Panoptic Enterprises’


Federal Acquisition Developments, Guidance, and Opinions

November 2012
Vol. XIII, No. 11


OMB Issues Guidance on Allowable Costs Associated with the WARN Act
4th Contingency Contracting Handbook Released
GSAR Part 504 Revised
DOD Announces Service and Construction Labor Website
OFPP Clarifies CAO Roles and Responsibilities
Government Charge Card Abuse Prevention Act Enacted
NASA Provides Anchor Tenancy Regulations

OMB Issues Guidance on Allowable Costs
Associated with the WARN Act

Daniel Werfel, Controller of the Office of Federal Financial Management (a part of the Office of Management and Budget (OMB)), and Joseph Jordan, Administrator for the Office of Federal Procurement Policy (also part of OMB), issued a joint memorandum to the federal government’s chief financial officers and senior procurement executives providing guidance on allowable contracting costs associated with the Worker Adjustment and Retraining Notification (WARN) Act should potential across-the­board budget cuts (the “sequestration” mandated by the Budget Control Act of 2011) occur as scheduled on January 2, 2013, because of congressional failure to act.

The WARN Act requires employers with 100 or more employees to notify employees 60 days prior plant closings and mass layoffs. The purpose of this notification is to give the employees an opportunity to obtain alternative employment or necessary training on a timely basis. An employer that fails to provide such notice to its employees is liable to each aggrieved employee an amount including back pay and benefits for the period of violation, up to 60 days, and further subject to a civil penalty not to exceed $500 for each day of violation. The civil penalty is paid to the local government.

On July 30, 2012, the Department of Labor (DOL) issued a guidance letter in response to questions regarding whether the WARN Act requires federal contractors, whose contracts may be terminated or reduced in the event of sequestration on January 2, 2013, to provide WARN Act notices 60 days before that date. The DOL responded, “No. In fact, to provide such notice would be inconsistent with the purpose of the WARN Act...The act lists three situations in which notice may be given fewer than 60 days before a plant closing or mass layoff will occur. These exceptions are referred to as the faltering company, unforeseeable business circumstances, and natural disaster exceptions. Of these three exceptions, the unforeseeable business circumstances exception is the one that would apply to plant closings or mass layoffs occurring before or in the wake of the potential sequestration on January 2...Although it is currently known that sequestration may occur, it is also known that efforts are being made to avoid sequestration. Thus, even the occurrence of sequestration is not necessarily foreseeable.”

Despite DOL’s guidance, some contractors have indicated they are still considering issuing WARN Act notices, and some have inquired about whether federal contracting agencies would cover WARN Act-related costs in connection with the potential sequestration. To further minimize the potential for waste and disruption associated with the issuance of unwarranted layoff notices, OMB issued a clarifying memorandum providing guidance regarding the allowability of certain liability and litigation costs associated with WARN Act compliance:

                      “Specifically, if (1) sequestration occurs and an agency terminates or modifies a contract that necessitates that the contractor order a plant closing or mass layoff of a type subject to WARN Act requirements, and (2) that contractor has followed a course of action consistent with DOL guidance, then any resulting employee compensation costs for WARN Act liability as determined by a court, as well as attorneys’ fees and other litigation costs (irrespective of litigation outcome), would qualify as allowable costs and be covered by the contracting agency, if otherwise reasonable and allocable.”

While this may sound reasonable, allowable costs are paid by the government under cost-reimbursement contracts only, not fixed-price contracts. Besides, even if the contract is cost-reimbursement, what are reasonable attorney’s fees and other litigation costs when it comes to contesting the failure to issue a WARN Act notice? This issue is far from being resolved!

4th Contingency Contracting Handbook Released

Richard Ginman, the Director of Defense Procurement and Acquisition Policy, has announced the release 4th edition of the Defense Contingency Contracting Handbook. It is available at http://www.acq.osd.mil/dpap/ccap/cc/jcchb/. A print copy of the handbook can be requested.

The following are the contents of the handbook:

In addition, the website contains more than 1,000 related resources, including checklists, training, role-based scenarios, guides, policies, forms, templates, and links to other resources.

GSAR Part 504 Revised

The General Services Administration (GSA) has revised GSA Acquisition Regulation (GSAR) Part 504, Administrative Matters, to update statutory and regulatory references, update titles, delete outdated office symbols, eliminate confusing or redundant supplementary material, maintain consistency with the Federal Acquisition Regulation (FAR) while eliminating duplication, and clarify text.

This final rule amends GSAR Part 504 as follows:

DOD Announces Service and Construction Labor Website

Richard Ginman, Director of Defense Procurement and Acquisition Policy, has announced a new website focused on the application of labor laws in federal acquisitions (see FAR Part 22, Application of Labor Laws to Government Acquisitions). The webpage is at http://www.acq.osd.mil/dpap/cpic/cp/labor_information.html. This webpage provides a variety of labor-related information, targeted resources, training material, and direct contact information for agency labor advisors.

“Labor in both services and construction contracts can be a significant cost driver and may provide both cost and performance risks,” writes Mr. Ginman in his memorandum to the DOD acquisition executives. “Contract costs should be considered, planned for, and addressed at acquisition strategy planning and into the award and administration phases of department contracts. Understanding the impact, for example of minimum wage and fringe benefit increases as a result of updated Department of Labor area wage determinations and/or collective bargaining agreement renegotiation can be critical to managing risk and cost.”

The website states, “Agencies should exchange information on labor matters with other agencies to ensure a uniform government approach...Our goal is to provide this uniformity through helpful sources or training material, regardless of which agency was the original developer.”

OFPP Clarifies CAO Roles and Responsibilities

Joe Jordan, Administrator of the Office of Federal Procurement Policy (OFPP), issued a memorandum to all federal chief acquisition officers (CAOs) and senior procurement executives that seeks to clarify the CAOs’ roles and responsibilities to ensure that acquisition issues receive high-level management attention as envisioned by the Services Acquisition Reform Act of 2003 (SARA) (Title XIV of Public Law 108-136), which established the position (for more on the SARA, see the December 2003 Federal Contracts Perspective article “Services Acquisition Reform Act Signed Into Law, Establishes Training Fund, Chief Acquisition Officer”).

“The Government Accountability Office (GAO) recently examined the role of CAOs and found that their responsibilities often differ among agencies depending on the mission of the agency and its acquisition environment. Additionally, GAO found that many of these non-career executives also hold multiple senior-level management positions, such as CFO [chief financial officer] or Assistant Secretary for Management, which can add to the complexity of the CAO’s responsibilities,” states Mr. Jordan. “Because of the unique needs of each agency, GAO determined, and the Office of Management and Budget (OMB) agreed, that while the roles of CAOs may differ appropriately among agencies, those roles should be clearly articulated and communicated to the agency workforce.”

Mr. Jordan says that CAOs should focus on the following:

Finally Mr. Jordan is inviting the CAOs and SPEs to the December 13, 2012, CAOs’ Council meeting to discuss how they can leverage their combined efforts to improve acquisition across the federal government. Imagine having to invite CAOs to the CAOs’ Council meeting!

Government Charge Card Abuse Prevention Act Enacted

On October 5, President Obama signed Public Law 112-194, the Government Charge Card Abuse Prevention Act of 2012. The statute contains the following provisions:

NASA Provides Anchor Tenancy Regulations

The National Aeronautics and Space Administration (NASA) is replacing NASA FAR Supplement (NFS) 1812.7000, Prohibition on Guaranteed Customer Bases for New Commercial Space Hardware or Services, with NFS 1812.7000, Anchor Tenancy Contracts. The original NFS 1812.7000 incorrectly prohibited NASA from awarding “a contract with an expected duration of more than one year if the primary effect of the contract is to provide a guaranteed customer base for, or establish an anchor tenancy in, new commercial space hardware or services.” The replacement NFS 1812.7000 permits NASA to enter into multi-year anchor tenancy contracts for commercial space goods or services.

“Anchor tenancy” is “an arrangement in which the United States government agrees to procure sufficient quantities of a commercial space product or service needed to meet government mission requirements so that a commercial venture is made viable” (new paragraph (d)). Anchor tenancy was authorized by Section 401 of the Commercial Space Competitiveness Act (CSCA) of 1992, but NFS 1812.7000 was never revised to reflect the authorization.

According to new paragraph (a), NASA may enter into a multi-year anchor tenancy contract for the purchase of a good or service if the NASA administrator determines that:

Paragraph (c) places the following limitations on the use of anchor tenancy:

One respondent submitted comments supporting the proposed rule. NASA recognized that the rule needed to be clarified, so it added the definition of anchor tenancy as paragraph (d).

For more on the proposed rule, see the June 2011 Federal Contracts Perspective article “NASA Proposes Rule on Anchor Tenancy.”

Copyright 2012 by Panoptic Enterprises. All Rights Reserved.

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