Global Regulatory Enforcement Law Blog : Global Regulatory Enforcement Lawyers & Attorneys: Reed Smith Law Firm: Government Contracts & Compliance

This post was written by Christopher G. Cwalina, Amy S. Mushahwar and Frederick Lah.

On August 15, the Federal Trade Commission issued an advisory opinion letter saying that it has no present intention to challenge the Council of Better Business Bureaus' accountability program for companies engaged in online behavioral advertising. The program is designed to hold those companies accountable for compliance with the Self-Regulatory Principles for Online Behavioral Advertising, which were released by the FTC in 2009. While the FTC's analysis was limited to competition law, it still signals a step in the direction of self-regulation for the online behavioral advertising industry. In our Client Alert, we review the requirements of the program and take a closer look at the FTC's analysis.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher L. Rissetto, Robert Helland and Melissa E. Beras.

As we noted last week, the $900 million cut from the federal budget to avoid default of the nation’s debt obligations is only just the beginning. The Budget Control Act of 2011 (“Act”) guarantees that another $1.2 to $1.5 trillion will be cut from the federal debt over the next ten years (Public Law 112-35). The only question is how these cuts will come. Will the bipartisan congressional debt “Super Committee” meet the tight deadlines mandated in the Act and come to a consensus on a debt reduction package? If they do, how much will the cuts affect Medicare, Social Security and other mandatory spending programs, as well as defense? And will the package include any revenue increases? If the Super Committee does not come to a consensus, then the Act’s “Automatic Trigger” kicks in: spending for both discretionary and mandatory programs, including Medicare, would be cut from 2013 through 2021. The cuts would be 50-50, between defense and non-defense. However, the Medicare cut could not exceed 2% in any given year.

With a daunting task in front of it - and the fallback of the Automatic Trigger - it would be somewhat understandable if the Super Committee was set up to fail. However, Republicans and Democrats have appointed members to the Super Committee who are serious, at least at this point, in bridging the partisan divide in Congress and coming to a consensus on a debt package. The Co-Chairs of the Super Committee are Senator Patty Murray (D-WA) and Rep. Jeb Hensarling (R-TX-5). The remaining members are: Senators Max Baucus (D-MT); John Kerry (D-MA); Jon Kyl (R-AZ); Rob Portman (R-OH); Pat Toomey (R-PA); and Reps. Dave Camp (R-MI-4);.Fred Upton (R-MI-5); James Clyburn (D-SC-6); Chris Van Hollen (D-MD-8); and Xavier Becerra (D-CA-31). We note that these Senators and Representatives have an understanding of the spending issues in the programs at risk for cuts. For example, two of the Members chair congressional committees with jurisdiction over Medicare [Senator Baucus, Chair of the Senate Finance Committee, and Rep. Camp, Chair of the House Ways and Means Committee].

The timetable is tight, though. Under the Act, the Super Committee has until November 23rd to produce a debt reduction package and Congress has until December 23rd to send that package to the President’s desk (the President has until January 15th to sign the bill into law). As we also noted previously, the Act does give the Super Committee, and Congress, some tools to expedite package and avoid delaying measures used by other Members of Congress in the past, such as requiring any debt package to face an up-or-down vote and thus avoid any amendments on the House or Senate floor that could be deal breakers. Moreover, there are other parallel legislative events -- the likely Omnibus Appropriations bill and certain Re-authorization bills -- that may also influence final budget issues. It remains to be seen, however, whether in the end the Super Committee can bridge partisan differences on principles central to each party, such as spending for safety net programs and opposition to any tax increases. In other words, stay tuned….

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher L. Rissetto and Stephanie E. Giese.

Those of us who have an interest in compliance with the federal Cost Accounting Standard (“CAS”) are not surprised that the CAS Board eliminated the Overseas Exemption effective October 11, 2011. See 76 Fed. Reg. 49365 (Aug. 10, 2011). What may be more surprising than the elimination of the exemption is that the CAS Board is eliminating the exemption that it first promulgated in 1973 without ever offering its interpretation of how the exemption should be applied. So, for contractors who have relied on this exemption or will rely on this exemption for contracts and subcontracts awarded prior to October 11, 2011, we will never know which federal agency’s interpretation of the exemption is correct. The CAS Board’s failure to interpret this exemption introduces some uncertainty for contractors who have relied on the exemption, particularly in the event of a CAS compliance audit.

Federal Agency Interpretations of the Overseas Exemption Differ. Some federal agencies such as the U.S. Agency for International Development (“USAID”) have interpreted the application of the exemption narrowly in acquisition policy guidance such that the vast majority of U.S. companies could not rely on the exemption (if any costs, direct or indirect, are incurred in the U.S. and charged to a USAID contract). Other federal agencies, including the U.S. Department of Defense (“DoD”), have stated in acquisition policy guidance that a U.S. company may rely on the Overseas Exemption if all direct costs incurred in connection with a government contract are incurred overseas.

The CAS Board’s Limited Jurisdiction was the Basis for the First Promulgation of the Overseas Exemption. You may ask why the Overseas Exemption was first promulgated in light of the fact that the federal agencies do not agree on its application. The Overseas Exemption was first promulgated in the Armed Services Procurement Regulation (“ASPR”) in 1973. The original basis for the exemption was that the CAS Board’s jurisdiction was limited to contracts awarded in the U.S., its territories and possessions pursuant to Section 2168 of the Defense Production Act (“DPA”). Thus, by default, contracts and subcontracts executed and performed entirely outside the U.S. were exempt from CAS. The CAS Board ceased to exist under the DPA in 1980, but was reestablished in 1988 under the Office of Federal Procurement Policy (“OFPP”) Act without the overseas limitation on the Board’s jurisdiction. In 1992 and again in 2008, during the time when its jurisdiction included contracts performed overseas, the Board reviewed its rules and chose to retain the Overseas Exemption without offering any further interpretation of the applicability of the exemption.

CAS Compliance May Depend on Your Agency’s Interpretation of the Overseas Exemption. This month the CAS Board again offered no further interpretation of the Overseas Exemption when it eliminated the exemption. So a government contractor may want to consider the federal agency that awarded the contract before relying on the Overseas Exemption to CAS -- while the exemption lasts!
 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

This post was written by Vicky G. Gormanly and Joseph I. Rosenbaum.

The interest level in storing health records in digital format has grown rapidly with the lower cost and greater availability and reliability of interoperable storage mechanisms and devices. Health care providers like hospitals and health systems, physician practices, and health insurance companies are among those most likely to be considering a cloud-based solution for the storage of patient-related health information. While lower cost, ubiquitous 24/7 availability, and reliability are key drivers pushing health care providers and insurers to the cloud, a number of serious legal and regulatory issues should be considered before releasing sensitive patient data into the cloud.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Christopher L. Rissetto, Robert Helland and Melissa E. Beras.

Last week, the House of Representatives and the Senate each voted to pass the Budget Control Act of 2011 (“Act”) raising the nation’s debt limit and averting the real threat of a default on our debt obligations. President Barack Obama promptly signed it into law the same day, narrowly averting default (Public Law 112-35). However, a compromise called by some as a “Satan Sandwich” still has major ramifications on federal spending priorities for months to come.

Some pain now, more pain later. The Act immediately gave President Obama the authority to raise the debt ceiling by $400 billion. A second $500 billion adjustment in the debt ceiling, which is subject to a congressional vote of disapproval that can be vetoed by President Obama, will likely come this September 2011. These first two increases, totaling $900 billion, are offset by $917 billion in 10-year savings in non-defense federal discretionary spending – i.e. funding not mandated by federal law, such as through the Medicare or Social Security programs. This will be achieved by cutting annual appropriations down to $1.043 trillion in 2012 and then slowing the rate of future growth in following fiscal years to a fraction of inflation.

The Act also mandates another $1.2 trillion to $1.5 trillion in deficit reduction. This will happen one of two ways: either through the recommendations of a Joint Committee of House and Senate members or by automatic across-the-board cuts that would be split equally between mandatory programs, including Medicare and Social Security, and defense.

Why some are calling this a “Super Committee”. No later than November 23, 2011, the Joint Committee is required to vote on a report that contains a detailed statement of its findings, conclusions, and recommendations for what programs should be cut. There are a number of provisions in place to give the Joint Committee additional powers to come to a decision on cuts and get that enacted into law. For example, they have a freedom to include matters not ordinarily included in similar legislation, such as policy issues that do not impact the federal debt, for example changes in the recently heath care reform or Dodd-Frank finacial regulatory reform laws. Also, any legislation reported would not face amendments and only require a simple majority in each house of Congress for final passage. For these reasons, the Joint Committee is also being known as the “Super Committee”.

The “Automatic Trigger”. A lesser of two evils? Failure by the Joint Committee to hit at least $1.2 trillion in savings would trigger automatic cuts in both discretionary and mandatory programs, including Medicare, from 2013 through 2021. The cuts would be 50-50, between defense and non-defense. However, the Medicare cut could not exceed 2% in any given year. So for all those who rely on Medicare - from the pharmaceutical industry, to hospitals, to nursing homes, to doctors - it would likely make sense to hope the Joint Committee does not come to a consensus on cuts. Given the lobbying expected by the Defense Industry, it is highly possible that the Joint Committee could make non-defense programs suffer the greater amount of cuts.

This also guarantees that lobbying activity of Congress will be at a fever pitch for the next six months.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This post was written by Lorraine M. Campos and Joelle E.K. Laszlo.

Full and open competition is a bedrock principle in federal contracting, so government initiatives to expand competition, like the interim rule on multiple-award schedule (“MAS”) contracts that took effect this summer, should come as no surprise. But competition breeds a lot of different things, and enhanced competition for orders placed under MAS contracts could have a number of unintended consequences. Schedule contractors will do best to keep their heads about them in this brave new world.

The interim rule, issued on March 16th and effective two months later, applies only to MAS contracts with civilian agencies, including the General Services Administration’s and the Department of Veterans Affairs’ Federal Supply Schedule contracts. (Department of Defense agencies already follow competitive procedures similar to those set forth in the interim rule.) The interim rule amends the MAS ordering procedures in the Federal Acquisition Regulation (“FAR”) to require contracting agencies to take certain steps when placing MAS orders valued above $3,000 (the current micropurchase threshold). For example, for orders valued between the micropurchase threshold and the simplified acquisition threshold (“SAT,” currently $150,000), an agency must request quotes from at least three schedule contractors (or, for orders to be issued with a statement of work (“SOW”), provide the SOW to at least three schedule contractors), and must justify in writing any decision not to solicit its requirement so broadly. For any order above the SAT, an agency must post a request for quotations (“RFQ”) to GSA eBuy, or provide the RFQ to “as many schedule contractors as practicable.” As with orders under the SAT, an agency is only permitted in specified circumstances to limit competition, and must document its reasons for doing so.

The interim rule sets out similar competition requirements for placing orders under existing Blanket Purchase Agreements (“BPAs”), and for establishing new BPAs. In addition, where new BPAs are to be established the interim rule expresses a preference for multiple-award BPAs, and limits such awards to five years in duration. Except in limited circumstances single-award BPAs over $100 million are no longer permitted, and any new single-award BPA may only be awarded for a year (with up to four, one-year options).

The new competition requirements implement Section 863 of the 2009 National Defense Authorization Act, which was promulgated in part to respond to criticism that has continued to build over the insufficiency of competition under MAS contracts. In a September 2009 report on BPAs, the Government Accountability Office (“GAO”) essentially found that the lack of competition in MAS ordering was based on the absence of regulations and procedures requiring it, and the failure by contracting officers to follow existing regulations and procedures. It thus stands to reason that without at least better training of contracting officers, the new competition requirements won’t make the positive difference for which they are designed. At the same time, the increased competition may force schedule contractors into low-bidding wars, especially for BPAs which, with their new durational limits, may end before a contractor is able to break even (let alone make a profit). And with GAO’s recent determination that it has the authority to hear bid protests of task orders of any value (and Congress expected to pass a bill to this end), any order that doesn’t hue closely to the new competition requirements may be up for challenge. These factors together could make the future of MAS contracting a tempestuous one, even for the most seasoned offerors.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link