DoD, ODNI sign ‘permission slips’ to keep contractors viable through the pandemic

The Defense Department and the Office of the Director of National Intelligence released memos late last week outlining how contractor officers can implement a p...

The memos are coming fast and furious. Like the movies with a similar name, many times the sequels are just as good as or better than the original.

This is especially true with the Defense Department’s acquisition memopalooza over the past few weeks. Since March 1, the Defense Pricing and Contracting Office has released 13 memos, four class deviations, three announcements and two sets of frequently asked questions.

Each one gives contractors more and critical information for how to work during the coronavirus pandemic.

“The challenge is there are so many flavors of contracts that it’s hard to write policy for them all, but you could do something broad and then narrow down to contract type,” said Stan Soloway, president and CEO of Celero Strategies and a former Defense procurement official. “It’s been interesting to see how this all has been playing out.”

The latest DoD memo and frequently asked questions may be among the most important so far. DoD provided contractor officers and other acquisition professionals with guidance for how to continue to pay contractors even if they can’t do work during the emergency.

Kim Herrington, DoD’s acting principal director of the Defense Pricing and Contracting office, told defense acquisition workers that under Section 3610 of the CARES Act, the government can modify contracts to ensure vendor employees are paid when they can’t work. Herrington also released a set of frequently asked questions to solve some of the more complex questions that rose from the law, including whether paid leave is considered a direct or indirect cost—it’s an indirect cost in most circumstances—and cost reimbursement is an option, not mandatory.

The director of Defense Pricing and Contracting, Kim Herrington, delivers remarks at a Pentagon press briefing about acquisition in regards to COVID-19, in March. along with Undersecretary of Defense for Acquisition and Sustainment Ellen Lord (left), and Deputy Assistant Secretary of Defense for Industrial Policy Jennifer Santos. (DoD photo by Lisa Ferdinando)

“Currently, many DoD contractors are struggling to maintain a mission-ready workforce due to work site closures, personnel quarantines and state and local restrictions on movement related to COVID-19 pandemic that cannot be resolved through remote work,” Herrington wrote. “It is imperative that we support affected contractors, using the acquisition tools available to us, to ensure that, together, we remain a healthy, resilient, and responsive total force.”

Classified contracts pose more challenges

At the same time, Kevin Meiners, the deputy director of national intelligence for enterprise capacity, issued a similar memo for contractors working for intelligence agencies.

The challenge for contractors working in the IC to work remotely is even more pronounced than for DoD.

“The memorandum provides you with documentation on the guiding principles we are using to address procurement issues during the pandemic mitigation,” Meiners wrote. “ODNI strongly encourages IC agencies to make full use of the flexibility provided by this [CARES] act and other existing contracting tools to enable the maximum number of contract personnel to convert to staying home in a ‘ready state’ during the national effort to mitigate the spread of COVID-19 pandemic.”

Eric Crusius, a partner with the law firm Holland & Knight, said he’s heard from clients that have classified contracts about how their employees are working in shifts to limit how many people are on site at any one time.

“They are finding ways to make it work but there are impacts on contractors,” he said. “The idea behind both of these and other documents is the government is not taking a hard line against contractors who are having a hard time performing. Instead, they are encouraging flexibility with missions.”

Soloway and other procurement experts praised DoD for not only its communications during the pandemic, but also how the Pentagon has been inclusive of contractors being part of the broader team.

“I think we’ve seen a really good tone from acquisition leaders. This pandemic is something that will test the public private partnership in government contracting, and agencies have to recognize the challenges,” Soloway said. “It’s encouraging that they are striking the right tone. Don’t underestimate how important that is. It’s a signal for how the workforce will act. They will give a level of support [that] will be consistent to that tone.”

Read more: Technology News

Crusius said the acquisition speed at which agencies are moving is heartening for many reasons.

“This memo is a wonderful permission slip for contracting officer to see. They know if they have the funds available, they can pay contractors so it’s a double win because it’s keeping contractors on ready state and keep[ing] firms from going under,” he said. “As I’m speaking with clients, there are some employees who can’t work so that is impacting their profits and their cash flow. Certainly big companies that do cleared work will be impacted as will companies that work onsite doing services like cleaning offices.”

Crusius said it’s important for vendors to keep a few things in mind as they consider asking DoD for financial support through Section 3610.

First, he said the memo makes it clear that vendors can’t “double dip” in relief programs such as if a small business receives money from the Paycheck Protection Program, it cannot receive money from DoD, too.

Crusius said it’s also important for vendors to communicate with contracting officers and document any expenses. He said vendors should keep in mind DoD isn’t mandated to pay contractors, it’s just an option.

Where are OFPP, GSA?

The one missing piece in this effort the lack of governmentwide guidance coming from the Office of Federal Procurement Policy (OFPP) and from the General Services Administration. OFPP issued initial guidance on March 20, but new questions and challenges have risen since then, especially in regards to the stimulus bill.

“We are anxiously awaiting to see their interpretations and the three legs of the acquisition stool are fully aligned,” Soloway said. “It would be terrible to have different sets of rules for different parts of the acquisition community.”

GSA has been active in developing guidance and class deviations, but nothing so far around Section 3610 of the CARES Act.

Jeff Koses, GSA’s senior procurement executive, did issue a memo on Monday accelerating payments to small businesses that are both subcontractors and prime contractors.

The class deviation of the Federal Acquisition Regulation will:

  • Provide accelerated payments to prime contractors that are small businesses;
  • Establish a goal of 15 days after receipt of a proper invoice for payments to prime contractors that are small business and prime contractors that subcontract with a small business concern; and
  • Prohibit prime contractors from charging consideration or a fee to subcontractors when issuing accelerated payments.

DHS opens up CSO to fight COVID-19

Additionally, the Department of Homeland Security announced it plans to use its Commercial Solutions Opening (CSO) authority to help the agency respond to the coronavirus pandemic.

“DHS is seeking innovative commercial products that are in support of the COVID-19 response or similar microbial threats. Considering the magnitude and potential threat that COVID-19 and similar microbial threats pose to our nation’s health, safety and security, the government seeks to rapidly accelerate the testing and fielding of new capabilities, employing innovative commercial products to the detection of exposure, prevention, containment and treatment of COVID-19 and similar microbial threats,” the notice states. “Proposed innovative commercial products may be, but are not limited to, products that: 1) supplement shortages and/or emerging needs for personal protective equipment, 2) enhance or expedite screening capabilities, 3) enhance or expedite facility cleaning capabilities, 3) extend testing capabilities, 4) utilize technology to support the COVID-19 response, or 5) convert existing production and logistics operations to support the COVID-19 response.”

Read more: Acquisition News

DHS said the solicitation will remain open and it will accept proposals on an ongoing basis, with awards scheduled for fiscal 2020.

Soloway said one question that DoD, DHS, GSA, OFPP and really every agency need to answer is what happens after award.

“I’ve heard from some companies who have been surprised by the pace of awards. They are still happening at a relatively reasonable schedule. Some do expect RFPs to be pushed to the right,” he said. “What happens with contract transition and kick off? Can you do that with remote working or will they have to delay awards and kick off? How [do] you transition to [a] new contractor and launch the work and what does that do to financial stability and ready state? How does the current situation impact the security clearance process too? It’s all about the implementation of contracts where the rubber hits the road.”

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