is executive vice president and counsel at the professional services Council. Thanks so much.

Alan Chvotkin: Always a pleasure, Tom.

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